REI Voice Magazine - June 2012 by San Jose Real Estate Investors Association

www.reivoice.com

June - Aug. 2012

FINDING THE DEAL

LOCATING RICHES IN AN INVENTORY POOR MARKET

J.D. ESAJIAN — CHANGING LIVES • STRUCTURED SALES EXPLAINED • SPOTLIGHT ATLANTA Dec. - Jan. 2012 REI VOICE

INVEST WITH CONFIDENCE ACHIEVE IMMEDIATE CASH FLOW D

iscover the lowest risk, highest quality residential investment properties in the country. Using sophisticated methodology, the best investment properties are carefully selected and rehabbed beautifully to secure the best tenants. With superior property management and instant cash flow, your investment pays worry-free dividends from day one. We Hide Nothing. Complete specs on each property are published on our website.

Highest Quality Product. Fully and expertly renovated with details to attract the highest quality tenants.

Highest Quality Metro Area. Growing, diversified economy; growing, employed population; high occupancy.

Price: $124,000 Rent: $1275 Year Built: 1996 3 Bed / 2.5 Bath / 1982sf

Price: $140,000 Rent: $1495 Year Built: 2002 5 Bed / 3 Bath / 3439sf

All Properties Direct from the Source. We own clear title. Wilson Investment Properties is owned by an investor with $100M and 1,800 units of experience in the DFW area.

Highest Quality Neighborhoods. No inner city. No rural.

Superior Property Management by the same team that manages our own portfolio.

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

Call Today for a FREE Cash Flow analysis. No high pressure sales. If the deal isnâ&#x20AC;&#x2122;t right for you, it isnâ&#x20AC;&#x2122;t right for us.

Price: $131,000 Rent: $1350 Year Built: 1991 3 Bed / 2.5 Bath / 2492sf

Email us for a copy of our new, free, 18-page report on how to select the best market for real estate investing: TomKWilson@earthlink.net

Price: $135,000 Rent: $1395 Year Built: 2001 4 Bed / 2.5 Bath / 2001sf

TOM WILSON, President

408-867-1867

TomKWilson@earthlink.net TomWilsonProperties.com

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

TABLE OF CONTENTS An a lysi s

6 In Intimate Detail: Atlanta, GA REI Voice publisher Geraldine Barry interviews Lori Greymont about the Atlanta market. Ms. Greymont identified Hotlanta as a hot place for rental investments and shares the reasons why.

12 Deal or No Deal? When is an opportunity a deal, a steal, or a wipeout? We identified an investment property and then asked three experienced investors to analyze it. While their ultimate conclusions may not surprise you, their thought processes may.

A dv i c e

10 12 Ways to Lose Money in Real Estate Today

Take Aways from 9 Days of Kiyosaki

Rapid Success: The Anthony Lolli Story

When investor and turnkey provider Tom Wilson decided to attend the Robert Kiyosaki wealth builder cruise, he was wise to leave his wife behind. Days later he came home with mountains of advice and no suntan. Mr. Wilson shares lessons learned.

A rental-based franchise, founded by New Yorker, Anthony Lolli, is poised to ride the wave of rentals across the country. How Mr. Lolli discovered this unlikely route to rapid success.

B asi cs

Real Estate Investment EXPO Comes to Silicon A Good Deal, At What Price? Valley, Sept. 8

Whether Silicon Valley or Las Vegas or Miami, investors are competing with homebuyers. As inventory shrinks across the United States, what price should you bid on real estate? Jeb Henley, investor and broker, answers.

Defer Capital Gains Taxes with 26 a Real Estate Structured Sale Social Networking for Deals When it’s time for an investor to arrive at an exit strategy, there are a few classic plays, then there is the little known structured sale. Kevin Kaaha, investor and expert in real estate structured sales, explains this often overlooked option.

Features

In 27 years, no one has ever asked real estate attorney, Jeffrey Hare, for legal advice because they made too much money on a real estate deal. He offers pointed advice for halting the bleed of a bad deal.

Twenty-one hours of sales-pitch-free real estate investment workshops in one day are coming to Silicon Valley, sponsored by three bay area real estate investor associations. Learn why and how you can participate in this one-of-a-kind event.

Kathy Fettke, CEO of Real Wealth Network, sets the record straight on the hyperbole of the terrific deal. She frankly discusses the 12 sure fire ways to lose money in real estate.

When Deals Go Sour

16 JD Esajian—Valuesbased Success Many people think they know JD Esajian from his appearances on television’s Flip this House, but what is the true method behind the man? Geraldine Barry, publisher of REI Voice Magazine, set out to discover his secrets.

Social Media expert Aaron Norris readily agrees that social networking can quickly become a black hole of wasted time. Yet, he’s successfully managed social networks for The Norris Group and tracked leads to deals. He shares his tips.

Words to Thrive 30 By: Tuigim, Ger 19 CALENDAR 29 I nv estor R es ou rces June - August 2012 REI VOICE

P UB LIS HER’ S NOTE REI Voice™ Magazine A publication of SJREI Association™

WELCOME

Many investors today are bemoaning the fact that they can’t find a deal. Inventory is constrained, despite the obvious fact that numerous distressed properties exist.

Geraldine Barry Publisher, President of SJREI Association

We see them with our own eyes as we drive down certain streets, not to mention that preforeclosure data is readily available. As president of an investor association, I find this trend worrisome. Our goal is investor education AND investor participation. We have the former covered, but participation? We can’t force inventory to open up just as we can’t hold back investors who are ready to get into the market. This issue of REI Voice is focused on the deal: where to find one, how to analyze one, when to walk away, when to go all in. Portions of the real estate market are unforgiving to novices. First timers rarely make money on their first flip. We have heard the pain. Likewise, first-time, do-it-yourself landlords find plenty to complain about: “My tenant is always finding something wrong. I’ve already spent thousands on that house, when am I going to start making money?” Finding a deal is relative to your experience as an investor. An REO or short-sale property may be a deal for someone with a few rehabs under their belt, but a money pit for a first time investor. This is where turn-key operators have stepped in. They create the deal for both the novice and hands-off investor. By identifying a good property, coordinating the rehab, setting the

4 REI VOICE June - August 2012

tenant in place, ensuring cashflow, and offering professional property management, they have created a turn-key product that is ready to place with a new or hands-off investor. The busy professional doesn’t have to deal with the headaches of an SFH rental, but reaps the benefits of ownership without actually doing the work. Tom Wilson, SFH Expert on the Dallas/Fort Worth market said,“As an investor in this market, it is not only imperative to select a location and product that definitely produces cash flow immediately, but that also has the lowest risk of further declines and a maximum probability of appreciating.” Cash-flow has become more important than owning properties within a fifty-mile radius of one’s home. Chris Clothier, partner at Memphis Invest, has seen this first hand. “The vast majority of our client base is out-ofstate (clients from 39 states and 6 countries). We obviously like our current markets, Memphis and Dallas,” said Clothier, “and feel that they will continue to be strong markets for single-family rental investments, and we continue to look toward expansion into Atlanta and possibly Nashville. These southern cities are some of the fastest growing areas in the country and have solid, fundamental economies in place.” All turn-key operators, how-

ever, are not created equal so buyer beware — the due diligence on where to invest and the company to work with is critical to success. Fly by night operators selling properties to unsuspecting individuals in war zones is an all too common occurrence. Visiting the property before inking the deal and checking out the company before you pull the trigger are highly recommended. Tom Wilson shared, “Location is key - if there is anything I have learned from my 1,800 unit transactions it is that sub-markets vary tremendously in performance. Like all metros however, it is critical that one utilize an expert in the area to locate and secure the best products in the best neighborhoods.” Turn-key operators who have weathered the storm with the recent downturn, are poised to be very successful in this segment by simply providing top notch service to ensure that this desirable demographic has an experience that is pain-free. These ready-to-go rentals with tenants in place mean that the investor enjoys cash flow from day one, by managing the managers. For many, that is a great deal!

Publisher Geraldine Barry | 408-264-3198 Geraldine@SJREI.org Editor-in-Chief Susan Hare | 408-391-8068 Susan@REIVoice.com Advertising Sales Meghan Ben | 408-264-3198 Meghan@REIVoice.com Art Director Kevin Bell kbell@Western-Web.net Director, Administration Meghan Ben | 408-264-3198 Meghan@REIVoice.com Printer Western Web Western-Web.net

SJREI Association is a member of NREIA®

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.

9% First trust DeeDs

Looking to add real estate to your investment portfolio but don’t want to be a full-time real estate investor or property manager?

Trust deeds are the secured and passive way to include real estate in your portfolio without the headaches of being a hands-on landlord. Below are recent examples of trust deeds made available exclusively through The Norris Group.

Since 1997, The Norris Group has created passive and secured investments for our trust deed investors which includes: • • • • •

Busy professionals Wealth managers Pensions Self-directed IRAs And retirees

Trust deed investors leverage our: • • •

Unparalleled market timing research Award-winning resources And hands-on real estate investment experience

Location: L ancaster, ca ApprAised VAlue: $80,000 loAn A mount: $47,000 loAn to VAlue: 58.75% pAyment to inVestor: $352.50 r ent: $1,000 term of loAn: 8 yeArs Property Facts: 3 bedroom, 2 bAthrooms, 1,158 sf, 41,694 sf. lot, built in 1984. this property is Currently under r ehAb

Zilpy.com – Rents (Range = $900-$1,250) 1 2 3 4 5 6 7 8 9

$900 $1,200 $1,200 $1,100 $1,250 $1,100 $950 $950 $1,250

SFH 3 br/2 ba 1,134 sqft SFH 3 br/2 ba 1,320 sqft SFH 3 br/2 ba 1,384 sqft SFH 3 br/2 ba 1,463 sqft SFH 3 br/2 ba 1,346 sqft SFH 3 br/2 ba 1,134 sqft SFH 3 br/2 ba 1,025 sqft SFH 3 br/2 ba 1,300 sqft SFH 3 br/2 ba 1,388 sqft

40635 166th St, Lancaster CA, 93535 40617 E 159th St, Lake Los Angeles CA, 93535 40265 162nd St, Lake Los Angeles CA, 93591 40139 Ronar St, Lake Los Angeles CA, 93591 41418 158th St E, Lake Los Angeles CA, 93535 41348 154th St E, Lancaster CA, 93535 40912 173RD ST E, Lancaster CA, 93535 15163 Greenrock Avenue, Lake Los Angeles CA, 93535 40661 178th St East, Lancaster CA, 93535

5/2/2012 1/25/2012 1/27/2012 3/10/2012 4/30/2012 5/2/2012 1/25/2012 3/12/2012 12/11/2011

If you are interested in this trust deed investment and would like to see the entire appraisal, please call the office at 951-780-5856 and ask for Craig Hill.

