www.reivoice.com
Nov. - Jan. 2014
Geraldine Barry:
The Garry Keller Interview
Jed Kolko:
Brief Soak in the Bathtub of Housing Data
Hot and Hotter:
Arizona, Texas, Silicon Valley
FORMULA FOR SUCCESS:
NETWORKING + KNOWLEDGE Nov. 2013 - Jan. 2014 REI VOICE
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IT’S TIME TO MAKE MONEY POWERFULLY, PROFITABLE INVESTMENTS San Jose:
4-plexs $600k to $800k
Houston:
Single family homes $65k to $135k
Arizona:
4-plexs and Multi-fams $45k to $450k
Meet Jeb Henley, advocate for your portfolio. With over thirty years of satisfied customers, Jeb’s specialty is transforming your real estate holdings into a POWERFULLY, PROFITABLE PORTFOLIO. He’ll help you identify and liquidate underperformers and reinvest into cash cows. Jeb calls his portfolio analysis “selective pruning.” Turning over an entire portfolio is only profitable for the broker. By selectively eliminating stagnant investments and grafting on right-priced rental properties, Jeb ensures that your portfolio flourishes—and you profit. “I’ve built my business on treating people right. That means I focus on building a long-term, successful partnership with my clients. If you’re reading this ad, it means you’re looking to increase the profit of your portfolio or to build an investment portfolio from scratch. I can help. I offer a no-cost, no-obligation portfolio review so that you can get to know me and I can understand your goals. Call me today to set up an appointment. It’s time to make money!”
RA W FOION O N CALL OBLIGAT VIEW NO OLIO RE F PORT
831-419-4200 • jebhenley@gmail.com
Investment Broker #00608973
ER NN WI f t h e a l o ion d r t N a Awarint A P I R E B est t ion f o ru b l i c a P
SOUND OPINION—WISE DECISIONS: VOICE OF THE PROFITABLE REAL ESTATE INVESTOR
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TABLE OF CONTENTS ANALYSIS
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In Intimate Detail: Phoenix, Arizona
REI Voice publisher Geraldine Barry interviews Rick Merritt, president and cofounder of Elliott D. Pollack & Company, a real estate and economic consulting firm. Mr. Merritt discusses the Greater Phoenix economic climate and real estate market.
26
Data Lovers Special: Santa Clara County Metrics
16
‘Make A Difference Year’ Lori Greymont, turnkey property expert, revisits her 2013 challenge to make a difference by taking action in real estate.
22
Protecting Your Investment with Equity Transfer Attorney and author Garrett Sutton explores debt as asset protection, using equity transfer to protect equity by encumbering a real estate holding.
FEATURES
An amazing amount of real estate market data is free and available if you know where to look. We’ve compiled essential data for Santa Clara County. Enjoy!
ADVICE
Turnkey Buyer Beware
How do you avoid common mistakes when looking at turnkey properties? Heed the advice of Chris Clothier, real estate investor and business entrepreneur.
12
Gary Keller: Change Broker
Gary Keller, co-founder and chairman of Keller Williams Realty, the largest real estate company in North America, thrives on change. Publisher Geraldine Barry speaks with Mr. Keller about his business philosophy and influencers.
20
Real Estate Investors Pay Up Already! Welcome: A New No Wiggle Kind of Bank Room in California Law California real estate attorney and LLC specialist, Jeffrey B. Hare, simplifies what it means to “do business” in California and who needs pay attention to the new LLC registration requirements.
Avoiding a $350,000 Marketing Fine
A marketing campaign that guarantees top ratings across review websites may sound like a good deal until you get hit with a big, fat fine. Social media expert Aaron Norris explains how stay compliant with advertising laws and still enjoy great reviews.
BASICS
8
5 Essentials for Equity Growth Income
Jeb T. Henley, Equity Transitions, summarizes the five essential elements of protecting your equity and growing your investments.
17 10
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How did Umpqua transform itself from a little six location Oregon community bank, to a regional bank with $11 billion in assets and growing? A new vision of banking. Why should investors care? To begin with, borrowers may be able to finance up to 20 investment properties.
Builder Trends: Why You Should Care
Jed Kolko, Chief Economist and VP of Analytics at Trulia, clarifies the hoopla about housing starts and shows what it means for investors.
18
Make More Money with Proper Property Management
Pam Blanco operates one of the country’s premier property management companies. She shares the questions you should ask a potential property manager, and the ideal answers.
28 Calendar 28 Investor Resources
to Thrive 30 Words By: Tuigim, Ger Nov. 2013 - Jan. 2014 REI VOICE
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PUBLISHER’S NOTE
WELCOME Geraldine Barry Publisher, President of SJREI Association
REI Voice™ Magazine A publication of SJREI Association™
Welcome to the newest edition of REI Voice - we are so excited about the market bounce back and the opportunities that represents. As our cover indicates the success formula for investors includes networking+information. When we connect with others, and leverage our collective experience, we make exponential growth. Running counter to the crowd is where money is made in most investing strategies, but that takes courage and knowledge. Despite the government shenanigans, and the lack of promised funds for retirement, what we need to remember is that we have the power to secure our own retirements. Strategic planning is required ensure results, but what better vehicle to do that than real estate? With that in mind I would like to invite you to join us at our SJREI meetings where we connect and educate investors, and provide you with the knowledge to succeed. As an investor, I’m very interested in what is driving markets. A solid understanding of market forces leads to confident action. That is what investing is all about, taking calculated risks with preservation and growth of capital being the goal. This issue features two economists’ perspectives: one addresses an emerging market, and the other looks at one metric to consider as you evaluate any market. Also, Gary Keller, of KellerWilliam’s fame, reminds us that all investing and success is based on focus, systems, and implementation. Gary shares the insight learned as an investor and founder of the largest franchise in the county with 90,000 agents. As this is our final edition for this year I’m including my top 10 favorite books for 2013. I love non-fiction books and find that reading a book can be life changing. If you want to become more interesting and to grow in the process, read a few selections from this list. Next issue, you’ll see a greatly redesigned and updated REI Voice magazine. However, our mission will remain the same: to be the Voice of the Real Estate Investor. My goal for 2014 is to continue to provide you with the BEST speakers at our monthly SJREI meetings, the BEST atmosphere for networking and smart dialogue, and the BEST publication for furthering your knowledge.
Publisher Geraldine Barry | 408-264-3198 Geraldine@SJREI.org Editor-in-Chief Susan Hare | 408-391-8068 Susan@REIVoice.com Advertising Sales ads@REIVoice.com
1. The Millionaire Real Estate Investor by Gary Keller
PUBLICATION MANAGER Ashley Rodriguez | 650-690-0215 sjrei.ashley@gmail.com
2. Eat Move Sleep: How Small Choices Lead to Big Changes by Tom Rath
Publication Assistant Belle Li | 408-264-3198
3. David and Goliath: Underdogs, Misfits, and the Art of Battling Giants by Malcolm Gladwell
4. Lean In: Women, Work, and the Will to Lead by Sheryl Sandberg
5. Investing in Real Estate by Gary W. Eldred
6. The Happiness Project by Gretchen Rubin
7. Winning from Within: A Breakthrough Method for Leading, Living, and Lasting Change by Erica Ariel Fox 8. Remote: Office Not Required by Jason Fried and David Heinemeier Hansson
9. Focus: The Hidden Driver of Excellence by Daniel Goleman 10. How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Life by Scott Adams
Art Director Kevin Bell kbell@Western-Web.net Printer Western Web Western-Web.net
REI Voice™ is a publication of SJREI Association™ www.SJREI.org Reproduction or use of any editorial or graphic is prohibited. To request reprints or reprint rights, contact Info@REIVoice.com. REI Voice Magazine c/o SJREI Association 4309 Sayoko Circle San Jose, CA 95136 www.REIVoice.com 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 © 2013 SJREI Association. All rights reserved.
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training education success
Nov. 2013 - Jan. 2014 REI VOICE
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ANALYSIS
In Intimate Detail: PHOENIX, ARIZONA An Interview with Rick Merritt by Geraldine Barry
6 REI VOICE Nov. 2013 - Jan. 2014
Q: From your perspective as an economist, how did this the most recent economic downturn differ from those you previously encountered? The most obvious difference is the unprecedented impact on the residential housing market. In the early 1990s, the commercial markets took the brunt of the downturn, with residential property sliding by relatively unscathed. This time it was the residential market that was impacted and most homeowners in the country were in some way affected. The recovery now has been blunted by the lack of homebuilding activity in most markets. If you look at every recession over the past 30 to 40 years, housing was the one industry that stimulated the recovery from the recession. In fact, housing construction boomed out of every other recession. Not his time however. Q: Arizona was one of the first markets to decline during this last recession and continued on that downward slide for several years. How is the Arizona market recovering today? The market is recovering fairly well. Housing prices in Greater Phoenix are up 60% from the bottom of the market. Homebuilding is still somewhat stagnant but improving. We should see 13,000 to 14,000 single family permits in 2013, up slightly from 11,600 in 2012. However, we are still well below the historic average of 30,000 to 35,000 permits per year. Multifamily housing is on a roll with numerous projects underway in all parts of the region. Arizona is 8th in the country in employment growth for 2013. A few years ago we were 49th. Q: What specifically is driving the recovery? The recovery is spread across virtually all industries although it is still weak compared to other recoveries. The industries that are leading the recovery are trade, transportation and utilities; education and health services; leisure and hospitality and construction. Gains in manufacturing are virtually non-existent. The area is starting to see some inflow of new residents, which has been lacking over the last few years. As housing markets recover and people can sell homes in California and the Midwest, we should start to see more population driven growth.
