THE INVESTOR HOW TO RETIRE RICH, THIN AND SEXY IS IT A DEAL? WITH SELF-DIRECTED IRAS EVALUATING SMALL RENTAL PROPERTIES WORKSHOP
Presented by Quincy Long
Okay, okay, the second two adjectives in that rich relatives) title might be just to get your attention, but the • Why you might want to take the hit and confirst is completely doable when you undervert your traditional IRA to a Roth this year stand the power of combining tax-free and tax- • The top ways that real estate entrepreneurs deferred plans with real estate. mess up, and get their IRAs (and 60% of the money in them) taken away by the IRS Quincy Long, one of the nation’s most successful IRA investors joins us in August to open your Whether you use the huge wealth you build eyes to the most powerful wealth-building tools in your IRA to get skinny or sexy is up to you; available to real estate entrepreneurs: the self- just join us at this meeting and find out your directed IRA, 401K, Health Savings Account, next steps to getting the rich part down pat. and Education Savings Account. H. Quincy Long is the President of Quest IRA You might be an experienced IRA investor or and works in the Houston corporate office. a brand new REIAGC member, but either way Quincy has been a licensed Texas attorney you’ll get educated and inspired by Quincy’s since 1991, specializing in real estate. He vast knowledge and experience. He’ll show you: received his Masters of Law in 1997. He has • Why you don’t need to start with a lot of money served on the board of directors of the Realty in an IRA to accumulate massive wealth over Investment Club of Houston (RICH), the sectime—in fact, cash is the LEAST important ond largest real estate club in the country, thing you can have and maintains the title of Certified IRA Service • Why Shakespeare was wrong: you should Professional, CISP. He’s the co-author of two BOTH a borrower and a lender be (at least in courses on self-directed IRA investing. your IRA) • How you can get massive income, tax free, Join us on Thursday, August 3, 2017, beginBEFORE you’re 59 ½, with an inherited IRA ning at 7:30 pm at the Ramada Plaza, 11320 (and how to create one, even if you don’t have Chester Road, Cincinnati Ohio, 45246!
Evaluating rentals isn’t quite the same as evaluating properties for resale; the ‘value’ is as much in the income and appreciation as it is in the comps. So we’re doing a second hands-on workshop for the landlords, where you’ll work your way through data about rents, management costs, taxes, insurance, and repair costs to determine the right offer for a rental. Join us on Thursday, August 3 beginning at 6 pm at the Ramada Plaza, 11320 Chester Road.
JOIN US EARLY AND ENJOY HEARTY HORS D’OEUVRES!
The Real Estate Investors Association of Greater Cincinnati (REIAGC) has added food to our general meetings! Please be sure to join us early for hearty hors d’oeuvres and networking fun with your industry peers.
10945 Reed Hartman Hwy | Ste. 113 Cincinnati, OH 45242 P: 513 407-3137 www.cincinnatireia.com
July 2013 61 A
2017 BOARD OF DIRECTORS & COMMITTEE CHAIRS President Anita Johnson 513 334-0444
Sunday
AUGUST 2017
Monday
Tuesday
Wednesday Thursday
Friday
Saturday
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
Secretary Gina Bowden 513 477-4132
20.
21.
22.
23.
24.
25.
26.
Treasurer Scott Ellsworth 513 272-8400
27.
28.
29.
30.
31.
Vice President Drew White 513 207-9846
2 3
Board Members Ben Bauer Eric Kottner Narendra Mundhe Cheryl Long Linda Hull Tom Terlau Association Manager Nancy Terry 513 407-3137 Cincinnati REIA 10945 Reed Hartman Hwy | Ste. 113 Cincinnati, OH 45242 P: 513 407-3137 | F: 844 734-2472 www.cincinnatireia.com
Disclaimer
The REAL ESTATE INVESTOR is published 12 times a year by the REAL ESTATE INVESTORS ASSOCIATION OF GREATER CINCINNATI. The subscription cost is $120 per year. First class postage paid. © Copyright 2017 by the REAL ESTATE INVESTORS ASSOCIATION OF GREATER CINCINNATI. All rights reserved. Reproduction or dissemination in whole or in part, in any form whatsoever, is expressly prohibited. Printed in the USA. The information contained herein and information shared at meetings and events is believed accurate, but it is not guaranteed or warranted in any manner. The information is provided with the understanding that neither the author(s), program speaker(s), nor the publisher (or its directors, officers, employees or agents) are engaged in rendering legal, accounting or other professional advice. REIAGC does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. We recommend you perform your own due diligence and seek appropriate legal, accounting, or other professional advice before making any investment. TM
20172017 2 | The Investor ||July August
4 7 8 12/ 13
WHOLESALING FOCUS GROUP
6:30 pm | Perkins 7108 Hamilton Avenue Michelle Clayton - 513 400-4937 Cheryl Long - 513-429-2583
GENERAL MEETING
6 pm - Is It A Deal? Evaluating Small Rental Properties Workshop 7:30 pm - How To Retire Rich, Thin and Sexy with Self-Directed IRAs Ramada Plaza, 11320 Chester Rd
FRIDAY MORNING MEETUP 9 am to 11 am Frisch’s Restaurant 2439 E. Sharon Rd, Cincinnati Linda Hull - 513 549-7821 Cheryl Long - 513 429-2583
REHABBERS FOCUS GROUP 6 pm - 8:30 pm Slatts | 4858 Cooper Road
INVESTORS LUNCH
11:30 am - 1 pm Century Inn Restaurant 10675 Springfield Pike Dave Jasper - 513 942-5110 or Max Arroyo 513-772-5736
IRA WORKSHOP
9 am to 5 pm Crown Plaza Dublin 600 Metro Pl N | Dublin, OH www.cincinnatireia.com
15 17 19 22 24 28
LANDLORD FOCUS GROUP 6:30 pm Crosley’s Sports Cafe 4901 Vine Street, Cincinnati Scott Ellsworth, 513 659-5531 Jim Shapiro, 513 515-6717
GENERAL MEETING
6 pm - Creative Finance Primer OR Give Yourself Some Credit: Hack Your Way to Better Leverage 7:30 pm - How To Get Practically Free Houses Ramada Plaza, 11320 Chester Road
SUMMER PICNIC & OPHP MAKE UP DAY
11 am - 4 pm Lake Isabella | 10174 Loveland Madeira Road, Loveland
NORTHERN KENTUCKY FOCUS GROUP
6:30 pm at PeeWee’s Place 2325 Anderson Road Crescent Springs, KY Brandon Brewer - 859-240-7339 Tom Terlau - 859-653-6412
FORECLOSURE NOTE BUYING SHORT SALE FOCUS GROUP
6:30 pm, Wendy’s Restaurant 5909 Mulhauser Road Deb Meyer - 513 266-4008 or John Dohtery - 859-653-3290
CREATIVE BUYING AND SELLING FOCUS GROUP
6:30 pm Perkins, 7108 Hamilton Avenue North College Hill
MISSION STATEMENT
