Real Estate Journal - Winter 2018

Real Estate Journal

Winter 2018

2. Inside the Little-Known SelfDirected IRA

8. Winterizing Your Investment Property for Colder Temperatures

11. National REIA Legislative Update

Vendor Directory

3. There is Indeed Strength in Numbers 4. Insurance and Disaster Recovery 5. Buying and Holding HUD Properties 6. The $100,000 Mistake Many Landlords Unintentionally Make 7. The Truth About Investing with OPM

Member Spotlight

B

Mandan, North Dakota and has been a landlord since 1982. He currently lives in Tucson, AZ where he and his wife, Camille have built a substantial residual income from real estate notes. Bob and his wife Camille started Win3 Realty on a bar napkin and have sold more than 4,000 homes in the past 13 years.He is a member of the Arizona Real Estate Association (AZREIA).

Please tell us a little about who you are and what you did before getting into real estate investing: After college, Bob took a job with Texas Instruments and during the next 6 years worked as an Instrument Engineer on oil exploration crews in 17 states,

Professional Publishing Inc., PO Box 6244 Beaverton, OR 97007

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continued on page 20

15. The Latest and Greatest 16. The Secret To Selling More 17. The Equifax Breach Just Put Your Sensitive Data in the Wrong Hands

Y

Vol. 3 Issue 1

The Benefits of Being a Member of National REIA

already know that membership in your local real estate investor association (or REIA as they’re commonly known) was one of the best business decisions you ever made. Not only did you gain access to priceless investing knowledge & know-how from experienced peers but you also gained the strength & power of being part of a larger organization, the National Real Estate Investors Association. Being a member of your local REIA (or investment group) means opening the door to countless educational & training opportunities, exclusive discounts ou

ob Zachmeier was born in

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Circulated To Over 40,000 Real Estate Investors Nationwide

$4.95

Bob Zachmeier

13. Beware of False Service Animals

with national vendors as well as many other benefits coming directly to you thanks to their affiliation with National REIA. All of which make a positive contribution to your business’ bottom-line.

Being a member of National REIA means always having the resources you need for success in today’s everchanging marketplace. It means being part of a larger, nationwide network of like-minded investors.

This “strength in numbers” aspect is how National REIA has been able to partner with some of the country’s leading businesses to bring you valuable resources, discounts and

other tools that will help you hit the ground running and further your success.

As a member of your local REIA, you have access to the following great benefits thanks to their affiliation with National REIA.

The Home Depot is the world’s largest home improvement specialty retailer. Not only do they offer customized cost reduction solutions that target and meet the evolving needs of real estate investors but they continued on page 18

The Regulatory Burden

by Chris Kuehl, Ph.D.

R

egulation is a given and in

truth nobody wants to be in a country that has none.

Even the most ardent critic of an overregulated economy will blanche at the kind of system that exists in China, where air quality in Beijing can be so bad that the whole population is urged to stay inside for days at a time, and where 2,500 coal miners die every year in mining accidents. The reality is that some regulations are welcomed by the average citizen and by business, as they tend to weed out the poor and dangerous competitors while opening market share to better companies. However, at the same time there are regulations that many argue go too far and make

the conduct of business far too complex.

There are basically two motivations for most regulatory effort. One is simply designed to

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set the "rules of the road" and these are rarely objected to. Nobody wants a world without traffic laws and nobody wants to live in a "buyer beware" environment where nothing can be trusted.

The other motivation is punitive and this is the variety that creates the most opposition. The logic is that something bad has happened and rules must immediately be promulgated to ensure that such a thing never happens again. This approach often ends in significant overkill. In the last few years there has been a great deal of attention focused on the Bank Reform Act but there are many others that have created issues for the real estate sector. continued on page 16

Real Estate Journal

Inside the Little-Known Self-Directed IRA

by Heather Taylor

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any investors don’t realize

that you’re not limited to stocks, bonds and mutual funds when it comes to retirement investing. Susan and Dale of New York were under that impression until they began to research alternatives.

“To my surprise, I discovered there were many non-traditional assets such as real estate, tax liens and promissory notes that our retirement dollars could invest in using a self-directed IRA,” she says.

Susan opened a self-directed IRA and has been utilizing her account to invest in promissory notes.

Real estate investor Lowell of California learned about the concept in 2013 and decided to transfer his 403(b) account into a self-directed IRA. Lowell used his account to acquire a bank-owned property for just over $85,000 which provided rental income for two years, before

generating nearly 77-percent return on investment (ROI) when he decided to sell the property.

As a real estate investor, Lowell prefers the idea of using his retirement account over borrowing to fund his investments.

Best-kept secret for investors?

Investors can use self-directed qualified retirement accounts to invest in a variety of assets, in

addition to stocks and bonds.

Allowable investments include real estate, tax liens, promissory notes, private entities, and more.

Self-directed accounts include the Individual Retirement Account (IRA), Roth IRA, 401(k), Simplified Employee Plan (SEP), and Savings Incentive Match Plan for Employees (SIMPLE), as well as Health Savings Account (HSA)

and Coverdell Education Savings Account (CESA).

When investing in alternative assets with a qualified retirement account all profits and expenses flow through the account. Tax advantages may include tax-free or tax-deferred growth within the account depending on account type.

Though some investors have never heard of the concept, selfdirected investing is nothing new.

Since IRAs were established by the government in 1974, the IRS has listed items that are not permitted in an IRA (the entire list can be found in IRSPublication 590).

Think you don’t have enough to invest? You’d be surprised. Some investors mistakenly think selfdirected investing isn’t an option because they don’t have enough in their retirement account. Susan thought this was the case until she learned that she could partner her IRA with other self-directed continued on page 8

VENDOR DIRECTORY

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BUILDING/PAINTING SUPPLIES The Home Depot 1-800-466-3337 www.homedepot.com

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SIGNS & BANNERS Build-A-Sign.com 1-800-330-9622 www.buildasign.com

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REAL ESTATE INVESTING SOFTWARE Rent Perfect reipro 1-800-639-1918 www.myreipro.com

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REAL ESTATE MARKET REPORTS Local Market Monitor 800-881-8653 www.localmarketmonitor.com

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

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Real Estate Journal · Winter 2018

Real Estate Journal

There is Indeed Strength in Numbers

By Rebecca McLean, Executive Director, National REIA

I

t is hard to believe that this is the

tenth issue of the RE Journal.

When we first launched this publication, our goal was to add value to your business through relevant news articles, important information and featured commentary that you can use to further enhance your bottom-line.

As a member of National REIA, you know the importance of furthering your education and sharpening your skills on a regular basis. We are confident that this publication has helped further that goal and so much more!

That notion fits perfectly into what we do here at National REIA. We provide the support that you need so that you are free to innovate, to build, and to succeed in today’s ever-changing marketplace. We offer education, legislative support and benefits that include market updates, services, discounts, and other professional resources that you need to run your business (see article on page one). More importantly we provide a solid, nationwide network where you can

Real Estate Journal · Winter 2018

connect with other investors for ideas, insights, and support.

Being a member of National REIA helps keep you at the top of your game, well informed, and firmly protected so that you can do business in an industry that we believe is, as Marshall Field said is “…not only the best way, the quickest way, the safest way, but the only way to become wealthy.”

We are living in exciting times for real estate investing. While the property market seems to be facing uncertainties brought upon by a strengthening economy and contradicting economic indicators, we know better. Smart real estate investors never let a crisis go to waste and are quick to identify a silver lining in any situation, turn it to their advantage and move on to the next deal. It’s a phenomenon not unlike that in nature when all creatures, great and small, participate in a perpetual cycle of regeneration. Whether you buy & sell properties, invest in multifamilies, enjoy buy-n-hold landlording, or provide funding for complex deals, you play an integral role in where people choose to live,

work and raise a family. Now that’s impressive!

After all, our current economy is built on ideas that fuel innovation and give the edge in competition.

Ideas that are able to spread the fastest, win. Did you know that at one time in America owning a farm was the ticket to wealth? Then came industrialization and then factories were the moneymaking road to riches. The first 100 years of our country’s history were about who could build the biggest, most efficient farms. The second 100 years were about the race to build more efficient factories. Now we’re firmly in the third century and this one’s about ideas.

The good news is that in this economy you’ve got more choices than ever. Try this strategy or that one? Quit a full-time job to invest or attempt to handle investing as a second income? Take on a partner or do it all yourself?

The explosion of choice is one of the unanticipated, unavoidable, outgrowths of the convergence of technology, abundant capital, economic growth, and a changing market—the new world of business

in which all of us work and live.

The bad news is you have tougher decisions than ever with each one involving higher stakes. The margin for error has shrunk and the variables are more complex than ever.

That is why there is strength in numbers. At National REIA we play a vital role in keeping our industry strong and our members successful. That is our renewed commitment to you as we start yet another year – our 32nd in fact!

And, as my good friend George likes to say, “Good Luck and Good Investing!”

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Real Estate Journal

Insurance and Disaster Recovery

by Jeffery S. Watson, Esq.

T

year we have seen powerful hurricanes hit Texas and Florida that have caused major devastation, the impact of which will be felt for years to come. I recently spoke to a client of mine who has over 30 years of experience in the property and casualty adjusting arena. He shared with me some important things homeowners, lienholders and rehabbers need to know about disaster recovery and insurance.

When there is damage to your property, file a claim with your homeowner’s insurance carrier immediately. Unless your homeowner’s policy has the additional endorsement or rider for flood insurance, all damages caused by ground water or a flood will not be covered; however, you need the denial letter from the insurance carrier specifying what is denied to then open a claim with FEMA. Here’s where it gets technical.

