REI Voice October 2015

O C T O B E R

2015 $4.95

VOICE MAGAZINE The Award Winning Voice of the Profitable Investor

Trulia’s Chief Economist Selma Hepp “What does the American Dream Home Look Like?”

The Power of First Impressions: Staging for $$$ Agent Elena Johal Investors Franchise “We Buy Ugly Houses” Mark McKeller

Investing in Real-Time, Not Bank-Time Todd Pigott

Analysis

American Dream Home: Midsized, Suburban and Modern Selma Hepp

Economist of Trulia

B

eing married and having children is one of the biggest drivers of homeownership, but age will likely determine the type of homes that people want.

For many Americans, homeownership is part of their personal American Dream. For some, this dream of owning a home is well within reach, but for others it may as well be a dream within a dream. But what does this dream home look like? And where is located? What amenities do people dream of most? To find out, an online survey conducted by Harris Poll on behalf of Trulia surveyed 2,026 Americans in late May 2015 to tell us about their homeownership aspirations and the home they hope to buy one day. Here’s what we found.

First Comes Marriage, Then Comes Baby and House With the U.S. housing market on the mend, 7 in 10 Americans (71%) said owning a home is part of achieving their personal “American Dream.” While still a majority, this is a notable decrease from 77% in 2010. Yet despite this downward trend, America is not becoming a nation of renters. Most Millennial renters aged 18-34 (89%) plan to buy a home one day — more than any other generation.

But as more people today forgo or delay marriage and children, homeownership has become more of a lifestyle choice than an expected life milestone. Among parents with children under 18 years old, 81% said homeownership is part of their American Dream. In fact, most parents — regardless of their marital status — plan to buy a home as their primary residence once day.

More than 7 in 10 Millennials Plan to Buy in 2018 or Later While many Americans aspire to become homeowners, most are not ready to buy a home. Only 14% of those who plan to buy say they will do so within the next year. Most (69%) plan to wait at least two years.

In tracking the housing recovery, the intentions of Millennials has been a key indicator that we’ve been following. Why? This generation of first-time homebuyers was hit hard during the recession, and their ability to find jobs, move out of their parents’ homes and form their own households, and eventually become homeowners is a key part of a healthy housing market. Of the 1834 years old who aspire to become homeowners, 72% said they plan to buy a home in 2018 or later. The sense of urgency only increased when marriage and children were involved.

When Do You Plan to Buy (Another) Home as Your Primary Residence?

All

Married without Kids Under 18

Married with Kids Under 18

Within the next 6 months

4%

6%

9%

7-12 months from now

7%

10%

18%

13-24 months from now

17%

29%

20%

More than 2 years from now

72%

55%

53%

Note: Among Millennials (18-34 year old) who plan purchase a home (Cont. on page 36

October 2015 REI Voice

3

Rei Voice Magazine October| 2015 PUBLISHER LORI GREYMONT 408.782.9162 lori@sjrei.org gerbarry2015@gmail.com EditoR Geraldine Barry Director of Design Bach Pho Bachpho@yahoo.com Design Editor Belle Li Contributing Writer Hannah Ash Photographer Tiago Moules 408.763.0083 Advertising Sales Dan Noble 408.269.9777 dan@sjrei.org Affiliate Membership Sales Mark Gagner mark@sjrei.org Production Manager Loraine Cruz 408.782.9162 Loraine@sjrei.org

publisher’s

note

I

t is with pleasure that I returned to REI Voice to help put this issue together.

Having sold SJREI and REI Voice earlier this year, to my friend and colleague Lori, I took time to visit my homeland, and family in Ireland, and to travel with my sister in Europe. Returning home, I have moved forward with my own ventures and found I missed the thrill of creating this first-rate journal that highlights our industry’s movers and shakers. Lori and I teamed up again to bring you the latest on what is trending in real estate, who is getting results, statistics and data to paint a picture for you, and a peek into the world of investors who share frankly what it takes to be effective in this space. We have established a tradition of bringing you the industry’s top masterminds and leaders - the ones whose discerning voices we need to hear.

My time in Europe gave me a new perspective that I am happy to infuse in this issue. The Bay Area is considered by much of the country, and the world, as a special place where technology and business move light-years faster than anywhere else. In real estate, our markets are strong and the nation looks to us frequently to see an example of a healthy, vibrant local market. It only makes sense, then, that a real estate magazine published in Silicon Valley should be the voice of the profitable real estate investor today. We, those featured within these pages, and those of you reading this, stand apart as leaders who have the very real ability to set the standards for our industry - and more the bar moving forward.

In this issue, you will find local investors who have risen to success thanks to their hard work and dedication. Sometimes I forget to highlight the many years of work, and energy, that it requires to build a real estate portfolio-small or large, and how gratifying it can be when the work pays off, and it does if done correctly.

Find inspiration within Todd Picotts’ story of thinking outside of the box (and the bank), see how Carl Salas transforms a neighborhood with his investments, learn how Kathy Fettke sets up her deals with a clear plan, energy, focus and drive, and learn from our publisher and investing mastermind Lori Greymont her top tips for completing a rehab ontime and on-budget.

REI VOICE™ Magazine A Publication of SJREI Association™ Reproduction or use of any editorial or graphic is prohibited. To request reprints or reprint rights, contact info@REIVoice.com.

REI Voice Magazine www.REIVoice.com 408.782.9162 SJREI Association and REI Voice Magazine make no representations or warranties regarding the content, accuracy, or validity of the advertisements or of the articles contained herein. All persons should exercise due diligence and consult with legal and tax professionals before making any investment decisions.

Copyright www.reivoice.com

4

© 2015 SJREI Association.

All rights reserved.

The tiny house movement is a piece we focused on as it is beginning to gain speed, and may even be an option for our homeless crisis. This Valley has the capacity, and brain power, to find solutions for many problems and if we just put our heads together, we can have a hand in resolving this issue also. Read the opinion piece by my friend, Geoffrey Morgan, CEO of First Community Housing on the state of affordable housing in Silicon Valley, a cause that we as a community can impact.

For those of you who hold the distinction of being SJREI members, you have personally met and mingled with many of the people included within these pages - continue to visit us at SJREI Association (SJREI.org), and meet other likeminded people. We welcome new attendees and if you have not attended in the past, email Loraine@sjrei.org to secure your free pass so we can change that.

Lori & Geraldine

Contents Welcome

Publisher’s Note:

Advice:

We buy Ugly houses

5 6

By Mark McKeller Free Legal Advice

By Jeffrey B. Hare, Attorney at Law Lori Coach’s Corner

By Lori Greymont Recognizing high end DNA

By Alain Pinel Affordable Housing Crisis

By Geoffrey Morgan

Analysis:

South Bay employment get better and better

By Dr. Christopher Thornberg, PhD. American dream home: midsize, suburban & modern Selma Hepp Trulia Will the stock market correction affect the real estate market?

Carole Rodoni Inside the number with Santa Clara County Assessor Larry Stone

29 8

Features:

24

Investing in Real-Time, Not Bank-Time with Todd Pigott

By Geraldne Barry The Power of First Impressions: Staging for $$$ Agent Elena Johal

By Geraldne Barry Profile of a Sucessful Commercial Deal Kathy Fettke

22 27

40 32

42 3 31 16

Basics:

Real Estate Investing as Science

By Pam Blanco Attracting Private Money Mark Hanf Now is the time to invest?

Tom Wilson Success Recipe Dan Noble Inside a deal with Carl Salas

By Geraldne Barry

46

Calendar Investor Resources Affliate Members

21 44 38

6 11 15 18

October 2015 REI Voice

5

Basics

Attracting

Private Money

by Mark Hanf

It’s Not about You

•

When do I get my money back?

he title of my book, The Insider’s Guide to Attracting Private Money was chosen on purpose.

I am a firm believer in the power of attraction, as opposed to promotion. What is the difference?

•

What happens if you disappear?

T

“Promotion is about you.

Attraction is about the other person.”

One of the keys to forming a successful relationship with an investor is a sincere focus on what is in the best interest of your prospective partner. This is especially true in attracting private money. When you demonstrate that you have the best interest of your prospective money partner at heart, and that your goal is to help your private lender make a great return on his or her money without taking unnecessary risk, you become extremely attractive.

By focusing on the needs, goals, and concerns of your prospective money partner, you create a loyal client for life—one who will refer you to others who can also benefit from your good work.

My book approaches the challenge of attracting private money from the vantage point of your private money lender. What are his or her primary thoughts and concerns over the prospect of working with you? What important questions will he or she need answers to?

I have found that there are five basic questions that cover these concerns. These five questions are presented from the perspective of your future private money partner. I use these questions to formulate a strategy I call The Five Steps to Money Method™. They are: •

What is the opportunity?

•

How much money do you need?

•

How much money can I make?

www.reivoice.com

6

Virtually every important aspect of an investment opportunity falls somewhere within these five questions. By clearly and completely answering each of them, you will attract millions of dollars in private capital. How do I know that? Because I personally know hundreds of real estate investors who have successfully implemented this strategy. And I have personally raised over $200 million in private capital for my mortgage investments by using this exact strategy.

In fact, as you can see, none of these questions relate specifically to real estate. The Five Steps to Money Method™ will work for raising capital in any endeavor. Every successful business plan must answer each and every one of these questions or it will not attract the interest of investors.

In my book, we investigate each of these five questions individually.

We also review the components you need to provide your potential investors with attractive answers to all five questions.

Let’s run through an overview of each of these concepts.

(Cont. on page 33)

WHY INVEST IN ALABAMA? Now is a great time to add Alabama real estate to your investment portfolio. Alabama home prices are currently at historically low levels.

Alliance Wealth Builders of Birmingham specializes in helping real estate investors purchase high quality, undervalued, real estate investments and turn-key, cash flow, real estate in the greater Birmingham area, as well as other profitable markets within the State of Alabama; Huntsville, Montgomery/ Prattville.

1. Property Acquisitions 5. Property Management

The AWB Turn Key Process

4. Property Sales

2. Property Renovation

3. Tenant Placement

Our goal at Alliance Wealth Builders, Inc is to offer our valued clients a simple and hassle free experience when purchasing one or more of our Turn-Key income properties.

By purchasing one of our high-quality, turn-key real estate income properties, you’ll benefit from our teams handling of every aspect of the investment process; starting with property acquisition and property renovation, and continuing throughout the process of tenant placement and ongoing property management.

(205) 552-7009

www.alliancewealthbuilders.com 100 Century Park S., Suite 105 Birmingham, AL 35226

Coach’s Corner

Rehab it Right

by Lori Greymont

I

often tell my students that 90% of your success depends on your mindset, but this month I would like to address one of the key components in the remaining 10% - especially for those of you who fix and flip or rehab properties: managing the contractor.

When I first started rehabbing on my own back in 2001, I asked my mother a serious question (since we grew up rehabbing), “How do I make sure there is profit at the end of the project?” She said, “get 3 bids and add them together.” I waited for her to finish but she had stopped. That was the long and short of her advice!

A Simple Yet Effective Approach It’s simple. If you take a bid x3 and the deal works, you have a solid deal! Having completed over 400 rehabs since then, I can tell you that it is sage advice to OVER-estimate your costs and your time - not just x2 of what you think. For some reason, we often want to make a deal work and we will trim away the costs of rehab in order to justify buying the property - but in doing so, you are playing Russian roulette with your money.

Finishing on time and on budget. If you finish on time, but you overrun your budget, you lose money. If you finish 3 months later but on budget, you still lose because of the extra months of carrying costs, and missed opportunity to turn your money on on other projects.