OF THE REAL ESTATE INVESTORS ASSOCIATION OF GREATER CINCINNATI (REIAGC) • Encourage our members’ success through education and professional services • Represent REIAGC members as positive, ethical contributors to the economic and the social well-being of our community
PRESIDENT’S CORNER
By Anita Johnson, REIA of Greater Cincinnati President Greetings! It’s hard to believe that it’s August already and that the summer months will soon be coming to a close. Hopefully you’ve been enjoying the warm summer months and longer days and have taken some time out for a little rest and relaxation. It’s not too late, so if you haven’t taken full advantage of this nice summer we’re having you better get going! Here at REIAGC we continue to focus on bringing to you the speakers and topics YOU need to continue to grow your business AND be an educated investor. And, based on what you have been telling us, we are giving you exactly what it is you want and need. Let’s see, what have we done just in the past two months, since our annual Vendor Showcase? Here’s a quick rundown for you…… During the month of June we tried something new by taking a hands-on approach to teaching you how to evaluate properties. No matter what your area of focus or exit strategy, properly evaluating properties and knowing what to pay for them is something that EVERYONE doing anything in real estate needs to know. We also brought in the experts on buying properties from the Land Bank, which is something that very few people even know about let alone how the process works. The hottest topic right now? Wholesaling. And yes, we just about filled the room to capacity when we brought in our local expert to tell you how you can make big money wholesaling. In July we taught you about self-directed 401Ks, and if you didn’t know about them before, I’m sure you now
know that it’s definitely something you should be doing because self-directed 401Ks quite simply “rock.” We held our version of Real Estate Shark Tank, where a few of your fellow members pitched their deals and got funding. And we closed out the month of July with teaching you all about lease-options and why it’s the perfect wealth-building strategy. Whew! There’s definitely a LOT going on at REIAGC. Even though we’re now two-thirds of the way through the year, and yes, we have done a LOT of exciting things so far this year, REIAGC continues to have a lot in store for you during the upcoming months. This month we’ll have a 2-day IRA Workshop held in conjunction with COREE in Columbus, and we will have our REIAGC Summer Picnic and OPHP Makeup Day. If you attended the 2-day IRA workshop a couple years ago, you know just how much information you are going to get, and you will want to attend again since things are always changing and you need to stay on top of those changes if you want to grow your investments in a tax-free environment. And if you didn’t attend, well, you definitely need to attend this year! This year’s Summer Picnic on August 19 will be held at Lake Isabella, and you’ll have an opportunity to get those OPHP credits that you need and that are oftentimes hard to get - in order to become an OPHP graduate at this year’s OREIA Conference. And that’s what’s happening just in the month of August; there’s even more throughout the remainder of the year. Finally, I’d like to say “Thank You” to those of you who have signed up to be one of REIAGC’s “Most Valuable Volunteers.” We simply cannot do what we do without your support. Have a great August!
Anita Johnson
2017 OREIA
National Real Estate Summit Save The Date! November 9 - 12 Great Wolf Lodge Conference Center Mason, Ohio
The Investor
3
COMING UP AT THE AUGUST 17 GENERAL MEETINGS Early Meeting Beginner Investors: Creative Financind Primer Maybe you can’t go to the bank to get financing to buy properties. Maybe you don’t want to go to the bank to get financing to buy properties. That doesn’t mean you can’t buy properties; most real estate investors actually prefer seller financing and private financing because they’re easier and often cheaper than institutional loans. But how do they work, and which are best for which deals? Attend this meeting and learn the basics of owner-held mortgages, buying “subject to” and private and hard money, including what documents you’ll need to make them work. Join us on Thursday, August 17 beginning at 6 pm. Early Meeting Active Investors:Give Yourself Some Credit: Hack Your Way To Better Leverage with Mathew Adams We’re all taught to buy without banks, but the truth is that having access to traditional lenders is a big leg up when it comes to building a portfolio. And the other truth is, most of the credit that you can get as a real estate entrepreneur is based on your PERSONAL credit. That’s why it’s worth it to know how to hack the credit system (without cheating, “credit repair” or other costly or ethically iffy methods). If you’re hoping to get unsecured credit lines, conventional mortgages, and other credit-dependent loans soon, join Matthew Adams as he describes how you can build (or re-build) a solid personal credit foundation in just 90 days for less than $500, qualify for new credit without hard inquiries, and manipulate your credit profile for higher scores and limits with just your current spending. He’s raised his own credit score over 100 points in the last 180 days; learn how you can do the same. Join us on Thursday, August 17 beginning at 6 pm.
heard about—the ones where the bank is refusing to foreclose and yet the owner doesn’t want them. More importantly, he’ll talk about how you can use little-known legal processes to wipe out that mortgage, getting the property for just the amount of the back taxes and court fees! You’ll learn: • How to identify opportunities to get free or nearly free property (Hint: they’re not found on the MLS!); • Information sources and data mining for the real estate investor; • How to obtain title through a quiet title action; • Which zombie foreclosures are worth pursuing, and which to run from; • How to time the payment of the property taxes so you don’t spend a bunch of money before you make money And most importantly, you’ll know a strategy that almost no real estate entrepreneurs are aware of, and see profitmaking opportunities where others don’t! Joe will be speaking at the REIAGC main meeting on Thursday, August 17 beginning at 7:30 pm.