Q: What is the state of the Arizona economy today, and what are the economic drivers in Phoenix? The historic economic drivers of the Arizona economy are aerospace, semiconductors and tourism. The aerospace and semiconductor industries are still relatively strong and have weathered the recession well. However, they have not grown since the recession. Leisure and hospitality have regained all jobs lost during the recession. Financial services and government have also shown good increases in employment since the bottom of the cycle. Arizona lost 314,000 jobs in the recession and has regained about 47% of those lost jobs. Greater Phoenix lost 251,000 jobs and regained the same 47% of lost jobs. So while we are growing relative to other states, we still have a ways to go before we get back to pre-recession employment levels. Most forecasts suggest that we will not return to full recovery until 2015 or 2016. Q: How are inventory levels, and what is the evidence that a recovery is under way? Demand still exceeds the supply of available housing, which is driving the price increases. The inventory of available homes is at a two-month level, but increasing. ASU housing studies suggest that the market may be in balance by year end, at which point we may see housing price increases moderate to some extent. Homebuilding may increase in 2014 if the market comes into balance. Investors are still holding onto their homes and receiving a good return on their investment. We don’t see investors shedding their inventory for another year or two. Q: Can you address the current status of REO properties and short sales? The market has corrected. The number of foreclosures, short sales and REO properties have declined significantly and are not a factor in the market anymore. With the run up in housing prices, investors have moved on to other markets. The resale housing market is getting into balance and the opportunity to make a windfall capital gain on single family homes has largely passed. Q: What opportunities do you see locally, and state wide, for investors in the market today? Investors seem flushed with cash and
finding good opportunities is difficult. There still may be a few opportunities in the commercial markets with office vacancies still hitting the 20% range. Retail vacancies are also high, but opportunities are very market specific. There is quite a bit of obsolescence in the retail market. Because of the availability of investor capital, commercial properties seem to have been bid up to levels that may not make financial sense. Some opportunities may still exist in the land market, but good deals are difficult to find unless the buyer is a user, not a speculator or investor. From our perspective, great land deals are long gone and most owners are waiting for full recovery. Q: Is Arizona a growth state? What are the long-term demographic trends? Arizona always has been a growth state and, unless something catastrophic happens in the future, is expected to continue to be growth state. The population of Greater Phoenix is forecasted to reach over 5 million by 2020 from its current 4.3 million residents in 2012. Through 2020, Greater Phoenix employment is forecasted to increase by about 570,000 jobs. Q: What emerging trends do you see for the state long term? Continued growth and inflow of population, the same as the state’s history. However, business services and financial services appear to be on a strong growth trend. Software development firms are moving to the area. State Farm is going to open a new regional service center in Tempe with 6,000 to 7,000 new employees in a totally new campus of over 2 million square feet of office space. Q: What major companies are doing business in Phoenix? What is the appeal for them to do business in Phoenix? Some of the major companies include Boeing, Honeywell, Intel, Raytheon, Apollo Group (University of Phoenix), US Airways, Freeport-McMoran Copper & Gold, and American Express. Amazon is new to the area and has hired thousands locally for their fulfillment center. The appeal is good weather, no major natural disasters, relatively moderate wage structure (compared to California), moderate cost of living, limited congestion, moderate utility costs and less regulation (a gener-
ally business-friendly atmosphere). Greater Phoenix is one hour by air to L.A. or six hours driving. Phoenix Sky Harbor Airport is the sixth most active airport in the country, a hub for US Airways and Southwest Airlines, and good service to all major markets. Q: What are your current rental occupancy rates, and what is your typical renter profile? Multi-family occupancy stands at a healthy 6% to 7% in Greater Phoenix. The market is currently very strong as a result of foreclosure and short sale activity which dinged the credit of former homeowners. We expect these households to be able to clean up their credit in the next few years and return to the ownership market. Q: What is the median price house today? The median price of a resale home in Greater Phoenix is currently $198,500 up from $125,700 in 2011. Q: Can you give us a snapshot of inventory levels today? Inventory levels for single family housing currently stand at a two month’s supply. For a normal market, it should be 3 to 4 months. Q: How about affordability rates? In your opinion how do affordability rates impact sales? Housing in Greater Phoenix is very affordable today. Even with the increase in price, 76% of area households can afford the median priced home according to the National Association of Realtors. Q: What key economic indicators would you recommend looking at to determine whether it is time to exit or enter a given market? Each segment of the real estate market is different. However, employment growth and trends are certainly a significant indicator of the health of the region or state and where it is heading. National trends are also important to help evaluate the amount of uncertainty in the markets. Vacancy rates and absorption are key indicators for each of the commercial markets. Q: What was the last book you read? The Big Short: Inside the Doomsday Machine by Michael Lewis
Nov. 2013 - Jan. 2014 REI VOICE
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5
BASICS
ESSENTIALS FOR EQU IT Y G ROW TH I N COM E By Jeb T. Henley
1
Create a financial plan based on economic turmoil. 2014 will be very different from 2013, which was also different from 2012. Plan for turmoil as the constant and you’ll be prepared for the future. Jeb Henley is a Real Estate Broker and investor with over 35 years experience with both residential and commercial properties. Mr. Henley has been investing, selling and exchanging real estate since 1975 in both California and across the United States. As a broker, Mr. Henley works with strategic partners and affiliates to locate solid real estate values for his investor clients.
2
Inflation typically follows recovery. Make sure your financial planner or investment advisor have a plan for insulating your investments from inflation.
3
Profit from the changing world of economics. Mexico is one of the new growth economies. Put your investments in that path of success. Border states Arizona and Texas will benefit the most from growth of the Mexican economy.
4
Profit from the chaos continuing in the Middle East, alternative energy production costs have hit a tipping point. More jobs will be centered in the sun-belt with abundant sunshine & natural gas. Industry needs predicable energy resources and an educated work force. Again, both Arizona and Texas are strong alternative energy producers. Investments in these states are on sound footing.
5
Make sure your investment plan expects interest rates to rise in 2014. Real Estate has been appreciating rapidly at 3% interest rates. Interest rates at 6% and 8% will alter the market rapidly. Lower priced properties will still be affordable at higher rates. For example, $40,000 condos will not be as hard hit as million dollar houses in San Jose. Focus on affordability as long as all the other growth and strength factors of a market are also positive. Contact Jeb Henley at 831-419-4200 or jebhenley@gmail.com
8 REI VOICE Nov. 2013 - Jan. 2014
AZ IS STILL HOT! DISCOVER WHY POWERFULLY, PROFITABLE INVESTMENTS Phoenix:
Condos at $50K that actually cash flow Houses from $100K that are appreciating Fourplex’s that are appreciating and cash flowing Find a property that is right for you!
RA W FOION O N CALL OBLIGAT VIEW NO OLIO RE F PORT
Phoenix, AZ is attracting smart investors. See for yourself why this market is tops in producing powerfully profitable properties. Join Jeb Henley of Equity Transitions and SJREI on a property tour of Phoenix. With over thirty years of satisfied customers, Jeb’s specialty is transforming your real estate holdings into a POWERFULLY PROFITABLE PORTFOLIO. Learn if Phoenix is a good fit for your portfolio. Register today for this due diligence tour! DATE: JANUARY 18, 2014 (ARRIVE IN PHOENIX 1/17) COST: $250 DETAILS AT: www.SJREI.org
831-419-4200 • jebhenley@gmail.com
Investment Broker #00608973
Nov. 2013 - Jan. 2014 REI VOICE
9
FEATURE
GARY KELLER: Change Broker By Geraldine Barry
Y
ou opened your first Keller Williams Realty office in Austin, Texas, 30 years ago and have grown that franchise into the largest in North America. When I questioned some local brokers about Keller Williams, a common theme emerged that you came from left field, creating a classy, successful business built on systems and education. Expand on this – what was your goal starting out?
I looked at a chart of the real estate sold in North America and estimated that if we had 500 offices and 50,000 agents we’d be the largest real estate company. As big as I was thinking, I wasn’t thinking big enough. Keller Williams recently surpassed 90,000 agents. People consistently overstate short-term change and underestimate long-term change. Initially we were seen as a profit-sharing company that offered some training and education. In reality we were a training and education company that happened to sell
real estate. That investment in education has paid off. At our core, we had this radical idea that if you take care of agents and treat them as partners you’ll achieve great success together. What three things fueled the incredible growth of the franchise?