There can be multiple causes of his

water damage to a property in events such as what happened in Texas and Florida. Damage to the roof and ceilings from water getting in due to wind damage to shingles would be covered. In a two-story home with water damage in the upstairs due to leaks in the roof caused by wind damage, and flooding on the first floor caused by ground water rushing in, the insurance company will deny much of the damage caused on the first floor but cover the damage on the second floor.

This leads to the conundrum of where the line is drawn for the damage due to mold. Read your policy very carefully and pay close attention to any new exclusions or exceptions that have been issued in the policy as to what is or is not covered regarding mold. Much of the language in your homeowner’s policy relative to mold is a result of problems that originated in Houston, Texas thirty years ago in litigation that resulted in placing costs on insurance carriers that they had not anticipated.

I’m sure there were many people in the Houston, Texas area and elsewhere who were unable to locate a copy of their insurance policy, and for good reason. All the interior contents of their home or apartment had been lost due to water damage. In this situation, contact your insurance agent (provided their office is still functioning) or your insurance carrier and request that they send you a certified copy of your insurance policy.

There are other potential insureds besides the fee simple owners of their primary residences, including lienholders (private lenders who have money secured by collateral that has now been damaged by a major event), landlords and rehabbers.

If you are a lienholder, make sure you are listed as a loss payee on the policy, and that you have exercised your rights to make sure the policy has remained in full force and effect. A particularly important area for you is to make sure that when insurance benefits are paid, the check has both the name(s) of the insured and your name as the lienholder on it. The insurance company should be making the check payable to both. This is to make sure your interest in the collateral property is protected.

As the lienholder, you can ask

the insured to provide you with detailed information regarding the scope of work as well as background and reference material on the contractors involved.

Hurricanes Katrina and Sandy showed us that less-than-honest contractors will flood the area and prey upon desperate and ignorant homeowners, taking advantage of them by grabbing the money and running, doing slipshod work, or other unacceptable and immoral behaviors. Protect yourself and your borrowers by using good due diligence.

Lienholders, please remember there are portions of the benefits that you are not entitled to have any control over, like the portions that would provide coverage for displacement, and the replacement of personal effects and household goods. You can only have input in and control over the insurance benefits paid out by the carrier to replace and repair the damaged structure.

Landlords and rehabbers, the policy you purchased needs to be appropriate for the type of investment you have made into the property, specifically for nonowner-occupied properties. Those of you who are in a flood plain, I trust you have purchased flood insurance. continued on page 15

With National REIAU, we have made learning from some of the best fast, easy and inexpensive. National REIAU delivers great low-cost, high-quality investor training on exactly the subject you want, exactly when you want it.

Learn more by visiting www.nationalreiau.com

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Real Estate Journal · Winter 2018

Real Estate Journal

Buying and Holding HUD Properties

by Larry Goins

S

you are considering purchasing a HUD property and you are wondering what your options are in terms of profiting from it. Due to the proliferation of reality shows based on the process of flipping houses, you might think that is your most obvious choice. While such a choice is not without its merits, buying and holding a HUD property might be more feasible for you, at least initially.

What does buying and holding mean? When you buy and hold a property, you purchase it and keep it in your position: no wholesaling, no flipping. Instead, you rent it to tenants. Your profit does not come to you in one, lump sum; rather, it provides you with a steady source of income each month.

Now, you may be asking yourself, why should you consider this option over the others available to you? Renting seems messy. You have to maintain the property and hope you get tenants who care for your property as much as you do. o,

But buying and holding provides several benefits over other options.

The advantages are that you can make a lot more money in the long run from the cash flow from the rent a tenant will pay.

You also increase your equity over time as the loan is paid down (if you have a loan), as market values increase, and you may also receive depreciation benefits on your tax return.

The downside to buying and holding is that the financing is harder to get and you have to wait longer for your payday— sometimes years longer. If you have the money to put down, are qualified for a mortgage, and don’t mind managing the property and tenants over the years, this may be the way to go. The benefits are that you are building long term passive income and equity in the property, which is an asset you can always keep forever or eventually sell.

Many investors also pay cash or get short-term financing in order to buy a property in a couple of days or weeks, and then refinance with a loan whose interest rate is lower

than it would be getting an initial purchase money loan.

If buying and holding is your strategy, do your market research and find out what areas of your city or state are scheduled to have the most appreciation, or, are in the path of progress. Those are the places you’ll want to look for homes during your search. You can use www.Google.com to find out this information. Simply search for the keywords: "your state" then "cities with best appreciation."

Example: "South Carolina cities with best appreciation." I think every investor should keep at least a few properties as rentals. This way you are building long-term wealth.

If all you ever do is wholesaling or flipping then you will always have a "job." This is because flipping and wholesaling is a business and keeping properties as rentals is an investment.

I also think that every investor should learn how to deal with tenants and manage properties.

You may not like it, but it is good experience to learn how to do it.

When I keep a property as a rental, I like to try and get at least 2-3% per month of what I have in the property as rent. For example, if I paid $25,000 for the property and invested another $5,000 in repairs then I have a total investment of $30,000. Well, 2-3% of that per month would be $600-$900 per month in rents. This is not a bad return on my investment when you multiply this by 12 to get my annual yield. The other good news is you will also have other tax

advantages of owning real estate, such as depreciation.

But keep in mind, you will have repairs and maintenance and vacancies from time to time. There isn’t an option available to you that isn’t without its risks. When you rent, you risk problems with tenants and periods of vacancy.

When you wholesale or flip, you risk not making a large enough profit to make the process worth it.

In the end, once you fully consider the pros and cons, you may find that buying and holding is the right option for you.

Just remember: wholesaling and flipping are not the only options available to you. By renting your property, you provide yourself with a steady source of income, an income which can—over time— exceed the income you would receive from selling the property.

And if you buy in and up and coming neighborhood, you can make money from renting the house until housing prices go up, giving you an even greater profit.

In this case, the saying just might be true: good things come to those who wait.

Larry Goins is an author, trainer and national speaker. He has written several books on real estate investing that are available wherever books are sold. He is making his latest book HUD Homes Half Off! available for free for a limited time at the following special website: www.

FreeHUDBook.com

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5

Real Estate Journal

The $100,000 Mistake Many Landlords Unintentionally Make

FHA Violations – Unfortunately, Even Good Landlords Commit Them

by Christian Bryant

A

s I travel around teaching

classes to landlords, I hear way too many stories about the landlords that unintentionally commit FHA violations. These stories hit me especially hard because, if they would have attended one of my FHA classes they would have known how to avoid these mistakes. Don’t get me wrong though, I don’t believe for a second that all FHA violations are unintentional. The sad reality is that most violations are committed by the very small percentage of landlords that make the rest of us look bad.

The Office of Fair Housing and Equal Opportunity’s Annual Report on Fair Housing (found online at https://www. hud.gov/sites/documents/ FY2016FHEOANNUALREPORT. PDF) came out earlier this year.

This yearly report summarizes everything HUD/FHA related for the July 2015 – June 2016 fiscal year. There were 8,385 FHA violation complaints and of those that were found in violation (about 800) received $25,297,453 in civil penalties/fines. That’s an average of close to $30,000 per violator.

HUD civil penalties / fines have maximum limits that range from $19,787 - $98,935 per violation depending on the circumstances.

Keep in mind that these are just the amounts that go to HUD and do NOT include the plaintiff ’s actual damages, legal fees, and punitive damages. These can range anywhere from $10,000 to well into the millions in some cases.

After you factor in the defendant’s legal expenses defending their actions the total cost can quickly hit the $100,000 mark. Most landlords have less than 5 units and an expense like this will surely send them into

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6

bankruptcy and their properties into foreclosure. For those that are intentionally discriminating, I say good riddance. Sadly though, there is always a small percentage of landlords penalized that did something as simple as advertising that their unit would be ideal for families with children, because it is close to a good school.

Of all the complaints filed, well above 75% of them involved some form of discrimination violation within the terms, conditions, privileges, facilities, advertising, and/or statements. That means that most violations occur before the tenant even applies for the unit. To learn the ins and outs of FHA & Discrimination laws, you really need to attend a continuing education class. This article merely touches on the surface of all that you should know.

I can give you a general guideline to follow that will help you avoid the most common unintentional FHA violations. A landlord’s job is to provide the facts a tenant needs to determine what is best for them.

A landlord does not have a right to influence the tenant’s decision.

When you are creating your unit advertisement or answering questions about the property, this is very important to remember.

Did you stick to the facts and allow the tenant to determine why your unit is or is not ideal for them?

Typically, this all comes down to how you word things. A common mistake I see is when landlords are advertising a unit close to a school.

Incorrect, “Great rental unit across the street from Lincoln Elementary is ideal for a family with young children.”Correct, “ Great rental unit across the street

from Lincoln Elementary School.”

A tenant that does not have a family could see the first example and assume that by saying it is good for families with young children, it is not a good choice for them.

By sticking to the facts like in the second example, you don’t push them towards that assumption.

The tenants with young children will naturally come to their own conclusion that your unit is ideal for them. Simply by changing the wording you still get to advertise the good things about your unit without unknowingly committing a FHA violation. You allow the tenants to decide if your unit is ideal for them without nudging them in either direction.

Personally, I don’t disagree with any of the FHA / Discrimination laws and I am not proposing that we change them. They exist to provide some protection for people that truly need it. I simply want to point out the risks for landlords and thus the importance of attending continuing education classes on a regular basis. There are very simple things that you can do to protect yourself, but you don’t know what you don’t know. Right?