Main Meeting:How To Get Practically Free Houses Presented by Joe Lucas, Esq. Yeah, we thought that headline would get your attention—and yeah, it’s for real. Attorney Joe Lucas will discuss how to find and get all those “zombie houses” you’ve
NRL Lisa Chambers
(513) 607-4107 lisa.chambers@nrlmortgage.com
4
August 2017
WELCOME NEW AND RENEWING REIAGC MEMBERS!
REIAGC Would like to welcome its new members and thank its renewing members in the month of June: Chris Averette Michelle Billington Sam Black Steve Brandt Priscilla Burnam Glenn Burton Reginald Clay Sr. Braighton Coey Rodney Crook Matt Deininger Denny Dellinger Dennis Estrada Leah Evans Omar Garced Lachanna Jackson Marshan Johnson Marvin Lane Maria Llambi Lenny Llambi David Nell Joseph Ray Bruce Sandy
Donald Solomon Tim Stein Edward Waldroff Jacque Waldroff Velma Weaver Cheryll West Janice White Steven White Diana Williams-Harris Joanne Wilson Mark Yeager
THANK YOU TO REIAGC’S MVVS FOR JULY! Mark Heismann Muriel Settles
Alicia Vodde Cleaning Logistics, LLC Catherine Cahill Cleaning Logistics, LLC Lisa Chambers NRL Mortgage
The Investor
If you would like to be an REIAGC MVV, contact the office at 513-4073137 or info@CincinnatiREIA.com.
5
YOU HEARD IT HEAR FIRST: A MEMBER PREVIEW OF THE 2017 OREIA NATIONAL REAL ESTATE SUMMIT! If you’re new to REIA, you’ve probably heard the rumors about a giant convention coming up in Cincinnati in November. You’ve heard that it’s the biggest in the country, packed with education, and more fun than you can shake a stick at. Well, you’ve heard right. It’s the 2017 Ohio Real Estate Investor’s Association Summit, it’s November 9-12 at the Great Wolf Lodge and Waterpark near King’s Island, and it’s the event of the year. OREIA works year-round to find the most experienced experts on the most up-to-the-minute topics to bring to this event. We can’t reveal every single presenter until the contracts are finalize, but here’s a taste of what you’ll get: Thursday’s All-Day Workshops will include Robyn Thompson on “How to Renovate and Resell for Riches.” Robyn is the undisputed Queen of Rehab, and covers everything from which property to buy to how to finance the deal to the smartest upgrades to make. If you’re more into long-term cash flow than buying and selling, you’ll love our other all-day presenter, George Antone, presenting “The Wealthy Code.” This is an incredibly in-depth workshop about how to use debt, minimize risk while maxi-
6
mizing return, and make passive income the main focus of your investing business. And the all-day sessions are just the tip of the iceberg; on Friday, Saturday, and Sunday, you’ll be treated to these topics: • How to Raise Private Money (with Alan Cowgill) • How to Make Money Buying Defaulted Mortgages (with Scott Carson) • How to Automate Your Landlording Business (with Steven VanCaughenburg) • Plus lease/options, promoting your business, wholesaling, turning your rentals into Air BnBs, and more The entire 4 day conference is just $197 for REIA members— unless you register by August 15th and take advantage of the early bird special at just $157 for 1 person, $197 for 2. Block out the dates, get registered, get a room at the Great Wolf Lodge (they filled up by early October last year), and whatever you do, GET THERE. More information and registration at www.OREIAConvention.com 888-99OREIA. We look forward to seeing you there!
August 2017
GETTING RID OF CIGARETTE SMOKE ODORS WITHOUT PAINTING, AND STILL SAVING MONEY By Deb Meyer, President, OdorXit
It’s your first attempt to get rid of cigarette stains on your rental property walls. You’re left with the white spots from the pictures your tenant took down as they moved out. You have no questions. Paint is the answer. So what do you know about cigarette smoke? Did you know it’s a gas? Not a liquid or a solid. But a gas. It actually leaves tar and nicotine on your walls which is what is making the smell – and the stain. So as property owners, you are left with the residue. In one of my first rentals in 1986, I painted over cigarette smoke on the walls. I didn’t know any better. But I soon learned it wouldn’t work. I painted with latex paint. The paint didn’t stick to the walls. It stuck to the tar and nicotine. The paint peeled off in 4’ long plastic looking gross sheets. OMG! I was going to need to paint the walls a second time in an attempt to get rid of the smoke smell. We then got an alcohol based, lung killing, hair in your nose burning alcohol based primer. We had washed the walls first so it stuck better but I should have worn a respirator. Oh my gosh, did it give me headaches too. Tar and nicotine is a gas or at least the odor you smell is and unless you get rid of the odor, people still won’t rent or buy your property for top dollar. And unless you eliminate the source of the odor, you won’t get rid of the smell.
good place to be if you did something at the showing to intentionally cover up the smell. And you know intentional cover up is totally frowned on and illegal. What can you do? Oxidize things that can be oxidized. Smoke can be oxidized. I don’t mean an ozone machine. NOT! But OdorXit’s AQM – Air Quality Manager will oxidize the smoke even under a coat of paint. It will take 3-4 weeks. But don’t paint the walls first and it will only take 3-4 days. And the AQM is safe enough for you or your workers to be in the house while it works. Not so with an ozone machine. Always STAY OUT with an ozone machine. After those 3-4 days and the odor is gone, the odor will not come back. Ever. And the AQM won’t harm the paint as it permeated through the paint to get to the smoke. You’re thinking that is hard to believe. But call us. Call us now or log on to our web site. Then order it yourself and try it. We guarantee the smell will be gone. Visit us at www.OdorXit.com or call 877-Odor Xit (636-7948. Ok, but what is the catch you ask? Yes, there is a catch. You have to follow the directions.
