THE INVESTOR HOW I DID 1000 DEALS: GETTING SELLERS TO SAY YES IN ANY MARKET Presented by Drew White
How to Hire A Virtual Assistant OPHP: 1 hour Management
For the past 5 years or so, it seems like the answer to every “How do I find the time to…?” question has been: “Hire a V.A.!” Virtual assistants ARE useful for taking care of things you don’t have the skill (graphic design), time (answering your phone) or desire (looking up hundreds of addresses in the public record) to do. They can also be incredibly inexpensive - as little as $3 per hour or $5 per project. But the question always comes down to, HOW do I do it? That’s what we’ll cover at our early meeting beginning at 6 pm at the Crown Plaza Hotel on Thursday, March 2, 2017:
Sure, the market has “heated up”— • Half a dozen techniques you can there’s more competition for fewer take home and use on Friday deals. So what skills do YOU need morning to get more deals. to hone to make sure you’re getting the good deals you need to make Whether you’re a new investor your fortune? who’s never talked to a seller at all, or an old pro who’s looking In this presentation, he’ll share: for new techniques to beat the current competitive market, you’ll • What REALLY makes a seller sell learn (and probably laugh) a lot at cheap (or on terms): it’s not any of this meeting. Join us on Thursday, the ‘pat’ answers like “motivation” March 2, 2017, at the Crowne • Why any particular seller will Plaza Hotel in Blue Ash beginning choose to work with you, rather at 7:30 pm. than your competitors • What to do with a seller who NEEDS to take a lower price, but won’t • When walking away from the negotiation is the best possible thing you can do to get the deal
• Where to find V.A.s • How to hire and communicate with them • What they can do for you • What NOT to do This hands-on workshop will literally walk you through the process, and prepare you to leverage your time by hiring your own help right away.
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
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2017 BOARD OF DIRECTORS & COMMITTEE CHAIRS President Anita Johnson 513 334-0444
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Treasurer Scott Ellsworth 513 272-8400 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 2016 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
2 | The Investor ||August March2015 2017
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WHOLESALING FOCUS GROUP
6:30 pm | Perkins 7108 Hamilton Avenue North College Hill Michelle Clayton - 513 400-4937
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GENERAL MEETING
6 pm - How to Hire A Virtual Assistant 7:30 pm - How I Did 1000 Deals: Getting Sellers To Say Yes In Any Market Crowne Plaza Blue Ash
FRIDAY MORNING MEETUP 9 am to 11 am Crown Plaza Blue Ash 5901 Pfeiffer Road, Blue Ash Linda Hull - 513 549-7821 Cheryl Long - 513 429-2583
REHABBER’S FOCUS GROUP
6 pm Slatts 4858 Cooper Road, Cincinnati 45242 Joe Davidson Eric Kottner
INVESTORS LUNCH
11:30 am - 1 pm Century Inn Restaurant 10675 Springfield Pike Dave Jasper - 513 942-5110 or Max Arroyo 513-772-5736
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GENERAL MEETING
6 pm - How To Find the Value Before You Make An Offer OR Best Local Contractors and Suppliers Workshop 7:30 pm - The New Retailing: How To Provide Turnkey Rentals To Out of State Buyers and Make Big Money With Less Competition Crowne Plaza Blue Ash
LANDLORD FOCUS GROUP 6:30 pm Crosley’s Sports Cafe 4901 Vine Street, Cincinnati Scott Ellsworth, 513 659-5531 Jim Shapiro, 513 515-6717
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
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
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 March is here, and if we’re lucky spring is right around the corner! Yes, we all look forward to longer days, more sunshine and warmer weather that comes with spring. Overall, we tend to get more energy as we transition to this new season so I’m definitely looking forward to the change and I’m sure you are too. Remember those plans that you put in place at the beginning of the year, the ones that would help you get back on track and do more deals this year? Well, believe it or not, March signals the end of the 1st quarter of the year and is a time for you to go back and assess how you are doing against the plans you put in place. I know, I can hear you saying, “But the time has gone by so fast!” And yes, that is true. Which is why it’s important to remain focused on your goals and stay committed to your plan. And it’s also another reason why being part of a mastermind group can help in holding you accountable.