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.

Real Estate Journal · Winter 2018

Real Estate Journal

The Truth About Investing with OPM(Other People’s Money) Be meticulous and treat investor funds like your own, and you’ll be fine.

by Kathy Fettke

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ost of us start out in real estate investing using our own capital to make investments. This can be highly profitable, and a lot of investors never switch gears to investing with OPM (Other People’s Money) because the income from previous investments funds the next round.

However, in most cases, restricting yourself to the sole use of your own capital will limit the size and number of the deals you can transact.

“Now You Get to Become a Real Investor” Back when I was first learning about real estate investing and living in California, I worked with a highly seasoned investor who acted as a casual mentor. I’d run ideas past him and he’d give the thumbs up or down.

At that time, California properties had recently doubled in value. Since I was a mortgage broker, I was wellversed in the potential represented by leverage and bringing "dead equity” to life. I refinanced our primary residence, taking as much cash out as I could to buy cash flow properties in Dallas, Texas, where properties were much more affordable.

My mentor approved of this plan and helped review the properties my husband and I were purchasing. We ended up buying 14 rental homes, but then ran out of money. I wanted to continue building up cash flow, so I asked my mentor what I should do next. He replied with a grin, “Ah, yes. Now you get to become a real investor.”

I asked him what he meant. I thought I was doing pretty well already! Noticing my confusion, he continued. “Real investors use other people’s money. Everyone, even Donald Trump, runs out of their own money eventually. That’s why you need to learn how to use OPM.” But What Happens When There’s a Recession?

At that time, the only way I knew how to use OPM was to use the bank’s money through conventional financing. Since we were tapped out on down payments I just stopped investing for a bit. As it turned Real Estate Journal · Winter 2018

out, I’m glad I did, because shortly thereafter the Great Recession hit and real estate investors nationwide got hammered. One colleague of mine had a private lending fund in which he had raised millions of dollars in capital using OPM. His own father-in-law had invested over $5 million.

As property values plummeted, borrowers walked from their loans and my colleague had to repossess most of the properties in his private lending fund. By 2009 the homes were worth much less than what was owed and they didn’t cash flow so he was forced to sell them at a major loss. The investors in his fund were furious and some tried to sue him, even though he obviously wasn’t responsible for the housing meltdown. Nonetheless, legal bills mounted and he ended up losing everything, including his marriage.

I watched all of that happened and realized using OPM is serious business. Honestly, I was in no hurry to implement that strategy.

I stuck with helping people buy foreclosures, having no idea just how exciting OPM was about to make my life and the lives of my real estate investing network’s members.

My First Capital Raise Around 2009, I was introduced to a highly experienced real estate developer who had already successfully navigated several boom and bust cycles over his 40 years in real estate. He made far more money during the “busts” than he did during booms. Thanks to that track record, bank asset managers would call him to off-load development projects that had been repossessed during a recession.

After the housing crash and financial meltdown, many builders went under. In many cases, their developments were solid but their credit lines were pulled by banks that no longer had liquidity. The builders then could not finish their projects, and often lost them to foreclosure.

That’s exactly what happened to a developer in Portland, Oregon who was 70% complete on the construction of 27 riverfront townhomes. His bank failed and the construction credit line was cut. The FDIC took over and was willing to sell the $12M note for just $3M. My new developer acquaintance told me about this and asked if I could raise the $3M since he no longer

could get financing either.

Before the mortgage meltdown, an established developer could walk into nearly any bank to get $3 million for an incredible deal like this, but not in 2009. Banks were busy licking their own wounds.

I sent out an email to our Real Wealth Network members to see if anyone would be interested in this deal. To my great surprise, I had $3 million committed within hours. I also had no idea how very nearly I avoided disaster in the process!

At the time, I didn’t realize there are very strict rules for raising money. Sending out an email is not one of them! The Securities and Exchange Commission (SEC) governs the use of OPM very carefully because it represents such a huge potential for gain, loss, and abuse of trust if you handle things poorly or lack ethics.

One of the strictest rules at the time was that you could only present deals to investors “with whom you had a pre-existing relationship,” which means exactly what it sounds like: You could only ask people to invest on big group projects, also known as syndication, if you already knew them in some way. This meant that you could not just call up someone you knew was really wealthy and ask them to participate in your deal or go to an investors’ association meeting and stand at the front of the room and call on a bunch of strangers to put funds to work with you.

Fortunately, the people to whom I sent the email were members of my network and regular attendees at our in-person events - so I did have a pre-existing relationship.

Even more luckily, the money came in so quickly that I didn’t mention it on my podcast. If I had, I would have unknowingly broken securities law, because announcing a private placement to the public is a violation. It might have been an accident, but the SEC still could have fined me. If I had committed fraud in some way (and I didn’t!), the S.E.C. could have thrown me in jail. That’s how seriously they take this stuff, and they should.

That project ended up being very successful, and investors earned double-digit returns in the middle of the Great Recession. I was hooked, and it marked the beginning of my new role as a syndicator. I realized that if I was very careful about the projects I promoted and the people

I worked with, I did not have to be afraid of OPM and I could generate wealth for my investors, my company, and my family in the process.

My original rule from the first time I heard about OPM from my mentor still stands firm, however: Don’t hurry the process or rush into anything. If you do, you might miss something important and Definitions: • SEC: The U.S. Securities and Exchange Commission (SEC) is an independent federal government agency.

It regulates securities markets, promotes full public disclosure, and protects investors against “fraudulent and manipulative” practices.

• Real Estate Syndication: The pooling of funds from multiple investors and channeling those funds into real estate projects.

• Securities: A tradable financial asset.

• Private Placement: When an asset or interest in an asset is sold directly to an investor or investors rather than as part of a public offering.

• Public Offering: Offering stocks or shares in an investment in a public setting.

find yourself in a bad position of having failed to help your investors generate the returns you all had hoped for.

How the JOBS Act Changed the Game In 2012, President Obama signed the Jumpstart Our Business Startups (JOBS) Act into law. That legislation was created to help small businesses raise capital by easing some U.S. securities regulations. For the first time ever, private companies could raise money by marketing their offering to the public rather than only to investors with whom they continued on page 22 7

Real Estate Journal

Winterizing Your Investment Property for Colder Temperatures

by Sulema Vela, Southern Division Pro Director, The Home Depot

I

t’s the most wonderful time of the year... if you’re properly prepared. Cold temperatures are here, and winterizing and preparing your property now will ensure a comfortable and efficient home environment. Here are five strategies to prepare properties for winter weather.

Don’t Wait, Insulate While attics can be draft conductors, they also are among the easiest areas to reinforce. The simple addition of extra insulation can improve heat retention and localize incoming air blasts. If applied properly, proper insulation can reduce energy costs and serve as a selling point.

Modern insulation also can deliver benefits beyond temperature management. At The Home Depot our merchants and

Owen Corning worked together to develop a new product called Pure Safety insulation. Pure Safety insulation maintains healthy air quality in your home and is certified asthma & allergy friendly by the Asthma and Allergy Foundation of America. It’s fire resistant and can provide valuable extra minutes in the event of a fire. It also reduces noise to help you sleep better by

the onset of acquiring a house, investors should inspect doors, windows and siding for gaps and holes that allow cold air into the space. If areas need repair, foam sealants, weather strips and caulk offer low-hassle, low-cost solutions that will prove their value almost immediately.

While preparing for cooler temperatures, remember to assess the plumbing. Pipe maintenance takes greater priority during the winter, as leaking and freezing both elevate the risk of bursts and potential water damage. Evaluate pipes for cracks or disconnects absorbing and reducing noise before winter arrives to reduce the levels across a broad range of sound likelihood of a costly repair. frequencies. You can only find it at The Home Depot.

Light the Way With the days getting shorter and Mind the Gaps the nights getting longer, lighting Drafts may not seem like a big is an often overlooked area for deal, but the average home has energy savings. Many investors enough air leakage that it adds up to and tenants have been hesitant to a two-foot square hole, according switch to LED bulbs because they to the Department of Energy. From ...continued on page 11

Self Directed IRA ...continued from 2 retirement accounts.

She partnered with family members’ IRAs (three total) to loan funds to a real estate investor to complete a rehab. She utilized a third-party servicer to structure the promissory note. During a 14-month term, the note yielded a return of over $42,000, a 25-percent ROI. The return must be split according to the percentage loaned from each account and returned to the accounts accordingly.

How to get started with selfdirected investing? The first step to self-directed investing is opening and funding a selfdirected retirement account. There

are a few ways to do this, including: Open an account and fund with an out-of-pocket contribution.

Assuming you or your spouse earned taxable compensation for the year, you can make a contribution to your qualified retirement account from your personal checking or savings account, or by credit card.

• Move funds or assets from an existing qualified retirement account to a new qualified retirement account. The funds or assets are transferred directly from your current financial institution to the self-directed custodian.

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 8

• Complete a rollover, which involves moving funds from a qualified plan, such as a 401(k), 403(b), Thrift Savings Plan or other qualified plan, to an IRA. A rollover typically occurs when you receive a personal distribution from your previous employer or current provider of your plan and deposit it into the new account. Consult with your financial professional to determine if a rollover is appropriate.

• Not all custodians offer self-directed qualified retirement accounts; Equity Trust Company is one such custodian. IRS Publication 590 provides guidelines for owning and investing with an IRA. In addition to the list of investments not permitted in an IRA, the publication provides information about: • Disqualified individuals • Indirect benefits • Unqualified Business Income Tax (UBIT) • Members of National REIA qualify for a FREE account for one year with Equity Trust. For more information please call 844-732-9404 or visit www.