So how do you get rid of the odor? • Baking cookies before the showing • Plug ins in every outlet • Rent a cat so they can’t smell the smoke. • Use essential oils to counteract the smoke smell • Light candles for every showing • Live with it. If your tenant or buyer is not a smoker, living with it is a pretty tough one to do. If it is that annoying, they’ll move. And probably sue you if you’re the landlord or seller. And that’s not a
Max J. Arroyo, Jr. Vice President Investment Property Asset Manager Berkshire Hathaway Profesional Realty
Commercial Services First Circle Property Management
7311 Tyler’s Corner Place First Circle Property Management
West Chester, OH 45069 Direct: 513-772-5736 Leasing and Service: 1-888-288-5912 E-Mail: Marroyo@bhhspro.com www.firstcirclepm.com A member of the franchise system of BHH Afiliates, LLC
Building Value LLC 4040 Spring Grove Ave. Cincinnati, OH 45223 (513) 475-6783 www.buildingvalue-cincy.org
The Investor
7
10 THINGS YOU NEED TO KNOW ABOUT IRAS BY QUINCY LONG
There is a lot of confusion over self-directed IRAs and what is and is not possible. In this article I will discuss some of the most important things you need to know about self-directed IRAs. I will explore these issues and a whole lot more when I speak at REIAGC on August 3. I look forward to seeing you there! 1. IRAs Can Purchase Almost Anything. A common misconception about IRAs is that purchasing anything other than CDs, stocks, mutual funds or annuities is illegal in an IRA. This is false. The only prohibitions contained in the Internal Revenue Code for IRAs are investments in life insurance contracts and in “collectibles.” Since there are so few restrictions contained in the law, almost anything else which can be documented can be purchased in your IRA. A “self-directed” IRA allows any investment not expressly prohibited by law. Common investment choices include real estate, both domestic and foreign, options, secured and unsecured notes, including first and second liens against real estate, C corporation stock, limited liability companies, limited partnerships, trusts and a whole lot more. 2. Seven Types of Accounts Can Be Self-Directed, Not Just Roth IRAs. There are seven different types of accounts which can be self-directed. They are the 1) Roth IRA, 2) the Traditional IRA, 3) the SEP IRA, 4) the SIMPLE IRA, 5) the Individual 401(k), including the Roth 401(k), 6) the Coverdell Education Savings Account (ESA, formerly known as the Education IRA), and 7) the Health Savings Account (HSA). Not only can all of these accounts invest in non-traditional investments as indicated above, but they can be combined together to purchase a single investment. 3. Almost Anyone Can Have a Self-Directed Account of Some Type. Although there are income limits for contributing to a Roth IRA, having a retirement plan at work does not affect your ability to contribute to a Roth IRA, and there is
no age limit either. With a Traditional IRA, the fact that you or your spouse has a retirement plan at work may affect the deductibility of your contribution, but anyone with earned income who is under age 70 1/2 can contribute to a Traditional IRA. There are no upper income limits for contributing to a Traditional IRA. A Traditional IRA can also receive funds from a prior employer’s 401(k) or other qualified plan. Additionally, you may be able to contribute to a Coverdell ESA for your children or grandchildren, nieces, nephews or even my children, if you are so inclined. If you have the right type of health insurance, called a High Deductible Health Plan, you can contribute to an HSA regardless of your income level. With an HSA, you may deduct your contributions to the account and qualified distributions are tax free forever! All of this is in addition to any retirement plan you have at your job or for your self-employed business, including a SEP IRA, a SIMPLE IRA or a qualified plan such as a 401(k) plan or a 403(b) plan. 4. Even Small Balance Accounts Can Participate in NonTraditional Investing. There are at least 4 ways you can participate in real estate investment even with a small IRA. First, you can wholesale property. You simply put the contract in the name of your IRA instead of your name. The earnest money comes from the IRA. When you assign the contract, the assignment fee goes back into your IRA. If using a Roth IRA, a Roth 401(k), an HSA, or a Coverdell ESA, this profit can be tax-free forever as long as you take the money out as a qualified distribution. Second, you can purchase an option on real estate, which then can be either exercised, assigned to a third party, or canceled for a fee. Third, you can purchase property in your IRA subject to existing financing or with a non-recourse loan from a bank, a hard money lender, a financial friend or a motivated seller. Profits from debt-financed property in your IRA may incur unrelated business income tax (UBIT), however. Finally, your IRA can be a partner with other IRA or non-IRA investors. For example, one recent hard money loan we funded had 10 different accounts participating. The smallest
Renters Warehouse The Professional Landlords
Scott Adams ScottAdams@RentersWarehouse.com 513-334-4010 www.RentersWarehouse.com
8
August 2017
account to participate was for only $1,827.00! 5. Caution: There Are Restrictions on What You Can Do With Your IRA. Although as noted above in paragraph 1 the Internal Revenue Code lists very few investment restrictions, certain transactions (as opposed to investments) are considered to be prohibited. If your IRA enters into a prohibited transaction, there are severe consequences, so it is important to understand what constitutes a prohibited transaction. Essentially, the prohibited transaction rules were made to discourage certain persons, called disqualified persons, from dealing with the income and assets of the plan in a self-dealing manner. As a result, disqualified persons are prohibited from directly or indirectly entering into or benefitting from your IRA’s investments. The assets of a plan are to be invested in a manner which benefits the plan itself and not the IRA owner (other than as a beneficiary of the IRA) or any other disqualified person. Investment transactions are supposed to be on an arms-length basis. Disqualified persons to your IRA include, among others, yourself, your spouse, your parents and other lineal ascendants, your kids and other lineal descendants and their spouses, and any corporation, partnership trust or estate which is owned or controlled by any combination of these persons. It is essential when choosing a custodian or administrator that the company you choose is very knowledgeable in this area. Even though no self-directed IRA custodian or