of ANYONE doing deals that doesn’t have to know how to find them. So you’ll want to make sure that you attend this session on Saturday, March 4 to hear a host of experts talk about what you need to be doing to find deals. REIAGC is getting ready to make another exciting move coming up in April. Starting with our first General Member meeting on April 6, our meetings will be held at the Ramada in Sharonville, which is directly across from the Sharonville Convention Center on Chester Road. The new location is easy to find and is still centrally located for our membership base, and we will continue to provide light hors d’oeuvres before the meetings. Although the move to the Crowne Plaza last year was a great move, we needed to secure a more permanent “home” for our meetings. We will be sending out more information in the coming weeks. So, another exciting change coming soon! Remember, Cincinnati REIA is here to help you achieve your real estate investing and entrepreneurial goals. Make plans to come out to our Focus Group meetings (previously called Subgroup Meetings) and the Friday Morning Meetup. All of our events are posted on our calendar which can be found on the website.
This month’s all-day Saturday session is all about how to find great deals. No matter what the exit strategy, Have a great March! you first have to find the deal! One of the biggest challenges in today’s market is finding deals. I don’t know Anita Johnson
FRIDAY MORNING MEETUP Have deals to sell? Services to provide to real estate investors and landlords? Or just want some time to just hang out with fellow real estate investors, landlords, and service providers with no agenda except making connections? Then join our Friday morning meetup—it’s free and open to the public. This morning networking meeting doesn’t have a topic, but just the chance to meet with fellow entrepreneurs and service providers. This meeting will take place the Friday after the 1st Thursday of every month.You’ll meet great, helpful people and make connections to build your business. A breakfast buffet is optional and available for purchase prices are $12 for hot buffet and $8 for cold buffet, available in the lobby/atrium area until 10:30am. Our next meeting is scheduled for Friday, March 3, 2017, from 9 am to 11am at the Crowne Plaza Blue Ash located at 5901 Pfeiffer Road in Cincinnati 45242.
MARCH CREATIVE DEALMAKING FOCUS GROUP
TOPIC: TURN $500 INTO $50,000 IN YOUR RETIREMENT PLAN Too many investors put off doing deals in their retirement plans for the simple reason that they don’t have enough money in their retirement plan to do a deal. But that’s just because they’re not thinking creatively. In reality, you could use creative strategies to grow your self-directed IRA, 401K, or even health care or education account from pennies to tens of thousands of dollars in just a year or 2. Let’s discuss how. It’s at Perkins at Hamilton and Cross County in College Hill on March 27 at 6:30.
The Investor
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COMING UP AT THE MARCH 16 MEETING ACTIVE INVESTORS FOCUS GROUP: BEST LOCAL CONTRACTORS AND SUPPLIERS WORKSHOP It’s time to update REIA’s popular “suppliers and contractors” list, so bring your best recommendations (with contact information, please!) and your “wants and needs.” We’ll compile member recommendations and make them available to everyone, but you need to be there to help the community! Come find out in this meeting for new investors only beginning at 6 pm on March 16 at the Crowne Plaza Hotel in Blue Ash.
Northeast Ohio for more than 15 years, and his latest most profitable strategy is turnkey rentals. He’s going to share his perspective on how this works, including:
NEW INVESTORS FOCUS GROUP: HOW TO FIND THE VALUE BEFORE YOU MAKE AN OFFER Unless you can effectively determine what a property is worth, you can’t make an offer that’s guaranteed to make you money. In this new-investor-only workshop, you’ll learn why using “The Zestimate” is almost always a mistake, what resources actually DO work, and how to determine the value of a property when the “comps” are all over the map. Join us at 6 pm on March 16 at the Crowne Plaza Hotel in Blue Ash.
• Why buyers will cheerfully, knowingly pay more than full value for turnkey rentals
MAIN MEETING: THE NEW “RETAILING:” HOW TO PROVIDE TURNKEY RENTALS TO OUT OF STATE BUYERS AND MAKE BIG MONEY WITH LESS COMPETITION WITH ROB GILLESPE It’s DEFINTELY the hottest new strategy of 2017: providing turnkey rentals to out-of-state buyers with a lot of cash but few options for buying properties in their own markets.
• Which properties are best for selling turnkey, and why you’ll have better luck finding these at low prices than the typical “retail” deal • What kind of renovation a turnkey rental should get • Who your buyers are, what they’re looking for, and most importantly, how to find them
• The steps to getting a turnkey rental deal completed • How you can build a business selling turnkey rentals that literally generates $50,000 a month in income This is one of those topics that you can’t learn about just anywhere, and that you REALLY need to know about. It’s also one that we won’t be able to offer again this year. In other words, don’t. miss. It. Join Rob Gillespe on Thursday, March 16 at the General Membership Meeting to learn more!