TrustETC.com/NationalREIA

for more details.

As with any investment, your due diligence is key. Before making an investment decision consult with a tax, legal or financial professional.

Heather Taylor is with Equity Trust, a financial services company that enables individual investors to diversify investment portfolios through alternative asset classes, including real estate, tax liens, privateequity and precious metals.

The case studies are for educational purposes only. Past performance is not indicative of future results. Investing involves risk, including possible loss of principal. Information included in the above case studies were provided by the investor and included with permission. Equity Trust Company does not independently verify all information provided by third parties.

Real Estate Journal · Winter 2018

Real Estate Journal

Real Estate Journal · Winter 2018

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Real Estate Journal · Winter 2018

Real Estate Journal

National REIA Legislative Update Tax Reform s of this writing, tax reform is the next big agenda issue for the White House and Republicans. The new healthcare reform effort has pushed the release of some of the key points and details of the tax reform package on the back burner until Obamacare is repealed or the Republican's efforts are finally put to rest. The tax reform package is most surely going to include tax cuts for businesses and possibly to the individual’s rates. In terms of the details of the individual tax cuts, the current seven brackets would be collapsed into four: paying 35%, 25%, 12% and 0% for the House version. Additionally, the House Republicans’ package would lower the corporate tax rate from 35% to 20%, and eliminate the Estate Tax.

A

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Real Estate Journal · Winter 2018

The White House is doing more to engage conservatives. They have been hosting conservative groups in order to get them on board early, so there is not a collapse from within the base, like April’s House Healthcare vote. However, many Senate Republicans, like Senate Finance Chairman Orrin Hatch, are claiming that the “Big Six” tax reform details will be advisory and that the senate is likely to change things up. With the White House wanting Tax Reform done before the years’ end, or early 2018, Senate Republicans will try to prioritize the big tax issues.

However, with the plethora of ideas in the Republican Conference on taxes, the issue may lag until the second quarter of 2018, just months before the midterms.

There are several key “loopholes” that are up for consideration and/ or elimination. These deductions

restriction language possible to limit converting wages to profits Child Tax Credit amount (about $1,600) • Expanded exemption of the Estate Tax to $11M...with a question on complete repeal • Difference in the top individual tax rates: 39.6% vs 38.5% • State & Local Tax Deductions (SALT) – the House preserves a $10K property tax deduction • While the White House and House of Representatives may drive the conversation, the House must pass a bill first, and then it will be in the Senate range from Employer Sponsored where the greatest test will take Health Insurance (ESI), to State place. Senate President Mitch and Local Taxes (SALT), to home McConnell cannot afford to lose mortgage interest, and charitable 2 Senators, which puts every donations. While SALT is Senator in a key negotiating unpopular, as it is perceived that position. the federal income tax subsidizes At National REIA we will high tax communities, the other continue to engage on this three have some strong supporters and are more broadly supported issue, and communicate real developments as they take place – across the country.

Presently, the House and Senate as well as helping our members see through the smoke & mirrors of agree on the following: • Reducing the corporate tax rate the DC intrigue being played out on the national stage. from 35 percent to 20 percent • Elimination of the Personal HUD Lead law update: Exemption On August 10, 2017 HUD • Nearly doubling the Standard issued a notice updating its Lead Deduction Safe Housing Rule (LSHR).

• Elimination of the Alternative This rule impacts all Public Minimum Tax Housing Authorities, Project • The House and Senate are close Based Properties, AND Housing on several other items: Choice Vouchers, i.e. Section 8 Top Pass-through rate – ...continued on page 19

Winterizing Your investment ...continued from 8 didn’t like the quality of the light.

At The Home Depot, we worked with Cree to develop the new 75-Watt replacement LED R20, which is one of the brightest bulbs available and delivers a clean, high quality light that fills up large rooms. It uses 85 percent less energy than incandescent bulbs and lasts more than 20 years, which means you don’t need to worry about tenants climbing ladders to replace the lights.

Tools for Success Ice and snow accumulation can become a safety risk. Instead of waiting for a weather event, stock up on salt, ice melt and tools now while the demand is less urgent.

Stowing these items away keeps an adequate supply on hand to address challenges and helps deter tenants from venturing out in potentially unsafe conditions.

The fall months also are a great

time to check the performance of shovels, snow blowers and other removal equipment. If these tools are outdated, consider upgrading to a powerful alternative that clears space quickly without disturbing neighbors, such as EGO’s 56 Volt Snow Blower. This blower uses a lithium-ion battery to deliver the power of gas without the noise and mess.

service. This added control will help reduce heating bills and allow you to monitor the temperature remotely.

It’s important to do inspections on your investments regularly.

Check for leaks, cracks or insulation problems now, because once winter weather arrives, property maintenance can be challenging and expensive to fix.

Heat Smarter Smart thermostats - a cool way to stay warm.

Smart thermostats not only reduce the toll on HVAC systems, they also give homes a contemporary feel to entice potential buyers or renters.

Options like the ecobee4 adjust the temperature based on occupancy trends. They also synchronize their smartphones to watch and adjust temperature settings from any location, and the ecobee includes built-in Amazon Alexa voice

Sulema Vela is responsible for the Pro business in The Home Depot’s Southern Division, leading a team of more than 80 Pro Account Representatives in an area that encompasses 700 stores across 13 states. She has more than 18 years of experience at The Home Depot, starting in 1999 as a part-time cashier while she earned her Bachelor’s degree in business administration. During her time at The Home Depot, Sulema has served in a variety of roles and capacities – including department supervisor, assistant store manager, store manager and district manager.

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Real Estate Journal · Winter 2018

Real Estate Journal

Beware of False Service Animals

by Kevin Coughlin

O

ne of the most effective

public policy campaigns of the last few decades has been the one that taught us not to park in spaces reserved for the disabled.

A combination of robust public education and stiff penalties has helped make it universally understood that able-bodied persons should avoid parking cars there.

A newer push is underway to curb the growing practice of people passing their pets off as service animals. While most people

associate the conflicts this practice presents with access to business particularly restaurants - landlords are also increasingly impacted.

It’s not hard to see why so many people find it easy to commit this kind of self-serving fraud. The federal regulations governing the rights of individuals with disabilities to be accompanied by animals are murky. Three different federal laws govern this space and the result is an array of confusing and conflicting regulations.

One thing all the federal laws have in common: no certificates or proof of training is required, only the word of the potential tenant.

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Many states have stepped into this void by enacting stricter rules.

To date, twenty states have passed anti-fraud measures. Of those, sixteen make misrepresenting a service animal a misdemeanor or petty offense punishable by fines, jail time, and/or community service.

The states that have passed laws are California, Colorado, Florida, Idaho, Kansas, Maine, Michigan, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Texas, Utah, Virginia, Washington, and Wyoming.

The growing trend in service animal fraud can make it more difficult for people with true disabilities to gain access to places they need to go.

Property investors may see an increase in renters trying to claim service animal status for their pet.

With state legislatures and courts actively settling issues regarding the rights of those with emotional, therapy, or comfort animals, many people may seek to call their pets service animals.

REIAs in states that have not enacted service animal fraud laws have an opportunity to build new partnerships with disability groups to form a coalition in support of such laws.

Seek out your state and local disability rights organizations, as well as any organizations representing service dog trainers.

Look for training businesses or groups accredited by Assistance Dogs International, a service dog standards group. These groups have an interest in protecting the integrity of service animal status and can be valuable allies in getting laws passed in your state.

If you do plan to propose a law in your state and want to know the different ways you can craft it, a review of the various state laws on this subject can be found here: www.animallaw.info/topic/ table-state-assistance-animal-laws

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.

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Real Estate Journal · Winter 2018

11/20/14 10:51 AM

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Real Estate Journal

Are Realtors a Necessary Evil?

by Stuart M. Gethner, RPh

W

here do Realtors fitin to our real estate investor business model? After all, don’t they have a fiduciary responsibility to sell a property for as MUCH as they can?

And doesn’t the real estate investor want to buy that same property for as low as they can? However, the more the house sells for the larger the Realtor’s commission. That’s not greed, that’s human nature.

I like to say that real estate investors and Realtors attend the same church. They just pray in different pews!

When one graduates from real estate school and passes the appropriate exams, they become a real estate agent. Did you know that they are an agent for their

14

Broker, NOT a Seller or Buyer?

For an agent to become a Realtor it costs around an extra $450 per year and provides many tremendous advantages.

First, you get to put the ® next to your name. And you get a lapel pin with the Realtor® insignia as well as the monthly magazine, Realtor.

There are quite a few television commercials promoting Realtors featuring Phil Dunphy and “Shark Tank’s ” Judge, Barbara Corcoran.

The B-I-G advantage of being a Realtor is access to your areas Multiple Listing Service (MLS) and some additional online resources. The MLS is a database full of real property and their idiosyncrasies that is currently for sale in that marketplace.

Are all Realtors created equal?

Of course not! Did you know

the average Realtor does 2.6 transactions a year? And 87% of all agents are out of the industry within five years! Some agents focus on residential while others focus on commercial, or specifically, multi-

family or office space.

Many agents ‘farm’ a certain area that they consider their area of expertise. For example, my associate, Lisa Schofield of Homesmart, concentrates specifically on farming Warner Ranch’s residential homes in Chandler and Tempe, Arizona.