Remember Your Objective The common scenario is that you get a bid from a contractor and you might negotiate a little and feel like you have a great deal. Then as the project starts, you notice the contractor doesn’t show up when he is supposed to, disappears for days at a time and when you finally see him again, he has found something new that wasn’t included in the original bid. Now your timeline has doubled and by the time you are done, your budget has too! When you take on a rehab project, your goal is to get the highest amount of rehab as fast as possible with the least amount of money. The contractor’s goal, however, is to earn as much money as possible every day he has his employees working on your job. You have conflicting goals but yet have to both work to complete the project.

There are two major components to managing a successful rehab.

PERSONALIZED EDUCATION FROM A TRUE EXPERT LORI GREYMONT Wholesaling is one of the most profitable ways to make money in real estate, and often misunderstood This is a results-driven, action-focused program that really gives you all the tools you need to wholesale your way to success.

Ready to take your investing to the next level?

12 months Program - you’ll Get: 8 weeks of structured actions to establish your strategies and get calls coming in! The know-how on where to find sellers, and how to talk to them Inside info on forms and contracts Day-to-day operational advice Ongoing support and deal reviews and… the results you deserve!

We take ownership of your success…

Call for Appointment: 408.782.9162

Coach’s Corner Two Sides of the Same Deal In order to create a win-win scenario, you need to think about ways to construct a working relationship that meets both of your goals. We have implemented several systems that accomplish that.

First, we don’t work with contractors in the common manner of 25%/50%/75% draws as the project is complete. We do, however, create a line-by line item bid and give it to several contractors.

One thing I have learned is that most contractors have a hard time taking time to stop swinging the hammer to create a bid, so if I create the bid for them, they can look at it and tell me if my prices are fair, if I missed anything, or if there is a cheaper way to get something done. Since the exact same bid is going out to multiple contractors, they most often won’t push back on my pricing. I then ask them to walk the property to see if I missed anything because I tell them that anything they didn’t bid will not be a “paid” change order, but it will be done for free unless it was something unforeseen. My contract talks about no more than 10% change order and the rest of those costs fall on them. This, of course, doesn’t include anything catastrophic that no one saw or could have known.

Crafting the Win-Win Contractors have payroll each week even though they often collect money every 3 or 4 weeks. We pay our contractor every week per

line item when that line item is 100% complete. They love this because they get cash flowing each week and that helps them cover their payroll obligation. One of the issues that happens when a contractor runs short on money is that they will pull their team off your project and go take a small job to get the money flowing. This is why paying weekly keeps them focused on your project.

We further incent our contractor to finish early by giving them a bonus for doing so. For example, on a project that will take 4 weeks and cost $60,000, we will incent them to finish at 3 weeks for an extra $5000. If you consider the amount of savings on carry costs, you can justify this very easily. The other side of this is that if they go past the deadline, they have a cost of $500 per day. Additionally, if we have a budget of $60,000 and they can complete the job for a savings greater than 10%, we might give them as much as 50% of that savings. The other key incentive we give our contractors is the knowledge they have the next job if they want it. This means they don’t have to spend time going out to market for new business, writing bids and chasing money.

A contractor is a business owner who understands the value of repeat business. So we help them meet their goals by paying each week, incenting them to finish early and below budget with money and ongoing jobs. We meet our goals by getting jobs done on time or early and on budget - we have contractors we know, like and trust to do the job the way we want it done.

Basics

Now is the Time to Invest?

Why?

by Tom Wilson

Abstract:

While most investors believe in diversification, the recent all-time highs in the stock market – followed by the recent volatility – are causing many to sell their stocks and double-down on real estate.

If you’re like most people, you’ve enjoyed quite a run-up in the stock market these past few years, and the market’s recent volatility is making you wonder if you should get out before there’s a major correction.

Data Point # 1: Stock are at all-time highs

As you can see from the chart below, the S&P has tripled since 2009, from 700 to 2,100: Is the stock market more likely to keep going up from these levels, or is it more likely to go down?

apartment buildings and commercial properties.

And that’s what many savvy investors are doing right now: Taking money “off the table” in their stock portfolios and using it to invest in cash-flowing real estate.

Single Family Homes – A Great Entry Point

In many parts of the country such as Dallas or Atlanta, singlefamily homes can be purchases at prices that enable them to cash flow with 20-25% down. These markets have these desirable features; • Monthly rents that are high (typically 1.0%) relative to purchase price • Diverse economies not dependent on a single industry • Job and population growth • Pro-business governments The investor merely makes the down payment ($25K on a $125K property), take out a low-interest fixed loan, and hire property managers to manage it. The tenants pay off the mortgage over time, yielding tax-sheltered cash flow from day one.

Commercial Properties - $50K Gets You In! Most investors don’t of “playing in the big centers, office buildings, commercial syndications,

even consider the possibility leagues” by investing in retail or public storage, but through those options are open to you.

Here’s how they work: •

Data Point #2: Mortgage Rates Are At Historic Lows

•

30-Year Fixed Rate Mortgage Average in the United States©

•

15.0

(Percent)

12.5

• •

10.0

7.5

5.0

Summary:

2.5 1985

1990

1995

2000

2005

2010

2015

Source: Freddie Mac Shaded areas indicate US recessions - 2015 research.stlouisfed.org

At the same time that stocks are at an all-time high, mortgage rates are at their all-time lows: Think about that: If you can borrow money at 4.0% and invest in a cash-flowing property that yields 8.0% - and most of that tax-sheltered – why wouldn’t you buy as many properties as you can? Cap rates of 8.0% are everywhere: In single-family homes, www.reivoice.com

10

A commercial syndicator puts a commercial property under contract.

The purchase price is broken down into affordable shares e.g., $50K per share x 20 shares to raise $1M for a retail center The syndicator pools the capital, funds the deal, and makes improvements to raise the value of the property over a 3-7 year hold period.

The investors get quarterly cash flow distributions.

At the end of the hold period, the appreciated property is sold and the investors get paid their principal and capital gain.

The stock market can drop 20% in one day.

Is this where your retirement nest egg should be?

Or is now the time to take advantage of low rates and invest in quality, turnkey, cash-flowing property?

The key to getting started is to partner with an experienced, trustworthy turnkey provider of both single-family and commercial property. Wilson Investment Properties, Inc. strives to provide this level of excellence.

HIGHEST QUALITY INVESTMENT PROPERTIES INVEST WITH CONFIDENCE SINGLE FAMILY HOMES • ACHIEVE IMMEDIATE CASH FLOW Highest Quality Product Fully and expertly renovated with details to attract the highest quality tenants.

Highest Genuine Cash Flow Unlike others we give actual current income and expenses on each property.

Highest Quality Metro Area • Highest U.S. employment growth metro.

• Broad based economy.

• High occupancy.

Price: $139,000 Rent: $1,450 Year Built: 2007 5 bed/3.5 bath/3,131 sq. feet

All Properties Direct from the Source All properties with clear title.

Principal has $100M and 2,000 units of experience in DFW.

COMMERCIAL PROPERTIES • GAIN ECONOMIES OF SCALE Invest with as little as $50K! Excellent cash ow and appreciation.

Tax sheltered income.

Long term leases.

Annual rent increases and renewal options.

Easier to deploy larger amounts of money.

Easier to manage professionally.

Excellent innation hedge.

INVESTOR PROPERTY TOUR Sunday, Nov 22nd in DFW Spend the whole day guided by experienced investors.

See examples of retail & p industrial properties, rentals, neighborhoods & more. realty411guide.com/events for more info

Preferred rates of return.

Triple net with reimbursement for expenses.

FREE article “Sell Stocks, Buy Real Estate” visit www.TomWilsonProperties.com for your free copy

Tom K. Wilson, President (408) 867-1867 info@TomWilsonProperties.com www.TomWilsonProperties.com

Connecting People, Educating Investors, Inspiring Action.

Presented by Lori Greymont

CEO SJREI Association

With SJREI Membership You Will...

• Hear the best speakers and get the best real estate investing education • Network with investors, buyers, sellers and the people who support them • Stay motivated, stay on top of the market and avoid the pitfalls • Have the opportunity to attend monthly meetings

Education. Networking. Success.

SJREI Association is peopled by experienced real estate investors. We offer high quality educational programs presented by recognized experts in their field, and the grand opportunity to network with other local had-working real estate investors.

$349 NEW MEMBERS

$299

RETURNING MEMBERS

Join today, or learn more: www.sjrei.org

Advice

Creative Financing/Investing How SJREI CEO Lori Greymont Designed a Deal - and a Property - to Find Success

by Geraldine Barry

I

recently interviewed Lori Greymont regarding the specifics of her latest rehab project, which showcases both her creative design and finance methods. She is an avid investor who wears many hats. CEO of the SJREI Association, CEO of Summit Assets Group and an owner of the now well known, “We buy ugly houses” franchise, Lori has been immersed in the investing world all of her life, just as her mother had been before her.

Greymont attributes her success, in part, to being able to navigate the difficult times that are inevitable in every business. She also knows how to build a thriving operation and possesses expertise that comes, in no small part, from her mother, who exposed her to the true demands of the business: the process of rehabbing, painting and cleaning up newly purchased homes, getting projects rent ready, and much more. This strong work ethic has served Greymont well and has helped launch her into the successful businessperson that she is today.

maximizing the existing space, and increasing the Return On Investment (ROI) in the process.

As the house is more than 50 years old, the municipality required a historical and architectural review of all permits for anything that would change the exterior look of the house. This limited the rehab to designing an interior that didn’t alter the exterior.

In typical Greymont fashion, she found a creative way to do this: remodel the kitchen into a bedroom and move the kitchen forward; transforming it into a galley style setup. She established a $75,000 budget for the complete rehab, including appliances, permits, and materials costs. All said and done, the cost for the property and rehab came to $665,000.

New Floor Plans

As CEO of the SJREI Association, Greymont immerses herself in all aspects of the real estate business, and creatively financed deals just happens to be one of her strengths. Greymonts’ recent deal, spotlighted here, brings readers inside the process of getting things done in a geographic location where investors have difficulty simply finding deals, never mind creatively financing them to boot.

Greymont recently bought a 2 bedroom/1 bath, 988 square foot house for $580,000 (welcome to the Bay Area real estate, readers!).

She accomplished this feat by taking over the existing financing and putting $100,000 cash down. The biggest question to be addressed, initially, was whether, or not, to increase the square footage of the property. Ultimately, she decided to redesign the original footprint,

According to Greymont, “Ultimately, we created an additional 1 bedroom and 1 bathroom by reconfiguring the floor plan; we did not increase the square footage.

The complete rehab took four weeks.” The incentives for the contractor included a 10% bonus to finish in 3 weeks, a full budget if the project came in on time, and a penalty for each day past the deadline. The contractor was ultimately charged for coming in 3 days past the deadline.

October2015 REI Voice

13

Advice

Lori Greymont

When it came time to put it on the market, Greymont shared her insight into the final steps of the project, “The property was listed with a realtor who provided landscaping for the front yard and staging in the package to us. That was a big savings to us and the realtor also coordinated that component of the project. It’s going

on the market Wednesday at $799,000, and we expect it to sell for $830,000.” All in all, this deal highlights the elements that make Greymont a success - and one with true staying power: knowing the field, tenacity, diligence and creativity.

Before and After

All photos coutesy of Elena Johal Realtor, Keller Williams www.reivoice.com

14

Basics

Success in Retirement: As Simple as 1, 2, 3

by Dan Noble Director of Investor Relations Summit Assets Group

Success: it’s a delicious souffle we often think takes a lifetime of hard work to achieve. By retirement, we have baked what we are going to bake and it’s time to start enjoying it. Quite simply, this idea is limited. The funds are finite. Is it possible to concoct more success? If yes, is it really as simple as one, two, three? Here’s my personal recipe for success in retirement - and it’s all about real estate investment.

PREPARATION Every good chef honors the policy of “mise en place” - a french term for having everything set up before you began cooking. When setting up your business, you need to have your tools for success in place. Line up your business structure. Get your phone, business cards, designated computer, office supplies and even an accountant ready. Hire a coach or mentor who can guide you: find someone who has real industry expertise and the contacts you need to get you from point A to point B.