Location: Lancaster, CA Appraised Value: $80,000 Loan Amount: $47,000 Loan to Value: 58.75% Payment to Investor: $352.50 Rent: $1,000 Term of Loan: 8 Years

Location: Los a ngeLes, ca ApprAised VAlue: $250,000 loAn A mount: $150,000 loAn to VAlue: 60% pAyment to inVestor: $1,000 r ent: $2,000 term of loAn: 8 yeArs Property Facts: 3 bedroom, 2 bAthrooms, 1,476 sf, 5,500 sf. lot, built in 1949. this property is Currently under r ehAb

Zilpy.com – Rents (Range = $900-$1,800) #

Rent

1 2 3 4 5

Type/beds/bath/sqft

$900 SFH 3 br/2 ba 1,520 sqft $1,800 SFH 3 br/1 ba 1,200 sqft $1,795 SFH 3 br/1 ba 1,076 sqft $1,200 SFH 3 br/2 ba 1,198 sqft $1,500 SFH 3 br/2 ba 1,042 sqft

3 bedroom, 2 bAthrooms, 1,664 sf, 6,534 sf. lot, built in 1986. Zilpy.com – Rents (Range = $875-$1,700) #

1 2 3 4 5 6 7 8 9 10

Rent

Type/beds/bath/sqft

$900 $895 $875 $1,050 $975 $1,125 $1,700 $1,300 $1,095 $900

SFH 3 br/2 ba 1,600 sqft SFH 3 br/2 ba 1,500 sqft SFH 3 br/2 ba 1,318 sqft SFH 3 br/2 ba 1,598 sqft SFH 3 br/2 ba 1,561 sqft SFH 3 br/2 ba 1,929 sqft SFH 3 br/2 ba 2,000 sqft SFH 3 br/2 ba 1,750 sqft SFH 3 br/2 ba 1,200 sqft SFH 3 br/2 ba 1,200 sqft

Address

Last seen

13340 Quinta Way, Desert Hot Springs CA, 92240 12990 BEECH AVE, Desert Hot Springs CA, 92240 13785 Hermano Way, Desert Hot Springs CA, 92240 68271 Calle Descanso, Desert Hot Springs CA, 92240 13905 Hidalgo St, Desert Hot Springs CA, 92240 12578 Avenida Serena, Desert Hot Springs CA, 92240 12079 Redbud Road, Desert Hot Springs CA, 92240 13838 OVERLOOK DR, Desert Hot Springs CA, 92240 67650 SAN JACINTO ST, Desert Hot Springs CA, 92240 15402 Avenida Mirola, Desert Hot Springs CA, 92240

3/22/2012 4/27/2012 3/13/2012 2/20/2012 1/13/2012 3/7/2012 3/28/2012 4/30/2012 4/18/2012 4/15/2012

If you are interested in this trust deed investment and would like to see the entire appraisal, please call the office at 951-780-5856 and ask for Craig Hill.

3/7/2012 4/21/2012 4/30/2012 4/30/2012 12/10/2011

(951) 780-5856 • www.TNGtrustdeeds.com

Page 1

Property Facts:

Last seen

If you are interested in this trust deed investment and would like to see the entire appraisal, please call the office at 951-780-5856 and ask for Craig Hill.

(951) 780-5856 • www.TNGtrustdeeds.com

Location: Desert Hot springs, ca ApprAised VAlue: $91,000 loAn A mount: $55,000 loAn to VAlue: 60.43% pAyment to inVestor: $412.50 r ent: $1,000 term of loAn: 8 yeArs

Address

1611 W 137th St, Compton CA, 90222 14002 S NESTOR AVE, Compton CA, 90222 13916 S Nestor Avenue, Compton CA, 90222 922 East 163rd Street, Carson CA, 90746 200 N Nestor Avenue, Compton CA, 90220

Location: Los Angeles, CA Appraised Value: $250,000 Loan Amount: $150,000 Loan to Value: 60% Payment to Investor: $1,125 Rent: $2,000 Term of Loan: 8 Years

Page 1

Location: Desert Hot Springs Appraised Value: $91,000 Loan Amount: $55,000 Loan to Value: 60.43% Payment to Investor: $412.50 Rent: $1,000 Term of Loan: 8 Years

Location: Moreno VaLLey, ca ApprAised VAlue: $101,000 loAn A mount: $63,000 loAn to VAlue: 62.37% pAyment to inVestor: $472.50 r ent: $1,050 term of loAn: 8 yeArs Property Facts: 2 bedroom, 2 bAthrooms, 896 sf, 3,920 sf. lot, built in 1984. this property is Currently under r ehAb

Zilpy.com – Rents (Range = $850-$1,200) #

Rent

1 2 3 4 5 6

Type/beds/bath/sqft

$900 SFH 2 br/2 ba $1,000 SFH 2 br/2 ba 900 sqft $1,071 SFH 2 br/2 ba $850 SFH 2 br/2 ba 1,100 sqft $1,090 SFH 2 br/1 ba 1,120 sqft $1,200 SFH 2 br/2 ba 1,045 sqft

Address

Last seen

24115 AMBERLEY DR, Moreno Valley CA, 92553 13368 Cavandish Lane, Moreno Valley CA, 92553 24243 RADWELL DR, Moreno Valley CA, 92553 13810 Caspian Way, Moreno Valley CA, 92553 13805 gucci dr, Moreno Valley CA, 92553 13719 Rena Court, Moreno Valley CA, 92553

1/25/2012 1/13/2012 4/14/2012 12/20/2011 12/29/2011 1/1/2012

If you are interested in this trust deed investment and would like to see the entire appraisal, please call the office at 951-780-5856 and ask for Craig Hill.

(951) 780-5856 • www.TNGtrustdeeds.com

Location: Moreno Valley, CA Appraised Value: $101,000 Loan Amount: $63,000 Loan to Value: 62.37% Payment to Investor: $472.50 Rent: $1,050 Term of Loan: 8 Years

(951) 780-5856 • www.TNGtrustdeeds.com

Page 1

Because they want: • •

No property management Passive income (checks in the mail)

Location: Hesperia, ca ApprAised VAlue: $87,000 loAn A mount: $54,000 loAn to VAlue: 62.06% pAyment to inVestor: $405 r ent: $1,095 term of loAn: 8 yeArs Property Facts:

We’re not only funding millions in deals every month, we’re in the market investing daily and know what it takes to succeed.

3 bedroom, 2 bAthrooms, 1,229 sf, 28,000 sf. lot, built in 1984 Zilpy.com – Rents (Range = $1,050-$1,295) #

Rent

1 2 3 4 5 6 7

Type/beds/bath/sqft

$1,050 SFH 3 br/2 ba 1,314 sqft $1,100 SFH 3 br/2 ba 1,368 sqft $1,100 SFH 3 br/2 ba 1,582 sqft $1,295 SFH 3 br/3 ba 2,307 sqft $1,250 SFH 3 br/2 ba 1,829 sqft $1,095 SFH 3 br/2 ba 1,330 sqft $1,200 SFH 3 br/2 ba 2,440 sqft

Address

Last seen

18031 Manzanita St, Hesperia CA, 92345 18125 Sequoia Avenue, Hesperia CA, 92345 18181 Manzanita St, Hesperia CA, 92345 17850 Sequoia, Hesperia CA, 92345 11781 I Ave, Hesperia CA, 92345 18155 Catalpa St, Hesperia CA, 92345 18273 Birch St, Hesperia CA, 92345

3/18/2012 4/29/2012 11/10/2011 3/10/2012 4/29/2012 3/24/2012 4/9/2012

If you are interested in this trust deed investment and would like to see the entire appraisal, please call the office at 951-780-5856 and ask for Craig Hill.

Location: Hesperia, CA Appraised Value: $87,000 Loan Amount: $54,000 Loan to Value: 62.06% Payment to Investor: $405 Rent: $1,095 Term of Loan: 8 Years

Location: compton, ca ApprAised VAlue: $232,000 loAn A mount: $140,000 loAn to VAlue: 60.43% pAyment to inVestor: $1,050 r ent: $2,000 term of loAn: 8 yeArs Property Facts: 3 bedroom, 1 bAthrooms, 1,027 sf, 5,000 sf. lot, built in 1951 Zilpy.com – Rents (Range = $900-$1,800) #

Property Facts: 3 bedroom, 2 bAthrooms, 1,229 sf, 28,000 sf. lot, built in 1984 Zilpy.com – Rents (Range = $1,050-$1,295) #

1 2 3 4 5 6 7

CA D ept .of Real Est ate, Real Est ate B ro ker B r uc e N o r r is Financ ial G roup Inc .,

Rent

Type/beds/bath/sqft

Address

Last seen

$1,050 $1,100 $1,100 $1,295 $1,250 $1,095 $1,200

SFH 3 br/2 ba 1,314 sqft SFH 3 br/2 ba 1,368 sqft SFH 3 br/2 ba 1,582 sqft SFH 3 br/3 ba 2,307 sqft SFH 3 br/2 ba 1,829 sqft SFH 3 br/2 ba 1,330 sqft SFH 3 br/2 ba 2,440 sqft

3/18/2012 4/29/2012 11/10/2011 3/10/2012 4/29/2012 3/24/2012 4/9/2012

If you are interested in this trust deed investment and would like to see the entire appraisal, please call the office at 951-780-5856 and ask for Craig Hill.

Type/beds/bath/sqft

$900 SFH 3 br/2 ba 1,520 sqft $1,795 SFH 3 br/1 ba 1,076 sqft $1,800 SFH 3 br/1 ba 1,200 sqft $1,600 SFH 3 br/1.5 ba 1,100 sqft $1,500 SFH 3 br/2 ba 1,042 sqft $1,200 SFH 3 br/2 ba 1,198 sqft

Address

Last seen

1611 W 137th St, Compton CA, 90222 13916 S Nestor Avenue, Compton CA, 90222 14002 S NESTOR AVE, Compton CA, 90222 1105 W 134th St, Compton CA, 90222 200 N Nestor Avenue, Compton CA, 90220 922 East 163rd Street, Carson CA, 90746

3/7/2012 4/30/2012 4/21/2012 1/25/2012 12/10/2011 4/30/2012

If you are interested in this trust deed investment and would like to see the entire appraisal, please call the office at 951-780-5856 and ask for Craig Hill.