People, people, people. Once I realized that I could only succeed through others, I made people the focus of the business. I got into relationship with incredible leaders like Mo Anderson, Mark Willis and Mary Tennant who have absolutely powered this business forward. We also started offering an executive-level training course to help our associates find partners to grow their businesses. What are your thoughts on companies like Trulia, Zillow, and Redfin who are inserting themselves in the residential sales process?
We have great respect for these companies. We were pleased to partner with them early on to ensure that our agents would always be where their clients want to be met. Agents are smart. They only allow intermediaries when there’s a win. As long as these companies provide value, agents will use them and their services. Many agents/brokers have made their clients wealthy. Why do you think so many neglect to invest in the commodity that they trade in?
When we wrote The Millionaire Real Estate Investor, our tagline was “Anyone can do it … not everyone will.” Only a small percentage of individuals choose to invest in real estate. That creates real opportunity for those who do. In our investing books, such as Flip and Hold, we have sought to foster an openness to real estate investing among real estate professionals.
10 REI VOICE Nov. 2013 - Jan. 2014
A large percentage of licensed agents do one or two transactions annually while others make millions of dollars. What are the fundamental differences between successful and unsuccessful agents?
Real estate is an equal opportunity, unequal reward profession. The biggest difference between those who significantly outperform their competitors is lead generation. Those who focus on generating the leads that will generate more business will always find themselves among the front ranks. What principles drive the achievers?
They’re willing to think big and act small. The most productive agents set big goals but engage in highly focused activities that allow them to line up the dominos that lead to extraordinary results. As an investor yourself, what is your area of preference in terms of your own portfolio?
Like a lot of real estate investors, I started by investing in residential properties and over time moved into commercial as well. I believe strongly in making your money going in. Focus on cash flow and value from Day 1 and you’ll always make a great investment. What are your thoughts on current residential trends and how they are evolving?
Like any good professional, I keep an eye on the market. From an investment standpoint, every market provides opportunity. I do not believe in timing the market. Timing finds you. Know your criteria and be ready to act when opportunity arises. Change is the name of the game in today’s market and flexibility is important to achieve results. You have devoted your life to real estate and teaching. What is the single most important
thing agents and investors should be doing on a daily basis to move their business forward?
Focus on your ONE thing. In our book, The ONE Thing, Jay Papasan and I write about the power of this simple strategy for achieving extraordinary results. Make a daily appointment with yourself, preferably 3-4 hours in the morning when you’re at your best. Use that time to focus on your most important work. And make sure you protect that time at all costs. You actually have to be inflexible about your ONE thing. What are your thoughts on the personto-person relationships that are the true drivers in any business model, particularly as they relate to real estate?
The way to build a great big business is the way to build a great small business: one productive person at a time. The foundation is always people. Keller Williams Realty was founded on the premise that real estate is a local service business based on individual real estate agents and their spheres of influence. That’s as true today as it was 30 years ago, which is why we were the first real estate franchise to provide all of our associates with an individually branded mobile search app and why you’re not going to see a lot of national advertising from us. I loved your last book, The ONE Thing, which is a must-read for anyone who wants to increase their output and results. What have you read recently that you recommend?
I rarely let visitors leave my office empty-handed. Right now, the books I’m handing out most frequently are 100 Great Businesses and the Minds Behind Them by Emily Ross and Angus Holland and The Greatest Business Decisions of All Time by Verne Harnish and the editors of Fortune. I love to read about successful businesses and successful businesspeople. There’s a lot of great information in these volumes.
GARY KELLER is co-founder and chairman of Keller Williams Realty, the largest real estate company in North America. He is the New York Times bestselling author of several books, including The ONE Thing: The Surprisingly Simple Truth Behind Extraordinary Results, which recently hit #1 on the Wall Street Journal bestseller list.
BUY & SELL REAL ESTATE WITH A CLICK Turnkey I nvestment Properties
O ff M arket Listings Search M illions O f Foreclosures Sell. Bid. Counter. Accept O ffers O nline 1 0 0 % Free
Browse Listings, Bid or Add Your Inventory at www.ListedBy.com
Nov. 2013 - Jan. 2014 REI VOICE
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ADVICE
Pay Up, Already! No Wiggle Room in California Law By Jeffrey B. Hare
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, LLC formation, negotiations and selfdirected IRAs.
D
o you use an out-of-state or “foreign” LLC for your real estate investments to save money on taxes? Due to recent changes in California law, you may be considered to be “Doing Business” in California, and must register your foreign LLC with the State and pay the $800 tax anyway! Many people ask me “What state should I register my LLC in? I don’t want to pay the $800 tax in California. Are there any disadvantages of registering my LLC in another state?” Simple answer, “Yes.” No matter what, you must register your LLC in any State where you are “doing business.” Until recently (2011), this meant, in most cases, that if you were a California resident, had formed a Nevada LLC, and owned an investment property in Arizona, you would only need to make sure you registered your Nevada LLC in the State of Arizona. However, in 2011, California changed the rules in as to how it determines whether or not you are “doing business” in California. Be sure to review the Examples below, they may surprise you. California defines doing business as “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit” (R&TC § 23101(a)). In addition, LLCs are considered “doing business” in California if: • It is a nonregistered foreign LLC that is a member of an LLC that does business in California. • It is a general partner in a partnership or limited partnership that does business in California. • ANY of the LLC’s members, managers, or other agents conducts business in California on behalf of the LLC. This bears repeating: Regardless of where an LLC primarily conducts its business, if any of its members, managers, or other agents conduct business in California on behalf of the LLC, the California Franchise Tax Board
12 REI VOICE Nov. 2013 - Jan. 2014
considers the LLC as doing business in California and you must pay the $800 fee. Example 1
Paul is a California resident and a member of a Nevada LLC. The Nevada LLC owns property in Nevada. The LLC hires a Nevada management company to collect rents and provide maintenance. Paul has the right to hire and fire the management company. From his California home or office, Paul occasionally has telephone discussions with the management company regarding the property. Paul is ultimately responsible for the property and oversees the management company; therefore, Paul conducts business in California on behalf of the LLC and the Nevada LLC must file Form 568 and pay the $800 registration fee. Example 2
Rachel is a California resident and member of an Oregon LLC. The Oregon LLC has a retail store in Oregon. Rachel uses a California address for the LLC’s tax filings and a California accountant to prepare the LLC’s tax returns; therefore, Rachel conducts business in California on behalf of the LLC. The Oregon LLC must file Form 568 and pay the $800 registration fee.
Example 3
Sara is a California resident and a member of a Texas LLC. The Texas LLC receives royalties from Texas oil wells. Sara maintains a California business bank account and secures financing in California for the LLC’s Texas investments; therefore, Sara conducts business in California on behalf of the LLC. The Texas LLC must file Form 568 and pay the $800 registration fee. Any way you look at it, if you reside in California, your out-of-state LLC will most likely have to pay the $800 registration fee. If you haven’t already formed an LLC for your real estate investing, form it in California and save yourself the grief of trying to circumvent the FTB and the cost of registering it twice (once out-of-state, and once in-state). If you already participate in an out-of-state LLC, pay the FTB the $800 registration and move on to making money. For more information, go to www.ftb. ca.gov, and consult with your attorney or tax professional. Contact Jeffrey Hare at 408-279-3555 or Jeff@JeffreyHare.com
Borrower/Client Property Address City Lender
Ike 15610 S Haskins Ave Compton The Norris Group
Desert Hot Springs, CA Appraised Value: $67,000 Photograph Addendum Loan Amount: $40,000 Loan to Value: 59.7% County Los Angeles State CA To Investor: $300 mo. 9% yield, 5-year term Buy to Hold
Zip Code 90220
Los Angeles, CA Appraised Value: $261,000 Loan Amount: $170,000 Loan to Value: 65.1% To Investor: $1,558 mo. 11% yield, 1-year term Fix and flip Front Subject
“
“
Trust deeds allow me to make consistent returns without the volatility of the stock market. I like knowing that the cash is coming in every month and that my investment is secured by the property.