WELCOME NEW AND RENEWING REIAGC MEMBERS! REIAGC Would like to welcome its new members and thank its renewing members in the month of January: Chuka Anyadiegwu Trey Aulls Carmen Baker Todd Ball Daniel Bathe Lou Bell Jacob Brandstetter Louis Breeden Angela Bronzie Ron Burmeister Jason Carmack Cheryl Carmack Jean Clark Blaine Clark Chris Cox Bailie Cruze Bari Cruze Sherri Davidson Latoya Dunn Emile Farris Dave Galicic Chadwick Giles Jim Godsey
Anthony Henderson Bruce Ibold Shameka Jackson Tony Jenkins Anitillio Lee Paulette Linn Pamela Mallory James Markowitz Jamie Miller Thomas Moler Melissa Neal John Neal Randal Neff Stephen Neltner Marsha Ogletree Stephen Palluconi Leah Schaefer Nick Schroth Dan Smith Andrew Smith Steven Smyth David Stanford Nina Stanger
Alton Stephens Bethany Stephens Emily Stephenson Andrea Straus Randy Tye William Whitehead Sherry Whitlock James Whitlock II
It’s SO hot, in fact, that we couldn’t even get any local turnkey providers to give up their secrets. We had to reach all the way up to Cleveland to find a successful entrepreneur who’d share how it’s done. Rob Gillespe (AKA “Rob the House Guy”) has been buying, rehabbing, wholesaling, and managing properties in
Benjamin A. Bauer, Attorney at Law 10999 Reed Hartman Hwy., Suite 108A (513) 851-7600 ● ben@thebauerfirm.com -
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Licensed in Ohio, Kentucky, & Florida -
www.thebauerfirm.com 4
March 2017
The Investor
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LEGISLATION MATTERS: DID OHIO JUST MAKE PLYWOOD ILLEGAL? NOT EXACTLY... A mini-panic overtook members in January when the national media picked up a story entitled, “Ohio becomes first state to ban plywood for vacant houses.” The articles celebrated the forward-thinking Ohio legislature for passing a law requiring that vacant properties be boarded up with a clear, theoretically more aesthetically pleasing material rather than the more common plywood. In an article from ThinkRealty Magazine, one advocate said:
leadership and enact similar legislation.” “Clear boarding is a new technology solution that is far preferable to plywood,” Klein said. “It is virtually unbreakable, resembles glass so it enhances neighborhoods, protects property values and secures properties so they can be returned to the market more quickly in a more stable and marketable condition.”
“This is a significant advancement for those engaged in the battle against neighborhood blight in Ohio,” said Robert Klein, founder and chairman of Community Blight Solutions and an advocate for H.B. 463. “Plywood is an outdated solution to a growing modern-day problem. We need to apply 21st century solutions to reverse the trends that are decimating our neighborhoods. It is my hope that other states will follow Ohio’s
criterium-cincinnati@fuse.net
It won’t come as a surprise to any reader that Mr. Klein is the owner of a Cleveland company called SecureView, which produces and sells the very material that the State requires to be used now. This material, as you might guess, is significantly more expensive than plywood at…get this…$115 for a 4x8 sheet. But before you panic over the idea of your board-ups suddenly costing literally 10x what they did with plywood, do
what the media didn’t do and actually read HB 463. The bill lumps together a number of unrelated issues, including one that the Ohio Real Estate Investors Association (OREIA) has been supporting for several years: a foreshortened foreclosure process for abandoned properties where the property is clearly vacant and the owner makes no attempt to answer the foreclosure. Under the new process, the lengthy Ohio foreclosure process could be cut down to a few months, making the time available for such a property to deteriorate and be vandalized significantly shorter. In a late addition to the bill, it also requires banks that take advantage of this process to use the clear boarding materials to board up the resulting REO. Not you, not banks that go through the regular foreclosure system—just those that use the new, foreshortened process. It’s our fear that a requirement that makes lenders pay thousands of dollars to board up an already-abandoned property might keep them from using the opportunity to get abandoned properties through the process more quickly, thus defeating the entire purpose of the new law.
REIAGC INTRODUCES NEW REHABBER’S FOCUS GROUP!