(951) 780-5856 • www.TNGtrustdeeds.com

Page 1

Location: Hesperia, ca ApprAised VAlue: $87,000 loAn A mount: $54,000 loAn to VAlue: 62.06% pAyment to inVestor: $405 r ent: $1,095 term of loAn: 8 yeArs

Rent

1 2 3 4 5 6

(951) 780-5856 • www.TNGtrustdeeds.com

Visit our website now to watch our education videos and download our free e-book to learn more about earning a passive and secured 9% on cash-flowing California real estate.

Location: Compton, CA Appraised Value: $232,000 Loan Amount: $140,000 Loan to Value: 60.43% Payment to Investor: $1,050 Rent: $2,000 Term of Loan: 8 Years

Page 1

Location: Lancaster, CA Appraised Value: $90,000 Loan Amount: $56,000 Loan to Value: 62.22% Payment to Investor: $420 Rent: $1195 Term of Loan: 8 Years

Nav iga

one of hel p of wit h the ies. inv est ing st dee d g com pan rld of tru mo ney len din ble wo g har d pro fita ting the ifor nia ’s lea din Cal

g Investinis st Deed By Br uc e No rr by ru T ia rn Califo

For your free e-book on trust deed investing, visit www.TNGtrustdeeds.com or call 951-780-5856

(951) 780-5856 • www.TNGtrustdeeds.com Page 1

D BA T he N o r r is G roup D R E Lic ense 01219 911 flyer-ad.indd 1

June - August 2012 REI5/21/2012 VOICE 5 1:50:37 PM

AN ALYSIS

In Intimate Detail: ATLANTA, GA

An Interview with Lori Greymont by Geraldine Barry

Lori Greymont President Summit Assets Group www. SummitAssetsGroup.com

6 REI VOICE June - August 2012

With planning for the Real Estate Investment Expo Silicon Valley well under way, we decided to take a look at another region that is making claims about tech driven growth: Atlanta. Lori Greymont, president of Summit Assets Group, identified the Atlanta real estate market as one with affordable real estate coupled with a solid economic engine. Here is her interview: Q: Why did you select the Atlanta market to focus on for your turn key business?

About 2 years ago we started noticing the high rents that we could get in the Atlanta market. The demand seemed very strong and so we invested in a couple rentals to test the market. We started researching it as a viable rental market and the statistics supported our experience. Q: How are the employment numbers in Atlanta?

The unemployment rate in Atlanta Metro Area is 9.20 percent (U.S. avg. is 8.60%). Recent job growth is positive. Atlanta Metro Area jobs have increased by 1.00 percent over the last 12 months. Projection for next 10 years is 32.8% growth for the Metro area. Q: How does the Atlanta market compare to the CA market?

Atlanta is a very diverse economy. There are parts of Atlanta that get poor rent ratios. But, then there are areas that are ground zero for new home buyers. These areas are where the highest foreclosures happened. The homes during the peak were selling in the $150,000 - $200,000 range and now are in the $40,000 to $70,000 range. This huge drop was caused by the number of foreclosures in the area and the lack of mortgage financing. Q: Your focus is on single family homes (SFH)? Why is this market appealing to you?

Having been an investor for over 25 years, I have owned duplexes, fourplexes, apartment buildings and single family. The vehicle of investment comes down to what your goal is. I am buying right now for the purpose of cash flow. Every purchase has to make sense on that premise. I also have an eye to the future- knowing that we will see inflation, interest rates will go up and that people prefer to live in single family homes over rentals or even multi-unit dwellings. New construc-

tion has been on hold nationwide for the past 5 years. As demand for housing increases, there will be a shortage. It may not be for 3 years, 5 years or even 10 years; however, the demand will increase and if I am holding SFHs, I will get a higher price when I sell than if I had a multi-unit. Homeowners buy on emotion and will pay a higher price for the same house as an investor. Multi-units only sell to investors who are always looking for a deal. My ultimate exit is to sell or to leverage these homes when the market appreciates. Q: How are rents trending? Occupancy rates?

Per stats collected by NARPM; Average days on market in Atlanta is 61 while the national average is 102. Median rents went from $1,086 in May of 2010 to $1,146 in May of 2011. Occupancy is around 91% metro wide. Vacancy is higher in crime ridden areas, no surprise, and 35 miles or more out from the metro area. Q: What percentage of the population are renters?

In the inner city area, nearly 52% are renters. The suburbs average around 30% Q: Do you have specific areas that you focus on?

Atlanta is a huge metropolitan area. They don’t have any geographical boundaries to contain the growth. There is the inner city of Atlanta, the beltline and then the suburbs. Most people divide Atlanta into four sections- NW, NE, SE and SW. When you choose an area to invest in, you need to pay particular attention to the crime stats for that area. Using a national average of 100 for crime, there are areas in the high 600’s and areas in the low 20’s. There are Zip codes to avoid, such as all the codes between 30303 – 30318. Many investors are fighting over the southern half of the city. The prices are great and rentals are needed. We focused on the Northern half of the city for nearly 2 years without any compe-

tition, but I guess the secret is out now. We are writing over 20 offers weekly and get about 1 out of every 50 homes we bid on. So, the inventory is tightening up significantly. Q: How do you allay the fears of out-of-town investors? How does your process work?

Investors need to remember they are buying a commodity, not a “home.” We live in a home, we buy investment properties. When an investor first contacts us, we work up an investment blueprint. We want the investor to be thinking about wealth creation for the long term and building a portfolio of investment properties. One house out of state can be an expensive headache, but when you build a portfolio of homes, it creates economy of scale. Once an investor has a plan, we review our inventory of properties to select the ones that match their criteria. We provide the investor with a 10day, no questions asked due diligence period and help arrange whatever inspections or due diligence the investor deems necessary. After that period, we close. Most of our investors pay cash for the properties because the price point is so affordable. Over 55% use IRA money. We close the property through an attorney in Georgia. We have a local property management team that is very thorough on the management aspect and one of our team members contacts the investor every month as the key point of contact. Our goal is to create a no hassle wealth building experience for our investors. Q: What resources do your recommend for researching the Atlanta market place?

Aside from me? The internet is a great resource. I like Sperling’s best places (www.bestplaces.net) as a starting point. You can contact the local chamber of commerce for the specific areas you like. Also, call realtors and interview them.

Lori’s Seven Reasons to Love Atlanta ♥ Low property taxes and minimal homeowner insurance rates makes Atlanta unique and allows investors to maximize their ability to cash flow on rental properties. ♥ The rental laws favor the landlord. The only thing a judge looks at for an eviction is whether or not the tenant paid rent. A tenant can be evicted and moved out in less than 20 days. ♥ Prices have fallen more than 70% in some of the areas, creating a unique opportunity for affordability. Because these prices are below rebuilding costs, it is an opportunity for significant probability for price appreciation. ♥ US Census Bureau predicts Atlanta will gain over 2 million people in the next 20 years, growing to a total of over 6 million. ♥ Atlanta ranks #3 in terms of net migration for those 65 years of age and older. It is one of the economies that supports multigenerational families. Employed grandchildren live near grandparents and make for a stable community. ♥ 13 Universities and 14 colleges make for an educated, employable workforce ♥ Diverse economy sectors- Finance, Health Care, Service, High Tech, Transportation and Construction. Home to 12 Fortune 500 companies and 15 Fortune 1000 companies.

June - August 2012 REI VOICE

B ASICS

A Good Deal, At What Price? By Jeb Henley

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 that will provide his investor clients with opportunities for both cash flow and appreciation.

Prices and rents are rising in most markets. Demand is exceeding supply. Whether Silicon Valley or Las Vegas or Miami, investors are competing with homebuyers. As inventory shrinks across the United States, what price should you bid on real estate? First, however, consider where you want to invest. Not all real estate markets are re-bounding at the same pace. A market with continued outward migration, high-unemployment, and depressed rents, is not a bargain at any price. Look for a combination of rental income and potential appreciation. That combination is often found in major metropolitan areas. High occupancy rates are a good indicator of a strong investor market. In those markets, income is higher on most properties than I have seen in 35 years of investing. Investors can now trust that their buildings will have tenant demand. Once you’ve identified the market, what cost considerations make or break a deal? Many investors consider a rent ratio of 1% as the breakeven point. On the face of it, rent ratio is a simple calculation: Monthly Rent [purchase price + rehab costs + fees] For example: $1,000 monthly rent [$75,000 purchase price + $25,000 rehab + ($5,000 mortgage, leasing, and other fees)] =.01 or 1%

Assuming a rent ratio of 1% is the breakeven point, a good deal is anything above that. For example, in a neighborhood where rent is $1,000, an all-inclusive purchase price of $84,000 produces a rent ratio of 1.2%. Keep the math simple with income property, but do factor in rehab and other fees. If you paid $84,000 for just the title

8 REI VOICE June - August 2012

and didn’t factor in at least $30,000 for rehab and fees, your actual all-inclusive purchase price would be $114,000 with a rent ratio of 0.87% —not a good deal at all. To determine your maximum offer for a property, use this equation: Max Offer = [ Rent – Rent Ratio*(rehab costs + fees) ] Rent Ratio $1,000 – .012 * ($20,000 + $5,000) .012 = $58,300 (your max. offer)

The rent ratio analysis is a helpful way to quickly analyze a single family home you intend to flip and hold yourself, to analyze a turnkey property, and to analyze a small multi-fam. When you calculate the rent ratio for a turnkey investment, you don’t have to factor in the rehab or, usually, the initial lease fee, but you do have to include any points or fees if you purchase the property with a loan. And you should deduct the property management fees from the expected rental income. How to identify a deal?

• Look to high employment metropolitan areas with inward migration. • Look for a rental market with a 90% occupancy rate. A really great market shows 95% occupancy. • Do the math. Aim for 1.2% rent ratio or above. Remember, as prices increase, your profit on a deal may not unless you pay attention and do the math. Contact Jeb Henley at jebhenley@gmail. com 831-419-4200

Learn How to Invest in Real Estate With Your IRA or 401k A self-directed IRA from The Entrust Group, Inc. gives you the freedom to invest in commercial property, rentals, rehabs, and more. As an IRA administrator, we will help to educate you on the choices available for self-directed investments, and how to achieve tax-deferred or tax-free growth. Entrust offers a full range of retirement accounts, so that you can invest in what you know best.

Get started today! Call Tiffany Hodges at (800) 392-9653. www.theentrustgroup.com

Find out how you can take advantage of a world of investment options.