administrator will give you tax, legal or investment advice, the education they provide will be critical to your success as a self-directed IRA investor. 6. Some IRA Investments May Cause Your IRA to Owe Taxes – But That May Be Okay. Normally an IRA’s income and profits are exempt from taxation until a distribution is taken (or not at all, if it is a qualified distribution from a Roth IRA). However, there are three circumstances when an IRA may owe tax on its profits. First, if the IRA is engaged in an unrelated trade or business, either directly or indirectly through a nontaxable entity such as an LLC or a limited partnership, the IRA will owe tax on its share of Unrelated Business Income (UBI). Second, the IRA will owe taxes if it has rental income from personal property, such as a mobile home not treated as real estate under state law (but rents from real property are exempt from tax if the property is debt-free). Finally, if the IRA owns, either directly or indirectly, property subject to debt, it will owe tax only on the portion of its income derived from the debt, which is sometimes referred to as Unrelated Debt Financed Income (UDFI). This may sound like something you never would want to do, but a more careful analysis may lead you to the conclusion that paying tax now in your IRA may be the way to financial freedom in your retirement. For example, one client made a net gain of over 1,000% in less than four months after her IRA paid this tax. This is definitely a topic you will want to learn more about, but it is not something you should shut your mind to before investigating whether the af-
STRIVING TO REACH YOUR FINANCIAL GOALS TOGETHER
Investing in real estate is a serious decision. Don’t go it alone. • Investment Analysis and Due Diligence Assistance • Accounting Services Different levels of service to match your budget • Clean, organized records means less hassle at tax time • Tax Planning and Compliance
Ellsworth & Associates 513-272-8400
What you’ve always dreamed of, someone else who knows accounting and tax to handle it for you. The Investor
9624 Cincinnati Columbus Road Suite 209 West Chester, OH 45241
9
ter tax returns on your investment would exceed the return you might otherwise be able to achieve in your IRA. 7. An Inherited Roth IRA Can Give You Tax Free Income Now No Matter What Your Age. Many people know that a qualified distribution from a Roth IRA is tax free. To make the distribution qualify as tax free, it must be distributed after the IRA owner has had a Roth IRA for at least 5 tax years and after one of four events occurs – 1) the IRA owner is over age 59 ½, 2) the IRA owner becomes disabled, 3) the IRA owner dies and the distribution is to his or her beneficiary, or 4) the distribution is for a first-time home purchase, either for the IRA owner or certain close family members. Although the neither the original Roth IRA owner nor his or her spouse has to take a distribution (assuming the spouse elects to treat the IRA as their own), non-spouse beneficiaries of a Roth IRA do have to take distributions, normally over their expected lifetimes. However, once the five year test is met, those distributions are tax free, regardless of the age of the IRA beneficiary! Even a $100,000 Roth IRA left to a 6 year old beneficiary may generate as much as $80,496,367 in lifetime tax free distributions if the IRA can sustain a yield of 12%, which is very possible with a self-directed IRA. 8. Tax Avoidance With Permission of the U.S. Government. Most people who understand the benefits of a Roth IRA really want one, but many people have not been able to qualify for this incredible wealth building tool because of income limita-
tions which restrict the eligibility of a person to contribute to a Roth IRA or to convert pre-tax accounts like Traditional IRAs into a Roth IRA. In 2010 the rules for conversions changed so that anyone, regardless of income level, is now eligible to do a Roth conversion. Beginning in 2010 anyone who has a Traditional IRA (including a SEP IRA), a SIMPLE IRA which has been in existence for at least two years, or a former employer retirement plan such as a 401(k) or a 403(b) can convert those into a Roth IRA and can then begin to create tax free wealth for their retirement. In certain situations you can even do a Roth conversion within the 401(k) plan itself. Even if you do not currently have an IRA but are eligible to contribute to a Traditional IRA, the contribution can be made and immediately converted into a Roth IRA. This truly is one of the most exciting tax planning opportunities to come along in a very long time! 9. There Are Millions of Dollars Available to Finance Your Real Estate Deals Right Now. We are in a very exciting time for wise real estate investors. There are a lot of super real estate bargains out there right now, but it can be very difficult for investors to get financing – unless they know the secret of private financing. There are billions of dollars of lazy IRA money sitting on the sidelines waiting for the right investment, because many people are very afraid of the stock market. Included among the many things people can invest in with a self-directed IRA are real estate secured loans or even unsecured loans.