Rancho Mirage, CA Appraised Value: $1.1 mil Loan Amount: $530,000 Loan to Value: 48.4% To Investor: $5,300 mo. 12% yield, 1-year term New Construction
Rancho Cucamonga, CA Appraised Value: $295,000 Loan Amount: $177,000 Loan to Value: 60.0% To Investor: $1327.50 mo. 9% yield, 5-year term Buy to Hold
Front Subject
earn 9-12% with
trust deeds Tired of wild fluctuations in the stock market? Want checks instead of bills? Think trust deed investing. Not everyone has the time or expertise necessary to be a full-time real estate investor. Others are just tired of dealing with tenants and toilets! Trust deed investing offers a secured and passive way to incorporate real estate into your portfolio. The Norris Group offers:
Rear Subject
Rear Subject
• 9%-12% returns • 1 trust deeds only st
• No pooling • 1 to 5-year terms • 70% ARV max
• Ideal for retirement accounts • Experienced team with ver 100 years of combined experience
• Direct deposit Signature Name Shawn E. Solis Date Report Signed July 16, 2013 State Certification # Or State License # AR038207
State State CA Form PICFOUR2 — "WinTOTAL" appraisal software by a la mode, inc. — 1-800-ALAMODE
Download our NEW & FREE Trust Deed E-Book online. California Trust Deed Investing
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ADVICE
Turnkey Buyers
BEWARE By Chris Clothier
Chris Clothier is a self-made entrepreneur who has worked with other members of the Clothier family to build MemphisInvest. com, the largest real estate investment firm in the Mid-South and the largest, private property seller in West Tennessee. Along with his family, Chris is passionate about assisting real estate investors and real estate investment companies. He actively supports others in their goal of building longterm sustainable wealth through real estate.
I have been working with turnkey buyers for the past 8 years and I have come to believe that there are some common mistakes that many investors make when they start looking at turnkey properties. Some of the mistakes cost investors money. Some mistakes cost investors time. All of the mistakes carry little lessons with them that can easily help an investor avoid making the same mistakes twice! Now, if we would all only listen... 1. Money Burning A Hole In Your Pocket?
I guess I am at a point where I should not be surprised anymore by how quickly some investors want to get moving. It is the exact opposite of a phrase that has been around for a number of years describing investors who get bogged down by research – Analysis by Paralysis! Too many investors continue to jump into the real estate market with no understanding of why they are buying investment real estate. Making matters worse, they have no clear plan for how to manage their future investing. Investors need to plan for where they are going with their investments in order to know when they arrive. Those plans have to include how to keep themselves in check 2. Purchasing For Yield
Whatever happened to good, old-fashioned, solid returns of 7-9%? When did it become such a negative to have a consistent performing property in your portfolio that you could rely on year over year to produce a positive return? Investors today have so few options when it comes to consistent rates of return and to hear someone talk about consistency in real estate may seem a bit crazy. But consistent returns are out there and while they may not always be double-digit returns, what is wrong with a 7-9% return? Many investors are turning to turnkey
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real estate opportunities to find higher yields without having to join the landlord game. Unfortunately, the reach for higher yields carries a counter balance...much higher risk. 3. Using Promoters To Find Properties
Promotion companies that actually sell other companies properties are not all bad. There is not even a problem with promoters who simply point investors in the right direction. As an investor, you simply have to be aware of what role the promoter plays and why they play it. They have a financial incentive to help you purchase properties. Often, their biggest incentive is to make sure you have success as an investor and continue to work with them building a portfolio. But, others simply look at quick dollars and will promote anything for pay. It is your job to determine if that financial incentive is going to help or hurt you in the long run. 4. Shiny Object Syndrome
Being attracted to the shiny bell and the loud whistle that are hung around the neck of a pending disaster house, is a very, very common occurrence for out of area buyers. There are lots of marketing noises happening and plenty of confetti with streamers, but what about the property itself. What about the renovation and the property management? What about a solid long-term plan with a great team in place to make your investment actually perform! These are 4 very common mistakes for out of area investors and as the markets in high priced areas of the country begin to improve, the number of investors looking elsewhere for great deals seems to grow. It is a good time to take note and be prepared to avoid these mistakes! Contact Chris Clothier at 877-773-9998 chris@memphisinvest.com
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TOP PROPERTY MANAGEMENT COMPANY IN MEMPHIS & DALLAS CUSTOMER SERVICE EXPANDING SOON INTO THE HOUSTON MARKET! WE MAKE IT EASY FOR INVESTORS TO BUY THE Right Property AT THE Right Price WITH THE Right Company FROM ANYWHERE IN THE WORLD! AMERICA’S #1 COMPANY ASSISTING REAL ESTATE INVESTORS WITH TURNKEY INVESTMENTS
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Nov. 2013 - Jan. 2014 REI VOICE
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ADVICE
Make a Difference Year By Lori Greymont
Lori Greymont is CEO of Summit Assets Group. She offers educational presentations around the U.S., trains and mentors people new to purchasing distressed assets and coaches on creative financing techniques. Her company sells Investment properties.
Well, here we sit in the last quarter of 2013 and the challenge that I posed to my investors and to listeners of my radio show was to make 2013 “Count” in moving their financial future forward…to make 2013 Make A Difference in their finances by taking action. How did you do? Don’t despair if you haven’t done anything yet— you still have a couple months, meaning you still have “a little” time but you can do it. Why did I put this challenge out? Simple. Life has a way of taking control of our focus and time unless we set out with a specific goal that is important enough we make the time to accomplish it. In 2010, I started investing in Atlanta, Georgia, and a few of my clients joined me before most markets were seeing recovery because they understood it was time to buy when prices were low. In 2012, most markets were in recovery and many people were still sitting on the sidelines waiting to see if the recovery was real. Sitting at the end of 2013, these same markets are still recovering. Economist Robert Campbell shared with me that he invests on the trend lines of an investment. While there isn’t a national real estate market, most real estate markets are performing the same now in 2013 and the trend line is going up. The prices in many markets dropped to prices as low as we saw in 1999 and many have recovered somewhat. For example, in Atlanta our prices are comparable to the pricing in 2003…that’s a 10 year discount! Birmingham prices are similar to prices in 2002. Other investors agree that most markets are still priced comparable to prices 8-10 years ago…what does that mean? It means that if you haven’t taken action it is time. Most investors know that it is time, but still don’t take action. Why haven’t you taken action? Fear? Lack of resources? Lack of knowledge? Winston Churchill said. “Success is not final, failure is not failure, it is the courage to continue that counts.” I would add that it is the courage to take action even the first time that counts. The biggest hindrance for most people is fear. Fear is usually unfounded and because of the lack of confidence. Confidence is built with experience and knowledge. Join a local REIA like the SJREI association where
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education is the focus of each meeting. Second, connect with investors who are experts. One of my sayings is, “Wisdom earned is far more expensive than wisdom learned.” What I mean is that you can learn faster by learning from an expert. If you have to experience everything first-hand in order to learn it, you will be very old before you are wise. The fastest way you can gain wisdom is on the coattails of an expert. Some of these experts will partner with you, others will coach or teach you. Another saying of mine is, “You will pay for your education one way or another, the question is whether you want to do it the fast way or through the school of hard knocks.” Not only can seasoned investors help you safely invest, they can also show you how to invest even if you don’t have all the resources needed to make an investment. Finally, take action. Nothing will happen if you don’t take action. This is most often the step investors avoid. If you are ready to invest,
but you avoid taking action, I have a couple things I know will help you. 1. Write down all the ways taking action will help your life. 2. Write down all the ways not taking action will HELP your life. Notice, I didn’t say write the negative of taking action. The reality is most investors will see very quickly in black and white that there aren’t any good reasons to delay taking action. Lastly, I suggest you commit your plan to take action by sharing it with to two to four people you highly esteem. Make it painful to not take action because the next time you see them, they will want to know about your progress. I want to make a difference in my readers’ lives this year. So, email me your plan and your obstacles. I commit to helping you with your next step. This is my way of making a difference! Contact Lori Greymont at 888-298-0652 Lori@SummitAssetsGroup.com
BASICS
Builder Trends: By Jed Kolko
Jed Kolko is Chief Economist and VP of Analytics of Trulia. He oversees Trulia’s research programs. Applying a background in economic development and research methods, he transforms real estate data, economic trends, and public policy debate into digestible insights for home buyers, sellers and renters.
N
ew home construction starts and new home sales are recovering much more slowly than other housing indicators. In August, new home starts and new home sales were 40-50% below normal levels, in contrast with existing home sales, which were just 2% below normal. What’s holding construction back? The vacancy rate and household formation are two fundamental drivers of construction demand, and both still look weak.
Why You S hould Care
Census, closer to its high point after the bubble burst (10.9% in 2010) than to its pre-bubble level (8.9% in 2000). Even though inventory has been recently trending upward a bit, for-sale listings are still well below normal. The share of all for-sale homes each year (based on NAR inventory for June and Census total housing stock for Q2) peaked in 2007 but is now at lowest level since 2000. That means there’s an inventory shortage, not a housing shortage. In short: the vacancy rate is still relatively high. 2. Household growth is slow.