Tiffany Hodges The Entrust Group, Inc. (800) 392-9653, ext. 238 thodges@theentrustgroup.com www.theentrustgroup.com 555 12th Street, Suite 1250, Oakland, CA 94607

» Full Service Real Estate Broker for the Investor as well as home owner » Residential and Commercial » Conventional and Private Money Loans » Business Broker Services

Stuart Baeriswyl REAL ESTATE BROKER DRE#: 01807909

Let Stuart Baeriswyl be your all-purpose Real Estate Broker.

P H O N E : 4 0 8 . 3 7 3 . 676 6

EMAIL: stuart@CSRteam.com June - August 2012 REI VOICE

ADVICE

12 WAYS TO LOSE MONEY IN REAL ESTATE TODAY Kathy Fettke is the CEO of Real Wealth Network, and is frequently featured on CNN, NPR and CBS MarketWatch. For more tips on how to protect yourself and make money buying real estate as an investment today, join www. RealWealthNetwork. com (it’s free!) and download the free report: “7 Steps for New Real Estate Investors.”

10 REI VOICE June - August 2012

By Kathy Fettke Realtors often preach about all the ways you can make money in real estate. Rarely are we told about how we can lose money. As a real estate professional, I’m here to set the record straight. Here are 12 sure fire ways to lose money: 1. Not Understanding The Investment

Never put money into an investment you don’t understand. Get advice from a professional who does. A good attorney can be your best friend when it comes to investing. Get your advice from someone who has successfully done what you are trying to achieve - ideally someone independent from the transaction. 2. Not Understanding Tax Implications

Plenty of people are learning this lesson today. Anyone who did a short sale or walked away from a property may be facing debt relief taxes this year. 1031 Exchange laws are strict and auditors are now actively auditing those who claim real estate professional status. Never make any financial moves without the advice of a CPA who specializes in real estate and understands our ever-changing tax codes. 3. Believing, Not Seeing

There’s wisdom in the old saying, “You’ve got to see it to believe it”. Too many people are buying U.S. real estate today based on what they are being told, without verifying it themselves. It seems obvious, but never

buy a property you haven’t seen - especially from someone you haven’t met. Certainly don’t trust what you see on the internet! Just like on-line dating, reality can be very different than what ‘s shown on the web. 4. Saving $350 on an Inspection

It’s fairly easy to protect yourself in real estate by ordering an inspection and an appraisal. It could be the best $350 you’ve ever spent. Make sure the inspector is representing you, not the seller. Not all inspectors are licensed and some may point out problems just so they can go in and fix them. Get guidance from associations like www.ashi.org and www.appraisalinstitute.org. 5. Spending Money on Programs You Don’t Need

There are many self-professed real estate gurus out there who charge thousands of dollars for bootcamps and training programs. These slick speakers are masters at getting attendees to run to the back of the room to purchase programs that promise great wealth. Unfortunately, their information is often outdated and even inaccurate. There are many books in the library that can teach you what you need to know, or join a local investment club to learn from others who have done what you hope to do. 6. Doing it Yourself

If you’re not a contractor, property manager, lawyer or accountant, don’t act like one. Using the services

of qualified professionals will pay off in the long run. No one wants to inherit low quality work, except the IRS. They thrive on your weaknesses. Anyway, how much is your time really worth? You need to add that in to the equation when calculating returns. 7. Confusing High Distress With High Profits

Money can certainly be made when purchasing distressed property for a discount and then fixing it up. But when the entire area is distressed, no amount of fixing will help. When the majority of properties for sale in an area are foreclosures or short sales, you are no longer getting a deal. You are buying at market value. And what will you do with your property? If you plan to live in it for at least 5-7 years, you may be fine as long as the area doesn’t suffer from high crime. If you plan to rent it or sell it, you will have lots of competition. Competition in real estate means lower prices. 8. Breaking S.E.C. Laws

If you are raising money to buy real estate, you may be entering into securities territory. If you are lending money to someone who wants to buy real estate, you may be entering the twilight zone. Always get profesional advice before borrowing or lending money to anyone (especially family or church members). 9. Not Getting Enough Insurance

It’s no fun, but you’ve got to read the fine lines - or get an attorney to

do it. Get as much insurance as you can get. It doesn’t cost much more but will cover things you may not be expecting. And read the fine print, or have an attorney do it for you. 10. Taking Poor Advice

Everyone seems to be an expert when it comes to real estate. Don’t listen to your neighbors or your hairdresser, unless they are super successful real estate investors. Get your advice from someone who’s successfully done what you’re trying to do. 11. Thinking You Have Time to Flip Properties

There are many ways to profit from real estate. Some strategies are totally passive and some require hands-on, time-consuming work. If you work full-time and have family, you may not have the time to take on a renovation. Instead, consider working with turn-key providers who specialize in finding great deals and fixing them up for rent or sale. 12. Working with Real Estate Agents Who Aren’t Investors

Most real estate agents specialize in selling residential property within a particular radius. Do not expect an agent to be an expert in areas outside their comfort zone, and certainly don’t expect a residential agent to understand commercial or investment property. Only work with professionals who have successfully done what you are trying to achieve.

June - August 2012 REI VOICE

AN ALYSIS

DEAL OR NO DEAL? by Susan Hare

hen is a real estate investment opportunity a deal, a steal, or wipeout? We identified an investment opportunity in San Jose, California, and then asked three experienced investors to analyze it. We weren’t so much interested in their ultimate conclusions as in their thought processes. What are the considerations that successful investors take into account? To be fair, we gave each person the same set of facts. However, even that isn’t quite fair, is it? Some of the investors were intimately acquainted with the San Jose area, some were not. Others were more experienced in rehabs and flipping, not ground up construction. Nevertheless, their insights might help you the next time you’re asked to participate in the real estate deal of the century. Before you read their astute conclusions, consider the facts yourself. What would you do in this situation? Then, compare your conclusions with our panel of investors.

THE OPPORTUNITY Lot for Sale: Huge, flat, level, corner lot with room for large home and separate shop, detached garage or granny quarters. Separate curb cutouts for driveway access from front or side street. Desirable San Jose neighborhood with custom homes built between 1900 and 1970’s. Size: 9,583 sqft lot. Zoned: R-1-8. Asking Price: $505,000. Days on list: 400. No liens, owned outright by retired couple. The building department of San Jose recommends using the following for a rough estimate of permit fees: 5% to 8% of the building valuation for most projects. Comps: Sold between 2011 and present Year Built Bed Bath Sqft Lot Price 1975 3 2 2,100 4,791 $769,000 1941 3 3 2363 6720 $889,600 1992 4 4 3,023 5,750 $799,000 1902 3 2 1,347 6,656 $668,000 1908 4 3 2,698 6,098 $980,000

Mary Morrongiello, Bootstrap Patriot Corp. CONCLUSION: No Deal

My first dilemma is that the comps given are completely USELESS for analysis. First, only comps sold within the last 90 days are relevant in this current market. Values are continuing to decline in most markets. In others, properties are beginning to garner multiple offers creating an environment that is a “moving target for values.” This situation requires the investor/flipper to use ONLY the most current sales to avoid over paying or under bidding and losing the deal to somebody who knows this is a pocket neighborhood that is increasing in value. Second, without knowing the condition of the comps when they sold one cannot judge their value. Was the home built in 1908 completely renovated with updated plumbing, electric, windows, flooring, paint, siding, insulation, HVAC etc. with permits and when was that done? in 1985 or 2011? Get my drift? So... that being said I have to ignore the comps and just explain how I would

12 REI VOICE June - August 2012

approach a basic analysis of the property to determine whether I’d even spend time looking at relevant comps to formulate an offer. What data would strike my interest first is the days on market (400) which tells me it is grossly overpriced and may be ripe for a low offer, or the site has building constraints (perhaps it sits in an historic overlay within a city that will require development by committee) or restrictions that render it too small for development such as setbacks from each street that are 20 feet which is the reason I hate corner lots. Next, the owners are an older couple who own it free & clear. This tells me they have a potential HUGE gain in the property which means big taxes to be paid if they sell for all cash. I’d begin by having a sit-down with the sellers to determine their motivation, their financial situation and whether they are aware of the tax consequences of an all cash sale. Let’s assume that they are living on a pension and social security, so they don’t need a chunk of cash to supplement their fixed income if it means 15% goes to the feds and 10% to the state right off of the top! Now I know I can put together a more creative purchase offer that will benefit them by having them finance the sale thereby diminishing the tax impact. They will only pay taxes as the income comes in and that can be structured to be in monthly payments of, say, $2,000 a month for the next 20 years or any other payment plan that will work for all parties involved. In this situation I can offer more for the property because I have no down payment and I have low interest or NO INTEREST financing spread out over 20 years. Since I’ve determined this arrangement is attractive to them I must now take a look at the deal more closely. If this lot could have a single family spec home built on it that will have at least 3 bed/2 bath and be no less than 2000 sqft, let’s ASSUME it would sell based on comps for $830,000. Here is the REALITY: architect’s

plans, site engineering, additional regulatory impact of 2010 California Green building codes now in effect, plan checking and permits will cost $130,000; cost of labor and materials to build will be about $600,000 in a custom-home neighborhood; therefore, the finished product will cost around $730,000. We haven’t even taken into consideration the cost of the lot and we only have a $100,000 GROSS profit before taxes. The deal doesn’t make sense if they give me the lot for free! I can’t spend a year in design, plan check, permitting and construction for a gross of $100,000 even with the land given to me free and clear. No Deal! I don’t even bother to try to get it under contract and wholesale it to another builder because they aren’t stupid either. Editor: Mary Morrongiello noted the age of some of the comps and astutely recognized this neighborhood may have an historic overlay. In fact, the neighborhood is in an area of “historic interest”; however, the neighbors have thus far successfully fought it being designated a historic district.

Glenn Polf, Diversified Ventures Group, LLC CONCLUSION: Deal Potenial

I first calculated the price per square foot for all of the comps: a.) $366, b.) $376, c.) $264, d.) $495, e.) $363. Then, I threw out the high one ($495), which is high because of a very small house. Now, we see that all of properties fall into a nice range of about $366-376/sqft for 2,100 to 2,700 sqft houses. Note that these comps are older homes with the newest being 1992 (20 year old). If we take the deal and build, we should be able to get a premium for our house since it will be new and with a much nicer and larger lot. Given these initial numbers, it appears that we can achieve $395/sqft; however, we would need to verify this estimate with local, experienced agents or brokers. We’d also attempt to uncover comps with an inlaw unit and with comparable lots. In my opinion, the best use would be to build a 2,650 sqft house, with possibly an in-law unit or other structure, about 7501000 sqft. For the secondary structure we

Experienced Investors Answer the Question would use a lower estimate on the price per foot, say $264/sqft. To calculate the potential selling price we take 2,650 sqft x $395= $1,046,750 plus the small unit. $1.25M resale is a number I’m comfortable basing my analysis on. Cost Calculations

My cost calculations take into account my experience acting as a general contractor, therefore, my building costs would be lower than those of an investor who had to hire a contractor. Also, my calculations assume that I’m only out of pocket the $100k down payment on the lot. Everything else is financed.