INGREDIENTS You need to have a business/retirement plan. Know your entry point by knowing what your exit plan and strategies are. Consult with others: one can’t row a boat alone, so don’t try it. Assemble a team of helpers who are ready and willing to propel you on to greatness. Cash is king and to find success, you will need cash and credit (whether you use your own or someone else’s). Finally, you will need property. Here are two solid examples of why property is a necessary ingredient: Example #1: Buy a $150k property that rents for 1% or $1,500/ mo. in an area that appreciates at 6-8%/yr. hold for 5+ years with + cash flow, exchange at increased future values for other properties paying off mortgages as you go.

Example #2: Buy a $100k property that needs $15k in repairs for $55k You’re in for 70% of ARV

Simply repeat the process as needed to pay off all personal and business debt until you own your property free and clear - with a monthly income sufficient to fund a retirement plan.

Teach your children this process so they will know how to keep the wheel rolling for themselves. As they teach their children the cycle of inherited wealth disappearing within 1-2 generations will begin to extend to additional generations.

Let Summit Assets Help You Summit Assets has been working to develop and incorporate all we’ve been teaching into a brand new opportunity for you. Our intention is to become the one-stop-shop for you, the active investor, to launch or increase your investment activities in the residential housing market. We work for you - based solely on what you want and can do.

When You Work With Us, You Can Expect: 1. A 30 minute consultation with me to determine your desire, motivation and available resources 2. I’ll prepare the “Next 10 Properties” report tailored to your situation and desires.

3.

After we discuss it and make any changes, we’ll then put you in touch with a quality property provider in the areas you’ve specified.

4.

We will then monitor the activities between you and the provider for quality control for you and them.

Note: There is no cost for the consult, initial report, and provider interface & monitoring If you’d like a consultant to ensure the success and quality of the transaction or just for additional learning, we can discuss that with you upon request.

SERVINGS So, how many servings of success will you get to enjoy? Well, one property will provide all the necessary experience and motivation to do another and more importantly, it’s what has gotten you started.

October2015 REI Voice

15

Analysis

Inside the Numbers with Santa Clara County Assessor Larry Stone

Larry Stone County Assessor Santa Clara

by Geraldine Barry

The County Assessor’s Office Annual Report 2015-2016 was recently released and is a wealth of information on the Santa Clara economy filled with data and facts. Who are the biggest tax payers?

How are the tax dollars collected allocated? What cities within Santa Clara led the way for growth and dollars assessed? For those among us who enjoy data, it is a veritable feast. The much admired County Assessor, Larry Stone, puts out a report that is enlightening and gives us insights into where the overall economy is headed, and how it performed the prior year. Efficient and effective, Stone and his team, returned $572,000 of the Assessor’s budget to the County General Fund; a dizzying $10.8 million has been returned during Stone’s 20 year tenure as Assessor. Not your average County Assessor, and not your average County, Santa Clara, in terms of taxes generated...

I extrapolated from the extensive report, and share some interesting statistics and highlights with you that reflect real estate trends, and property values in the county. Santa Clara County has enjoyed a third straight year of economic recovery, and another year of tremendous growth. The Santa Clara County gross assessment roll reached a new high of $409 billion which makes it a leader in

statewide assessment roll growth. Stone shared, “Property sales and new construction were once again the primary drivers of increases in the assessment roll. These two factors accounted for 59% of the $31 billion increase in the 2015 assessment roll.”

Which cities are thriving economically?

Stone summarized, “Santa Clara led all cities with a 14.5% increase; Cupertino Mountain view and Sunnyvale each experienced double digit increases. Growth in these cities was triggered by extensive new construction in the technology sector, completion of the 49ers Levi Stadium ($1.4 billion) and an insatiable demand for for new multi-family housing.” Growth in Cupertino, the home of Apple, and the home to the Apple headquarters, currently under construction, but was assessed at $820m-and that number will increase dramatically once the building is completed and occupied in a few years. The “Apple effect” is being felt county wide as technology companies compete for space, many of whom are the in the Fortune 500, expand with the technology boom being experienced in Silicon Valley.

The Total Taxes collected in FY2014-2015 was

$ 3,744,751.881!!

y unit % m m 7 Co eges Coll l cia ts 6% e p S tric Dis

ment ust p o l e r v Rede r ty Tax T e Prop 11% d n Fu

14% Cities

County 18%

K-12 P Schoo ublic ls 44%

Santa Clara County Average Property Tax Revenue Allocation 2014-2015

The County Assessor’s Office notClara calculate taxes,Office * Data provideddoes by the Sana County Controllers collect taxes or allocate tax revenues. *Data provided by the Santa Clara County Controller’s Office

Analysis

The increase is notable year over year for the last couple of years with $31 billion or 59 percent increase in 2015 assessment roll is attributed to property sales and new construction.

Interesting fact ...while mostly exempt from property taxes, in 2015 major new construction totaling over $1 Billion at Stanford University --primarily the new hospital - also generated and exponential increase in jobs and services.

While assessment roll growth was strong in every community, Santa Clara, Cupertino, Mountain View and Sunnyvale recorded growth -- between 10.7 and 14.5 percent-triggered by commercial and industrial development … a direct result of being at the epicenter of the nation’s high technology boom.

In 2014, Cupertino’s growth in assessed value from new construction was $33 Million. In 2015 it leaped to $958 Million.

Palo Alto and Mountain View had increases of 179 and 190 percent respectively…

For full report, visit www.sccassessor.org

October2015 REI Voice

17

Basics

One motivated, focused, dedicated person can change a neighborhood…

Carl Salas shares his journey

by Geraldine Barry One real estate investor can change the world - by transforming an entire neighborhood - and find his own success in doing so.

Born and raised in Washington D.C., Carl Salas grew up as one of five boys. Today, he and his wife Marianne make their home in San Jose: together, they raised two grown children. Carl made the decision to get married while still in college - which prompted his parents to withdraw their financial support. They said to him, “Good luck with that,” - and he suddenly had to fly solo.

His parents inadvertently facilitated his first foray into real estate.

He purchased a trailer to live in at college and, with a payment of $35 a month, it made more sense than paying $225 for rent. Carl and his wife lived in the trailer for a few years before selling it for $500 more than he had paid. This gave birth to a realization that would change his life: one really could make money in real estate.

Before

Upon graduating from Virginia Tech, where he studied mechanical engineering with a nuclear option, Carl accepted a job with General Electric (GE). This began his journey and career in sustainable

After design. After several years at GE, a mentor encouraged him to go work for a small company so he could get the experience necessary to start his own. That is exactly what he did, and ultimately he ended up partnering with that company’s owner, Dan O’Brien: Salas O’Brien Mechanical Engineering was born.

Before

After www.reivoice.com

18

The firm grew into a solid enterprise with a few hundred employees, and eventually was purchased by an equity group.

Carl’s partner had an interest in real estate, and while Carl was sideswiped by the downturn in the 1980’s and lost a house to foreclosure, his partner thrived. The lesson he learned was that both business and real estate are cyclical: it’s important to be prepared for the unexpected. Money in the bank is always an asset and helps one sleep at night.

His engineering business was located near San Jose State University, and the partners began to slowly acquire properties in the area. When issues began to arise with tenants, as they always do, another strategy evolved. These residential properties were zoned for commercial use, and as the engineering company expanded, it became clear that some of properties they purchased were best used to house the company and its employees, as well as for other commercial enterprises for people who wanted to locate their business close to the thriving university.

Basics

Carl Salas after, Carl and Co. acquired the property and transformed the area. Marianne, Carl’s wife, recruited a tenant from neighboring Milpitas who owned a bagel store, convincing them to open a much-needed coffee shop in the blighted area.

Before

That was 20 years ago; today the store continues to thrive, serving as a gathering point for a vibrant community. One person and their vision can change the world and, more specifically, transform an area.

How has Carl remained successful and stayed afloat in real estate over the years? He knows his strengths and weaknesses. A significant struggle for Carl as a landlord was how he responded to his tenants’ life issues: he found himself falling for stories, and tenants, that caused problems down the line.

After Alongside their growing engineering company, local commercial real estate became their focus. As Carl and his young family lived in the area, and became entrenched there, he had a vested interest in his community thriving. A blighted spot on 10th St. and San Carlos housed a liquor store. A young woman was murdered there several years earlier, and it became a shrine to the victim: the spot was generally run down and crime ridden.

Carl decided to get involved: he reached out to the owners of the property who were out-of-state. He asked if he could have permission, on his dime, to put some streetlights in and to plant trees. Though they refused his kind offer, he did it anyway. Soon

“Real estate is a heart investment for me,” Carl shared, “but I have learned to do what I’m good at, and delegate the rest. It is just like any other business: one can’t be effective in every facet so that is why one hires others - and one has to have systems in place to be effective.” Learning quickly from the school of hard knocks, Carl toughened up and began to be more realistic in how he approached his real estate business. “I stopped doing the stuff I was no good at - I don’t like being the bad guy,” Carl laughed.

Carl’s philosophy in life and business reflects the good work he has done in the neighborhoods in which he invests: be happy, be productive, give back, enjoy every day… for a man who signs his emails “energetically yours”, that philosophy seems very appropo…

Advice

“We Buy Ugly Houses” Franchise for Investors--Golden Goose

Mark McKeller

by Geraldine Barry

A

lways entrepreneurial, Mark McKeller became interested in acquiring real estate while running a couple of unrelated businesses. He saw the value and the potential to really thrive in the real estate space. His research revealed that the most challenging part of buying real estate was finding and keeping a steady flow of deals. At a business event, he ran into the founder of Homevestors, Ken De Angelo, a well known Dallas based franchise - famous for its “We Buy Ugly Houses” tagline. Ken’s model was to buy houses at a discount, fix them up, and sell them to end users who could not qualify for traditional financing. He did this by creating notes and selling the paper to investors , thereby filling a niche that banks did not cater to. More importantly, this niche provided the opportunity for people with credit issues to get into a home.

Mark purchased a franchise, and bought 32 houses the first year; Homevestors really knew how to generate leads. As an entrepreneur, Mark discovered their methods were practical and logical, and more importantly: they yielded results. Most of the dollars generated went into marketing and advertising, so leads were consistent and fruitful. He mused, “some of the best businesses have failed because of lack of advertising and marketing budgets.”

In 2006, the word on the streets was the market was due for a big correction, Mark went into hold mode with his business. In his dealings he could see how fragile, and unpredictable, the very market that had climbed so quickly could be. Mark shared, “when you are immersed in a business like HomeVestors, other franchisors collaborate and have access to real time information on what is happening in the market today”. This is an invaluable asset of being part of a business larger than oneself.

How does it work? What kind of people call HomeVestors with a home they want to liquidate? “We buy directly from sellers who have issues, some are 95 year old and need to move into an assisted living facility now, the hoarder you have seen on TV is actually out there, the person who wants to sell quickly on a house that has deferred maintenance, landlords with code violations who want to move on with their lives…” These are all real life situations.

For these owners, getting top dollar is not their biggest concern.

HomeVestors advertising reaches potential sellers from all walks of life. For example, the now famous billboards ‘We Buy Ugly Houses’, that have become synonymous with the company, can generate a lead on a house in Los Angeles that someone who lives in Arizona inherited.

These sellers want to liquidate without hassle and gain access to the cash ASAP. They are what Mark calls the “hidden city of sellers.” ‘Trigger events’ happen in sellers’ lives that push them to want to get the job done as easy and effortlessly as possible.

Homevestors’ aggressive marketing aside, how else can you find these hidden sellers? Code violations is one way, as typically they are not talking to anyone. Time is of the essence for most of these sellers and to make things happen fast, Homevestors simplifies things. They generally work with a 30 day close, agree on a price, work out a moving date and plan, ensure that title is clear, and move forward quickly and seamlessly.