So you want to fix and do what? Whether it is flip or landlord, it doesn't matter because REIAGC is bringing you what you need to take it to the next level...welcome to the Rehabber's Focus Group! Lead by Joe Davidson and Eric Kottner, this group will be meeting on the first Monday of each month to share information on how to fix and flip or just fix it! Learn what to do next, once you have it under contract! This group is open to all REIAGC members so plan to attend! Location: Slatts, 4858 Cooper Rd., Cincinnati, OH 45242 Time: 6PM
But the bottom line is, it doesn’t affect you—at least at the moment. OREIA will be watching for the inevitable slippery slope that says, “If this is good for certain banks, it’s good for all banks, and if it’s good for all banks, it’s good for all owners.”
513-474-9600
BUILDING EVALUATIONS BY LICENSED PROFESSIONAL ENGINEERS • Residential and Commercial Inspections • Structural Inspections • Reserve Studies
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
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March 2017
The Investor
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THE NEGOTIATION STRATEGY NO ONE EVER TALKS ABOUT: KNOWING WHAT YOU WANT BEFORE YOU NEGOTIATE BY DREW WHITE
As an educated real estate investor, you should already know what makes a great deal versus a good deal versus a marginal deal versus a bad deal. You are aware of all of the formulae and have the skills to calculate values and costs. But have you ever sat down and thought about what YOU, PERSONALLY want from a deal? Buying, selling, and renting properties is about more than price and terms. It’s also about ease vs. hassle and time and energy. If you haven’t thought about EVERYTHING you want from a deal, you don’t know where in the negotiation you have to stand firm, and where you can give a little to get a little. When I say think of what you want out of a deal ahead of time, I’m not talking about a specific deal. Obviously, when you sit down with a seller to discuss what you’ll pay for his property, you should have your maximum allowable offer or offers calculated. That means you’ve gathered all the information that you can, determined the after-repaired value
of the property, subtracted repair costs and subtracted your profit. At that point, it’s simple: you just never, ever, pay more for a property than the arithmetic tells you is allowed. No, I’m talking about something more along the lines of a mental image, decided upon BEFORE you even have a specific deal in mind, of the things that you want out of ANY deal. Yes, the most you’re willing to pay (or the least you’re willing to accept) are part of this general outline of “must haves”, but you should think about the other things you want and need from a transaction as well. What are some things that don’t involve price and terms that could be important to you? Well, here are some that are important to me: 1. Time. My partner and I get calls all the time from sellers who have properties in Hamilton (a city about 40 minutes north of where we live) or Clermont County (an area on the far east side of town that takes us an hour or more to get to). When these calls come in, the phone negotiation is much more aggressive. Why? Because I don’t want to drag myself out to North Boofoo for anything less than a completely slam-dunk deal, and because I only want to do it once. If I’m trying to wholesale a deal in one of these areas, I want to be able to tell the buyer, “it’s on lockbox, show it to yourself, it’s an absolute steal, tell me when you want to close”. And in order to do that, I have to be getting it at a LOWER price than a property that’s closer to home, AND have a highly motivated seller who’s willing to sign a contract and give me a key at our first meeting. I can’t know that unless he tells me so over the phone. If he doesn’t tell me what I want to hear, I move on. 2. Hassle. There are certain things in our business where the pain in the posterior (or the potential liability) is out of proportion to the value that thing creates. Different people
have different pet peeves in this regard; one of mine is buying appliances for rental properties, because the only thing that makes sense to put in them is used refrigerators and stoves, and these have to be bought from used appliance stores that are out of the way, open odd hours, and have unpredictable inventories. A hunt for a good used appliance can take hours, so we always, always ask for every appliance on the premises, and ask for a significant ($1,000+) price reduction if we can’t get them. On the other hand, as important as they are, we’re willing to give up the appliances for better terms or quicker possession or the aforementioned discount. 3. Mental energy. I know wholesaling backwards and forwards. I have all the forms, contracts, service people, and knowledge at my fingertips. There’s nothing I have to look up, learn, produce, or otherwise expend any energy on doing to make a wholesale deal happen. In fact, I have other people who do 99% of my work for me. A Drew’s life is a good life. On the other hand, the first time I did a “subject to” deal, I had nothing in place to make it happen. I didn’t know how to fill out the contract, what to tell the closing agent, or how
to handle the paperwork. Although I understood the concept of subject to, and saw that it could be profitable, doing the first deal took 2 days of research to make happen. There was no way I was going to work for 2 whole days–in a row yet!–for any deal that wasn’t a home run. I basically kept talking to sellers on the phone until I found one that had a 4.5% fixed rate 30 year loan AND $20,000 equity AND a property that was in great shape and in my own neighborhood before bothering to go see one of these houses. Now, of course, I have the things I need to do these deals without any stress, and treat them like any other purchase. But I still commonly pass up potentially profitable deals on mobile homes, condos, and commercial properties simply because they’re not in the “obvious home run” category, and I’m not interested in investing the energy to learn about them unless they are. Some new investors, armed with $50,000 in education and no experience at all, take the view that they’ll pursue any deal that looks like it has a profit at the end, no matter how vaguely they understand how that profit might be realized. From my perspective, this is a strategy that produces a lot of activity but not much result. From a personal and negotiating
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Ellsworth & Associates 513-272-8400
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THINGS THAT MAKE YOU GO HMMM!