▲ T H E LOT

▲ T H E HO U S E AC ROSS T HE ST REET

▲ T H E HO U S E N E X T DOOR

Building $510,000. $30,000.

Construction (2650/sqft + 750/sqft x $150/sqft) Permits at 6%

Holding: $2,000. $1,600. $1,400. $50,000.

/mo Insurance, utilities, lot loan ($400k lot at 6%, with $100k down only) /mo Construction loan at 8% average of $250,000 per month /mo Miscellaneous Costs (appraisals, points, lender fees) x 10 months Subtotal Holding

Resale Costs: $4,000. $62,500. $12,500.

Staging Commissions Escrow/title misc. fees (1%)

Subtotals: $540,000. $50,000. $80,000. $500,000. $25,000. $1,220,000. $1,250,000. $30,000.

Building (+5% misc below) Holding costs, min. Resale costs Lot purchase Misc costs Total Cost Estimated Price Profit

Ms. Hare is a real estate investor and principal of Susan Hare Marketing. Her consulting firm focuses on bringing big business marketing to small businesses and professionals. Ms. Hare is also a published author and editor-inchief of REI Voice magazine.

In this particular deal there are many variables, including the cost of the lot. Worst case, the seller wants the full asking price. There is no profit in the deal at the lot’s current list price; however, at $400,000 ($100k down, with the seller carrying the note) the deal becomes more interesting. Potential selling price is another variable. If a $100k bump in the selling price proved reasonable based on further research, then this deal looks even better and has the potential for $230K profit.. Finally, I estimated 10 months for construction. Before ground is even broken, I’d expect to spend six months on blueprints, planning and permits. The minimum time to market is likely 18 months. What’s the market going to • CONTINUED ON PAGE 14

June - August 2012 REI VOICE

CONTI NUED FRO M PAG E 1 3

PRICES ARE GOING UP RENTS ARE GOING UP Talk to an Investment Broker Today and Get a Portfolio Plan Now!

MULTI-FAMILY UNITS POSITIVE CASH FLOW EXPERT DUPLEX TO 40 UNITS + APARTMENT BUILDINGS RECENTLY OFFERED 4-Plex $139,000 SOLD 12-Unit $360,000 SOLD 18-Unit $750,000 SOLD

ASK ABOUT INCOME PROPERTY WEALTH BUILDING AND IRA RETIREMENT PLANNING LET US PLAN YOUR SUCCESS!

Jeb T. Henley, Investment Broker Equity Growth Specialist 35 Years Experience Equity Transitions Inc. 831-419-4200 JebHenley@gmail.com Los Gatos Ca. Investment Broker #00608973

14 REI VOICE June - August 2012

be like in 18 months? I’m very comfortable looking 30 to 60 days out—about the time it takes me to rehab a house. I’m less comfortable looking a year or more out. In the rehab business, we look for 30% to 50% ROI on our deals. However, I’d rather have a 30-day deal and make 10% than a 12-month deal at 30%. A builder might feel differently. My assessment? This vacant lot is a potential deal with the following reservations: 1.) The seller will accept $400k and carry the note; 2) Research confirms that the location would support a selling price of $1.35M; 3)The project would not exceed 18 months. Editor: Glenn Polf keyed in on the potential for an in-law unit on the property. What he didn’t know is that quite a few of the properties in the neighborhood have in-law units. Also that there are some very large estate homes in this neighborhood that command a very high price but rarely come on the market. It is a stable community where people tend to move in and then never move out.

Stuart Baeriswyl, Broker, CRS Team CONCLUSION: Deal Potential

This scenario illustrates that working with an experienced real estate broker in the area can make all the difference. Much has been taking place in the Santa Clara County real estate market since the beginning of the year; namely, inventory of active residential listings is way down. This is largely due to there being too few properties available for the many seriously interested buyers. As would be expected in a hot market like the one we are in, even the generally considered unattractive properties – the distressed ones – are selling too. This situation makes a new construction in an established area more appealing. Regarding the area, again, this is where experience and longevity in an area are an advantage. Just by the description of custom homes and the ages of the comps, I can guess that this lot is in the Willow Glen, Rose Garden, or Naglee Park neighborhoods. All are very desirable and have held their value, even in the downturn. This assumption influenced my analysis. Of course, in a real situation, there would be no need to assume. A 9,583 sqft lot is large enough to accommodate two duet structures. Nice duet units can sell for in the high 600k’s to low 700k’s in the many desirable San Jose neighborhoods. Additionally, there

is a trend within bay area cities to claim support for in-fill development, and the Green Belt Alliance is both vocal on this issue and holds some political sway. The right allies would help this project. Because the property is wholly owned, it is critical to know whether the seller would allow the buyer the time to go through the long process (1 year) to get a Tentative Map made. A lender would not want to provide a loan without one. The comps provided are insufficient since the property lot size is significantly larger than any of the comp properties; however, one does get a rough idea of value. Also, the estimated permit fees do not included the many and varied ‘other costs’ that the city can often come up with to charge for building developments. I would double or triple these estimated costs. Before either I, or someone I was working with, made an offer I’d want these three questions answered: 1.) Where exactly is the property? The Alum Rock neighborhood and the Willow Glen neighborhood are seven miles and several hundreds of thousands of dollars apart. Also, is the lot near a busy highway or in a quiet residential area (as it appears)? 2.) How close is the property to existing utilities (water/sewer/electrical)? 3.) Would the seller consider giving the buyer time (i.e. 12 months) for secure Planned Unit Development (PUD) permits? If the answers to the above questions are positive ones, then this property could be a deal. Any property should be developed to its highest and best use; in this case, perhaps two, duet structures (4 dwellings). Newer versions of these can be very nice and fit in well even in established neighborhoods. Editor: Stuart Baeriswyl came up with an out-of-the box idea: duets (a.k.a. duplexes). What Mr. Baeriswyl did not know was that there is precedent in this particular neighborhood for duets AND, he correctly surmised, for long planning cycles. Many thanks to the contributors of this article. You may contact Glenn Polf at 925-997-4965 polf@comcast. net; Stuart Baeriswyl at 408-3736766 stuart@CSRteam.com; and the editor, Susan Hare at 408-391-8068 susan@susanharemarketing.com.

ADVICE

Nine Days with Robert Kiyosaki By Tom Wilson

Tom Wilson is a thirty five year real estate veteran who has executed over $100M and 1,800 units of real estate investments. After thirty years of managing some of Silicon Valley’s pioneering technology companies, Mr. Wilson put his business and management experience toward fulltime investing. One of his companies, Wilson Investment Properties, offers high quality, highcash flow, fully rehabbed and leased properties to other investors.

“Wow,” I thought, “how fortunate can I get. An opportunity to spend nine days of personal time with one of the modern icons of real estate investing!” I met Robert Kiyossaki in 2002 and was impressed with his focus on fundamentals rather than the gimmicks that are so prevalent with seminar gurus. However, this recent opportunity was not only extensive time with Mr. K, but also his wife Kim, a successful business leader on her own, five of his Rich Dad advisors and many others, including Ed Griffin (Federal Reserve expert): 16 powerhouses in all. One hundred and fifty serious investors attended this real estate investment conference held on land and on a cruise ship from Orlando to Belize in May of 2012. I know what you are thinking: boondoggle. Well, this event, I assure you, was anything but sipping Margaritas in the sun. 8am to 11:30pm every day was packed with education and networking. There was only one non-structured, free afternoon during the entire trip. I hadn’t been this challenged to learn since my engineering school days. No one dared blink for risk of missing something with this phenomenal assembly of talent. Everyone learns differently. Personally, I learn best by being with successful people who like to teach and answer questions. Kim told me that Robert doesn’t just like to teach, he needs to teach. And teach he did. So did everyone else. I was in heaven and came home exhausted. I learned so much I would have to write a book to cover it; however, I’m excited to

keep it in action; velocity. Savers are losers. Don’t save dollars or put it in money markets; it will lose value. —Robert

what they hear, and 90% of what they experience. There is no substitute for jumping in the game.

Kiyosaki

Dream, acquire information, and apply. —Kim Kiyosaki We act like we think; be careful what you think. The military blinds soldiers into thinking that there are bad people in the world. After Vietnam as a Marine helicopter pilot, Robert Kiyosaki became an international citizen. The average helicopter pilot lived 30 days. You can’t be a leader if you aren’t a great speaker. Be generous, not greedy. Give and you will get returns. —Robert

The problem with gold is that it doesn’t produce cash flow. —Andy Tanner

One of the best advantages of real estate is its ability to leverage and use OPM. With social networking for business, the move is toward mobile websites; responses are much faster. You need many hits to capture a prospect; average time per hit is 2 sec. Wyoming and Nevada are the Robert Kiyosaki only states that protect a single member (single person or husshare a few of my take-aways from band and wife) LLC. —Garrett the event. Sutton Best inflation hedges are tangible commodities including real Economy All faculty supported Ron Paul’s estate. Robert Kiyosaki is primarLibertarian philosophies of smallily invested in: 4,000 rental units, er government and free market. 95% of the tax code is about gold, silver, energy production, how to reduce your taxes, not in- education. When you need to get somecrease them. Do more of what the government wants you to do for thing done, give it to a busy persociety. This is why the wealthy son. pay less percent tax.—Tom Wheelwright

Philosophy & General

The stock market is only predictable for about 1 month. —Andy Tann er Civilization cannot grow without energy. Our economic woes will come to a head in 2016 and there is a reasonable chance that we may have hyper (double digit) inflation. —Robert Kiyosaki

Not everyone has the genetic makeup to be entrepreneur; don’t push it if doesn’t fit you (Robert Kiyosaki and Donald Trump). Society mostly needs followers and producers; that’s OK. Be 100% with the other person when they are speaking. When you are absorbing other’s ideas, don’t let your own philosophy and emotions interfere with your objectivity. —Robert

Nuts and Bolts

Beat the Fed by being your own fed. Use Other People’s Money (OPM). Don’t park your money;