Mark says the Homevestors approach to real estate is one that delivers results. As he put it, “It works if you work it. I’m proof positive of that. I have had my share of difficulties, that is normal in any business. You simply have to put your head down, work hard, and things tend to work out for those who are diligent and consistent. That is my experience in every business I have owned.”

October October 8 :

SJREI Monthly Meeting- Bruce Norris Domain Hotel Sunnyvale @ 7PM October 10: Bruce Norris Workshop- Cashing in on the Boom October 16: I Survived Real Estate - Black tie affair at the Nixon

Library- www.isurvivedrealestate.com

November November 5: SJREI Monthly Meeting- Kathy Fettke Domain Hotel Sunnyvale @ 7PM November 7: JumpStart Program presented by

SJREI CEO, Lori Greymont Domain Hotel, Sunnyvale @ 9 AM

December December 3: Special Holiday/Charity event Domain Hotel Sunnyvale @ 6PM Come celebrate and mingle with other investors...

Guest Speaker: Greg Jamison, former President and

CEO of the San Jose Sharks

Visit www.SJREI.org for updated information

October2015 REI Voice

21

Features

Getting 100K over Asking...

Staging for $$$ Confidential Conversation with Realtor Elena Johal Elena Johal

REALTOR, Keller Williams

by Geraldine Barry If you’re thinking about selling, there are so many variables to be considered to maximize your return. How do you prepare a house for sale? What should be done? Where do you get the most bang for your invested dollar? When the market and timing are right, values can be dramatically increased by small, simple strategies to beautify, and stage the property and garden.

The Bay Area’s current hot market is creating dramatic results for sellers - with some offers coming in several hundred thousand over the asking price. What secret weapons are the area’s top real estate agents using to deliver these stunning results? We caught up with agent Elena Johal to find out. She clued us in on one major factor that ups her offers: staging. “A low inventory market, of course, doesn’t hurt,” she added.

Elena says, “Having the vision, knowledge and understanding of how staging and landscaping can enhance the resale value, and sharing that with clients, is an endeavor that I find rewarding personally and professionally.” An engineer by training, but a real estate agent by experience and in practice, Johal has perfected and simplified the process of selling a home by including both staging and landscaping for her clients.

Staging ensures that her clients’ properties look better, show better, and ultimately increases their perceived value so it looks inviting and enticing. A top producer with Keller Williams Realtors, it’s not hard to see why Johal is so effective; she owns a staging and landscaping company and includes these services free of charge when she lists a home. Normally in a real estate transaction, the seller pays for staging and any fix-up that is done to prepare the home for sale.

When I asked Elena why she finds staging and landscaping to be a must, she said, “my experience is that if one focuses on staging, a lot of issues with the property can be resolved or minimized… particularly if one has an eye for detail. When shopping for a home, the potential buyer envision themselves living in and enjoying the home. When a home is beautifully presented, the stage is set. I want to simplify and control the process from beginning to end and established my companies to accomplish this goal.”

In the Bay Area, where a very average home can sell for over a million dollars, selling a home is no small enterprise. So, what do you get for a million dollars? You may need to adjust your mindset….we’re not talking about a palace - or even a home that would make the average woman swoon. A million dollars can yield a very simple three bedroom and two bathroom home: welcome to the Bay Area. www.reivoice.com

22

Before

After With local property prices at two and half times greater than the national average, transactional stress is magnified for buyers and sellers. The prospect of buying or selling a home can drive a person over the proverbial edge…

It’s worth the effort though. A primary residence, in the high priced Silicon Valley, tends to be very profitable for its owners upon sale - especially with the favorable tax laws. Essentially, when one lives in the house for two years, one can sell and make as much as $500,000 tax-free on the sale with a partner or spouse, or as much as $250,000 tax-free for a single owner. (obviously, these amounts would be for properties that have appreciated in value).

Features

Elena Johal

In the last downturn, many lost their homes because they were over-leveraged. However, some savvy investors have made a career out of rehabbing a property, living in it for two years, selling and moving on to the next property. A complete rehab is oftentimes involved. It’s a stressful process - unless one has a knowledgeable team like Johal’s in place to simplify the endeavor.

Staging enhances and highlights the liveability of a property.

Smaller homes can benefit from staging, Johal shared, making limited square footage feel more spacious by strategically using larger pieces of furniture. “Someone with an eye for detail,” Johal says, “and who can creatively downplay any ‘warts’, can push a house right into a bidding war.” Elena’s goals with the homes she stages is not a small one: “I want to have a huge impact on the buyer’s experience of opening the door for the first time. I want them to envision themselves entertaining and enjoying their home.”

You buy what you like, staging matters: women know this innately.

When a couple walks in to look at the property, the man will check the floors, the cabinets, are things working properly. However, a woman walks in and looks at the kitchen and takes in the day-today functionality of the house. Would she be proud to introduce

her family members to the home? Livability is the issue for her. If you can set the stage to be visually pleasing, it’s the women that make the most buying decisions – if color and style is evident to her, he will find a way to finance it.

Although it is a mutual agreed on decision financially, it is triggered by emotion; one does not need to buy a home, they have to want to buy it and be the next proud owner.

What do sellers want? A trusted partner for the project, someone to take ownership and to be complete in the process, meet the timelines and get results. Elena Johal is an example of that partner: someone who not only recommends what is to be done, but who actually gets it done with her free staging, landscaping and complete vesting in the project of selling a house for the maximum profit.

As Elena succinctly puts it, “I want to have a huge impact on the experience of the buyer walking into my listing - from opening the door to seeing themselves entertaining and enjoying their home, that is what my experience in real estate and staging does.”

Before

After

Before

After October 2015 REI Voice

23

Work Hard, Play Hard!

Invest in Real Time, Not Bank Time

With Todd Pigott

by Geraldine Barry “Work hard, play hard is my motto,” says Todd Pigott. He explains,“This industry has enabled me to enjoy a lifestyle focused on family, golf, biking and … giving back to our community.” Life is good for this self-made entrepreneur. Living on a golf course in Fresno, with his wife Betsy of eighteen years and three children, he has worked hard to live well. He’s started several multi-million dollar businesses - and he’s done it all through hard work, sheer will and determination.

The real estate industry is constantly evolving, and as it does, so too does the reality for those who invest and work in this space. Those who find success within this industry evolve along with it. The success of a deal, more often than not, depends upon one’s ability to close it quickly - and to do so, the necessary funds must be in place, and ready to go at a moment’s notice. Companies such as Todd Pigott’s, ZINC Financial, fill a need in our industry: opening the gates of wealth for many who have benefitted from its flexibility and fast access to funds. Pigott explains, “we move with the times in order to capture the loyalty of our borrowers.” Funding within 24 hours is a significant way in which ZINC Financial differentiates itself, as we use our own funds and make our own decisions in house.”

In 1987, Pigott knew he wanted a college education. He had less than twenty dollars to his name and an hourly wage of $2.61, when he started his first company to assist with college expenses. Todd earning a sports grant, which he gratefully accepted, and a new outlook on life: he realized never again wanted to be caught in such a financially vulnerable position.

He went on to found a hugely successful facilities company, which he ran for eighteen years and eventually sold for several million dollars. Not one to rest on his laurels, he founded ZINC Financial in 2006, funding over ½ billion in the following years.

ZINC, an investment-focused lender, is an alternative to the lengthy and oftentimes complicated process of conventional lending. ZINC, and other companies like it, gives investors the ability to sidestep conventional financing and access private funds quickly. It gives investors a real edge: they can access the deals they want when they need to in order to lock them down in realtime, not bank-time.

Todd holds a firm perspective backed by years of experience; his knowledge on the ins and outs of this industry is comprehensive.

His industry is here to stay, Todd says, noting that “private money is becoming a bigger player in the financial sector, more than ever before.” What are some of the factors influencing private money’s rise? One reason, clearly, is that banks present a true hassle for an investor who secures a deal they want to close quickly.

With the economic downturn, banks tightened their lending guidelines, especially the area of real estate investment lending.

As Todd put it, “Legal restrictions limit financial institutions from being nimble unlike the private money sector.” With private money lenders like ZINC, an investor who secures a good deal can align themselves with the funds they need to fund and close the transaction by omitting the red tape that goes along with traditional financing.

As a result, the private money industry has boomed. “Private money is very fluid right now, there is a lot of it penetrating our industry with competitors jockeying for position,” Todd explained, “rates and terms have reached historic lows which is good for investors.” With ZINC’s exclusive ‘Buy and Hold’ program, for example, a 5-year loan is available in the 6-7% rate.

These are rates never seen before in our industry.

What are Pigott’s thoughts on the current market? He notes that the low-inventory market in California, particularly, is a competitive one for investors as well as lenders. “In this market, or any market, investors need a solid exit strategy. Finding the ‘fix and flip’ is harder in today’s market.” Competition may be tough, but Pigott is quick to note the current market’s strengths - he believes the fix and flip arena to be strong. Though profits may shrink, he says investors today are “investing more into a property, making less, but in a more stable environment.” For investors who do find a deal in this market, the likelihood of appreciation or a realizing a quick profit is solid. Simply put, “It’s easier to sell, confidence on the exit in a market with low-inventory keeps prices elevated.”

Todd, and ZINC, has its success formula down solid. They zoom in on investors with strong performance records. Companies with strong performance records are the ones with staying power; ZINC is a reflection of such a company. Needs, not wants, are ZINC’s bread and butter. Todd explains, “Our niche is median priced home SFR 1-4 in urban settings. We focus on necessary, practical, primary housing. If we occasionally stray from this it’s generally because it is an exceptional deal, otherwise we stay with what we know works.” Funding hundreds of millions of dollars and fixing and flipping millions ourselves has created a wealth of experience.

ZINC’s private money lending also plays in the auto lending sandbox, funding millions and millions on a monthly basis.

Shying away from luxury cars, ZINC’s auto-lending arm also focuses on lending to those who truly need cars, “we offer practical transportation for family and for work...$12K or less - that is our sweet spot. It’s very similar to our real estate model.” Strategic diversification is evident in the model which protects when down-

trending cycles impact the ability to compete in the real estate space.

Though it’s a tight market for lenders in the private money space right now, Todd’s company does several things that clearly outperform its competition. “We stress our service and partnership record with our borrowers – we genuinely want to partner with our borrowers and make the deal seamless and easy to navigate.”

Todd’s focus is on bringing a commitment to service in an industry that is quickly evolving. “In today’s competitive environment, there is little additional room in rate or fee reduction; therefore we differentiate ourselves by our service. Speed, Ease and Reliability has become our tagline, and our investors echo this with referrals, as 83% of all transactions involve some aspect of a positive referral.”

For investors who have grown weary of traditional financing paths, ZINC Financial’s business model is a breath of fresh air.

When you work with private money especially well established companies it allows investors to avoid bureaucracy and red tape, associated with conventional sources. In Todd’s own words, “We are a direct lender, which essentially means we use our own money for funds so we make decisions quickly and wire funds from directly from our office. We control the process, and can fund deals in just a few days, that a bank will not and cannot do.” Ride on and enjoy your ride.

We Lend on SFR Investment Properties

buy hold INVESTOR

Program Highlights: • No Primary Residences • Loan Amounts up to $1,500,000 • Rates starting at 6.99% • LTV: Up to 80% of purchase price • Loans up to 60 months

a program designed just for real estate investors!

Direct Private Money Lender Funding at High Speed!

Equity Based Lending Wholesale Division • California • Arizona Telephone 559.326.2509 Fax 866.602.8892 zincfinancial.net This information is for use by mortgage professionals only and should not be distributed to the general public. All loans are made in compliance with Federal, State and Local Laws. This is not a commitment to lend. Loans made or arranged pursuant to a California Lender’s License. Loans made or arranged in Arizona must be represented and originated by a mortgage broker qualified to do business in that state.