A Brief Soak in the Bathtub of Housing Data
To understand why the vacancy rate and household formation matter for new construction, here’s a simple analogy. Think of the vacant housing stock as water in a bathtub. The bathtub fills when new homes are built. The bathtub drains as vacant homes are occupied, which depends on how fast the overall number of households are increasing — “household formation.” There is no magical level of bathwater that’s perfect, but too little water in the tub means a housing shortage, and when the bathtub overfills, that glut of vacant homes might cause a price crash. In the long run, to keep the bathwater from being too high or too low, the “right” level of new construction depends on BOTH the vacancy rate AND on household formation. In the U.S. today, the bathtub is fuller than normal and is draining slowly. If the faucet were on full force (normal construction levels), our bathtub would soon overflow. The two key facts: 1. High vacancy rate means no housing shortage, despite inventory shortage.
The national vacancy rate in 2013 is above its pre-bubble level. The share of all housing units that stood vacant was 10.3% in 2013 Q2 according to the
As of 2013 Q2, annual household formation was 746,000 according to the Census; household formation since 2007 has averaged around 560,000 annually, which is roughly half the normal rate of household formation of 1.1 million. Why is household formation still so low? During the recession, many people doubled up with roommates or lived with relatives, including young adults who stayed in their parents’ homes. Even now, years after the recession technically ended, young adults remain much more likely to live with their parents than before the recession. A big reason why this is happening is that the share of employed young adults is still closer to recession levels than to normal. There is a strong upside to this bath time story. Most young adults won’t remain out of work and live in their parents’ basements forever. They represent pentup demand for housing, which — when unleashed — should push household formation up to and then above its longterm normal rate of approximately 1.1 million annually. That means the bathtub will start draining faster, causing the water level to fall. This will then cue builders to turn up the faucet by building more new homes. Only when that happens might we need to start worrying about a future housing shortage. Until then, let’s be more concerned about missing households than about missing homes.
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BASICS
MAKE MORE MONEY WITH PROPER PROPERTY MANAGEMENT By Pam Blanco
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 multifamily.
A
property management company can make or break an investment strategy. Good property managers protect your investment, help it grow, and take the extra burden off your back as a landlord. Inadequate property managers expose you to many risks and have the potential to sink good investments. Finding a good property management company plays a key role in your investment strategy. Over the years, we’ve developed a good system to make sure our investors are covered and their properties flourish. We not only follow, we’ve established, best practices in property management; however, we don’t operate in every area of the country. Highlighted below are some of the key questions you should ask when selecting a property management company, along with our answers to these essential questions. As you interview property managers in your investment territory, if their answers differ greatly you may want to keep looking! How do you protect my financial investment?
We know our investors are landlords to make a profit, not just for fun. Therefore, we constantly monitor the market rents to ensure we are priced right and are able to increase rents when the market value increases. We complete and provide an up to date market analysis each time a lease is up or a tenant vacates the property. We qualify tenants for their ability to pay and stable history, including a full background check and credit check. How do you ensure my property is taken care of?
We walk all properties on a monthly basis to examine the exterior condition. We look for everything from lack of watering, missing shingles, and storm damage, to small items like garbage or weeds building up. We don’t wait for tenants to inform us of an issue, we find the issues ourselves. In addition we do a bi-annual interior walk through to make sure maintenance is being performed and to find anything the tenant may have missed. Everything is photographed and documented.
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What do you do to make sure my properties are leased?
We begin the marketing process immediately when the tenant gives notice to vacate or when we know rehab of a new property will be complete. We capitalize on multiple web sites to generate leads as well as maintain a database of agents in the region who work exclusively with us because they know our properties are well maintained. How can I track the progress of my investment?
Each investor receives an executive summary with individual property financials each month. This report details all activities at the property throughout the month including maintenance, leasing, pictures from exterior or interior walks, and income & expense reports. Along with routine follow-up calls and emails, or even text messages if preferred, our investors always know the latest status of their properties. How can you help me grow my portfolio?
We strategically search for properties in neighborhoods that we know will rent quickly to reduce time on market. We look for neighborhoods that have less than 10% rentals in the area to minimize competition and reduce days on the market. We are also looking for areas that pull into good
schools and neighborhoods with good demographics where the average combined household income will support the rental prices. Finding the right property management company is essential to your success as an investor/ landlord. Ask the right questions and settle for nothing less than the best possible answers. Then, compare those answers with the actual experience of other investors who are doing business with that property manager. Your investment portfolio will be glad you did.
About Professional Asset Management & Sales Over the years we have evolved our business and have grown with the needs of our investors. We currently only manage properties that we have sold or have facilitated the purchase of so that we can ensure we manage quality properties. As we’ve grown, we have developed a turnkey business model so now we can find an investor a profitable property, manage the rehab process, find a tenant, and then manage the property. We have even expanded this model to even offering fully complete, leased properties for an investor to add to their portfolio. We’re confident that offering all the services an investor needs, makes investing in real estate easier, more profitable, and less stressful.
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FEATURE
REAL ESTATE INVESTORS WELCOME: A New Kind of Bank Umpqua Bank, headquartered in Roseburg, Oregon, features a sign hanging in every store that reads, “Welcome to the World’s Greatest Bank.” This isn’t a tagline or marketing slogan but a state of mind, one that serves as a constant reminder of Umpqua’s commitment to serving their customers and communities at the highest possible level. Innovative Customer Experience
Ray Davis, president and CEO of Umpqua Holdings Corporation, joined Umpqua Bank in 1994 with a vision for a different kind of community bank, one that blends innovative design and technology to create an engaging customer experience. Since then, he has grown the bank from six locations and $140 million in assets to nearly 200 stores across four states and more than $11 billion in assets today. Locations span between San Francisco and Seattle, along the Oregon and Northern California Coast, and in Central Oregon and Northern Nevada. Umpqua’s bank stores are designed to serve as community hubs, comfortable and engaging spaces that feature merchandise from local businesses, interactive digital technology and
computer cafés as well as information about local events and organizations. In addition to creating an engaging environment, Umpqua empowers its associates to provide expert guidance and to solve problems. Associates receive Ritz-Carlton customer service training and are cross-trained to assist customers with a variety of banking needs. Community Engagement
Umpqua’s commitment to its local communities runs deep, from active support of organizations to an unwavering focus on providing families and businesses the financial resources they need to thrive. Through the Connect Volunteer Network, every Umpqua associate receives up to 40 hours of paid time off each year to volunteer in their community. In 2012, 90% of Umpqua’s associates
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participated, donating nearly 45,000 hours to schools and nonprofit organizations. This was matched by a financial commitment: in 2012, Umpqua made loans of more than $2.5 billion to businesses and families in Oregon, Washington, California and Nevada. Expertise and Service
Umpqua Bank provides a unique banking service, combining the sophisticated expertise and products of a large institution with the customized, local service of a small community bank. Umpqua Bank’s full range of banking products and services include: consumer and small business banking services; home lending; commercial banking; treasury management; international banking and wealth management.
Investor Loan Programs
Umpqua can help finance properties through one of many investor loan programs. The home lending team recognizes that there are many benefits for investments—from rental opportunities to create extra cash flow as a landlord, to investments to create ongoing income or tax advantages for mortgage and home equity interest payments and property taxes. Loans from Umpqua are available for investors looking to purchase just one property or up to 20 investment properties. Investor loan programs will each have varying underwriting and down payment requirements. Umpqua offers conforming, portfolio and Fannie Mae HomePath® investment property loan programs and borrowers may be able to finance up to 20 investment properties.
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Loan products subject to credit approval.
ADVICE
Protecting Your Investment with by Garrett Sutton, Esq.
H
olding your real estate in an LLC is an excellent form of asset protection. But even so, in a lawsuit stemming from an accident or incident that occurred at your property, a creditor can get what is inside the LLC, namely your property. If there is no equity inside the LLC there is not much worth pursuing, making the LLC less of a target. Debt is a form of asset protection. The more debt, the less equity, the lesser chance of litigation. But what if you own your property free and clear? What can you do then?
Have you ever heard of the term equity transfer? Some call it equity stripping. With equity transfer you protect your equity by encumbering the property yourself. Debt is asset protection. Why not create the debt yourself? Of course, we have to be cautious here. You can’t put the debt on after you’ve been sued. That would be a fraudulent conveyance, meaning improperly putting your assets out of the reach of creditors. (Any time you hear of a term with the word ‘fraud’ in it, know that it is not a good thing.) Instead the process is designed to keep you out of court altogether. One method of equity transfer
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involves the pledging of your home or other real estate assets as security of collateral for a money loan, which is then placed into use elsewhere (perhaps in the purchase of another asset), optimally out of the reach of creditors. Let’s say that you live in California, own a home worth $500,000, and you have fully paid it off. With a homestead exemption of only $75,000 and your state’s unfriendly stand towards the California LLC, the bulk of the equity in your house is left unprotected. Knowing this, you go to your bank and obtain a cash loan for $400,000, using your house as the security for this loan. With a fair
market value of $500,000 and a loan of $400,000 you now have $100,000 in equity. Of the remaining $100,000 in equity, $75,000 can be protected using a California homestead, leaving only $25,000 of equity exposed. The $400,000 that you’ve stripped from the home can then be placed into other protected assets. As an example, you could place the $400,000 into a Nevada-based annuity account owned by a Nevada LLC. Under Nevada law, this structure cannot be touched by creditors. Your home is encumbered and the proceeds from it are protected. Since the bank has recorded the security interest in the home, they
Equity Transfer have priority over any later creditors who would attack the home. The creditor would have to pay off the loan first before getting their shot at any equity. In the scenario above, going after just $25,000 may not be worth it. If your transfer action has been properly executed, creditors will not have the incentive to chase after assets with little or zero equity. As with the use of LLCs, this strategy can give you the leverage to negotiate a favorable settlement. As with any method of asset protection, there are other advantages and disadvantages to consider in selecting this method of equity transfer.