Spring Valley Bank Dave Wittcamp springvalleybank@cinci.rr.com 513-761-6688
Shea Lawrence
10
513-673-2972
August 2017
Shakespeare wrote in his play Hamlet, “Neither a lender nor a borrower be, for a loan oft loses both itself and friend, and borrowing dulls the edge of husbandry.” I believe Shakespeare was wrong, but he might be forgiven since he did not have the advantage of knowing about selfdirected IRAs. You can benefit from your knowledge of self-directed IRAs either by having your IRA be a private lender or by borrowing OPI – Other People’s IRAs – for your real estate transactions. Networking is the key to success in the area of private lending or borrowing, but there are things you must know to do it properly. 10. Use Options to Dramatically Boost Your Small IRA. Options are one of the most powerful and under-utilized tools in real estate investing today, and they work beautifully within a self-directed IRA. The consideration for the option and the property being optioned can be almost anything, not just real estate. Once an IRA owns an option, it can 1) let the option lapse (which at times is the right answer), 2) exercise the option and acquire the property, 3) assign the option for a fee (assuming the option agreement allows for assignment) or 4) agree to cancel the option for a fee with the property owner, thereby getting paid not to buy the property! Options are very flexible and can be designed to fit almost any situation. One client paid $5,000 from his Roth IRA for an option which he later canceled for a fee of over $35,000. Then he took that money, bought a property at a foreclosure auction for cash, and later sold the property for $70,000 with $5,000 down and a $65,000 seller-financed note. By using the option he was able to take his $5,000 Roth IRA and turn it into a $70,000 Roth in less than a year! The more you know about IRA investing, the faster you can build your own tax-free plan. Learn more at the August 3 REIAGC meeting; I promise it will make you richer, quicker. Happy investing!
The Investor
11
REIAGC SUMMER PICNIC SET FOR AUGUST 19 Mark your calendar for Saturday, August 19, 2017 from 11 – 4 PM as the Summer Celebration and OPHP Make Up day! REIAGC had booked Lake Isabella’s Shady Elm Shelter for the picnic and the Chart Room for the OPHP Make Up classes. A Catered Affair will serve American style picnic fare from Noon to 3PM and the cost to REIAGC members is ZERO! In addition to great food and fun networking, REIAGC has four classes scheduled so you can accomplish those hard to get OPHP requirements! The classes begin at 11AM and go until 3PM. We will be covering Ethics, Fair Housing, Insurance and Regulations so take a look at your OPHP credits and register to attend the picnic! All OPHP candidates will need to have their requirements fulfilled by SEPTEMBER in order to be certified this year! Please contact the REIAGC office with any questions at 513407-3137 or info@CincinnatiREIA.com.
YOU INVEST. WE PROTECT. National Real Estate Insurance Group - the name you know and trust - has expanded to provide custom insurance solutions for all your RE investing needs. From landlords to lenders, flippers to funders, we have you covered. VISIT NREIG.COM FOR A FREE PROPOSAL.
National Real Estate Insurance Group is the nation’s leading agency offering coverage options for real estate investors across the country. Our lineup of products includes: REIGuard, LandlordGuard, PMGuard, TurnkeyGuard, and LenderGuard.
Cleaning Logistics, LLC Catherine Cahill
Inco�e �rotec�on with no �edical underwri�ng
catiecahill86@gmail.com (513) 846-4084 �ccident and �ri�cal Illness �rotec�on
Life insurance with guaranteed rates to 100 ‐ Guaranteed Issue*
*Call for details: Paul at 800.333.4638 ext. 203 12
August 2017
LISTENER QUESTION: HOW TO TAKE ADVANTAGE OF MLS Q: How can I best leverage MLS as a way to find deals to wholesale? There are so many properties for sale, and I don’t want to waste my time or my agents’. AK, Sacremento
A: The Multiple Listing Service, or “MLS,” is a catalog of all properties listed for sale through real estate agents. It’s available on the Internet to the public in most areas; however, the best and most complete access is available only to a licensed real estate agent with a subscription to the MLS’s database. Agents can connect directly to the MLS through a closed network system and can quickly sort by such criteria as price, condition, financing available, and so on. For these reasons, it’s to your advantage to work with an agent who will provide you with regular updates about properties on the market that fit your criteria. In return, you make offers on the properties through your agent, and he or she will be paid a commission (usually by the SELLER) for any properties that you buy. Advantages of the using the MLS to find deals include: • It’s perhaps the simplest way of finding properties for sale. If an owner bothered to list his property with a real estate agent, there’s an overwhelming chance that he actually wants to sell it. In addition, much of the information you need about the property, including asking price, number of rooms and bedrooms, property taxes and even some commentary on the condition of the property are right there on the “MLS sheet” or computer screen for you to see. • There are many, many properties to choose from. Statistically, more than 80% of sellers of 1-3 family properties sell through a real estate agent. This means that there are thousands of properties available through the MLS in any mid-sized metropolitan area. The vast majority of these sellers are not, of course, motivated to sell at a price that you can afford; however, with thousands to chose from, if only 5% are motivated, that’s still dozens if not hundreds of potential deals. See “tips on using the MLS to find deals” for information on how to narrow these down. • It’s cheap. In general, the agent who sells you an MLS-listed property is paid by the seller, through a “co-op” commission offered by the seller’s agent. A small percentage of agents that
work with buyers require a “retainer fee” of $500-$2,000 to start the process of showing you properties–but this retainer fee is usually returned to you when the agent makes it back on his first commission on a property you purchase through him. Disadvantages of using the MLS to find deals include: • The competition factor. Because the information is so easily accessible, there’s a lot of competition for MLS-listed properties. Many real estate agents are also investors (and many experienced investors have agents who are constantly on the lookout for deals for them), which means that there are lots of people out there ready to grab up the obvious deals within hours of the time they hit the market. See “tips on using the MLS to find deals” for tips on overcoming this. • Not all types of properties are commonly available in the MLS. If you’re looking for larger apartment buildings, office or retail buildings, vacant land, or mobile home parks, the MLS is not the best place to do it. There are some of all of the above listed in the MLS, but the sellers of these types of properties more often utilize agents who specialize in commercial sales. These agents work under a different kind of commission structure than residential agents, and do not typically list these properties in the residential MLS. • Agents themselves can be problematic. I hear the same complaints about real estate agents from investors all over the country: they don’t want to work with investors. They don’t present our offers to sellers, even though they’re legally obligated to. They “pocket” their best listings, selling them to their own buyers before they put them in the MLS–another illegal practice. They tell us that what we’re doing is illegal, or immoral, or impossible. They encourage sellers to believe that all junker houses sell for full price. They don’t return calls. They don’t keep their investor clients abreast of what’s new on the market. They never have time to show you the properties you want to see when you want to see them. The list of common complaints goes on and on–and yet, in any market, there are agents who understand what we need and are willing to go to bat to get it for us. But finding such an agent can be a long, frustrating process.