Features

Profile of a Successful Commercial Deal: Find a need and fill it!

by Kathy Fettke

H

ave you ever wondered how commercial deals happen?

Kathy Fettke shares the specifics of a deal that her company just completed that was spectacularly successful in terms of scope and returns. It all began with securing a lease option to buy, at a future date, a parcel of 6.6 acres. When no one was building, the economy was in an economic slump, and land was not a sought after commodity, a deal crossed Kathy’s desk and she decided to go for it. Years in the real estate space told her that this was an opportunity of a lifetime - the location, the potential, the vision drove her to make it happen. Kathy shared the details of how it played out.

Situation: In Feb 1, 2011, the Dublin City council approved a long-debated Downtown Dublin Specific Plan. The location was next to the new West Dublin/Pleasanton BART station. It was comprised of 284 acres between Amador Valley Blvd., Interstate 580 and Village Parkway and was set to become the new “downtown”, fashioned as a high-density live/work/play space.

Shortly after the approval, our team was able to lease the option to purchase 6.6 acres at 11875 Dublin Blvd, formerly known as the Heritage Park Office Complex. Our plan was to rezone the commercial property to residential within 18 months. The entitlements already included a Supplemental EIR Report and

Specific Plan. We needed to get approval on our: •

Tentative Map and Development Plan

•

General Plan Amendment (GPA)

•

Specific Plan Amendment (SPA)

•

Supplemental Environmental Reports

•

Greenhouse Gases

•

Traffic, Air Quality, Noise

Upon approval of the single-family home lots, we would take down the two existing office buildings and relocate the tenants.

Plan: •

Lease Option Price: $10M

•

We needed $1.2M for lease option down payment, annual payments and entitlement costs

•

We offered 24 member units in a Limited Liability Company (LLC) at $50,000 each - which we raised before our 1st meeting was over. The value was evident to all present.

•

Our pro forma estimated a $14M sales price for the lots to a local builder.

•

Investors would get 15% interest plus 15% of profits with a projected 34% IRR.

•

Our policy is that with syndications, investor capital is returned first, then interest and profits - all before mangers get paid.

October2015 REI Voice

27

Features Reality: We relocated all the tenants except one. Challenge Dairy was headquartered in one of the office buildings and wasn’t able to find a new space. As they had a long-term lease in place, they decided not to move. Also, the City of Dublin didn’t want them to move out of the city, and we needed the city on our side in order to get the entitlements.

What to do? Challenge Dairy certainly became a “challenge” for

us. Our solution was to build them a brand new two story, 14,000 sq foot office building on the corner of our lot. To do this, we put together another syndication and raised $1.6M - with investors receiving 20% preferred return plus 15% of profits. That property is now complete.

Results: We were able to complete the entitlement process and put the lots on the market. We had expected an offer of $14M. Our timing proved fortuitous: the market was hot when we started to sell the lots. Ultimately, we had multiple offers, with four of them at $20M. We chose Pulte homes, who put up half the money last September, and then will finalize the sale on Sept 28, 2015 - which will result in a capital gain tax treatment for investors (reducing their tax basis).

Summary: While the process took longer than expected, which resulted in holding costs being higher, the sales price was ultimately higher as well. Market timing has a lot to do with the success of this project.

We tied up the land with a lease option, when no one was building, and sold the lots when there was no inventory or lots available.

Kathy Fettke Investor returns will far exceed expectations of 34% Internal Rate of Return (IRR). Obviously, we can’t guarantee returns, but this project proved to be pretty spectacular for all concerned. This was a true win-win for investors and for the city of Pleasanton.

The lesson learned is: find a need and fill it. If city officials are on your side and have a vested interest in your success, you will find that your project runs more smoothly. When problems do pop up, everyone involved has a vested interest in resolving it quickly and efficiently. This creates synergy and, ultimately, results.

Kathy Fettke is the founder and CEO of Real Wealth Network, a real estate investment club based in Walnut Creek with over 20,000 members and growing. Real Wealth Network provides new and experienced real estate investors the information and data they need to understand the ever-changing real estate market.

They also searches the country for the best performing markets to buy real estate, find the best teams in those markets for finding and managing properties, and share that information with their members. Kathy is frequently featured on CNBC, Fox Business News, CNN, ABC, and NPR and was just celebrated among the Top 100 Most Intriguing Entrepreneurs by Goldman Sachs.

miles+barry contract furniture workplace furnishing to fit your business

yttttttt

miles/barry contract furniture is a full service independent furniture dealership providing quality, cost-effective interiors for businesses of all sizes.

We offer creative, flexible solutions tailored to individual space requirements, budget and aesthetic concerns. miles/barry contract furniture’s experience in the industry brings you prompt, professional service for every aspect of your project. You will enjoy the care, accuracy and efficienty of a single point of contact throughout your project.

www.MilesBarryFurniture.com

PRODUCT SOLUTIONS + Ergonomic Products + Workstations + Filing Systems + Conference Rooms

PROJECT SERVICES + Consultation & Design + Customerized solutions + Installation + Reconfiguration + Leasing

Call us to Simplify & Save on Your Next Project! barbara n. miles geraldine barry

415.519.7797 408.396.7177

Advice

Five Secrets to Keep Legal Costs Under Control

Jeffrey B. Hare, Attorney at Law, provides outcome-oriented legal services to real estate investors, commercial and residential property owners, and real estate developers. As a real estate attorney with over 25 years’ experience in real estate and business transactions, Mr. Hare provides his clients with a practical, cost-effective approach to solving complex legal issues, including due diligence, contract review, and negotiations. He also has extensive experience with entity formation (LLCs, etc.), and is very familiar with the use of self-directed IRAs for alternative investments such as real estate.

by Jeffrey B. Hare, Attorney at Law

T

he only 100% sure-fire way to avoid drowning is to avoid water.

But sometimes, the water comes to you, even if you don’t want it to. That’s why there’s flood insurance. Avoiding all legal costs is virtually impossible for real estate investors, but you can keep them under control. Here are five secret ways. Number 5 is especially important.

1. Homeowners Insurance. The first and possibly the

best-kept-secret is homeowners insurance. What’s so secret about homeowners insurance? Isn’t it required if you have a mortgage? Yes, but often people fail to put it to good use.

So, it must be a secret to some people! Faced with a lawsuit, many property owners rush to hire a private attorney before notifying their insurance carrier. Anytime you get sued over an issue involving your property, such as a neighbor disputing a boundary or fence issue, chances are that your policy requires the insurer to provide a legal defense, and in most cases the amount of coverage should be sufficient to provide a contribution sufficient to achieve a reasonable settlement of the dispute, and possibly enough to remedy the problem.

2. Renter’s Insurance. This is another underused resource

for investors, and therefore must be a secret to some. Although the investor or property owner cannot get renter’s insurance for themselves, they can insist that their tenants do. It is relatively inexpensive – actually cheap – for the range of benefits it provides to your tenants. In most cases, the property owner’s insurance would not provide coverage for your tenant’s possessions: computers, clothing, bicycles, electronics, etc., but this is covered under renter’s insurance. Renter’s insurance coverage also includes benefits to cover relocation and temporary lodging, food, and related expenses. A tenant whose basic needs are addressed and essential possessions are replaced is much less likely to make your life miserable!

3. Competent Property Management. Many investors

consider themselves to be “hands-on” managers, and take pride in keeping maintenance costs to an absolute minimum.

While a smart investor watches their expenses, if taken to an extreme it can be a penny-wise, pound-foolish strategy.

A competent property manager is worth their fees in so many ways, from screening tenants to performing routine inspections and maintenance. The consequences of failing to

utilize this resource, in terms of potential legal costs, can be drastic.

4. Read the Contract. Probably the No. 2 obstacle to

efficient resolution of disputes is the failure of the parties to read – and therefore understand – the terms and conditions of the deal. One of the first things a lawyer will generally do is ask to see the contract or other document that forms the basis of the dispute. If properly drafted, the documents should shed light on what the parties originally intended to do before the dispute arose. Of course, this presumes that the parties actually drafted such an agreement to begin with! But with so many standardized forms available, there is no excuse for failure to put the agreement into writing. The “secret” is to make sure you read it thoroughly, to make sure it contains the correct terms and conditions you agreed to! The same rules apply to any changes you need to make to the agreement – put it writing and read it carefully before signing it.

5. Get Rid of your Ego. When you get involved in a

dispute or a lawsuit, you’re probably upset, maybe very angry, probably mostly at yourself for letting yourself get trapped in a bad deal. Unfortunately, litigation is probably the most costly and ineffective way to resolve disputes. Many lawyers would love to have a client like you – eyes on fire and ready to jump into the ring swinging; “cost is no object – just get the bastard and make ‘em pay!” That’s all fine until it becomes apparent that (1) there is more than one side to the story, and (2) you have to spend a lot of money to convince everyone you are right and everyone else is wrong. So, the Number One best secret to avoiding extraordinary legal costs is to put your ego into a safe place, and take a long, hard look at your options.

Review them with your attorney. Determine your ultimate objective, come up with a budget, and then concentrate all efforts and resources towards reaching that objective. Make a business decision, not an emotional decision. Anything that doesn’t move you closer to your objective is a distraction – and a costly one. Focus. It will save you lots and lots of money!

October2015 REI Voice

29

Dependable Quality Cash-flowing Properties Headache-free Process from Property Selection to Post Sale Support No Risk, No Questions Asked Refundable Deposit

Do you have a roadmap to fund your retirement?

It’s not enough to just buy the houses, you need to have a strategy.

We work with you from start to finish, this means from your personal STRATEGY TO EXIT so you can retire rich with real estate • • • • •

Consultative Sale Turnkey Investments Investing For College Retirement Lifestyle

• • • •

Preparation Is Part Of The Process Achieve Financial Portfolio Development Company Works From Start To Finish -- Strategy To Exit

TURNKEY

ATLANTA - BIRMINGHAM - AND OTHER CASH FLOW MARKETS

I N V E S T M E N T S

Lori Greymont

1.888.298.0652 www.SummitAssetsGroup.com

Analysis

Carole Rodoni Will The Stock Market Correction Affect the Real Estate Market?

by Carole Rodoni REI Columnist

A

ccording to both CNBC and the Fox Business Channel, the stock market has been overvalued for some time so the recent correction should have been expected. Here is what we know: our economy is in the worst recovery in 75 years, our government does not seem to be able to work together, inflation is tame, and though the unemployment numbers look better, are they “real” numbers? I think we are going through more than a recession.

Instead, there has been a structural change in mature countries around the world that will create slower growth going forward.

Capital, consumption, debt levels, part time versus full time jobs, technology etc. have an impact. Then, add the issues of emerging countries with high inflation, currencies out of control, high debt and we have a picture of a world not on the cusp yet of a rebound.

What really escalated the situation was when Disney announced that the subscriber number of their bundle of services on ESPN was falling. Then China devalued their currency over a three-day period, oil kept falling, and is now around $40.00 a barrel. All of this added together caused the stock market to fall over 1,000 points in just one week into that 10% correction zone erasing $1.4 trillion dollars of wealth in the process.

quickly. When this occurs, prices will balance out, buyers can negotiate again, and sellers can stay realistic.

Everyone should remain thoughtful and calm. What we do not need is panic so that our real estate market takes a negative turn.

Look at your portfolios and adjust if needed, if you have cash there may be a buying opportunity. The world did not come to an end with this correction, it just corrected. It will happen again. It demonstrates a good lesson however-- things do not go up forever, and if it looks like they will, they are probably over valued. We now live in a global world so what happens here matters, but what happens around the world matters even more. And most important life has a way of “turning on a dime” and surprising us when we least expect it. The key now is how we respond…

Carol Rodoni was formerly Chief Operating Officer of Cornish and Carey Real Estate, and President of Alain Pinel Realtors.