Advantages
Disadvantages
When using your home’s equity, you may become eligible for a home mortgage deduction on your federal income tax return.
You must make your loan payments to the bank. You cannot prevent the bank from foreclosing on your home if you don’t pay the loan back.
If you have no notice of pending claims, judgments, or liens against you or the property, it is less likely to be considered a fraudulent conveyance.
You can end up losing money if the assets acquired with the loan do not derive more income than you pay towards the mortgage and other costs.
This is just one of several ways to transfer equity and protect your assets.
Garrett Sutton has over 25 years experience assisting and advising entrepreneurs and businesses in selecting the appropriate corporate structures to limit their liability, protect their assets and advance their personal and financial goals through real estate investments and other means of wealth creation. An author, speaker and member of an elite group of “Rich Dad’s Advisors” hand selected by Robert Kiyosaki, Mr. Sutton speaks to investors and entrepreneurs on a variety of issues. Mr. Sutton has authored numerous titles included in the “Rich Dad, Poor Dad” wealthbuilding book series. His books provide an accessible source of information for building your own success.
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FEATURE
Avoiding a $350,000 Marketing Fine By Aaron Norris
O
ne of the scariest things about outsourcing is loss of control. When you’re hiring an “expert” outside your area of expertise, you’re hoping they: 1. do an awesome job doing something you aren’t good at and 2. comply with the appropriate rules and regulations for that industry. Just like real estate, rules and regulations for marketing change constantly. Let me start with a story, share some important trends about online advertising, and then follow with a few non-legal tips that help you stay compliant with ever-changing rules.
Ignorance is Not Bliss
Three years ago, I went online to leave a Google review for a local business. I had an awesome experience and the product was really important to our growth. On Google I found the business had only one review which was negative and very generic. It didn’t actually sound like this “reviewer” had first-hand experience with the company. I went on Google to search other companies that had the same service only to find all but one local competitor in our area had a single star rating. And magically, that company had a perfect score and was the source of all the other negative reviewers. AH HA! I found the company’s owner and wrote him an email explaining my findings. I gave him the benefit of the doubt that he didn’t even know it was happening. Sure enough, he had hired a marketing firm and wasn’t aware of their devious tactics. New York Attorney General, Eric Schneiderman, fined 19 marketing companies $350,000 for this practice called “astroturfing” in October 2013. “Operation Clean Turf” set up a fake yogurt shop and took on these false advertisers in a one-year sting operation. These companies used fake accounts, contractors in foreign countries, advanced IP spoofing, and other techniques to manipulate online reviews and ultimately influencing consumers’ preference. Schneiderman’s report cited the statistic that 90% of consumers say online reviews influence their purchasing choices. This kind of deception is the newest form of false advertising. Have you hired people that play these games? Have you asked? Will local business
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that practices these kinds of shenanigans be held responsible at some point even though they didn’t even know it was happening? I always assume that eventually, these kinds of plays by unscrupulous marketers will ultimately get them and possibly you in trouble. Focus on long-term strategies that build your brand and engage customers legitimately. The Internet keeps getting smarter and figures out way to root out these fakers. Don’t be one. Aaron’s Non Legal Way to Stay Compliant
Lucky for you, there’s an easy way to stay compliant without have to know the rules and “regs” by heart. First, there are three key terms you need to understand before we proceed. While marketing, you want to focus on whitehat strategies as compared to black-hat strategies. White-hat strategies are best practices that won’t get you in trouble like in the yogurt shop example. Another important term is long-tail strategy. Long-tail simply means you’re not purposefully trying to game the system with shortterm tactics that game the system. You may not win immediately, but because you’re using triedand-true white-hat tactics, you’ll eventually be rewarded. Now, on to the tips! #1 Be the Expert. When you’re passionate about something, it’s hard to hide it. You tend to want to be the best at what you do and people notice and come to you because you’ve got the answers. They also sign up to receive more of your awesome service or advice. More on that in a second. #2 Hire People That Make You Look Good.
When you’re an expert, you want to work with others that elevate your game. This tip should not be mistaken for working with less talented folks because it makes you look good by default. Surround yourself with the pros that you respect and trust. Whether it’s financial, marketing or legal expertise you seek, ask for referrals from other trusted people in your network and make sure they are always focusing on white-hat and long-tail strategies. Follow tip #1 and you’ll naturally attract #2. #3 Get Permission. Selecting the right people in tip #2 helps a great deal here because they won’t allow you to be a pest. Be aware there’s a Do-Not Contact list for almost all forms of communication. Whether it’s mail,
phone, email or fax, you’ll find the rules and regulations for those on the Federal Trade Commission and the Federal Communications Commission websites. Beware of purchased mailing lists if you don’t use a professional mail house or printer. These services can sometimes save you a lot of money by not mailing to people who opted out of mass mail and also scrubbing the data that might be bad on the list. When you’re dealing in real estate, I know you’re not really concerned with this but be mindful that you’ve better keep track of who you mail to and remove them from your list if they request it. For email and fax, follow the existing business rule (EBR). Don’t contact anyone via those mediums unless they’ve done business with you or requested your information. If you’re going to take the risk of spamming (because that’s what it is when you don’t have permission), make sure to use systems that allows the consumer to opt out of receiving information easily and make certain when they do remove themselves off your list, they aren’t contacted again. If you were at the session I taught in summer at SJREI, you know my personal horror story of getting treated like a criminal by AOL and Comcast for breaking this rule after buying an email list. I was shut down for an entire week! #4 Keep It Organized and Clean. We’ve talked extensively in past issues about keeping your network relevant and clean, especially when it comes to social networks. Resist the urge to friend everyone that sends a request. Build meaningful and relevant networks to play into evolving Internet algorithms that seek to make sense of people and data to deliver a more customized and useful Internet. Because you’ll be focusing on tips 1 through 3, you’re going to be a bit of a superstar and people will want to connect to you. Be careful. Simple Truth
You don’t have to be a legal expert to stay out of the dog house when it comes to marketing. Just be awesome to the point where people want your stuff, surround yourself with excellence, focus on best practices, and build relevant and clean networks. You won’t be sorry. Contact Aaron Norris at 951-780-5856 Aaron@TheNorrisGroup.com
Aaron Norris is Vice President of the Norris Group where he is responsible for business development and production of TNG’s award winning radio show, events and educational seminars. Mr. Norris is also principal at Palisoul, Norris + Conroy, a marketing and strategy team based in Southern California and hosts the marketing and business podcast, The cocktail Party Statement.
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ANALYSIS
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Data Lovers Special: 1 2 3 4 5
6 7 8 9 10
Taxpayer Westfield Malls Google Inc. Pacific Bell Telephone Co. Intel Corporation Lockheed Missiles & Space Co. Inc
SANTA CLARA HowMETRICS Tax Bills Are Calculated COUNTY
Taxes Paid* $9,977,062 $9,725,937 $9,182,041 $8,257,320 $6,773,865
* Ten largest taxpayers on the 2012-2013 secured tax roll, includes local and state assessees Source: Santa Clara County Tax Collector, July 2013
After estate the Assessormarket determines data the assessed tionand of redevelopment agencies (RDA) the An amazing amount of real is free available if you value of each assessable property in Santa successor agencies created to manage RDA’s know where to look. We’ve essential dataoutstanding for Santa ClaratoCounty. debt continue receive a portion Clara compiled County, the County Finance Agency calculates and issues property tax bills in late September.
Largest Taxpayers 2013-2014* 1 2 3 4 5
Taxpayer Pacific Gas & Electric Co. The Irvine Company LLC Cisco Technology Inc. Blackhawk Parent LLC Campus Holdings Inc.
The property tax bill includes an amount necessary to Taxpayer make the annual payment onTaxes general Taxes Paid* Paid* $32,434,506 6 Westfield Malls $9,977,062 obligation bonds or other bonded indebted$17,161,366 7 Google Inc. $9,725,937 ness imposed agencies and approved $15,561,246 8 Pacificby Bellpublic Telephone Co. $9,182,041 tax by the9 voters and the maximum property $12,566,824 Intel Corporation $8,257,320 $10,514,295 Lockheed Missiles & Space Co. Inc $6,773,865 rate of10one percent.