Benjamin A. Bauer, Attorney at Law 10999 Reed Hartman Hwy., Suite 108A (513) 851-7600 ● ben@thebauerfirm.com
Carpets & Floors
sq ft
vinyl
49¢
Trigg Pendleton
sq ft
513.354.4851 TPendleton@McSwainCarpets.com
ceramic
99¢
starting at
start ing at
49¢
start ing at
carpet
sq ft
h a rd w o o d
2
$ 69
starting at
sq ft
-
Wills, Trusts, & Probate ● Real Estate ● Evictions LLCs ● Small Business Law ● Civil Litigation -
• Competitive Pricing • Knowledgeable Sales Team • Superior Customer Service
Licensed in Ohio, Kentucky, & Florida -
www.thebauerfirm.com The Investor
13
On the other hand, you really need an agent to avoid wasting your time. Although the properties in the MLS are also available to be viewed by the public through various internet sites (realtor.com is one), the information available through these public sites is generally not detailed enough to let you sniff out signs of seller motivation. Without an agent, the process for determining whether a seller is motivated is: 1) find a property that looks promising, 2) call the listing office and find someone who knows something about the property (usually the listing agent himself), 3) wait for a return phone call, 4) interview the agent about the situation, and 5) repeat over and over and over. With an agent, the process is: 1) tell him what you’re looking for, 2) let him search his more comprehensive MLS database for signs of seller motivation, and 3) get an entire list of prospects to choose from. • Seller financing is very difficult to negotiate when an agent is involved in a transaction. It’s a waste of time to look at listed properties if you’re looking for most kinds of seller financing, lease/options and small second mortgages being the exceptions. The reason is simple: agents aren’t trained to understand what owner financing is and what advantages it can have for a seller in trouble–and therefore, they can’t explain it to the seller, who is even less sophisticated than the agent himself. Furthermore, agents in some states are not allowed to be involved in certain types of creative transactions–and even in states where they are, some are constrained by the rules of their brokerages from becoming involved in these deals. Therefore, the most common types of deals you will do via the MLS are deals where you bring the money to the table to close, whether through a lender, a wholesale buyer, or your own cash. Some tips for finding great deals through the MLS 1. Find a good buyer’s agent. Any licensed real estate agent can act as a “buyer’s agent”, though not all choose to do so. A buyer’s agent is an agent that works on behalf of the buyer, presenting and defending the buyer’s offers, keeping your confidences (for instance, not telling the seller or his agent that you’d actually pay $5,000 more than you offered), and shepherding deals to closing. A GOOD buyer’s agent–at least from your point of view as an investor–is one who actively looks for the types of properties
criterium-cincinnati@fuse.net
513-474-9600
BUILDING EVALUATIONS BY LICENSED PROFESSIONAL ENGINEERS • Residential and Commercial Inspections • Structural Inspections • Reserve Studies
14
you want to buy, who has the time to show them to you, and who doesn’t mind that you will have to make dozens of offers before you get one accepted. Buyer’s agents are a dime a dozen–good buyer’s agents are as rare as hen’s teeth. One way to find a good buyer’s agent is to find out who other investors have used successfully–but this is one secret that most of your competitors won’t want to share with you. Another way is to go to an agent you already know (believe me, you know at least one) and see if he’s willing to do what you need him to do. But the most common way, in my experience, to find one is to identify some listed properties you’d like to see on your own. When you call the listing office to make an appointment, the agent on desk duty is likely to offer to show you any other properties you’d like to see, as well. Let him, see if it works out, and do what it takes to keep him around if it does. If not, keep on trying until you find the right one. 2. Focus on properties that need work, show signs of seller motivation, and are listed under market. You’re providing your own financing for MLS deals (or wholesaling them), so you’ll need to buy them at below-market prices in order to make a profit. Because sellers who have houses in great shape can usually sell for much closer to full retail price than you want to pay, they have no reason to entertain your low offers. So you’ll want triage the available properties that meet your criteria for property type, size, and neighborhood further by having your agent look for certain key words in the MLS like “handyman’s special,” “estate sale,” “lender owned,” and “vacant” as well as for comments in the agent remarks section like “as is,” “needs TLC,” and of course, the always-important “seller motivated.” And once you’ve limited your pool of prospects thusly, take the extra step of checking to see if the property is listed at least 10% below market before you bother to look at it: I’ve discovered that sellers who are showing all the signs of motivation, but still have their properties priced at or above retail price don’t accept my offers, ever. 3. Plan to make lots and lots of offers–and plan to make them multiple times. As an agent, I can do all of the prospecting above from the comfort of my own home–and, with years of experience in recognizing the signs of seller motivation, I can usually limit my property viewings to only the most likely-looking deals. Still, I have to make offers on about 20 MLS-listed properties to eventually get one. I say “eventually” because one of my biggest secrets for buying properties through the MLS is this: I make an offer on EVERY property I see, even if I know there’s no chance that it will be accepted. And then I REMAKE the same offer every month or so until the property sells, whether to me or to someone else. By the time I buy many of these properties, every one of my competitors has already made an offer on it, gotten rejected, and given up. But there I am, month after month, sometimes year after year, with my offer in hand. And when the seller gets motivated enough to take it, I’m ready.