While my lovely bride, Stephanie Flaute focuses on working with investors, focusing on probate.

So, how are Realtors a good-fit for real estate investors? If you’re a beginner, investor-friendly Realtors are an excellent resource to provide knowledge and insight into the real estate investing business. Initially, one might want the Realtor to help teach how to comp or value a property.

As one moves up the ladderof-experience, their needs gradually shift. Now we start to look to Realtors as a “second set of eyes.” That is, we do the comps and estimate the repairs on the property and look to the investorfriendly Realtor to sign-off on our valuations and calculations.

Realtors can always be a great source of referrals. Almost every Realtor I know has experienced a “Grandma Died” deal. This is when grandma passes away and the family lives out-of-state.

The Realtor gives the family sound advice: spend a few bucks upgrading grandma’s shag carpet along with a fresh-coat of paint before bringing to the marketplace.

However, the family would rather sell Grandma’s House at a discount than spend any money. I want that phone call!

Active Realtors know the pulse of their marketplace, specifically their neighborhood. Are prices trending up or down? Which family had twins and might be moving soon? Is this an area ripe for re-gentrification? Where is the new freeway being built? Or, are ...continued on page 21 Real Estate Journal · Winter 2018

Real Estate Journal

The Latest and Greatest

by M. Jane Garvey

area, but it would pay to check out other ads and see what features other landlords are highlighting. You may want to also talk to local real estate agents and potential tenants and see what their auto-reject buttons are.

In my area garages and dishwashers are necessities. Fenced yards are a big deal if you are willing to rent to tenants with pets.

Your other customer is you, the landlord. After years of owning rentals, I have my own requirements mostly built from experience. I want materials that last! They need to stand the test of time not only in style, but also in durability. I am never looking for the latest and greatest, although I will listen to the pitch about the better "mousetrap."

I am looking for things that have been around for decades and are still top sellers at the supply house.

There is no question that renters can be tougher on a house, but turnover is as well. Things need to survive with minimal maintenance, no specialized cleaning requirements, and no learning curves on operating them. They need to look nice now and 5 or 10 years from now.

Ordinary wear and tear should not destroy them. And, on top of all of that, they need to be the most economical. For instance, over the lifetime of owning the property, I want to provide the flooring at the cheapest overall cost. That frequently means something that is not the cheapest, but an upgrade that provides better durability at a minimal increase in cost.

To sum this up; Look at your rehab for resale with the latest trends in mind and look at your rehabs for rental with the economics in mind.

A

re you paying attention to

what is "trending" in the design world. How about following the TV "reality" programs that are showing rehabs? Are you following the latest and greatest trends in your rehabs? Open concept, two tone cabinets, huge islands, reclaimed wood, stone counters, tiny houses, and man caves are all seeing their day in the sun. But, will these trends stand the test of time? Should you be following the trends as you do your rehabs?

The simple answer is yes and no.

Rehabbing for resale and rehabbing for rental are two different things.

In both instances we aim to fix up the property so that things are fresh and new and appealing to our customer. But our customers are different, so the choices we make need to be different.

Many years ago the owner of a local carpet shop told us that we should be looking at different carpet if we were planning to keep the property as a rental. Initially I thought he was going to show us ugly industrial looking carpet for the rental, but I was wrong. He started talking about how the carpet was made, how it would feel underfoot, and how it would last. He took us through his shop and showed us carpet that felt extra plush but would not hold up as long - better for a rehab for resale. He showed us carpet with a tighter weave that would hold up to the wear and tear of a rental. He recommended extra thick pad to make it feel more luxurious. While the carpet choices have expanded greatly since that early lesson, the basic thought that the choices need to be made with the goal in mind has stuck with me.

As I read about trends and watch shows demonstrating the latest and greatest, I think about how things will look to our customers in 5 years, 10 years, or even 20 years. There are classic looks that stand the test of time. And, there are things that look great but are not easy to maintain or live with. When I see some of these trends, I frequently think it looks great but I wouldn't want to have to live with it.

There are times where new materials or equipment are introduced to the marketplace.

Sometimes they catch on because they are far less expensive. But a shorter life can make the savings immaterial.

Cheap plumbing connectors come to mind as one such false economy. A failure there can result in massive damage from flooding. Other times things catch on because they appear to make life easier, but once people live with them they realize that simpler is better. Humidity can damage electronic controls on appliances.

Do we really need 50 different settings anyway?

When you are rehabbing for resale, you can go with the latest design trends. Your customer is a homebuyer who has probably

been watching some of the "reality" shows, looking at design pictures in today's magazines, and is looking for some or all of these things. I would still recommend that you stick with things that are as neutral as possible so that they will go with the buyer's furnishings and taste.

Homebuyers who buy your rehab will want things finished.

Even if some of the things may invite additional work in the way of painting an accent wall, or reconfiguring the closet design, it is important to make it move-in ready. Many homebuyers will have exhausted their supply of spendable cash by the time they get through closing, so they need to be able to move in without additional money needed for rehab. As the carpet store owner told us years ago, the carpet that looks and feels better, but doesn't last as long, fits as something that the homebuyer can enjoy for a few years before they make a change that fits their design ideals.

In a rehab for rental, we need to realize that we have two customers, renters, and ourselves. To satisfy our first customer - our rehab needs Jane Garvey is President of the Chicago to provide the basics that will appeal Creative Investors Association. to a renter. The requirements and desired elements vary from area to

Disaster Recovery ...continued from 4 Whether you are the ownerresident, landlord, lienholder or rehabber of the property, you will need to document, document the full extent of the damage to your property. If in doubt, it would be prudent for you to pay the extra money to hire an independent adjuster to work for you and help you level the playing field between you and your insurance carrier. On large claims of $50,000 or more, this is a must!

The time to review your insurance policy is before you need it! Take time to assess your own Real Estate Journal ¡ Winter 2018

disaster preparedness. How are you doing with document retention and storage? How good are your insurance coverages? Have you identified any gaps in your current policies?

Please put your hands on a copy of your insurance policy and carefully review it to determine what is covered and what is not.

Ask detailed questions anytime you communicate with an adjuster as to what coverages you’re being allotted and how the damages are being calculated, and keep records of those conversations. Remember,

you are in a first-party relationship with the insurer in this case, and they owe you a duty of good faith.

In a large-scale, catastrophic event, adjusters are going to be overwhelmed with more claims than they can manage. Do the best you can to simplify the adjuster’s job with excellent pictures, careful documentation, strong estimates for rehab costs, and accurate financials relative to the income being generated on your rental properties so you can avail yourself of the loss-of-rents provision of your policy.

Help your insurance carrier help you by keeping records, following up as needed, and tracking all expenses that are related to the claim.

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.

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Real Estate Journal

The Secret To Selling More

by Alex Goldfayn

B

ecause I run a revenue growth

consulting practice where my clients add 10 to 20 percent to their growth year after year, people always ask me all the time, what’s the secret to sales?

Because I do keynote speeches and workshops every week, sometimes multiple times per week, people always ask me, what’s the secret to revenue growth?

What’s the magic bullet for revenue growth.

And I tell them.

And I’ll tell you right now.

Because I know what the secret is.

I’ve studied it.

I’ve looked for it.

No, I’ve hunted for it.

I’ve written about it.

I speak about it.

I teach it.

I will tell you what the secret is.

The secret is. ... That there is no secret.

There is no magic bullet.

There is only the grind.

There is only the work.

You already know what to do.

If your livelihood depends on your selling – and, preferably, selling more– then you already know what to do.

You know you must tell your existing customers what else they can buy from you, because too many of them don’t know. That’s why they frequently say "I didn’t know you did that!"

You know you should spend more time talking to prospects, people who have not yet bought from you.

You know they’d be better off with you than the competition, but you’re not really putting in the time to talk to them.

You know you should spend more time on the telephone talking to customers and prospects. Did you know salespeople average just four hours per week on the telephone?

Four hours! That’s it!

You know you should ask your customers for the business more.

You know you should pivot to the sale. They’re talking to you, they’re interested, ask them to buy!

You know you should ask your happy customers for referrals, and they’d be happy to give them to you.

Because people love giving referrals.

But we don’t do these things.

Because we spend our days reacting from one incoming call to another.

And when we live like this, we are not in control.

Our sales growth is not up to us.

If the right calls come in, you might grow.

But if the wrong calls come in, you won’t grow.

And it is completely and totally outside of your control.

Want to grow sales?

We must do the proactive work that growth requires.

And what is this work?

Communicating with customers and prospects! That’s it. The more that we communicate with them, the more they buy.

The less we communicate, the less they buy. It never works the opposite way. You can never communicate less, but sell more. continued on page 22

Regulatory Burden ...continued from page 1 Remember, if you will, back to the days of the credit collapse that preceded the recession.

The banking sector had become enamored of the sub-prime loan and many of the largest banks were suddenly in trouble. The list of failures was long and went to the heart of the financial sector.

Within a year there was no Bear Stearns, Lehman Brothers, Washington Mutual as well as many others that disappeared through mergers and acquisitions.

The reaction politically led to the Dodd Frank legislation and it was clearly punitive in nature. The banking system was held to blame for the economic debacle and the regulatory fury of the system was unleashed on the banking industry as a whole – all 3,000+ pages of it. By the time the legislation was passed it involved hundreds of new rules and regulations and over 20 federal agencies. Ever since, there has been a wry joke circulating around the banking community that asserts that the good news is that they are hiring but the bad news is that they are only hiring compliance officers.