* Ten largest taxpayers on the 2012-2013 secured tax roll, includes local and state assessees Property tax revenue Source: Santa Clara County Tax Collector, July 2013supports elementary,
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of property taxes which provides more revenue to other entities. ForFor example, schools received the first time 0.8 percent more revenue due to the eliminain many years, tion of RDA’s.
the assessment roll The accurate, consistent and fair valuation of growth was balanced property throughout by the Assessor’s Office thecreates the foundation that supports the delivery of vital county. 15 governments. cities public services providedAll by local recorded The Assessor’s Office doesassessment not calculate taxes, collect taxes or allocate tax revenues. For inforroll growth above six mation regarding the collection and allocation percent. of property taxes, please contact the Tax
high school and community college districts as well as local government agencies including cities, the County, and special districts. The Collector at (408) 808-7900 or the Controller property is divided among(RDA) the the at (408) 299-5200 or www.scctax.org. After the Assessor determines the assessed tion tax of revenue redevelopment agencies publicsuccessor taxing agencies. dissolu-RDA’s value of each assessable property in Santa agenciesFollowing created tothemanage Clara County, the County Finance Agency outstanding debt continue to receive a portion Santa Clara taxes County Property Revenue Allocation 2012-2013* of property which provides moreTax revenue calculates In and 2013 issues property tax bills in late to other entities. For example, schools received September.Stanford’s 0.8 percent more revenue due to the eliminauniversity and The property tax bill includes an amount nec- tion of RDA’s. hospitals received essary to make the annual payment on general obligation bonds or other bonded indebted- The accurate, consistent and fair valuation of an exemption from ness imposed by public agencies and approved property by the Assessor’s Office creates the their assessed value foundation that supports the delivery of vital by the voters and the maximum property tax of $7.78 billion; more rate of one percent. public services provided by local governments. The Assessor’s Office does not calculate taxes, than double the Property tax revenue supports elementary, collect taxes or allocate tax revenues. For infor$3.2 billion received high school and community college districts as mation regarding the collection and allocation in 2002. Stanford well as local government agencies including of property taxes, please contact the Tax remains oneandofspecial thedistricts. The Collector at (408) 808-7900 or the Controller cities, the County, property tax in revenue is divided among the at (408) 299-5200 or www.scctax.org. largest California... public taxing agencies. Following the dissoluCREDIT: Santa Clara County Tax Collector’s Office, July 2013
How Tax Bills Are Calculated
y unit % m Comleges 7 Col ial 6% c e Sp tricts Dis
ment velop e d e R essor Succ ies 11% c Agen
% Cities 13
County 18%
K-12 Scho Public ols 4 5%
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The County Assessor’s Office does not calculate taxes, collect taxes or allocate tax revenues. *Data provided by the Santa Clara County Controller’s Office
Santa Clara County Property Tax Revenue Allocation 2012-2013* 6%
nt
%
ic 5%
26 REI VOICE Nov. 2013 - Jan. 2014
ity 7%
CREDIT: Santa Clara County Tax Collector’s Office, July 2013
www.sccassessor.org 5
Change Inflation Factor
Distribution of Value by Type
6.00% 4.00% 2.00% 0.00% -2.00% -4.00%
(value in billions)
Net Percent of Value Property Type Secured* Unsecured** Exemptions Total Value+ Growth+ Professional Services $1.36 $8.82 $1.14 $9.04 30.63% 3.50% Electronic Manufacturers 1.77 3.70 0.00 5.47 18.53% 6.61% Computer Manufacturers 0.97 2.87 0.00 3.84 13.01% 25.10% 2004 2005 2006 Other 2007 Manufacturing 2008 2009 2010 0.46 2011 2012 2.74 9.28% -3.70% 2.272013 0.00 Retail 0.10 2.30 0.22 2.18 7.39% 0.92% Semiconductor Manufacturing 0.62 0.71 0.00 1.33 4.51% 11.83% Other 0.92 4.29 2.69 2.52 8.54% 9.59% Santa Clara County History Summary Aircraft 0.00 0.71 0.01 0.70 2.37% -3.64% Leased Equipment 0.00 0.89 0.00 0.89 3.02% -12.36% (Exclusive of public utility valuation and nonreimbursable exemptions) Mobilehomes 0.51 0.00 0.00 0.51 1.72% 0.57% Institutions 0.01Inflation 0.16 0.17 0.57% 0.61% Net Local Roll ChangeFinancial in Value Percent Change Factor* 0.00 Apartments 0.08 0.01 0.01 0.08 0.27% -2.23% $334,580,873,994 $25,772,654,328 8.35% 2.00% Boats 0.00 0.05 0.00 0.05 0.17% -5.85% $308,808,219,666 $9,711,486,101 3.25% $6.80 2.00% TOTAL $26.78 $4.07 $29.52 100.00% 5.50%
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... the largest home in Santa Clara County also has the highest assessed value. The Los Altos Hills home is 25,545 $2,622,622,011 * Secured Roll: Property0.88% for which taxes become0.75% a lien on real property to secure payment of taxes. square feet and the ** Unsecured Roll: Property for which taxes are not a lien on real property to secure payment of taxes. ($7,382,109,767) -2.43% -0.24% netby assessed Net of nonreimbursable exemptions, includes possessory interest assessments valued Real Property Division.value is + Percentages based on non-rounded $541,990,393 0.18% values. 2.00% $52.6 million... 0 Indicates a value of 0 or less than $10 million. As a result, totals of displayed numbers may be off by up to $10 million.
Ten-Year Assessment Roll Summary
Year 2013-14 2012-13 2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05
Entity Count 13,333 850 11 2,770 6,137 19 1,566 806 546 10,325 79 951 3,146 40,539
$299,096,733,565 $296,474,111,554 $303,856,221,321 $19,801,311,453 6.98% 2.00% $303,314,230,928 $283,512,919,475 $21,597,627,615 8.25% account 2.00% Six percent of all businesses for almost ninety percent of the assessed value of business $261,915,291,860 $21,773,313,717 9.07% personal property. Below are the top 252.00% companies in Santa Clara County as of the lien date, January 1, 2013, ranked by the gross assessed taxable value of2013-2014 their “business property,” which includes $240,141,978,143 $17,765,933,316 7.99% 2.00% Major Changes in Ownership* personal property, computers, machinery, equipment and fixtures. Ranging from $120 million to just $222,376,044,827 2.23% (assessed 1.87% value in millions) ...the largest $4,856,902,557 CREDIT: Office Santa Claraannually. County Assessor[Note: Larry Stone, is ofassessed The rankunder $2 billion, the business property of the top 25 companies * Proposition 13 limits the inflation factor for property values to 2% per year or the California Consumer Price Index, whichever is lower. July 2013. www.sccassessor.org Company (Assessee) Property Type City Net Value+ ing does not include the assessed value of real property or exempt value.] www.sccassessor.org 7 Jose Apartment San $173.75 home in Santa BMEF Enclave LP
6%
of all businesses Clara account forCounty almost ninety percent also has the of the assessed value of business personal highest property. These 25 assessed value. companies in Santa Clara County are ranked The Los Altos by the gross assessed taxable value of Hills theirhome is “business property,” which includes personal 25,545 square property, computers, feet and the machinery, equipment and fixtures. Ranging netto assessed from $120 million just under $2 billion, value isthe $52.6 business property of the top 25 companies million....is assessed annually.
(As of 1/1/13)
[Note: The ranking does not include the assessed value of real property or exempt value.]
Essex Portfolio LP Apartment San Jose Irvine Company LLC Office/R&D Sunnyvale (parentheses indicate last year’s ranking) Irvine Company LLC Office San Jose 10 Microsoft Corp (9) 1 Cisco Systems Inc (1) SVF Cupertino City Center Corp Office Cupertino 11 Network Appliance Corp (22) 2 Apple Computer Inc (4) EOSIL Palo Alto Tech Center LLC Office Palo Alto 12 Lumileds Lighting US LLC (11) 3 Google Inc (2) Landings SC LLC Office/R&D Santa 13 Space Systems Loral Inc (14) Clara 4 Intel Corp (5) Montague Park Junction LLC San Jose 14Office/R&D NVIDIA (17) 5 Lockheed Martin Corp (3) 15 KLA Instruments CorpCupertino (19) Properties LP II Office 6Mission HitachiWest Global Storage Techs Inc (6) 16 eBay Inc (15) 7SanJuniper Network Inc.Owner (10) Antonio Station LLC Office Mountain View 8* Income Applied generating Materials Incproperties (8) only. 17 Intuitive Surgical Inc (23) 9+ Includes Hewlett Packard Comp (7) 18 Equinix Operating in Co 2012. Inc (16) only properties with 100% change in ownership
$148.00
2013-2014 Top 25 Companies* $132.00 $120.00
19 Oracle Corp (20) $120.00 20 Brocade Comm Systems Inc (18) $118.77 21 Southwest Airline Comp (21) $103.50 22 Xeres Ventures LLC (13) 23$98.50 Broadcom Corp (NR) 24$65.00 VMware Inc (NR) 25$55.07 Yahoo Inc (12) * Ranked by gross assessed value of their business personal property. Excludes exempt entities.