Kiyosaki

The average person retains 10% of what they read, 20% of

—Kim Kiyosaki

Kiyosaki

Challenges make you smarter and stronger. A bend in the road is not the end of the road unless you don’t make the turn. —Russell Gray

Quotable Quotes: Just because you can doesn’t mean you should. Not everyone should be an entrepreneur. Let fear prepare you, not paralyze you. You don’t need to give childbirth to a new idea; you can just adopt someone else’s! Live everyday as though it were your last. The best way to help the poor is to not be one of them. —Laing Hancock Contact Tom Wilson at 408-867-1867 tomkwilson@earthlink.net

June - August 2012 REI VOICE

FE ATURE

JD ESAJIAN: VALUESFresno, the fifth largest city in California is so far out of the way, that the I-5, the main artery between Silicon Valley and Los Angeles, completely bypasses it. If it has any reputation at all, it’s that of the most boring place in California, certainly not the home of entrepreneurial powerhouses. Yet, Fresno is the hometown of JD Esajian, Paul Esajian, and Than Merrill, the childhood friends behind Fortune Builders—one of the top three education companies in the nation (Inc. magazine, 2011), the popular A&E reality show “Flip this House,” as well as the successful real estate investment company, CT Homes. When we caught up with JD (yes, that’s the name on his birth certificate) he was in his San Diego office overlooking Pacific Beach. He might have left Fresno miles behind, but JD still carries the values of that blue-collar town. Work hard. Make time for family and Family. Take care of yourself. Treat people right. Do what you can to make a difference.

resources and support team necessary to grow a business in California. When Paul and Than invited him to join CT Homes, JD seized the opportunity. He had always dreamed of building a company with friends and family and he had something valuable to offer back— a no-nonsense attitude and profound work ethic, attributes essential to growing any young company. In his first year with CT Homes, the company did 30 deals. That’s thirty escrows, thirty kitchens, sixty bathrooms, acres of new carpeting, and barrels of paint. In the second year, the team did 70 deals. By year three, they were up to 104 deals. The big need at that time was to take over some of the rehab work from Paul. JD is now Director of Operations for CT Homes and National Speaker and Trainer for Fortune Builders. He has the final say on every property under consideration and refuses to invest the company’s money until he has seen the property—even though that means hundreds of hours traveling each year.

Work Hard

Make Time for Family and Friends

Late in 2003, JD’s brother Paul and friend Than founded CT Homes in Connecticut. The idea was to renovate ugly houses into beautiful ones and make money on the result. At the time, JD was living in California. He’d graduated from college with a degree in economics and had purchased his first home. While he enjoyed the appreciation of that up-trending market, he lacked the

With his hectic travel schedule, responsibilities, and 10 to 12 hour work day, how does JD make time for family and friends? That’s not so difficult with a corporate culture that values relationships. Of the company employees, the vast majority are friends recruited by other friends, husband and wife teams, brothers, sisters, and other relatives. JD’s wife, Debora, works for the

By Geraldine Barry

16 REI VOICE June - August 2012

company. Than Merrill’s wife, Cindy, runs Than’s charitable foundation is no stranger to the office. Take Care of Yourself

To have energy available for family and friends, JD is conscientious about taking care of his mind, body, and spirit. He gets up at 6am every morning and starts the day with quiet time: collecting his thoughts, stretching, practicing his mantras. He eats breakfast and has coffee 99% of the time whether he is traveling or not. JD is a big believer in living a healthy lifestyle, including working out and eating well. Treat People Right

Treating people right is both a personal value, and a core value of the company, that JD considers essential to success. “If I like you and like the way you treat your team, I probably would like to be your customer. Pretty simple really,” JD explained. In order to treat people right, JD and his partners believe that you have to be at the top of your game. That’s why FortuneBuilders/CT Homes values personal development. JD, Paul, and Than start with themselves. They invest in their own education, and attend business and personal growth training that keeps them primed and moving forward. They follow through by coaching and educating staff. “We simply want everyone in our organization to continue to grow and

develop on our watch, and we do that primarily through example and training,” JD said. “We encourage our employees to go after what they want. We treat each of our employees is an intrapreneur. We give them the freedom to exercise decision making and the training to make good decisions.” The result of those good decisions is a 2629% growth rate according to Inc. magazine, a vocal and loyal customer base, and a solid reputation in an industry that has had its share of black-eyes. Make a Difference

“I want to finish every day better than I started,” JD said. The boundless, positive possibilities of transformation motivates JD personally and professionally. “Rehabbing houses transforms neighborhoods. We transform the lives of buyers by providing them with high quality products that allow them to attain the goal of home ownership. Through Fortune Builders I get to transform people and their lives through education. And by being part of a like-minded management team, I have the support to encourage our staff members to grow, stretch, and excel. The ability to make a positive impact is what feeds my soul.” Home Town Values

The beach town of San Diego where JD now calls home is a far cry from dusty Fresno, but he’s still a hometown boy at heart. The only time JD

-BASED SUCCESS bristled during our entire interview was when I expressed surprise that he hailed from that much maligned city. To set the record straight, Fresno is the birthplace of such luminaries as Ross Bagdasarian, Sr., creator of Alvin and the Chipmunks; Kirk Kerkorian, father of the mega-resort and major Las Vegas developer; Sam Peckinpah, director and screenwriter; William Saroyan, Pulitzer Prize-winning author; and, forgive me for mentioning, Kevin Federline. We can now add the following names to that list of Fresno success stories: Paul Esajian, Than Merrill, and JD Esajian. On the FortuneBuilders website, JD posted a quote from Zen teacher Cheri Huber, “How you do anything is how you do everything.” He explained the importance of that philosophy. “Our actions speak louder than our words. How you conduct yourself in business is who you are. Lead by example, respect people, conduct business with integrity. Maintaining our core values is very important for us. We don’t want to forget where we came from. That’s why we go the extra mile with a rehab. It’s why delighting our clients with our coaching and education is very important to me.” It is JD’s fundamental decency, loyalty, and humility that is so smalltown-America and yet so essential to his multi-million-dollar success. It makes speaking with the man an inspiring experience. Just don’t make fun of Fresno.

JD ESAJIAN www.cthomes.com www.fortunebuilders.com

June - August 2012 REI VOICE

FE ATURE

Real Estate Investment EXPO Comes to Silicon Valley, Sept. 8

wenty-one hours of sales-pitch-free real estate investment workshops in one day are coming to Silicon Valley, sponsored by three bay area real estate investor associations. New and experienced real estate investors will discover current market dynamics, learn best practices, and explore investing opportunities. The bay area’s leading forum for real estate investment training and networking is delivering 21 sales-pitch-free educational workshops and bringing together hundreds of real estate pros from across the U.S. to America’s homebase for innovation. The 4th annual Real Estate Investment Expo Silicon Valley is being held September 8, 2012 at the Santa Clara Convention Center. The Expo’s goal is to help individuals new to real estate investing and experienced real estate investors understand the current market dynamics, learn best practices, and explore investing opportunities. “For people new to real estate investing, education from reputable professionals is critical. Real estate investing can be as unforgiving as it is rewarding.” said Bruce Norris, real estate market timing expert and president of The Norris Group. “Networking with real estate investors who’ve been in the game a long time and attending educational forums, like Expo Silicon Valley, is the best way to make sound, profitable decisions.” The long slump in real es-

18 REI VOICE June - August 2012

tate prices makes this a buyer’s market. People who have been waiting on the sidelines for the market to bottom out are now ready to make the move into real estate. At the same time, many who’ve made their wealth in high-tech stocks are looking to diversify their investment portfolio to include property holdings. To serve these investors, SJREI Association is hosting Real Estate Expo Silicon Valley. In partner with NorCalREIA and California Apartment Association Tri-County region, SJREI Association aims to ensure that both new and seasoned investors are provided high-quality, no-sales educa-

tional workshops as well as the opportunity to meet and mingle with deal makers from across the U.S. “Even experienced real estate investors need to recharge their batteries now and then,” said Kathy Fettke, CEO of RealWealth Network. “The energy, the networking opportunities, the exposure to how other investors are leveraging market trends, are all reasons to attend industry events. That, plus the quality of organizations involved with REI Expo Silicon Valley, is the reason RealWealth Network is proud to sponsor the Expo.” Silicon Valley and the greater bay area is home to 2.6

million households within a 1 hour drive of the Expo, yet Geraldine Barry, President of SJREI Association, expects participants from across the country. “I’ve been to multiple industry events that purport to be educational in nature, yet lack content while pressing participants to spend even more money on training,” said Ms. Barry. “Real estate education is often associated with get rich quick schemes. It takes time, effort, and unbiased education to become proficient in real estate investing. At SJREI and with the Expo, we affiliate and associate with real estate professionals who possess integrity and smarts. The Real Estate Investment Expo Silicon Valley is an information rich forum for new investors, and with high-level workshops to expand the knowledge of experienced investors. It will not disappoint.” For more information about the Real Estate Expo Silicon Valley, September 8, 2012, or to take advantage of early bird discounts, please visit the Expo website: www.ExpoSiliconValley.com.

CALENDA R REGISTER ONLINE for our award-winning events: SJREI.ORG Sign Up for our email list for the most up to date event news

JUNE

6 7 19

JULY

South Bay Meeting, Domain Hotel in Sunnyvale with Bill Tan on “How to Make Money with Notes”

Mid-Peninsula Meeting, Crowne Plaza in Foster City with Mary Morrongiello on “Flipping in A Sizzling Hot Market”

East Bay Meeting , Hyatt in Dublin with Investor, Michael Zuber on “How to be Successful in Real Estate while Working a Full Time Job”

South Bay Meeting, The Domain Hotel in Sunnyvale with Investor, Michael Zuber on “How to be Successful in Real Estate while Working a Full Time Job”

Mid-Peninsula Meeting, Crowne Plaza in Foster City – Speaker TBD

28 AUGUST

East Bay Meeting, The Hyatt Place in Dublin with Bill Tan on “How to Make Money with Notes”

1 2 21

BE A PART OF SOMETHING AMAZING! BECOME A MEMBER TODAY (408) 264-3198 or www.SJREI.org

hether you have yet to purchase your first investment property, or are working on your hundredth deal, you’ve found the bay area’s source for sound, principled advice and networking. As investors ourselves, we understand the challenges that investors face, and customize our programs to address real-life situations and scenarios. MEMBER BEnEfITS Hear the best speakers, get the best advice Our educational meetings are delivered by recognized experts in their field. They keep you up to date on issues such as market timing, new legislation, and techniques that may affect or enhance your real estate investing. Network with iNvestors, buyers, sellers, ANd the people who support them All successful people rely on a network. Bringing like-minded people together to share information, assistance, and resources is a core goal of our chapter meetings. stAy motivAted, Avoid pitfAlls Who but another investor understands the doubts, challenges, and successes of real estate investing? SJREI Association fosters a positive climate of mutual support and sound advice. Your questions are respected, your participation is valued. three ChApters • south bay • east bay • mid-peninsula Membership entitles you to free admission to your local chapter’s monthly educational and networking programs and much, much more.