She is a renowned speaker of the economy and real estate and is curently the President of her own consulting company, Bamboo Consulting.

So, what is ahead? The market will rebalance but it will take time- no quick come back this time because there is still a lot of risk around the world. Markets do not like uncertainty, and the world is full of it right now.

In contrast, our real estate market last quarter was the hottest market since 2006. According to DataQuick days on the market fell to 26 from 27 while inventory fell to just 3.5 months. Competition was still high with 23% of homes selling over the asking price. And according to Redfin - Oakland, San Francisco and San Jose were among the hottest markets in the nation.

Now, the big question is: will this real estate market continue with what has happened in the stock market? I think there will be some pull back, a pause if you will, as some buyers will retreat from the market, others that were depending on their stock or stock options to finance a real estate purchase may delay. What happens over the next few months will determine whether this market fuels up again, calms down or really takes a turn. On the side of a market that continues to amaze is high demand and a limited supply, however, I predict that this stock market correction will be remembered for a long time and make buyers slow down.

That is what we need and want-- a pause after so many months of multiple offers, no inventory, and appreciation moving up too October2015 REI Voice

31

Analysis

Silicon Valley’s

Affordable Housing Crisis Geoffrey Morgan

CEO First Community Housing

Today, Silicon Valley is facing a major housing crisis in the nine county bay area.It’s a crisis that is hidden by the awesome economic growth we have experienced in high-paying high-tech jobs. Over the last three years, the Bay area has produced roughly 460,000 jobs: we have met the growing need with the construction of only 70,000 units of housing. This high-demand, low-inventory situation has led to an unprecedented rise in rents.

Recent studies published by California Housing Partnership show that 18.3% of all residents in Santa Clara County live in poverty due to rising housing costs. Minimum wage is currently $10.30/hour - this is insufficient to live on in this area. Real incomes are down, and monthly purchasing power has declined by an average of $422.

To house its residents who earn less than half of the median income, Santa Clara County would need an additional 68,000 units.

This means that not only can the lowest income residents not live here, but average workers that perform vital functions: teaching preschool, cleaning offices staffing high tech centers, serving our food and working in our retail shops, all have to work between 97 and 161 hours per week to pay the average asking rent. This may explain why some homeless studies in Santa Clara County show that over a quarter of Santa Clara County’s homeless are, in fact, employed.

If the quality of a society is judged by how we treat our most vulnerable, if we are supposed to care for “the least of these” in our society, then what do we need to do to affirm the belief that each life has value, purpose and meaning? Even from a purely pragmatic approach, we have not grasped the cost to all of us of not providing affordable housing. Families are broken up with endless commutes and for those who are homeless, we treat them, turn them back out on the streets and then pay to treat them again when they end up back in the emergency room.

The costs are staggering, both in the documented costs of not housing the homeless (at least $43,000 per year per homeless person, according to “Home Not Found” study of Santa Clara County), and in the undocumented cost of absent parents who cannot spend the time they would like instilling the values of hard work (the very ones that drive them to travel for hours to work each day or to give their families dollars from day work rather than spend the money on their own lodgings).

We are beginning to quantify the costs, but this has been a problem a long time in the making. California has simply not created enough housing to keep up with demand in population growth www.reivoice.com

32

since 1989. This problem did not occur overnight, and it will not be fixed overnight.

I have seen firsthand how housing, especially housing with services, transforms the lives of our most vulnerable. I will never forget how an elderly woman broke into tears as she viewed a small, tidy newly refurbished studio apartment for the first time, telling me, “this is the best place I have ever lived in my life.” I have witnessed the growth in health, in dignity, and in purpose that adequate housing has provided many in the communities we have built.

Having witnessed this transformational moment many times and through many grateful eyes, I continue to have faith that we can and we will, not just because it is the right thing to do, but because it is the solution to so many other problems. Let’s build more housing for our most vulnerable. Now. President and CEO of First Community Housing, Geoffrey Morgan has over 16 years in the real estate and affordable housing industry. He is a licensed contractor and LEED AP; Geoffrey has served at FCH for 8 years and is a Graduate of MIT with a Masters in Real Estate Development.

Basics What is the opportunity?

Answering this question goes far beyond your specific deal. An investor considering working with you is going to want to know things such as:

Mark Hanf (Cont. from page 6) Part of your budget should include a timetable that has a best-case and worst-case scenario. Showing that you have considered that the unexpected might happen makes you look more professional.

Also, keep in mind that it’s always better to under-promise and over-deliver than the other way around.

•

Who are you?

What happens if you disappear?

•

What is your background?

•

What is your real estate experience?

•

Can I see examples of your previous work?

•

How well did it go before?

While you do want to have a plan in place in the event that you get hit by a bus, the bigger point of this question is to address the concern about what happens if things go wrong. What are the risks? What safety and security features have you built into your model? What protections are you proposing to prevent or reduce the prospect of a loss to your investor’s principal?

Providing your detailed background and experience lays the foundation of your credibility, and answers the silent sub-question of “Why should I listen to you?”

How much money do you need?

Answering this question involves creating a detailed budget for the opportunity. You might also present more than one scenario for how your prospective money partner can be involved. There are many ways to structure the opportunity in a way that will convince the investor to participate.

•

Is it a loan?

•

Is it an equity investment?

•

Will you be using other capital in addition to your private lender?

•

Will you be using leverage?

While you don’t want to over-complicate or overwhelm a prospective lender with too many choices, understanding that there are many ways to structure a deal will help you to adjust your parameters based on a specific lender’s preferences and comfort level.

How much can I make?

How much you offer to pay your private lender will normally depend on a number of variables. One of those variables is whether you offer collateral in the form of a mortgage or deed of trust on the subject property, or if you offer an equity membership in an LLC that is formed to acquire the property. Will you be offering payment in the form of a loan (interest), will you be sharing the profit, or will you strike a balance between both? If you share the profit, what is the split?

When do I get my money back?

If you are planning to buy, fix, and flip a property, then your exit strategy is fairly straightforward. But what if you want your partner to invest in more than one project at a time, or to reinvest his or her profits from one project into another one? What if your plan is to acquire rental properties to hold long-term?

This is the area that many real estate investors either skip entirely or downplay, but addressing these issues up front actually makes you look professional and shows that you have both considered and planned for all possibilities. Optimism is important, but blind optimism can work against your goals.

The Big Picture The Five Steps to Money Method™ is a foundation for an effective presentation that will weave together your story, your opportunity, and your promise in a way that impresses investors, creates confidence, and attracts capital in a big way.

Mark is broker and president of Pacific Private Money Inc., one of the largest and most respected private money mortgage bankers in the Bay Area. Founded in 2008, Pacific has funded over 1,000 private money real loans totaling over $200 million, many of them “fix & flip” loans to Northern California rehabbers and flippers.

Uncovering the secrets to gaining access to unlimited cash, Mark has attracted more than 500 private investors to his lending practice.

Known as the “Private Money Guy”, Mark is a regular speaker at real estate events throughout the Bay Area.

He is author of the Amazon best-seller “The Insider’s Guide to Attracting Private Money” and cohost of a weekly 1-hour radio show “The Best of Investing” on the San Francisco Bay Area’s 910AM KKSF. October2015 REI Voice

33

2015

D E V I V R U IS E T A T S E L A E R

Hosted By

A Powerhouse Lineup of Industry Experts Converge for The Biggest Night in Real Estate

On October 16, 2015, join The Norris Group and our panel of industry experts at the Nixon Library in Yorba Linda, California for another award-winning evening. Get the inside scoop on top real estate trends from the leaders shaping our industry. Dress up, enjoy a spectacular meal in the Presidential East Room, network with successful real estate professionals from all over California, and help raise funds for kids with life threatening medical conditions.

THE PANEL

Bruce Norris President The Norris Group

THE CHARITY

Bill Emerson 2015/16 Chair Mortgage Bankers Association

Leslie Appleton-Young Chief Economist

California Association of Realtors

Doug Duncan Chief Economist Fannie Mae

Sean O’Toole President PropertyRadar.com

Ticket/sponsor funds directly benefit Make-AWish and St. Jude Children’s Research Hospital.

In seven years, we’ve raised nearly $520,000 for charity.

Eileen Reynolds Chair

California Building Industry Assoc.

THE SPONSORS MVT PRODUCTIONS

Adrenaline Atheltics Coachella Valley Real Estate Investors Association Coldwell Banker Town and Country Elite Auctions In A Day Development

Inland Valley Association of Realtors IRA Services Trust Company Jennifer Buys Houses Keystone CPA Las Brisas Escrow LA South REIA

Leivas Tax Wealth Management Pilot Limousine New Western Acquisition Northern California Real Estate investors Association North San Diego Real Estate

Investors Real Wealth Network Rick and LeAnne Rossiter Spinnaker Loans uDirect IRA Services Westin South Coast Plaza

www.ISurvivedRealEstate.com or 951-780-5856

The “TinyHouse Movement” is Gaining Steam!

We are going SMALLER...

by Geraldine Barry

Tiny Houses: Why? Are you ready to downsize your daily life? You probably know, or will soon enough, someone who is. Maybe you’re happy with the space you have - or even want to upgrade - but have you considered transitioning to a smaller workspace? Would you like a second home without the big expense? If so, welcome to the “tiny house movement”. The trend in smaller spaces, for work, living and play, has swept the nation by storm. Americans from coast to coast have stopped supersizing their living spaces, are saying farewell to their McMansions and are greeting tiny-house living with open arms.

So, what’s it all about?

Recessions Make People Look Inward Those choosing (important to distinguish from those without the option) to live in tiny homes, commonly defined as living spaces 200-1,000 square feet, are making a deliberate lifestyle choice and statement. First and foremost, proponents of small-space living overwhelmingly agree that living like this is about living simply.

The movement gained real steam during the recent recession.

Recessions and depressions have long been a time during which those affected find themselves questioning their values, how they spend their money, their time - and, maybe most importantly why they do so.

Lean & Green The lifestyle is one of minimalism, frugality and consciously making green choices. Today’s tiny-houses (including small offices and vacation homes) are often optimized for energy efficiency, with many even falling under the category of homes that actually generate more energy than they use. With many of these spaces averaging 100 to 500 square feet in size, they tend to cost significantly less to buy, build, and maintain. For baby boomers who grew up with a 1960’s ethos, tiny houses are a particularly attractive option as they near retirement age with investments that are still on the mend.

The limited square footage within these homes all but demand minimalism: it’s hard to keep an entire life of collected things when you only have a few hundred square feet to work with.

Simplify The statement tiny-home dwellers are making seems to be that by giving up material things, one acquires a fuller life. Take Henry David Thoreau, arguably the godfather of the tiny-house movement, who famously penned the book “Walden” and infused it with his musings on living the simple life in a one-room cabin in the woods... For Thoreau, his decision was full of purpose, as he

stated, “I wanted to live deep and suck out all the marrow of life, to live so sturdily and Spartan-like as to put to rout all that was not life.”

Options to include the comforts of home Today’s tiny-home dwellers, however, are not necessarily trading in all the comforts of home for Thoreau’s chilly and stark New England lifestyle. Many tiny-homes are custom-built with specialized builders offering high-end appliances, energy efficiency and custom options that maximize floorplans. For the more adventurous - airstreams and even shipping containers are examples of popular tiny-home choices. Tiny houses come in all sizes and options: some even have wheels, ideal for those who long for a change of scenery from time to time.

Tiny House Movement Just as with any pop-culture phenomenon, an avid following has grown around the tiny-house movement. Recently, Colorado Springs, CO was home to the annual Tiny House Jamboree (www. tinyhousejamboree.com). The August event had a huge turnout, with over 10,000 enthusiasts in attendance. Speakers and workshops ranged from Ikea designers to builders and even legal advice. Not surprisingly, lunch was provided courtesy of the tiny restaurant movement, food trucks.