standpoint, it’s much better to set limits on what you will and will not accept in a property in general and a deal in specific up front, and then concentrate on finding the deals that fit those requirements.
BY PETE YOUNGS AKA MR. REHAB In my latest deal that closed on Friday, there were many things that happened from the inspection that most of the people doing rehabs might have overlooked. Part of my teaching style in my systems and live events are to teach you things that you would not have realized on your own.
Whether you’re buying, selling, or renting–or hiring a contractor or buying a piece of office equipment, for that matter–figuring out what you will and will not accept well ahead of the actual negotiation makes a big difference in how confident you’ll feel as a negotiator, how profitable your deals will be, and how good you’ll feel about ending a negotiation and not looking back when it turns out that the other guy’s needs just can’t be reconciled with your own.
Sometimes you must look very hard a property to find the little things that will add up, and cost you thousands of dollars that you had not intended to spend. I teach how to do property inspections…one of the most important tasks that will save you big bucks, if you know what to look for. See, the buyer will hire a property inspector to list the defects of your property as a tool for getting a discount on the deal, or get you the seller, to pay for these repairs. Here’s what we had to recognize on my last deal. First, the gutters did not have a nice line to them. They had sagging areas that made the property look as if it would be best to replace the gutters. This would have cost around $800.00 to do. But for under $20.00, I got some gutter brackets that attached with a screw gun, and had a helper use a 2 x 4 stud to push up on the gutters to get them back in line as I screwed the brackets tightly into the fascia board. This made the appearance 100% better and saved about $780.00.
One of the real estate strategies that I’ve been most involved in over the years is wholesaling, where I put properties under contract for a certain price, then sell my right to buy the property to another investor for a $5,000-$20,000 profit. A lot of the advertising and marketing that my partner and I do is to attract sellers of the kinds of properties that lend themselves to wholesaling–primarily cheap, ugly ones in bread-and-butter or borderzone areas–and it’s a fact of a wholesaler’s life that about 20 times as many sellers will respond to this advertising as actually have good deals. At the beginning of my career as a wholesaler, I pretty much looked at any property that a seller called us about (mostly because at that time, not too many sellers were calling!) which meant that I spent a LOT of time standing on the front porches of various unmotivated sellers trying to get them to accept prices that just didn’t fit their goals at all.