JumpStart Program

ExEcuTIvE MeMBership

preMiuM MeMBership

Annual Membership Dues

$500

$225

Additional Member*

$350

$200

Benefits

East Bay Meeting , Hyatt in Dublin with Michelle Lenehan of Foreclosure Radar

Guest passes (use at any chapter meeting) free registration & attendance at local chapter meeting

South Bay Meeting, The Domain Hotel in Sunnyvale with Michelle Lenehan of Foreclosure Radar

network with other investors at each event free registration & attendance at all chapter meetings: Mid-peninsula, san Jose, east Bay Invitation to annual Leadership roundtable Vip seating at registered events

Mid-Peninsula Meeting, Crowne Plaza in Foster City – Speaker TBD

personalized name badge with expedited event check-in On-line community: member profile, read and post messages on message boards Hundreds in discounts for goods and services through national reiA affiliation Discounts on workshops and special events

Save the Date:

Saturday, September 8, 2012: SFBAY EXPO

Invitation to Quarterly Insider Luncheon Audio library of past events new member orientation

THE BAY AREA’S MOST DYNAMIC INVESTORS ASSOCIATION For More Information or to Register for Any of these Events, Visit: www.SJREI.org

June - August 2012 REI VOICE

FE ATURE

Rapid Success: The By Geraldine Barry

n just over two years, Rapid Realty, has grown from a single office to 54 franchise locations throughout New York. This rental-based firm, founded by Anthony Lolli, is poised to ride the wave of rentals across the country and plans to open 50 more locations in key markets like Los Angeles, Chicago, and Boston. How did this company come so far, so fast? Credit it to the genius and boundless energy of Anthony Lolli. Sixteen years ago, when Anthony was just out of high school, he experienced a profound “ah-ha” moment. It was during a real estate course he was taking in preparation for New York State real estate license exam. He looked at his instructor and thought, “If there is so much money in real estate, why is this guy teaching?” At the break he spoke with the instructor and discovered that the instructor owned the school, the building, and was a real estate investor. He told Anthony, “This school earns approximately $1.4 million annually and is just one of my ventures.” Anthony realized that becoming an agent was only one of many ways to make money in real estate. This lesson held him in good stead 14 years later when he developed the Rapid Realty business model; however he still had a lot to learn. Anthony quickly obtained his license with a clear career path in mind: join a large firm, learn all aspects of the business, then go to work

20 REI VOICE June - August 2012

selling multimillion dollar brownstones in Brooklyn Heights, which he called “The Beverly Hills of Brooklyn.” The first two goals proved easy enough; he signed on with one of the largest firms in Brooklyn, and in a matter of months he became their top salesperson. Making the move to Brooklyn Heights, however, turned out to be more difficult than he had imagined. Broker after broker told him he was too young to be effective, despite his prior success. Finally, he wandered into a brokerage firm on the second floor of a building. The owner disclosed that he was involved in several lawsuits and was not hiring. Undaunted by the law suits, Anthony persuaded the owner to take him on by agreeing to pay the bills and share all earnings 50/50. For the next several months, Anthony talked to everyone—he doorknocked neighborhoods, he secured co-ops and condos and listings for millions of dollars, and he recruited agents for the company. The company, and its profits, grew by leaps and bounds. But Anthony had another lesson to learn: the broker (Anthony’s boss) lost his lawsuits and reneged on his agreement to split earnings with Anthony. Like a true New Yorker, Anthony brushed himself off and started over—this time on his own terms. He left Brooklyn Heights and went deeper into Brooklyn, where he could afford to buy a three story building. He renovated the apartments on the upper floors and turned the ground floor into the office of his own broker-

age, Rapid Realty. From an initial staff consisting of just Anthony and a small handful of agents, Rapid Realty quickly grew, thanks to Anthony’s training and leadership. Again, his success attracted success and soon Anthony had 150 agents working for him. He was ready to expand. After grooming his seven member training staff to open seven new offices, they all left to start their own businesses without him. Real estate agents, he discovered, have very little incentive to be loyal to a single broker and he had just trained his own competition! He clearly needed another business model that made his investment in people worthwhile. An investor friend who owned a franchise spoke to Anthony and suggested that he consider a franchise model. “At first, I thought McDonalds and Burger King,” Anthony said, “not real estate. But once I started to learn more about it, I realized that the franchise model is actually very similar to the relationship between a broker and an agent. In a real estate brokerage, the broker provides training, infrastructure, and support, and in exchange the agent splits their commissions with the broker. In franchising, the franchisor provides all the same things to the franchisees, and in exchange the franchisor collects a portion of the sales as royalties from the franchisee. The more he considered it, the more interesting franchising became. By using a franchise model, Anthony would eliminate all the things that make people in business fail, plus

Anthony Lolli Story he would provide the infrastructure, website, and other marketing for Rapid Realty’s franchisees. All that the franchisees had to do was sell real estate—or more accurately, in Anthony’s business model, lease apartments. New York apartment leasing has unique quirks and the opportunity for making a lot of money. Unlike other major cities, New York City still practiced the broker fee method when Anthony founded Rapid Realty. Tenants were expected to pay the broker’s fee in order to secure the lease. Anthony decided pioneer the no-fee method in NYC (actually, there still is a leasing fee; however, that fee is paid by the landlord, hence “no-fee” to the renter). He started a billboard campaign off the highways advertising no-fee leases and soon had 220,000 visitors a month to his website. With that kind of success, Anthony was soon opening franchise offices throughout NYC. Rapid Realty differs from brokerage chains, like Coldwell Banker or Century 21, in several important ways. “First of all,” said Anthony, “we practice a different brand of real estate. We’re in the high volume rental business, as opposed to everyone else who focuses on sales. We are very unique in that we are the only rental real estate franchise model that’s out there. “In our system, every agent and franchisee can work from any of our franchise locations. In other franchise models, both in real estate and in any other type of business, when you work out of one franchise you don’t ever

work at another one that is owned by a different franchisee. Our company works completely different in that all of our salespeople and franchisees work from any office they want to. While the salespeople are assigned to one particular office, if they get a customer who wants to live in an area outside of the area that their office is located in, they can visit any Rapid Realty franchise and work from there. “It also helps us produce a lot more deals because it allows salespeople to always have a nearby office to stop in when they have a customer who is interested in applying for a space and leaving a deposit. Time kills deals, which is why it’s a great luxury and super convenient to the salespeople and our customers to have the ability to use any of our offices, no matter what area they are in — making it less likely the customer will get cold feet and not take the space, because they thought about it too long and wanted to procrastinate some more.” Rapid Realty’s unique take on the franchise model has become a phenomenon. In addition to their 50+ offices throughout New York City, the company opened its first office outside New York in September, 2011, in Jersey City, NJ. Currently there are Rapid Realty franchises underway in Boston, Philadelphia, and Atlanta. Anthony envisions Rapid Realty spreading across those cities the way it did in New York. He foresees the brand becoming America’s first household name for apartment rentals. At the rate the company is going, that goal seems well within reach.

ANTHONY LOLLI Founder/Chief Executive Officer Rapid Realty Franchise LLC

June - August 2012 REI VOICE

ADVICE

When Deals Go Sour I

by Jeffrey B. Hare, APC

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 formations (LLCs, etc.), and is very familiar with the use of self-directed IRAs for alternative investments such as real estate.

n 27 years, no one has ever asked me for legal advice because they made too much money on a real estate deal. More often than not, the typical comment is “I wish I had talked to you earlier.” Lawsuits happen. Being served with Summons and a Complaint is guaranteed to ruin your day, no matter what. The most important rule is “Don’t ignore it!” You have 30 days to file a response, so you need to get an attorney. Ignoring the Summons could result in a default judgment against you, which is a matter of public record and will have a significant adverse impact on your credit rating! The cost to mitigate the impact of a recorded Judgment can be quite expensive both in terms of money and time. The first question a lawyer will ask you is “What happened?” In other words, what events took place that led up to the filing of a lawsuit? Lawsuits are rarely a surprise – most people have some indication that a dispute exists that might lead to litigation. Keeping good records will help you prepare a detailed chronology of events, and might save you thousands of dollars in legal costs. Sometimes, a well-documented history of how you got

22 REI VOICE June - August 2012

into the dispute will reveal clues how to get out of it. Most people recognize the early signs when a deal starts to go sideways. The problem is that they don’t react properly. The first reaction is denial, and people have a tendency to seek confirmation that the problem will be corrected, and ignore evidence that indicates it will get worse. Personality conflicts, tension between the partners, a breakdown in communication, a disappointing report, and unexpected delays can trigger the unraveling of even the most carefully planned deal. Documenting these events as they evolve will help you be better prepared if – and when – the time comes to answer the question “what happened?” An experienced lawyer will ask is whether the dispute involves a business or a legal issue. Is it a disagreement over the amount of each investor’s share of profits or losses, or a question over the legal ownership of the property? Business disputes can often be quickly resolved through negotiation and mediation in a more cost-effective manner than going to trial. Attorneys’ fees and litigation costs can very quickly exceed the total amount in dispute. On the other hand, if the matter in dispute only requires a judicial interpretation of the legal issue, the parties can stipulate as

to the facts and seek an expedited ruling. The fact is that over 98% of all cases filed with the Court settle before a jury has the opportunity to issue a verdict. Alternative dispute resolution (ADR) options, including Early Neutral Evaluation (ENE), Mediation, and Arbitration – either binding or nonbinding, private or court-appointed – resolve most disputes. It can take up to five (5) years to get a case to a jury. Litigation extends rather than solves disputes, often delaying closing of the transaction. A project involving a three-month rehab and flip can turn into a three-year legal battle costing hundreds of thousands of dollars in legal fees and litigation costs. If there is a 98% probability that the dispute will settle, doesn’t it make financial sense to resolve it sooner rather than later? Don’t wait until the Summons and Complaint are served. Keep good records, and take action as soon as you sense a deal is going sideways. Consult with an attorney, and attempt to get the issue resolved quickly, before the whole deal is lost. An early resolution will prove to be the best return on your investment.