CREDIT: Office of Santa Clara County Assessor Larry Stone, July 2013. www.sccassessor.org
www.sccassessor.org 21
Major New Construction** 2013-2014 (assessed value in millions)
Company (Assessee)
Property Type
City
BRE Properties Inc Apartment Sunnyvale Airport Parkway Two LLC Hotel San Jose SJ 23 LLC Apartment San Jose BRE/Amerisuites Properties Inc Hotel San Jose Apple Inc Office Cupertino Villa Serra Apts Apartment Cupertino Belovida At Newbury Park LLC Apartment San Jose Kings Crossings LP Apartment San Jose Cornerstone At Japantown LP Apartment San Jose Fabian Way Associates Apartment Palo Alto ** Includes partial or completed construction. ++ Assessed value of new construction only (net change in assessed value).
Net Value++ $60.80 $45.40 $45.23 $22.38 $22.21 $16.32 $16.24 $15.80 $13.88 $10.62
CREDIT: Office of Santa Clara County Assessor Larry Stone, July 2013. www.sccassessor.org
Nov. 2013 - Jan. 2014 REI VOICE
Appraising and Assessing:
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SOUTH BAY MEETING Chris Clothier, Partner, Memphis Invest Domain Hotel in Sunnyvale MID-PENINSULA MEETING Richard Merritt, President and one of the founders of Elliott D. Pollack & Company, a real estate and economic consulting firm. Crowne Plaza in Foster City
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I nvestor Reso urces ATTORNEYS
INSURANCE
Jeffrey B. Hare, APC 408-279-3555 jeff@jeffreyhare.com www.jeffreyhare.com
Brighton Financial/Farmers Insurance Vernon Williams 408-931-6582 vwilliams@farmersagent.com www.farmersagent.com/ vwilliams
BANKING Umpqua Bank Bryan VanHuystee Mortgage Sales Manager NMLS #669364 408-832-2195 BryanVanHuystee@ umpquabank.com www.umpquabank.com/ bryanvanhuystee
HOME IMPROVEMENT HD Supply Remodel and Repair Nangvorlee Vang 408-330-0934 Nangvorlee.Vang@hdsupply. com www.hdsrr.com
IRA Accuplan Benefits Services Lamarr Baxter 916-708-0235 lamarrbaxter@accuplan.net www.accuplan.net The Entrust Group Gary Kowalski 800-392-9653 ext. 245 gkowalski@theentrustgroup. com www.theentrustgroup.com IRA Services Trust Company Michael McNair 650-593-2221 www.iraservices.com
28 REI VOICE Nov. 2013 - Jan. 2014
MORTGAGE BROKERS
PROPERTY MANAGEMENT
Michael Ryan Mortgage Broker and Banker DRE License # 01090891 NMLS # 295351 408-986-1798 mike@michael-ryan.com
ACL Property Management Charles Lassey BRE # 01893837 510-786-9025 lassey@aclrealestate.com www.aclrealestate.com facebook.com/aclrealestate
PRIVATE FINANCING Private Lender Michael Emens 408-580-6366 michael@PrivateLender.Pro www.PrivateLender.Pro Hard Money Broker Mark Hanf (800) 605-8050 Mark@PacificPrivateMoney. com www.PacificPrivateMoney. com for Borrowers www. PacificPrivateInvestments. com for Investors
PROPERTY SERVICES Thrasher Termite & Pest Control Inc. Janet Thrasher 408-354-9944 info@thrashertermite.com www.thrashertermite.com
REAL ESTATE AGENTS Alain Pinel Realtors Sheryl Martinez DRE License # 01310103 408-209-7674 sheryl@sherylmartinez.com http://about.me/ sherylmartinez
Keller Williams Realty Silicon Valley Anna Maria Valenzuela DRE License # 01362978 408-832-7727 amv@annamariavalenzuela. com http://about.me/annamariav
REAL ESTATE INVESTMENTS Equity Transitions Jeb T. Henley DRE License # 00608973 831-419-4200 jebhenley@gmail.com www.equitytransitions.com Jason Hartman Platinum Properties Investor Network 714-820-4200 jason@jasonhartman.com www.jasonhartman.com Memphis Invest Chris Clothier 877-773-9998 info@memphisinvest.com www.memphisinvest.com
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 Socotra Capital Chris Baumann DRE License # 01907957 916-277-9304 chris@socotracapital.com www.socotracapital.com
SHORT SALES Nick of Time Results Team Natalie Knowlton Matt Cassell 831-402-5107 natalie@calssp.com mattcossell@gmail.com www.nickoftimeresultsteam. com
TRAINING & EDUCATION Dream Big RE Investing 7 Week Mastermind Geraldine Barry 408-396-7177 sjrei.geraldine@gmail.com www.sjrei.org/dreambig
OTHER SERVICES WELLNESS 100% Chiropractic Dr. Josh Ben 408-340-5055 www.100percentchiropractic. com MARKETING/ INTERNET Susan Hare Marketing Susan Hare 408-391-8068 susan@susanharemarketing. com susanharemarketing.com TENANT SCREENING The Rod Group Josaf Rodriguez PI # 26229 831-241-0122 spec.investigations@gmail. com www.therodgroup.com
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Tuigim,* Ger C
by Geraldine Barry
urrent and historical data create context for what is happening in the market today, and a basis for what to anticipate tomorrow. With this in mind, keeping ahead of real estate trends as they emerge, and identifying the repetitive nature of how cycles play out is a very important aspect for investors to grasp on the journey to mastering the dynamic housing sector. The California market, particularly, has enjoying a comeback that has been spectacular in terms of the pace at which it has occurred. The Bay Area is leading the way nationally in the housing recovery and other metros are following suit. Northern California was the last market to fall this past cycle, and one of the first areas to recover. Let’s consider what is driving this spectacular growth. Silicon Valley is magical in terms of the innovation and creativity that is buzzing constantly under the surface, leading the way for the next wave of technology, bio-tech, and product innovation. High paying, high quality jobs are being created and these are driving the economy, and housing market in its wake. Initial Public Offerings (IPO’s) are happening again — think LinkedIn & Facebook for recent examples. Further, there are new IPOs on the horizon that will continue to propel things forward, Twitter, Box, etc. When companies go public in a given market, they drive construction, employment, consumer spending, and the housing market.
*
These positive unintended consequences have ripple effects that are far reaching. What is the next move for investors?
The spectacular appreciation we have enjoyed should leave us wondering how, and if we should enter the Bay Area market right now. 30% plus appreciation occurred just this year, something that took three years to accomplish in the last cycle. Affordability has fallen from over 50% to the 36% range, and more notably to the high teens in the hotter Bay Area markets. That accelerated drop in affordability is something to be concerned with when buying in this area particularly as it relates to flipping. There is smaller pool of people to buy your property as affordability declines. The strange thing is, that at the highest levels of affordability in 2008, first time buyers needed to be incentivized to step into the market. At that time, it made sense to buy particularly in the outlying areas when rents were picking up speed, and the cost to rebuild was much higher than the price. So when prices rise and inventory declines, people clamor to get in. Such is human psychology, and sentiment, which do drive markets. Even highly educated investors can get caught up in speculation. Harness those emotions! SJREI & REI Voice strive to keep you on top of the latest trends so you can make a logical decisions on what to do next.
Tuigim (pronounced tigg-im) is the traditional Gaelic answer to the question, “An dtuigeann tú?” (Do you understand me?)” Tuigim means “I understand,” “I got it,” “I follow,” “I’m with you…,” and is the answer Geraldine Barry, native of the Emerald Isle, most loves to hear.
Geraldine Barry is founder and president of SJREI Association, the premier educational and networking association for real estate investors in the Bay area. Under Geraldine’s leadership SJREI has grown from a half-dozen investors to a vibrant two chapter organization with over 400 investors attending monthly meetings. SJREI won the Award for Excellence from the National REIA (Real Estate Investors Association) in several categories in 2010. As an avid investor herself, Geraldine has interviewed multiple real estate pros, many of whom have been guests of SJREI. In addition to leading SJREI, Geraldine is a regular guest on the nationally broadcasted NTDTV, columnist for the Bay Area News Group, publisher of the award winning publication REI Voice Magazine, and producer of the much acclaimed annual Real Estate Investment Expo Silicon Valley. As a serial entrepreneur, Geraldine is also a principal in Miles/Barry Contract Furniture serving corporations in the Silicon Valley. Additionally, she coaches real estate investors through her program “7 Weeks to a Profitable You.” Geraldine resides in Silicon Valley, and is the proud mother of Colin & Claire, her two children.
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