Every such regulatory burst creates a wave of unexpected consequences and the Bank Reform Act has been especially egregious.

16

The new law became a catch-all for every idea and complaint that somebody had with banking with the small, community based banks affected as much or more than the larger banks that were actually engaged in the targeted behavior.

The impact on the mortgage market was significant and remains so. There is no doubt that many mistakes were made by overeager banks and the abuses have been well chronicled. The sub-prime fiasco was part of the reason for the housing bubble that soon dragged the entire economy down. The problem is that this reform effort affected good banks as much as bad ones and the housing market itself has been affected. It has become far harder to handle mortgage loans and this has been good in some cases and not so good in others. It has become far harder for people to qualify for a mortgage and that limits some of the abuses, but also limits availability for those that might have otherwise qualified.

The mood of the current political environment has been far more suspicious of regulation. Some key people have emerged that may well shift the emphasis that has been in place for the last several years. Most notably there has been a changing of the guard at the Federal Reserve

and that shift may not be over. The new Fed Chairman will be Jerome Powell. He was the Board governor that oversaw the regulatory affairs of the Fed when Daniel Tarullo elected to retire. Powell is no longer heading up the regulatory arm of the Fed but his orientation will continue to be towards the issues of regulation, as he comes to the Fed Chair position as an attorney and not as an economist. More importantly the man who will be heading up the regulatory activity of the Fed will be Randall Quarles.

His approach is radically different from Tarullo’s.

Quarles is a former Treasury official under the Bush administration (he was under secretary for domestic finance). He has also been involved with several investment groups and equity funds (Carlyle Group, Cynosure Group to name a couple). He has also been a major critic of the current regulatory regime and feels that it has damaged the economic recovery. He has not articulated the changes he would expect to make but most assume they will be designed to allow banks more freedom to engage in loans of all kinds – including mortgages, construction loans and those of a speculative nature.

The real estate industry is dependent on a variety of factors and in many respects is at the mercy of other players in the system. The banking system has to be favorably inclined towards loans that involve property and must have some appetite for risk – especially as it regards the commercial loan sector. There is dependence on the consumer, as they have to be in a position to take on the risks of real estate and home ownership.

That means that consumers have to be confident as far as their jobs are concerned as well as the state of their finances. The business community has to be confident as well. Lately many of these factors have been lining up in a positive direction as consumer confidence is up as jobless numbers have declined. The data in the business community indicates that capital expenditures are rising, as are measures such as durable goods orders, the purchasing managers’ index and the rate of capacity utilization. If the banks are able to respond to these developments with more engagement the potential for real estate growth improves as well.

Real Estate Journal · Winter 2018

Real Estate Journal

The Equifax Breach Just Put Your Sensitive Data in the Wrong Hands

by David Pickron

A

s a Private Investigator, I have access to more data than the average person.

In fact the amount and type of data I can access is down right scary. The truth is that with very little information on you, I can find your social security number, date of birth, relatives, maiden names, neighbors, friends or known associates, work, schools, education, court records and more (told you it was scary).For this reason, I am licensed and monitored by the Arizona Department of Safety. Access to this data can be used for great purposes; we protect landlords and employers everyday by performing deep background investigations on potential tenants and employees. This valuable data helps us put the right people in the right place and keeps those with criminal or eviction histories out.

The sad thing though is if all this information gets into the wrong hands, it will be used to wreak havoc. Unfortunately with the recent breach at Equifax, the wrong

people have our data and we need to wake up now.

As a society, our belief in “trust” has changed dramatically over the last 20 years. I remember my business partner moving from a small town in Utah about 20 years ago. He would go to the courts in Phoenix and throw his keys on the floorboard of his car because that is how you did it growing up in rural Utah. Two weeks into his employment with us, he came out of the court and his car was gone.

Most likely a criminal coming out of court that day saw him toss his keys on the floorboard and decided they would get a free ride.

My partner quickly realized two things: 1) he needed to secure his car and 2) that the world he lived in had changed.

The same applies to managing our personal information today. The way we have handled it in the last 20 years needs to change. Equifax has not been the only company to experience a catastrophic breach in the last couple of years. Target, Anthem, JP Morgan, US Office of Personnel and many others

have reported breaches of people’s personal information, including credit cards and account numbers.

In my opinion, Equifax’s breach is much more concerning because the amount of personal data that was compromised. With the Target breach, you might have had to clear up a credit card, cancel the old one, reissue a new one, and then the problem is solved. The problem with personal data like date of birth, social security numbers, relatives, and more is this information cannot be cleared up, canceled or

reissued. Since you cannot reissue your identity that data is now a valuable commodity ready to sell on the dark web for years and years. This is not something we just get credit monitoring for a year and be done. This has much longer lasting effects.

How can this stolen data be used against you? Imagine if a criminal decided he was going to AKA (Also Known As) your profile. He created ID’s and documentation convincing creditors, MVD’s, and

continued on page 18

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Real Estate Journal

Equafax Breach ...continued from 17 banks he was you. In addition to that exposure, he gets caught committing a felony and gives the police officer an identification card that has your personal info on it. Now, not only do you have to worry about credit cards, bank accounts and credit files, add to that headache false criminal records that could haunt you for years. Meanwhile the criminal goes back to his given name with a clear record. In other words, people do not have to become “you” all the time, just in certain situations where they don’t want to damage their identity and carrying that ID for years to come helps them do just that.

It’s not all doom and gloom; there is a solution. First, like my partners car, we have to lock our profile and credit file. Experian offers a service called a credit freeze that locks your credit so no one can access it. When you or a creditor needs access to that information you can unfreeze your credit for an amount of time.

Some states allow the credit bureau to charge $5 to $10 to unfreeze your credit file, but that is a small price to pay for protection. It is extremely important that you remember your “Pin” that Experian issues you for future management of your file. The process with this “Pin” is easy, but if you forget it, it will take days to have it mailed to your last known address on file. The good news is each credit bureau communicates one with another so placing a freeze on one will satisfy the others. Keep in mind that you can not set a freeze at Experian and then try to unfreeze it at Transunion.

In addition to freezes, the credit bureaus also offer a “fraud alert,” which allows those who are extending you credit to be diligent in whom they are doing business with. Though this process has its place, I recommend the whole freeze.

Second, I recommend setting a Google alert with your name, email address, and address. This allows Google to alert you anytime they pick up information that matches your alerts. This is very useful if you have an uncommon name.

Unfortunately, if your name is Mike White, it might become annoying.

Third, review everything about you online. What have you posted on Facebook, Linked In, Blogs, etc. This Equifax data has exposed your core data, but think about what other information someone can obtain from you online.

And while you are at it, teach your children the importance of managing and protecting their personal information. I can be diligent myself, but if my daughter 18

is telling everyone we are in Hawaii (so come rob my house) or she is having a party and posts our address or pictures of our house, it opens up access to our personal information. If her filters are not set and anyone can see Mom, Dad, Grandma, or other relatives, think of the information one can gather.

What is the main security question used by banks or other institutions?

It is “What is your mother’s maiden name?” Social media and oversharing just made answering that question really easy.

These three steps offer added protection but there is no foolproof way at this point to have total protection. The company Lifelock was forced to put a disclaimer on their commercials because of misleading advertising...you might have heard it...”No one can prevent all identity theft. But paying attention—to data breach news, your financial statements, credit reports, and more—can help you protect yourself ”.

Human nature tells us to take the easiest road, but when it comes to protecting your personal information, the last thing you want is to be caught up in an identity crisis. If you decide not to do these three steps then I recommend you get a service like Lifelock who will do it for you for $10 a month.

As a professional I am on the right side of sensitive data but with the latest data breach, and more to come in our digital future, access to sensitive data will continue to spill into the wrong hands for many years to come. As good as I think I am in the proper use of the data; there will also be those just as good on the bad side. My word of warning is to be diligent and cautious where you place your personal data. No company is too big or to secure to be immune to breaches, but with careful planning and monitoring, we are in charge of our data destiny.

David Pickron is Founder, CEO, and Chief Investigator of Rent Perfect, an Investigative Screening Company. For over 25, David has been working to make the process of finding and managing tenants easier. Drawing on his own experiences as a real estate investor, and thousands of interactions with his clients, he developed a series of custom solutions to help rental owners protect themselves, their properties, and the health of their ongoing investments.Learn more at www. rentperfect.com.

Benefits of Membership... REIA ...continued from 1 also have over a million products as well as the ability to do custom orders to fit almost any job!As a REIA member, you have access to The Home Depot’s Pro Xtra Loyalty program. Being a part of that program, means you will receive a 2% rebate on your Home Depot purchases, on top of their already low prices. You can also take advantage of the Home Depot Appliance program that allows you to easily order the appliances you need from an exclusive catalog designed for National REIA members. Doing any painting? The Home Depot offers National REIA members 20% off interior & exterior paints and primers at your convenient one-stop shop for paint, coating products & more.And, let’s not forget that great cabinet program where National REIA members can save 15% on in-store purchases of exclusive Hampton Bay cabinets (excluding Designer Series).

These are incredible deals that you won’t want to miss out on.

Rent Perfect is the solution rental property owners and managers have been crying out for. They’ve combined the hands-on human element of investigative techniques they’ve always been known for with the speed, convenience, and cost-cutting power of the digital age to provide you with an all-inone, mobile web-enabled screening process. The Rent Perfect Online Lease Agreement allows you to send your tenant(s) a customized lease agreement, electronically and securely! No more having to create or search for a lease; just generate it, and they’ll hold on to it for you!