Homeless Solution?

There are a few communities of tiny homes sprinkled throughout the U.S, for example, one in Eugene, OR, that have been built to accommodate 57 people since opening in 2013. The idea behind this came from a young Urban Planner, Andrew Heben, who creatively explored the idea and created a “homeless hut village.”

In Tiny House Magazine, Heben shared his vision.

“A village of tiny houses—it’s a place many of us have dreamt of. A place where humble dwellings dot a landscape filled with common gathering areas and organic gardens. Where neighbors come together to share resources and make decisions about how their community is run”. Essentially these are self-run villages of people helping each other to thrive in a community setting.

According to the U.S. Census, the average American homes comes in at 2,400 square feet, and the average price tag hovering at $360,000. Though tiny homes can cost anywhere from a few hundred dollars to a few hundred thousand - and can be as small as 100 square feet or as large as 1,000 - they clearly represent a new approach to the way we live and how we choose to spend our money.

October2015 REI Voice 35

Analysis

Selma Hepp (Cont. from page 3)

So what’s holding Millennials back from homeownership? Money.

Only 36% of Millennials are currently saving up to buy a home in the next five years. Most (52%) have their eyes on a new car, while others have shifted their priorities towards college tuition (35%), a trip of a lifetime (26%), a wedding (15%), retirement (9%) or an engagement ring (8%). Nevertheless, this generation remains optimistic with 87% believing that they will be able to purchase their dream home one day.

Most Americans Aren’t Dreaming About McMansions or Tiny Homes.

Only a small subset of Americans (just 35% of homeowners) said they’ve already purchased their dream homes — that means an overwhelming majority are still searching for a perfect place to call “dream home”. In fact, over one quarter of Americans are regularly searching for a dream home online with 28% looking at least once a month. So what does the American dream home look like? Well, it really depends on how old you are.

What Does Your Dream Home Look Like?

In general, Americans aren’t big fans of McMansions or tiny homes.

In fact, 44% want a home between 1,401 and 2,600 square feet — one that’s neither too small, nor too big. However, as people get older, their dream home gets smaller.

How Big Is Your Dream Home?

Moreover, Millennials and Gen X gravitate towards modern homes, which can often have newer home amenities and technologies.

Baby Boomers, on the other hand, want ranch homes (aka singlestory homes that are typically more accessible and without stairs).

And contrary to what you might think, only 6% of millennials would prefer a high-rise penthouse. That said, they are still 6X more likely to prefer this type of home than any other generations — even those with kids under 18. Similarly, only 4% of millennials dream of converted lofts, while Baby Boomers have no affinity for converted lofts at all.

www.reivoice.com

36

All

Millennials (18-34 Year Olds)

Gen X (35-54 Year Olds)

Baby Boomers (55+ Year Olds)

Modern Style Home

18%

22%

17%

16%

Ranch Home

15%

6%

13%

23%

Victorian or Craftsman Style Home

11%

13%

12%

7%

Farm House or Log Cabin

10%

10%

11%

9%

Colonial or Southern Plantation Style Home

8%

8%

8%

7%

High-rise penthouse apartment

3%

6%

1%

1%

Converted Loft

2%

4%

1%

0%

Other

33%

31%

37%

37%

Note: “Other” includes options such as Mediterranean style home, townhouse and houseboat, as well as other.

Americans Dream of Suburbs Over Cities When describing where their dream home is located, most Americans wanted to live in the countryside (27%) and suburbs (27%) rather than in the heart of a major American city (8%).

This was especially true for Baby Boomers and Gen X. But for Millennials, living a short commute to work (34%) and in a great school district (34%) were far more important that the actual location. But generational differences aside, there were some notable geographical preferences.

Analysis

Top Dream Home Amenities: Decks, Gourmet Kitchens and Open Floor Plans Americans love to entertain and eat. The top dream home features were social spaces where guests could gather and mingle, namely a backyard deck, open floor plan, or balcony with a view. Foodrelated amenities like a gourmet kitchen or vegetable garden were also popular. But as for private spaces, 44% of men wanted a man cave whereas only 17% women wanted a she shed (aka, a recreational room for the ladies).

Millennials, compared to any other generation, want it all. Given the option, 18-34 year olds would like all the latest and greatest amenities in their dream home — especially want a balcony with a view.

Generation X, however, followed the national trend with most wanting a backyard deck. The only variation was that 35-54 year olds preferred having a swimming pool over a vegetable garden.

Similar to Generation X, Baby Boomers want a backyard deck, open floor plan and gourmet kitchen. But unlike other generations, the 55+ age group has a green thumb with 37% wanting a vegetable garden.

All in all, Americans are pretty realistic and practical when it comes what they want in their dream home. Most people aren’t looking for a grand mansion, tiny home or even a home with an iconic architectural style — they want a mid-sized, modern home in the suburbs with a backyard deck. This is likely because the dream of homeownership is largely driven by marriage and children. Having a duel income makes buying a home more affordable, while parents often want the stability that comes with owning a home. As a result, many would-be homeowners dream of finding a home where they can raise their families. Such is the game of life. focused on providing house hunters with key insights about the economy, housing trends and public policy. Previously, she served as an economist and researcher at the California Association of REALTORS®, the National Association of REALTORS®, the Department of Housing and Urban Development and the National Center for Smart Growth Research and Education. Currently,

Selma collaborates with the University of Southern California’s Lusk Center for Real Estate and the REALTOR® University Center for Real Estate Studies. She earned her Master of Arts in Economics from SUNY at Buffalo and a Ph.D. in Urban and Regional Planning and design from the University of Maryland.

See more at: http://www.trulia.com/blog/trends/americandream-home/#sthash.56YozO93.dpuf

Selma serves as Trulia’s Chief Economist. Previously, she was a senior economist at the California Association of REALTORS® and as an economist and manager of public policy and homeownership at the National Association of REALTORS®. She has also worked as a research associate at the Department of Housing and Urban Development and the National Center for Smart Growth Research and Education. Currently, Selma collaborates with the University of Southern California’s Lusk Center for Real Estate and the REALTOR® University Center for Real Estate Studies.

What I do at Trulia: Selma leads Trulia’s housing economics research team and is focused on providing house hunters with key insights about the economy, housing trends and public policy.

Why it’s interesting: Finding a home is a messy and overwhelming process that hinges on making tradeoffs among price, space and location. As Trulia’s Chief Economist, Selma helps people navigate their home search by translating complex economic trends and housing policies into plain English – ultimately helping house hunters make smart real estate decisions.

October 2015 REI Voice

37

Connecting People - Educating Investors - Inspiring Action

THANK YOU TO OUR AFFILIATES FOR YOUR ONGOING SUPPORT!

To learn more visit us at: www.sjrei.org

ATTORNEYS Jeffrey B. Hare, APC 408-279-3555 jeff@jeffreyhare.com www.jeffreyhare.com

IRA

IRA Services Trust Company Michael McNair 650-593-2221 www.iraservices.com Bill Neville The Entrust Group bneville@theentrustgroup.com (800) 392-9653 www.theentrustgroup. com

MORTGAGE BROKERS

PRIVATE FINANCING

Michael Ryan Mortgage Broker and Banker DRE License # 01090891 NMLS # 295351 408-986-1798 mike@michael-ryan. com

Socotra Capital Chris Baumann DRE License # 01907957 916-277-9304 chris@socotracapital. com www.socotracapital. com

MARKETING

Hard Money Broker Mark Hanf (800) 605-8050 Mark@PacificPrivateMoney.com www.PacificPrivateMoney.com for Borrowers www.PacificPrivateInvestments.com for Investors

Tiago Moules Tiago Media (408) 763-0083 www.tiagomedia.com

Louis Bardis FJM Private Mortgage Fund lbardis@fjmpmf.com (415) 248-1167 www.fjmpmf.com

FINANCIAL SERVICES Gabe Bodner Lending Home gabe@lendinghome.com (650) 218-0976 www.lendinghome.com Susana Schreiner WDB Funding Hook8marketing@gmail. com (408) 482-3232 www.wdbfunding.com

John Citrigno Cirius Capital john@ciriuscapital. com (800) 951-9501 Tom Valentino Zinc Financial tom.v@zincfinancial. net (559)326-2509 www.zincfinancial.net

Niki Canotas Mobius Financial Network niki@mobiusfinancial.net (408) 529-2174 www.mobiusfinancial.net

REAL ESTATE AGENTS Keller Williams Realty Silicon Valley Anna Maria Valenzuela 408-832-7727 amv@annamariavalenzuela. com http://about.me/annamariav

REAL ESTATE INVESTMENTS Summit Assets Group Lori Greymont 888-298-0652 lori@summitassetsgroup. com www.summitassetsgroup. com Wilson Investment Properties Tom Wilson 408-867-1867 tomkwilson@earthlink.net www.tomwilsonproperties. com

TRAINING & EDUCATION SJREI Jumpstart Inverstor training Lori Greymont 408-782-9162 lori@sjrei.org www.sjrei.org/jumpstart

OTHER SERVICES Denise Wilson Tax Preparer & CTRP (408) 377-9703 denise@richardsmithtax.com

Mark McKeller Homevestors Mark.mckeller@homevestors.com (800) 200-6475 www.homevestors.com Dustin Rose Cash Flow Links dustin@cashflowlinks.com (916) 932-6865 www.cashflowlinks.com

October2015 REI Voice

39

Advice

Alain Pinel Recognizing High End DNA REI Voice Columnist General Manager of Intero Prestigio International

I

am a lucky guy. Over the years, I’ve had the privilege of working, whether directly or indirectly, with many of the most successful Realtors in the country specializing in the luxury market. All of them are still around today, and so am I. It’s a good sign.

I hope I helped them become who they now are. Conversely, there is no question they helped me be the leader I became. Together, we worked and re-worked everything that spells success at the high-end, from vision to strategy, from activities to tactics, from planning to coaching, from image to branding.

From my point of observation, I can say without a doubt that all the top guns in the multi-million dollar market have 5 things in common, 5 traits, which are all, required to get to the top, and to stay there.

Here they are: 1. They are all LISTING AGENTS: it does not mean that they do not represent buyers, they do, but their power comes from being the purveyors of the most exclusive properties and estates in their marketplace. Their reputation, old or newly established, earns them the trust of the wealthiest and knowledgeable home sellers.

Believe it or not, most anyone (given the good fortune of being at the right place and at the right time) can sell a multi-million dollar property, but in my book, that does not qualify the jackpot winners as high-end specialists. Only at the listing end can you rightfully claim the title.

2. They are all specializing in their LOCAL MARKET: Only in their primary market (their town + those towns immediately adjacent) can they make roots, grow, achieve notoriety and harvest recurring business. They avoid distractions so they can focus on their preferred turf. Most of these agents, even when given the opportunity to list a luxury property 10 miles from “home” would turn down the offer and refer the business to agents with whom they work in the market where the property is located. It is worth mentioning that, at that level, knowing your local market goes well beyond knowing neighborhoods, streets and values, it means knowing by name the people who live in these magnificent homes.

3.They are all associated with TOP REAL ESTATE FIRMS: You cannot work your way to the top if your company keeps you small.

The vast majority of real estate firms cannot compete at that level, even though they try and may suggest they do. It takes power, manpower, a specialized estates division and high-end marketing www.reivoice.com

40

program, a network of offices, a regional scope of coverage and partnerships with the best international high end marketing networks to reach out to wealthy buyers from all over the globe, who are both interested in and qualified to purchase the local trophy properties.

4.They are all excellent BUSINESS PEOPLE: They know and feel comfortable with facts, statistics, P&L and trends. They also master marketing. Many of them play solo, wearing different hats with amazing ease. They contract specialized services through their personal affinity group. Many others choose to hire team members to handle the logistics, the day-to-day marketing, the admin work, and the follow-up with clients, title, lenders, and vendors. Each his/her own way to get results and deliver the best service to the client.