Next problem was something that most would have missed seeing, unless you have a trained eye. There had been some siding replaced due to moisture rot on the bottom of the house around the entire exterior. (Probably from the gutter situation). An inspector would have picked up on this and made a big deal out of it. You see, siding must not touch the ground around the house. This makes for easy insect infestation such as termites, and also stops some loan institutions from financing a deal with this situation. Commonly, siding must be about 6 inches from the ground to be considered correct. To save money, we did not tear out the siding and start over. We got on both ends of the side portions of the house and measured up six inches from the ground, and then snapped a chalk line that marked the siding all the way across each side of the house. Then we adjusted the blade
Once we got our marketing plan together, though, this became impossible. We commonly receive 5-10 calls A DAY from sellers when all the ads are running and the mail is going out. So we developed a set of basic standards–limitations, if you will–that guide us to this day in deciding whether I actually leave my house to go to look at a property. We find out over the phones whether these standards are met, and if they aren’t we usually don’t even open negotiations, much less waste the time it takes to physically look at the property. 10
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on our skill saw to ½ inch and used it to trim the bottom six inches off the house. This now was acceptable when an inspection would be done. The toilets in the house seemed as if they could be kept if they were given new working parts on the inside. I put newspaper around the bottoms and flushed a few times, then left the newspaper overnight. When we returned the next day, we found that the paper had absorbed some water. This indicated that the wax ring in both toilets had been seeping a little. So by the time you have added up the moving parts Or guts to be replaced, then the wax rings and then the plumbers labor cost per hour it was actually cheaper to just buy new toilets. The new ones came complete with all new parts, most installed already. Therefore, it takes the plumber less time at his hourly rate to install new toilets rather than rebuild the old ones. It also looks good to the buyer to see brand new fixtures. The cabinets were stained dark brown and had a thin layer of poly on them. They really needed a fresh look to avoid replacing them. I have written techniques on how to prep and paint stained cabinets to a nice white look but here; this is a great way to restore a brand new look for under $5.00. There is a product in most any store that sell cleaning supplies called “Old English Scratch Remover”. You pour this dark oil onto a white terry cloth rag and rub over the entire cabinet area. This will not only blend in any light and dark areas, but also give the appearance of freshly stained and varnished cabinets. Saving easily about $1000.00 this one tip is one you will use over and over in your investing career. Last, was the big killer. If overlooked this could easily cost you several thousand dollars and in many cases is a deal breaker if you do not replace it. It is also something you should use as a discount when buying the house as an investor. Either way, somebody is likely to have to pay for this replacement. I am talking about polybutelyne water piping. Usually identified by being blue in color, this pipe has a reputation of breaking and leaking causing thousands in water damage. Though many houses may have it, nobody wants it. Not only is it unpopular, it’s expensive to replace. But using the techniques I teach in Rehab 101 we got our estimate to replace the entire pipe in the house and the underground service from the street down from $7995.00 to about half the cost at $4200.00. That’s a great savings on just that item alone. So be careful not to overlook a houses “fine print” when you do your initial walk around. See beyond what you think you see, and learn to look for the less obvious repairs that could make or break a good deal. These and other great money saving techniques are on my site www.peteyoungs.com
The Investor
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TOP 10 THINGS YOU PROBABLY DON’T KNOW ABOUT SELF-DIRECTED IRAS
BY H. QUINCY LONG, CERTIFIED IRA SERVICES PROFESSIONAL (CISP), ATTORNEY AND PRESIDENT OF QUEST IRA, INC. 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.
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.
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 “selfdirected” 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.
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
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) Traditional IRA, 3) SEP IRA, 4) SIMPLE IRA, 5) Individual 401(k), including the Roth 401(k), 6) Coverdell Education Savings Account (ESA, formerly known as the Education IRA), and 7) 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 12
March 2017
Sasha Allen 513-449-0514
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 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 selfdealing 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 qualifying 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 non-taxable 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 after 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) 2010 Brought an Incredible Gift From Your 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 limitations 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
The Investor
13
loans or even unsecured loans. 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 self-directed 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! H. Quincy Long is an attorney who holds the designation of Certified IRA Services Professional (CISP) and is President of Quest IRA, Inc., a third party administrator of self-directed IRAs serving clients throughout the nation with offices in Houston and Dallas Texas and in Mason, Michigan. He may be reached by email at QLong@QuestIRA.com. Nothing in this article is intended as tax, legal or investment advice.