August 2017
COMPANY
CONTACT NAME
PHONE NUMBER
BUSINESS TYPE
LEVEL
Badcat Properties LLC
Samuel Moore Jr.
moorejrsam@hotmail.com
(513) 485-8599
Financial Services
Bronze Vendor
Berkshire Hathaway Commercial Division
Max Arroyo
marroyo@bhhspro.com
(513) 772-7781
Property Management
Silver Vendor
BildWise
Dan Poske
rposke@crnsllc.com
(513) 301-0247
Rehab Project Mgmt.
Gold Vendor
BKH Contracting
Keith Hardig
keith@bkhcontracting.com
(513) 266-8719
Contractor Services
Bronze Vendor
Bowie Properties
Vena Jones Cox
vena@therealestategoddess.com
(513) 471-0141
Real Estate Services
Platinum Vendor
Charles P. Vonderhaar CPA
Chuck Vonderhaar
chuck@cpvcpa.com
(513) 563-0598
Accounting
Bronze Vendor
Cincinnati Home Improvement Company
Chris Penn
CincyHomeImprov@gmail.com
(513) 898-1878
Rehab & Restoration
Platinum Vendor
Cleaning Logistics, LLC
Catherine Cahill
catiecahill86@gmail.com
(513) 846-4084
Cleaning Services
Gold Vendor
Criterium-Cincinnati Engineers
Matt Klein
criterium-cincinnati@fuse.net
(513) 474-9600
Inspection Services
Silver Vendor
Dayton Capital Partners
Darrin Carey
darrin@daytoncapitalpartners.com
(513) 474-9600
Financial Services
Silver Vendor
Ellsworth & Associates Inc. CPAs
Scott Ellsworth
sellsworth@ellsworthcpa.com
(513) 272-8400
Accounting
Platinum Vendor
Exit Best Realty
Marty Russell
martysrussell@gmail.com
(513) 899-9990
Real Estate Services
Silver Vendor
Exit My Foreclosure
Kristin Calendine
kristin@exitmyforeclosure.com
(513) 429-3948
Real Estate Services
Bronze Vendor
Fabulous Floors of Cincinnati
David Caldwell
davidCaldwell@fabulousfloorsusa.com
(513) 453-4006
Floor (Wood) Restoration
Silver Vendor
Federle Realtors
Dennis Taylor
dennist123@aol.co
(513) 851-4021
Real Estate Brokerage
Gold Vendor
Handyman Connection
Derek Christian
dchristian@handymanconnectio.com
(513) 771-3950
Rehab and Reconstruction
Gold Vendor
Hartlaub CPA Advisory Grp
Marc Steiger
msteiger@hartlaubtax.com
(513) 821-8768
Accounting
Bronze Vendor
Icon Property Rescue
Jeremy Clayton
clayton@iconenvironmental.net
(513) 396-6653
Restoration
Silver Vendor
Keller Williams Pinnacle Grp
Kathy Waldeck
kathy.waldeck@kw.com
(513) 553-1883
Real Estate Services
Bronze Vendor
LD and SL Properties
Stephen Hering
STEVEHERING@PRODIGY.NET
(513) 737-6888
Real Estate Services
Bronze Vendor
Let Me Manage It LLC
Michael Rullmann
Mike@letmemanageit.com
(513) 703-1169
Management Services
Silver Vendor
National Real Estate Insurance
Julianna Shipp
juliana@nreg.com
(888) 741-8454
Insurance Services
Gold Vendor
NTN-Indiana/Ohio
John Spafford
john@ntnonline.com
(877) 579-3520
Tenant Screening
Bronze Vendor
NRL
Lisa Chambers
lisa.chambers@nrlmortgage.com
(513) 607-4107
Financial Services
Silver Vendor
OdorXit
Deb Meyer
deb@odorXit.com
(513) 266-4000
Cleaning Products
Bronze Vendor
Parkway Title
Louis Breeden
louis.breeden@parkwaytitlellc.com
(513) 701-6216
Title Company
Silver Vendor
Pease Warehouse
Stephen Pease
stevep@peasewarehouse.com
(513) 867-9926
Building Supplies
Silver Vendor
Renter’s Warehouse
Scott Adams
scottadams@renterswarehouse.com
(513) 293-5079
Property Management
Silver Vendor
Secured Investment Lending Corporation
Brittany Kiah
brittany@securedinvestmentlending.com
(407) 878-2830
Financial Services
Platinum Vendor
Spring Valley Bank
Dave Wittcamp
springvalleybank@cinci.rr.com
(513) 761-6688
Financial Services
Silver Vendor
Stepping Stones
Paul Olzeski
paul@steppingstones.rocks
(513) 520-0939
Insurance
Gold Vendor
The Bauer Firm LLC
Benjamin Bauer
ben@thebauerfirm.com
(513) 851-7600
Legal
Silver Vendor
The Northcoast Commercial Group
James Markowitz
james@nccgfinancing.com
(216) 310-4667
Financial Services
Silver Vendor
The Investor
15
PRESORTED PRESORTED STANDARD STANDARD
Cincinnati REIA Cincinnati REIA Road, Suite 100 7265 Kenwood 10945 Reed Hartman Hwy., Ste. 113 Cincinnati, OH 45236 Cincinnati, OH 45242
U.S.POSTAGE PAID
U.S. POSTAGE PAID CINCINNATI, OH CINCINNATI, OH PERMIT PERMIT NO. NO. 777 777
a New o t g n i ! Mov We’re ion April 7tdhetails! Locaetlow & inside for Se e b
REIAGC Meetings Our General Meetings are held at:
Ramada Plaza - Sharonville
11320 Chester Road
Cincinnati, OH 45246
Across from Sharonville Convention Center Be sure to come and check out our beautiful new location! Visit: www.CincinnatiREIA.com for continuous information updates and valuable resources!