5.They are all AMBITIOUS: This one is a no-brainer. Ambition is the fuel that keeps them driving uphill. It could be money but, more often than not, it is success, recognition, and the fulfillment of reaching the end-result: selling extraordinary homes for the benefit of the owners (road companions during the listing period).

Without ambition, there is no passion; without passion, you lose what makes you the best.

Many agents are likely to recognize themselves in those lines. As for the others, those who are dreaming of making it big one day at the high-end, they hopefully will know now what it takes to get there. May the force be with all!

REAL ESTATE INVESTING BASICS November 7th, 2015

Presented by Lori Greymont SJREI, CEO

9:00 AM to 5:00 PM The Domain Hotel 1085 East El Camino Real Sunnyvale, CA 94087

New Interactive Curriculum ¾ New 100 page comprehensive work book ¾ Locating deals ¾ How to evaluate a deal ¾ Cash flow analysis ¾ Traditional and Creative financing strategies ¾ Pros and cons of LLCs, corporations ¾ Effective property management ¾ Exit strategies

Sign up now: www.sjrei.org/jumpstart

$249

MEMBERS

$299

NON-MEMBERS Connecting People, Educating Investors, Inspiring Action.

Analysis

South Bay Employment Gets Better and Better

Dr. Christopher Thornberg, PhD Contributing REI Voice Columnist, Co-founder of Beacon Economics

by Dr. Christopher Thornberg

T

he economy of the South Bay looks better with each new quarter and the area’s employment growth has been nothing short of impressive. Total nonfarm employment in the South Bay stood at 1.04 million jobs in the first quarter of 2015—an all-time high for the region. That represents an increase of 21.9%, or roughly 187,000 jobs, since the low in the third quarter of 2009 and an increase of 4.4%, or roughly 52,000 jobs, over the past year. Currently, the labor market in the South Bay is growing faster than in any other region of California. Meanwhile, growth is the South Bay real estate market continues as the Construction sector added 5,400 jobs (13.8% growth) and the Real Estate sector added 900 jobs (6.8% growth). In fact, nearly every industry in the South Bay economy added jobs over the past year, with the

estimation, very much overblown.

Beacon Economics expects total nonfarm employment growth to slow only slightly over the next few quarters, standing at 4.0% growth year-over-year by the end of 2015. The unemployment rate will also continue to fall, to an estimated 4.0% by the end of the year.

HOUSING MARKET BOOM

The Professional, Scientific, and Technical Services sector added more jobs between May 2014 and May 2015 than any other sector (19,600 jobs, or 14.9% growth). Job growth in sectors like engineering or law is not surprising in an economy with a heavy concentration of high-tech jobs. The Information sector, which includes occupations in software and data processing, added 9,600 jobs during the same time (14.8% growth).

exception of the very small Farm and Natural Resources/Mining industries, which employ 5,000 workers and 200 workers in the South Bay, respectively. Even the Government sector, which faced substantial employment cutbacks throughout the state over the past several years, grew by 2.0% from May 2014 to May 2015.

Given the South Bay economy’s rapid pace of growth, might we be seeing the onset of another bubble as some observers, such as Jim Rickards, have claimed? Beacon Economics is not currently worried. In contrast to the housing bubble of 2006 and 2007, growth in asset prices in 2015 is based on actual business performance, not speculation. Profits for U.S. corporations are at a record high and the U.S. economy is not being driven by excess financial liquidity. The U.S. monetary base has grown substantially as a result of quantitative easing, but nearly 90% of that cash is being stored in the Federal Reserve itself in the form of excess bank reserves. Finally, growth in the U.S. economy has not been excessive. Construction has not reached the fever pitch of the bubble of 2006 and 2007, consumer spending remains at a normal level relative to income, and business investment has been consistently tracking earnings. Any bubble fears are, in our www.reivoice.com

42

The South Bay’s residential real estate market is booming with home prices growing faster than in any other region of California. From the first quarter of 2014 to the first quarter of 2015, the median existing single-family home price in the South Bay increased 11.1% to $842,000, or $84,000 overall. By comparison, the median price in the East Bay, the second-fastest growing region in the state, increased by 10.4% to $570,000, or $54,000 overall. Behind the East Bay was San Francisco, where the median price increased 9.0% ($86,000 overall) to $1.04 million.

Home sales in the South Bay meanwhile remain virtually flat; roughly the same number of homes sold in the first quarter of 2015 (3,225 sales in all) as in the first quarter of 2014. This is not entirely unexpected, as home sales have been relatively stable in recent quarters. Foreclosures fell rapidly over the past few years and continue to move closer and closer to zero, limiting the number of homes available for sale. There were just 84 foreclosures in the first quarter of 2015 in the South Bay.

Analysis

South Bay Economics

As a result, housing supply is becoming the biggest driver of home prices as opposed to economic improvement. With foreclosures no longer adding to the inventory of homes on the market, nor providing a supply of lower-than-market-value properties for sale, prices are escalating quickly while sales are not, even as construction continues to increase. In the South Bay, there are just 1.6 months of available supply of homes on the market, equal to the supply in San Francisco but lower than the 2.0 months of available supply in Alameda County. Planned residential construction in the South Bay is slightly ahead of 2014’s pace, with 624 single-family building permits issued in the first quarter of 2015, compared to 539 permits during in the first quarter of 2014. Multi-unit building permits in the first quarter of 2015, however, are only about half what they were in the first quarter of 2014: 1,079 versus 2,082.

Much of this decline is a return to more normal levels of multiunit construction—multi-family growth has been extraordinary in the South Bay over the past two years. New construction will help increase the supply of homes in the South Bay, which will in turn will help slow home price appreciation and promote growth in home sales.

fall to roughly 2% by the end of 2018. Annual home price growth will stabilize at roughly 2% through 2020, with the median price standing at an estimated $1.08 million by that time.

Beacon Economics expects home sales to turn around as construction activity adds new supply and homes that had been purchased by investors finally come to market. Home sales are expected to reach roughly 3,800 in the fourth quarter of 2015, compared to roughly 3,200 in the first quarter of 2015, and then growing to roughly 4,300 in the fourth quarter of 2016. Over time, price and finance cost appreciation will slow sales growth. Home sales are forecast to reach an estimated 4,500 in 2017, continuing into 2018. That level of sales should remain fairly stable through 2020 with an estimated 4,600 home sales in the second quarter of 2020. ** The South Bay refers to the San Jose-Sunnyvale-Santa Clara Metropolitan Area, covering Santa Clara and San Benito Counties.

Beacon Economics forecasts South Bay home prices to continue growing at a strong pace through 2015, standing at roughly 12% year-over-year growth by the end of the year. The median existing single-family home price is forecast to edge slightly over $900,000.

By the end of 2016, with home prices already well over peak, but with low interest rates keeping homes relatively affordable by historic standards, home price growth is expected to slow to 8% year-over-year. The median existing single-family home price is expected to surpass $1,000,000 in early 2017. By the end of 2017, home price growth will fall to roughly 5% year-over-year and then

Christopher Thornberg, PhD, is an economist and Founding Partner of Beacon Economics LLC. Learn more at www.BeaconEcon.com.

Housing Affordability

October2015 REI Voice

43

The best leads for discounted houses!

Money opportunities for purchase, rehab & rental of properties Training and support, to help you avoid mistakes

WE BUY UGLY HOUSES.COM

678-509-3172 For Franchise Information please contact: Michael McKeller michael.mckeller@homevestors.com

Private Mortgage Fund

WE MAKE PRIVATE LENDING EASY • Loan Amounts to $ 5M • Quick Closing 3 days or less • Reliable and performance driven • Lend on SFR, Multi-family, Condos, Commercial Properties • Rates from 8.5%

• Funded $140M in 2014 • Lend to LLC, Corp., and Foreign Nationals • No Appraisal required • No Pre-payment penalties

CFL # 6054701- Licensed by the Department of Business Oversight

Louis Bardis - Manager 415-248-1167 lbardis@fjmcap.com www.fjmpmf.com

TAKING CARE OF BUSINESS

Owning your own business is a dream;

HARD MONEY LOANS MADE EASY! Fix & Flip or Buy & Hold CONTACT:

JOHN CITRIGNO

(800) 951-9501 john@ciriuscapital.com CA BUREAU OF REAL ESTATE – REAL ESTATE BROKER #00526596

MEMBER SJREI SINCE 2007

running one is hard work. You need an investment plan that addresses every stage of your business life cycle, from opeing your doors to selling the company when it’s time to head into retirement.

I can provide the financial guidance you need to help meet important business and personal objectives, and give you the freedom to focus on what matters most.

Call today 408-871-1414 for more information or to schedule a consultation.

Niki Canotas CA Insurance Lic. #0B68853

MoBIUS Financial Network

Independence Powered by LPL Financial

Niki Canotas is a registered representative with, and securities offered through LPL Financial, Member FINRA/SIPC.

www.MoBIUSFinancial.Net

info@MoBIUSFinancial.net

Basics

Pam Blanco Real Results Investing

Get the process down and the rest will fall into place

by Hannah Ash By taking a look at how turnkey provider and property manager Pam Blanco runs her business, find out what you should look for in choosing your next turnkey provider and property manager. Keep in mind that turnkey providers are not all created equal...

The Hands-on Advantage Involved turnkey providers have their hand on the pulse of local research, advice on when to buy or sell, provide full property management, and give the option to buy turnkeys or properties that can be rehabbed through locally sourced and reputable vendors.

Locals Find the Best Deals

Location is Key The turnkey provider’s markets of choice matter. The Dallas and Fort Worth areas, Pam’s stomping grounds, are primed and ready for savvy real estate investors to enter. Not only is this area one of the country’s major metropolises, it is poised for growth as predicted migration to the area looks excellent; its school systems are also strong and its properties are modern and come with powerful curb-appeal. Quality turnkey providers are positioned to fly in growth markets with strong fundamentals.They simplify the process for investors to be effective outside of their own geographic area.

Pam and her team do it all. They proactively scout out great deals (which they either buy themselves or offer to their inside circle of investors), provide their investors with detailed monthly reports for their portfolios, and, through monitoring neighborhood data and stats, they know when the time is right to buy or sell.

Real-World Reporting Effective property managers walk their properties each month, taking note of any potential change that an investor should know about. They are, literally, noteworthy: providing investors with detailed reports electronically. If there’s a broken pipe or imminent repairs needed, they thwart it by alerting investors and dispatching quality vendors to address the problem.

The Power of “Invest-Worthy” By compiling research data, Pam Blanco’s deals are driven by the fundamentals of what makes a property “invest-worthy.” Whether they buy and rehab it themselves or offer it to an investor for rehabbing at below market prices, a thorough turnkey provider believes in the properties they recommend.

Automation Brings Reliable Results Turnkey providers can automate everything and boil the basics down to a science, making it easy and accessible for tenants to find an apartment, apply for one and even pay online. it also simplifies the process of researching potential tenants which can happen with the push of a button. Convenience is the name of the game.

Pam Blanco is the Founder and President of Professional Asset Management and Sales. Catering to investors, the company has developed into a turn-key solution provider to help investors grow and manage their portfolios of properties, both single and multi-family. - www.PamTexas.com www.reivoice.com

46

PRSRT STD US POSTAGE PAID PIN PRESORT

REI VOICE

WE’LL OPEN THE DOORS TO YOUR FINANCIAL FUTURE TURN KEY INVESTMENT PROPERTIES · PROPERTY MANAGEMENT · DEDICATED SALES & RESEARCH STAFF

Professional Asset Management & Sales Call now to get a 817.907.7347 FREE portfolio & market analysis www.pamtexas.com Proudly serving Dallas/Fort Worth and surrounding areas