REIAGC 2017 VENDOR SHOWCASE
DON’T MISS THE FUN! Thursday, May 18 Watch for more details
14
March 2017
Vendor Members Directory - 2/20/2017 Business
Company
Contact Info
Business
Company
Contact Info
Accounting
Chuck Vonderhaar, CPA
Chuck Vonderhaar 513-563-0598 chuck@cpvcpa.com
Inspection Services
Criterium – Cincinnati Engineers
Mathew Klein 513-474-9600 criterium-cincinnati@fuse.net
Property Mgmt
Berkshire Hathaway HS Commercial Division
Accounting
www.cpvpa.com
Ellsworth & Associates, CPA’s www.ellsworthcpa.com
Building Supplies
Butler County Edge-Co www.edgcowholesale.com
Scott & Deanna Ellsworth 513-272-8400
sellsworth@ellsworthcpa.com
Max Arroyo 513-772-5736 marroyo@bhhspro.com
www.firstcirclepm.com
Brent Fening 513-868-2068 edgcobp@yahoo.com
Rehab & Restoration
Cincinnati Home Improvement Co., LLC
www.cincyhomeimprov.co
Building Supplies
Pease Warehouse
Stephen Pease 513-867-9926 Stevep@peasewarehouse.com
Rehab Project Mgmt
Building Supplies
Surplus Warehouse www.surplus-warehouse.com
Brent McCleneer 513-245-2222
swcincinnaticlrn@ecbarton.com
OdorXit
www.peasewarehouse.com
www.criterium-cincinnati.com
Christopher Penn 513-898-1878 cincinnatihomeimprovement@g mail.com
BildWise
Dan Poske 513-301-0247 dposke@cmsllc.com
Real Estate Brokerage
Exit Best Realty
Deb Meyer 513-266-4008 deb@odorxit.com
Real Estate Brokerage
Federle Inc., Realtors
Marty Russell 513-545-1637 martysrussell@gmail.com Sasha Allen 513-449-0513 tealallenrealtors@fuse.net
Sasha Allen 513-344-3972 TeamAllen@fuse.net
Real Estate Brokerage
Outside The Box Real Estate
Christina Carey 513-509-2705 Christina@OTBrealestate.com
www.BildWise.com
www.bestexit.com
Cleaning Products
www.OdorXit.com
Cleaning and Evictions
Swept Away Property Cleanouts
Contractor Services
BKH Contracting
Keith Hardig 513-266-8719 keith@bkhcontracting.com
Real Estate Services
Exterminator
Formula Exterminators
Fred & Cindi Goff 513-671-7378 cindi.goff@gmail.com
Real Estate Services
LD and SL Properties
Steve Hering 513-253-2644 wtevehering@prodigy.net
Financial Services
Badcat Properties, LLC www.badcatproperties
Sam Moore, Jr. 513-485-8599 moorejrsam@hotmail.com
Real Estate Services
CORE Group
Jiries Dawaher 513-504-5565 jtd8.re@gmail.com
Financial Services
Dayton Capital Partners
Darrin Carey 937-458-3303
www.DaytonCapitalPartners.com
Darrin@DaytonCapitalPartners.co m
Real Estate Services
Exit My Foreclosure
Kristin Caledine 513-509-9814 Kristin@ExitMyForeclosure.com
Financial Services
The North Coast Commercial Group
Restoration
Icon Environmental www.IconPropertyRescue.com
Jeremy Clayton 513-396-6653
clayton@IconEnvironmental.net
Financial Services
Secured Investment Lending
James Markowitz 216-310-4667 james@nccgfinancing.com Brittany Kiah 407-878-2830 Brittany@securedinvestment lending.com Dave Woodcamp 513-761-6688 springvalleybank@cinci.rr.co m David Caldwell 513-453-4006
Security
ADT Security Services
Kristen McClanahan 513-497-7990 kmcclanahan@adt.com
Tenant Screening
National Tenant Network
John Spafford 877-579-3520 john@ntnonline.com
Title
Servicelink
John Wagner 513-857-9179 John.wagner@svclnk.com
Parkway Title, LLC
Financial Services Floor (wood) Restoration System
securedinvestmentlending.com
Spring Valley Bank
www.springvalleybank.com
Fabulous Floors of Cincinnati
www.fabulousfloorsusa.com
davidcaldwell@ fabulousfloorsusa.com
Floor Restoration
Olmec Reflections, INC.
Donald Boling 513-300-9203
Title
Flooring
McSwain Pro Floors
Legal
The Bauer Firm, LLC
Jon O'Connor 513-354-4400 joconnor@mcswaincarpets.c om Ben Bauer 513-851-7600 ben@thebauerfirm.com
Wholesale Properties
www.olmeccarpetcleaninginc.com
www.mcswaincarpets.com
www.thebauerfirm.com
OlmecReflectionsinc@gmail.com
The Investor
www.federleinc.com
www.OTBrealestate.com
ERA Real Estate Services
www.realsolutionsrentals.c om
www.coregroupre.com
www.ExitMyForeclosure.com
www.ntnonline.com
www.svclnk.com
www.parkwaytitlellc.com
You Buy Houses www.youbuyhouses.com
Jennifer Day 513-276-2996 jenniferday@era.com
Louis Breeden 513-701-6216 Louis.breeden@parkwaytitlellc.co m
Drew White 513-471-0141 DrewWhitePix@gmail.com
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