They have included all the legal greatness of a normal lease, and made it easy to customize to your specific property by adding terms such as: Lease Start and End Dates, Monthly Rent, Additional Lessees and Authorized Occupants, and of course Security Deposits and Concessions. Your tenant and you will then electronically sign the lease, which is then conveniently stored and available in your account at any time! National REIA members receive a discounted 95¢ set up fee. In addition, Rent Perfect’s simple Skip Tracing tool can locate someone’s current address in seconds for just $5. Simply enter their name, last known address, and social security number. (information from their rental application.) and a report will show any addresses reported in the last year. There is a reason so many national and local chapters are turning to Rent Perfect for help.

Try their platform for yourself today and see why it’s become the one tool

hundreds of property owners and managers just can’t live without.

Equity Trust has an exclusive offer for National REIA members – a free Self-Directed IRA for one year! Open a new Equity Trust account and pay NO annual account maintenance fee for one full year. Your one year maintenance fee free account includes; a Free Account for one year – A self-directed IRA account free for one year with no annual maintenance fee; Access to Gold Level Service Membership; An online SelfDirected IRA tutorial – Jumpstart to Financial Freedom Home Study Course; Digital download of our book on Self-Directed IRA retirement strategies – Self-Directed IRAs: Building Retirement Wealth Through Alternative Investing; Digital download of video on SelfDirected IRA Insights from Vice Chairman, Jeff Desich– Snapshot of Self-Directed Investing. Open your Self-Directed IRA with Equity Trust Company and use your retirement money to fund investments in real estate, notes, tax liens, and more.

Equity Trust Company, a leader in Self-Directed IRAs, provides you with the opportunity to take control of your financial future with taxadvantaged accounts.

Office Depot/Office Max offers tremendous savings, award winning customer service, and the ability to shop the way you like (online, by phone, or in-store) with up to 55% off retail on office supply, cleaning & breakroom items; 10% off average savings on technology solutions; 10% off an expansive in-store assortment of 6,000+ items; Up to 20% off printer ink & toner; special pricing on finishing, printing and copies; and free next day delivery on orders over $50.

Escrow Services will help you with the financial structure of the seller-financing contract. They act as a professional third-party escrow agent to handle all the 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 ...continued on page 19 Real Estate Journal · Winter 2018

Real Estate Journal

REIA Legislative Update ...continued from 11 vouchers. The rule increases the responsibilities of property owners who accept vouchers. Be sure to reach out to your local Housing Authority to make sure that if you accept a voucher holder, you are working under the most up to date rules for notification and maintenance.

Miscellaneous...

Energy Benchmarking: Portland OR has passed a new law requiring

all housing receiving city funding to have a LEEDs designation.

Chicago IL: is considering an energy rating system which would require all buildings to have an energy benchmarking – with an Energy Star© system that is under re-evaluation and may be changing its own system.

Rent control: California may be facing a rent control-style program through its ballot process by a

group that evolved from ACORN. Several Cities are also considering implementing similar plans.

Inclusionary Zoning Requirements: numerous cities like Philadelphia, have been working on approving new zoning mandates for mixed income housing.

Evictions: These are the latest hottest issue to “address” by municipalities. The book “Eviction”, has set the stage for an argument for making it more difficult to evict

a resident. Yes, even if they have wasted their income, blown their money on drugs (as repeatedly documented in the book) and lied to their landlord. Somehow the accountability aspect of paying a bill, i.e. rent, should now be more difficult to enforce. Read the book.

Be aware. Be ready for it to come to a community near you!

Constant Contact’s Toolkit offers NREIA members one tool, for all their marketing. Customers get real results through marketing campaigns like email newsletters, surveys, events, Facebook promotions, online listings, and more. But it’s not just about the product: awardwinning support and free marketing resources are there to make the path to success smoother.

Avis / Budget helps National REIA members make travel for business a pleasure with special savings and the highest levels of service. There’s never been a better reason to rent with Avis or enjoy Budget’s Fastbreak Service.

Benefits of Membership... REIA ...continued from 18 have the experience and expertise required to properly service any installment plan.

1-800-GOT-JUNK? offers NREIA members a 10% discount on fullservice junk removal. Call on them to assist with all of your property management needs. They can help you with: clearing out unwanted items when acquiring a new property, dealing with any illegal dumping, downsizing before a move, and decluttering a property before listing.

Their friendly, uniformed truck team members are ready to help.

National Credit Systems is a unique agency in that their entire company focus is on servicing the collection needs of apartment owners & managers. They are true specialists, with over 98% of their business coming from the multifamily housing industry. They do not divide their efforts among several different business types. Their entire collection system has been designed to accommodate the distinct needs of the multi-family housing industry.

The result of this specialization is higher net collection returns and an unmatched level of service for our valued clients. Quite simply, National Credit Systems provides its clients with More Money and Better Service.

show shipments with no minimums or obligations.

REIFA is The Real Estate Investment and Funding Association (REIFA) that aims to launch a platform that will better connect funders & investors in order to create easy, consistent & abundant deal flow. Members will post both their offer & their work criteria; those facets will be analyzed instantly to find the ideal match. With peer-topeer review, they let the community build and back the integrity of each CallFire offers one of the world’s match alongside REIFA. most trusted communications platforms for voice and text messaging. Use CallFire to compose and send SMS text and voice broadcasts in minutes. Reach Local Market Monitor provides all of your customers instantly decision tools for residential real to communicate information, estate investors with straightforward offer promotions to keep them logic and real time information engaged, and generate new leads for opportunity analysis.National – all while saving valuable time REIA members receive 25% off and money. With your National all purchases of Personal Investor REIA membership, you will receive Market Reports when they use their specially negotiated rates of 3 cents coupon code provided by their local per Voice Broadcast, 2.5 cents for association.

Text Messages.

BuildASign.com is the world’s largest online sign retailer. National REIA members receive up to 20% off all purchases of Retractable Banner, Yard Signs and accessories, Vinyl Banners and more. Simply upload your own artwork or use their design tool to make your own custom signs and have them delivered right to PartnerShip offers NREIA your doorstop. All Signage can members a comprehensive inbound be purchased through National and outbound shipping program REIA’s custom signage portal which that combines simplicity, savings, contains specially designed templates and value. PartnerShip works with that make ordering a breeze.

FedEx, UPS Freight, YRC Freight, and other reputable carriers to provide unparalleled customer service and significant savings on every shipment. NREIA members who enroll in this free program receive discounts on small package, LTL freight, truckload, and trade Real Estate Journal · Winter 2018

ClearVue Technologies has brought to market a revolutionary new product that not only detects bedbugs but captures them via a specially designed trap that is petsafe and people-friendly. These traps provide the most effective detection & protection against the growing threat of bed bugs on the market today.As a National REIA member, you will receive a limited-time 10% member discount on all purchases.

Their patented traps are a solution to the growing problem of bed bugs.

RING RING, LLC provides companies (both large and small) with vanity toll free numbers for the use of advertising and branding purposes. Vanity toll free phone numbers increase advertising response rates because they are simply more memorable. Brand yourself with a phone number that works for you and your customers.

HouseCanary – Good decisions come from good data and by utilizing the industry-grade reports from HouseCanary you can be assured of both. Simply enter the address of a property (or set of properties) and HouseCanary will generate a report with valuation, local comps, risk factors, and forecasts. They provide the most accurate and comprehensive data platform in the real estate industry today. In fact, HouseCanary is used and trusted by some of the biggest brands in real estate and financial services. National REIA members get ten free reports when they sign up through a special portal on Uniting Investors. Check them out today and get the comprehensive data you need for tomorrow’s wise investment decisions.

National REIA’s constantly evolving benefits package assures that you have the resources you need for success in today’s market.To find a REIA near you or to learn more about all of the benefits discussed in this article, please visit www.NationalREIA.org or call 888-762-7342.

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Real Estate Journal

Member Spotlight ...continued from 1 including 6 winters on the North Slope of Alaska and running a 40-person crew in the Australian outback for a year as the only American! Bob transferred to a more stable position in the Defense Electronics division in Lewisville, TX, but when Raytheon purchased their division from Texas Instruments, Bob and his wife Camille transferred to Tucson, AZ. They didn’t like the corporate culture at Raytheon, so they obtained their AZ real estatelicenses in 2000 and began selling homes and building a rental portfolio. Three years later, their rental income enabled Bob to quit his high-paying, 22-year career to pursue real estate full time. A year later he surprised Camille by flying her parents to Tucson and picking her up in a limousine on her 40th birthday to celebrate her last day of work (she didn’t know)!

down. Bob created NoteCarry. com to structure notes, wraps, rentals, etc. with reports for buyers, sellers, and investors. His creative solutions have helped hundreds of buyers across the country purchase homes without banks.

How did you get started?

In 1982 I was making good money in the oil field and was looking for a way to decrease my tax burden.

Several of the people I worked with owned rental properties so I decided to give it a try!

Describe a typical work week for you as a real estate investor: I meet with several sellers per week who want to sell their home without going through the traditional real estate process.

We have a line of qualified buyers who are not “bankable” so I show the Sellers how they can net more Bob doing his weekly radio show “Tuscon Home Solutions” on KNST 790 AM money with less hassle and a faster sale that creates residual income by How do you fund my written “bucket list” goal to carrying the loan for self-employed your investments? donate $1 million to Make-A-Wish business owners (the hardest The buyers typically put 10 to Foundation working people in America) who 20% down and we find retirees 3) To complete my training can’t qualify with banks. to fund 1st position loans around program that will enable other How long have you been 70% of the MLS market value. “normal” people in future investing in real estate?

We purchase the 2nd notes at a generations to benefit from the I bought two rental properties discount. lessons I’ve learned in the past 35 Bob and his wife Camille in 1982 when I was 22 years old years of real estate investing.

Do you have a real estate license? before I ever bought a home to live 4) Finish my 6th book on Yes – I’ve been licensed since Seller Financing and develop in!

Where is your current 2000 and the broker of Win3 Realty WhoNeedsTheBank.com to be a market and what is your Tell us about your first deal: since 2004 national portal for seller-financed focus or area of expertise?

I bought a condo and duplex in properties.

After decades of owning rental my home state of North Dakota What projects are you properties, Bob discovered notes where I was familiar with the currently working on?

What has been your top and realized that “mailbox money” market and my Mom was my I am developing training to struggle in this business? was far superior to the “tenant and property manager for a decade. A share my success doing local seller Educating people (especially toilet” hassles of rental property. year later I partnered with three financing with others. real estate agents) that they can be He transformed their real estate friends to build a 4-plex near two the bank and help people in their How much time do you put business to specialize in private hospitals that’s been full ever since. own community obtain home into your real estate education? financing for the self-employed ownership. business owners that banks turn I’m a life-long learner the market can change daily. I attend every What do you like most AZREIA meeting and plan to about what you do? attend at least a conference per Every situation is a “win” for quarter to network and stay abreast everyone. Buyers get a home of industry changes. nobody else could sell them; Sellers get a faster sale with less hassle and Has coaching or mentoring a higher net; Retirees get to enjoy a played a part in your success? better lifestyle with 35 times more Absolutely! In 2005 Camille and income than banks pay them; I were killing ourselves selling one Neighbors benefit from homes home a week. We heard about being renovated and sold at higher a guy in Canada (Craig Proctor) prices; and, Investors like me win! who was selling more than 500 Which then enables us to donate homes per year. We attended his our time, talent, and resources conference, joined his program, to less fortunate members of and using Craig’s methods to the community. It is a “win” for leverage people, technology, and everyone systems we began selling over 600 homes per year!

Do you have a tip or advice that you would pass What are your current along to other investors? and future goals?

Do what’s right and treat people 1) I’m currently working to fairly. Unfair deals don’t last, so try substantially increase the residual to make every deal a WIN-WINincome from our Roth IRAs WIN for everyone (hence Win3 2) To finish the 2nd half of Bob working on the North Slope of Alaska in the early ’80’s

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continued on page 21 Real Estate Journal · Winter 2018

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Member Spotlight ...continued from 20

The first duplex we bought.

Bob and Lizzie Bell, a “Wish Kid” who is now in her 20’s after previously receiving a successful bone marrow transplant!

Realty). I’ve NEVER sold a home in my life to earn a commission, in fact I’ve sold dozens without making a dime! If you listen more than you speak, and help people first and worry about getting paid later, you’ll be wildly successful with a referral-driven business.

How important is joining a local REIA to a new investor?

Belonging to a REIA is like having a private tutor at school. Local REIA’s bring in national speakers that educate people about new investment ideas and also provide a local network of people who have the experience that a new investor lacks. Joining a REIA would be the first thing I’d recommend to a new investor!

What is your favorite selfhelp or business book?

The book that impacted me most was Seeds of Greatness by Dennis Waitley. His “Wheel of Fortune” exercise helped me create a perfect life measured by my standards!

Do you have any interesting hobbies or something unique that you like to do?

This condo was part of my first deal in North Dakota I enjoy writing and have published 5 books (my sixth is in the works). I also enjoy teaching, probably go back to that when I which started in 1992 when I taught retire.

Social media accounts? a personal finance class to 6th and Does your business Find me on Facebook Bob 7thgraders for Junior Achievement have a website?

Zachmeier, Win3Realty, and for 10 years. I travel too much now NoteCarry.com Win3Realty.com NoteBusinessBuilder to stick to the schedule but will NoteBusinessBuilder.com

Necessary Evil ...continued from 14 the schools here desirable?

Many experienced investors are looking to invest outside their current area for a better return. For example, my daughter, Sydni, is currently living in San Francisco. As she looks to invest in San Francisco real estate, it becomes apparent that this area is cost prohibitive.

However, as she expands the radius of where to invest, she knows less and less of that area. An investor friendly Realtor is the PERFECT solution to help one navigate an unfamiliar real estate market.

Real Estate Journal · Winter 2018

Many times we do not have all the resources but we can be resourceful. Realtors can be a resource on the “inside” of the business. For example, they can refer us to an investor friendly painter, title company and shortterm lender. A Realtor is a TERRIFIC resource. They can be a source for deals as well as a resource of information and referrals.

Realtors also take an additional Oath of Ethics; similar to the Oath they took as real estate agents.

However, this Oath of Ethics states

that a Realtor won’t be a part of a Subject To transaction. Hence, Realtors are a great source for Subject To opportunities!

We have had many referrals from Realtors who find that there is not enough spread in listing a property opportunity.

Though traditional Realtors may not be a good-fit for real estate investors, finding an investorfriendly Realtor can pay huge dividends. Spend the time gettingto-know your Realtor to ensure they will be a desirable resource to

help grow your business.

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

Selling More ...continued from 16 The work is to proactively communicate with customers and prospects, systematically and repeatedly, multiple times a day.

When a customer calls, ask them the "did you know" question. Did you know we can help you with x, y, or z?

Ask for a referral. Who do you know like yourself who would find value in working with me like you do?

Pick up the phone and call a customer you haven’t talked to in six months or more. I was just thinking about you, how’s your family?

Ask for the business, on every call: How many would you like? Or I can get them to you Tuesday if you place the order today.

There’s your secret.

The grind is the secret.

The work is the secret.

We have to do the work.

We have to care enough to do the

Investing with OPM ...continued from 7 work.

You’d be amazed at how many people don’t care enough.

It’s not hard to stand out from the competition.

The competition is not very good.

We must be present for our customers and prospects.

We must care, and demonstrate to them that we care.

We must communicate with them, so that they know we are there for them.

We have to do the work.

The secret is the grind.

Alex Goldfayn is the author of The Revenue Growth Habit: The Simple Art of Growing Your Business by 15% in 15 Minutes a Day. It was selected the sales book of the year and one of the top business books of the year

by Forbes. Learn more about Alex’s keynote speaking and revenue growth consulting practice at www.goldfayn.com.

had that “preexisting relationship” as defined by the SEC. However, there was one major caveat. Only accredited investors could subscribe, and they would have to prove their accredited investor status in writing via a third party.

The SEC defines accredited as an individual who earns $200,000 or more per year or a married couple that earns $300,000 or more per year. An investor can also be accredited if they can prove that they have a net worth of at least $1 million excluding home equity.

Definitions: • Crowdfunding: Funding a project by raising small amounts of money from a large group of people. Crowdfunding usually happens online.

• Crowdfunding Platform: A venue used by borrowers to reach large groups of investors in order to crowdfund a project or investment.

The JOBS Act also gave birth to many of the crowdfunding platforms we see today. While this is a huge boon to small business growth, it is also still very restrictive.

Many people who would like to invest may not be accredited. As a result, Title III, the CROWDFUND Act, was created to enable nonaccredited investors to participate in capital raises. However, the capital raise is limited to $1 million, and requires a tremendous amount of reporting and oversight.

National REIA is one of the founding members of The Seller Finance Coalition, which was formed in February of 2014 to advance the interest of the seller finance industry. Last year the Seller Finance Coalition continued to grow with the addition of several thousand new grass roots members across the country.

For more information about the SFC and the Seller Finance industry, visit www.

SellerFinanceCoalition.org.

Follow us on Twitter @SFCdotORG and Facebook.

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Tips for Raising Capital and Staying Out of Jail 1. If you raise funds from anyone who is not necessarily an active partner but will be, instead, a passive investor, your activity falls under security law. Always check with a securities attorney to make sure your offerings are compliant from start to finish.

2. Learn the difference between a Reg D 506B, Reg D 506C and Title III. • Reg D 506B states that companies using this rule can sell securities to accredited investors without verifying those investors’ accredited status personally, but they can only offer those securities to buyers they already know and believe are accredited.

There is an allowance of 35 non-accredited investors.

• Reg D 506C states that companies can advertise their offerings publicly without creating a prior relationship with their investors, but they must verify accreditation by a third party (CPA, financial planner, or attorney.)

• Title III allows companies to make securities offerings to non-accredited investors, but only allows a raise of $1 million in a 12-month period and restricts the amount of money an investor can invest in the offering based on their income.

3. Disclose every single possible risk involved with the investment and make sure the investors understand the risks in writing 4. Always issue a Private Placement Memorandum and LLC Operating Agreement so that your investors know - in writing exactly what to expect, especially if things don’t go as expected 5. Never promise or guarantee returns. Give best and worst case scenarios in your pro-forma.

Over-estimate timelines and expenses and under-estimate returns.

Most importantly, don’t jump into a project you don’t fully understand - especially if you are using OPM to fund it. Even the greatest deal can go poorly with the wrong management in place. That’s why today I only do deals with people who have a long, robust track record of success doing exactly the same thing.

Finally, things can go wrong and usually do. Keep your investors updated with quarterly reports - and be totally honest. The syndicators who end up in jail tend to be those who cover up the losses, by robbing from Peter to pay Paul. This is called a Ponzi scheme, and never works. Always do the right thing, and you can get though even the roughest of deals.

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.

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Real Estate Journal · Winter 2018