Contact Jeffrey Hare at 408-279-3555 jeff@jeffreyhare.com

INVESTORS. BUYERS. SELLERS.

www.ressale.com What is Alternate Dispute Resolution (ADR)? ADR is a process in which a neutral person helps people who cannot agree, so that they can resolve their case. ADR is designed to take place as early as possible in the life of a case, to provide an opportunity to settle all or part of the case and keep litigation expense to a minimum. (Parties in a civil case can use a mediator, neutral evaluator, arbitrator, or settlement conference neutral for assistance in resolving a case.) Types of Civil ADR available: Mediation: Mediation is an informal, confidential, flexible and non-binding process in which the mediator helps the parties to understand the interests of everyone involved, and their practical and legal choices. The mediator helps the parties to communicate better, explore legal and practical settlement options, and reach an acceptable solution of the problem. Mediators are allowed to charge for their time. Neutral evaluation Neutral evaluation, sometimes called “early neutral evaluation” or “ENE”, is an informal process in which the evaluator, an experienced neutral lawyer hears a compact presentation of the case from both sides, gives a nonbinding assessment of the strengths and weaknesses on each side, and predicts the likely outcome. Evaluators are allowed to charge for their time. Private Arbitration The arbitrator hears the evidence and arguments of the parties, and then makes a written decision. The parties can agree to binding or non-binding arbitration. In binding arbitration the arbitrator’s decision is final and completely resolves the case, without the opportunity for appeal. In non-binding arbitration, the arbitrator’s decision could resolve the case, without the opportunity of appeal, unless a party timely rejects the arbitrator’s decision within 30 days and requests a trial. Private arbitrators are allowed to charge for their time. For more information, go to the Santa Clara County Superior Court web site: http://www.scscourt.org/court_divisions/civil/adr/civil_adr.shtml

ASK FOR A “REAL ESTATE STRUCTURED SALE” FOR YOUR NEXT PROPERTY TRANSACTION • DEFER YOUR CAPITAL GAINS TAXES. • NO 1031 EXCHANGE INVOLVED. • RECEIVE GUARANTEED FIXED INCOME. • INCOME IS NOT SUBJECT TO MARKET VOLATILITY. • INCOME IS PROTECTED FROM CREDITORS Investors and Buyers get a tool that increases their chances of getting the properties they want. Sellers get an exit strategy. They get a retirement vehicle that GUARANTEES their retirement life style and keeps their investment dollars working, long after the sale of their property. Call us for a No Obligation quote for the property that you want to buy or sell. Let us provide you with certainty during uncertain times.

CALL US FOR YOUR FREE CD ABOUT REAL ESTATE STRUCTURED SALES Disclaimer: This transaction is governed under IRC, Section 453 and IRS, Publication 537. This information is provided for general consumer educational purposes. Real Estate Structured Sales cannot predict actual tax consequences for any given situation because relevant tax law, which may include statutes, regulations, ruling, treaties, or conventions, is subject to change. This information is not intended to provide legal, tax or investment advice. For individual advice, you should consult your legal or tax advisor.

Real Estate Structured Sales

KEVIN KAAHA

LICENSED / CERTIFIED STRUCTURED SALES AGENT 408-821-4131 RESSALEKK@YAHOO.COM

June - August 2012 REI VOICE

B ASICS

24 REI VOICE June - August 2012

Defer Capital Gains Taxes with a Real Estate Structured Sale By Kevin Kaaha A recent study concluded that 90 percent of retiring Baby Boomers indicate a need to focus on income in retirement, versus accumulation of assets. Over three-thousand Baby Boomers were then asked the following question: “Are you more confident in knowing exactly how much money you’ll need at retirement OR how many gumballs are in the jar at the County Fair?” Sadly, 47 percent felt more confident in guessing at the number of gumballs, while 53 percent felt confident in their ability to gauge their retirement income needs. There is an exit strategy that allows investors and owners to sell their properties, defer their capital gains taxes on the sale of that property and receive guaranteed, fixed income payments over a scheduled period of time. The payments become a guaranteed passive stream of income that IS NOT subject to market volatility. The seller gets certainty during uncertain times. This exit strategy is called a Real Estate Structured Sale. The transaction is governed under IRC, section 453 and IRS Publication 537. Where did a Real Estate Struc-

tured Sale come from? Over the past several decades, many civil court cases have used an annuity product to fund damages. You often read about horrific accidents in which people were badly injured. At a civil trial, the jury decides that substantial damages are owed to the injured parties. In most cases, these damages require payments to the injured party. The payments from these lawsuits are often funded by large A+ rated insurance companies and are called “structured settlement” annuities. They provide payments for a period of many years. These structured settlements provide the economic assurance that the injured party will receive income in a scheduled and timely manner. These large A+ rated insurance institutions looked at the real estate market and determined that their structured settlement product could be used to defer capital gains for retirees who sell real estate. Here is a hypothetical example of a Real Estate Structure Sale. Bob, the owner of an apartment building is selling his property. He receives an offer of $3,500,000. At age 62, Bob is concerned with market risk and providing a reliable income during

retirement. Bob agrees to $500,000 cash at the time of sale and $3 million, deferred for 20 years, via the Real Estate Structured Sale. Under this agreement, Bob could expect the following benefits: $500,000 in cash, payable at the close of sale, and $14,490 per month, guaranteed for 20 years. This income is not subject to market volatility. Bob also defers his capital gains taxes over a period of time. The Real Estate Structured Sale is a clean way to exit the real estate market and realize your retirement dreams. Sellers simply have to ask their buyers for a Real Estate Structured Sale offer. It is no cost to the buyer or to the seller. In fact, buyers who adopt the Real Estate Structured Sale offer, may turn this option into a deal-winning advantage.

Kevin Kaaha is a Licensed and Certified Structured Sales Consultant with a focus on helping property owners sell their property and defer their capital gains taxes. Mr. Kaaha works with strategic affiliates, throughout the United States, in providing an educational based platform to show commercial and investment property clients how to locate income producing properties.

The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SJREI or REI Voice magazine. Individuals should always consult a qualified tax professional or legal advice to review different options of selling highly appreciated property. Contact Kevin Kaaha at 408-8214131 ressalekk@yahoo.com

June - August 2012 REI VOICE

FE ATURE

Social Networking for Deals online mastermind group. Ask permission, keep it relevant, and don’t abuse the privilege.

somewhat addictive. Just make sure you’re getting value for your time spent.

Google Groups

they’re making you weaker.” It’s great advice not only for friendships but also for social media. Building a dense network of like-minded friends, colleagues, and prospects is exponentially more powerful than thousands of “friends” who don’t give a damn about what you do, and who provide absolutely no value to your business. In addition, building a strong, targeted network plays nicely into the evolution of social search. With these two filters in mind, let’s dive into some tools that turn social networking into potential real estate deals.

Google groups work like Facebook groups, except that Google groups are delivered via email. Someone posts a question and it arrives to all members via email, as do all subsequent replies. It quickly becomes annoying if the group is too large, if too many questions are asked, or if too many responses are made. When all members are not operating at the same level (e.g., too many inexperienced investors asking really basic questions), the group experience may become counterproductive. From finding favorite contractors in particular areas to locating details on how to appraise a weird add-on, the value that I’ve received from the few groups I belong to has far outweighed any annoyance of additional email. If you’re starting a group, ask permission from those you want to participate, don’t abuse the list, and keep it relevant and interesting. Boot those that cannot control themselves.

Others must be experiencing FFS too because LinkedIn has exploded with friend requests over the past six months. Admittedly, I don’t leverage this site as much as I could. However, I like LinkedIn because it offers tremendous access to business professionals that I’d never have access to on my own. Make sure to completely fill in your LinkedIn profile and pay special attention to the recommendations on your page. This is your living resume and people do read it. Your LinkedIn profile can also be used if you don’t have a personal website. I don’t friend everyone on LinkedIn, and I do try to have a conversation with people whom I don’t know but who have requested to be added to my network. If they aren’t willing to engage after the requested friendship, what are the chances they plan on adding any value to your network?

Facebook Private Groups

Niche Sites

I must admit, I am still recovering from Facebook Fatigue Syndrome (FFS). However, Facebook remains the most highly adopted social media tool in our industry. Private groups are one of my favorite tools when not abused. I’ve seen far too many groups die quickly because the Groupor invites Groupees without asking their permission. Then, the Groupor immediately starts pushing out unwanted messages and spam causing mass exodus. A better approach would be to ask a small handful of knowledgeable and active Facebook friends to form a very small, invite-only group. This select group would be your go-to for specific questions and deals that you don’t quite know what to do with yet. Think of it as an

Looking to cast your net a little wider? Check out niche sites like Bigger Pockets and Active Rain. Bigger Pockets caters to real estate investors nationwide while Active Rain has more of a REALTOR® following. It doesn’t matter if you’re a novice or an old pro. The currency on these sites is great questions by newbies and expert answers by experienced investors. Like any social network, show up and listen first, comment second. Take it all with a grain of salt and realize that different laws apply in different states (in other words, always check to make sure suggestions aren’t illegal). Beware, some of the greatest niche sites are gamified, which means that you get points and badges for participation. It can be

By Aaron Norris

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.

When I started with The Norris Group back in 2005, I vividly remember getting strange looks when I said everyone was getting an email address with the @thenorrisgroup.com domain. One of our team members actually said, “Why do we need email?” Only 60% of our customers had email at the time as well. Needless to say, things drastically changed. Today, 99.99% of our prospects and customers have email addresses and large numbers engage on Facebook, LinkedIn, Twitter, and Google+. The question has quickly become: How on earth do you manage all these networks and do they really lead to deals? Two important things to keep in mind before we get into specifics: “What gets measured gets managed.” – Peter Drucker Forget about size: It’s quality, not quantity.

The famous Peter Drucker quote reminds us to always show up with return on investment (ROI) in mind. If you’re not approaching social media strategically with business in mind, then leave it for personal use with family and friends. It can quickly become a black hole of wasted time. If a social media site isn’t helping you learn, build valuable relationships or close deals, why are you there? Revisit the P.O.S.T. method (People, Objectives, Strategy, Technology) in The Groundswell to choose your tools wisely, create goals, measure success, tweak, and repeat. I’m currently reading The 4-Hour Work Week by Timothy Ferriss for an upcoming podcast, and the following quote struck me: “You are the average of the five people you associate with most… If someone isn’t making you stronger,

26 REI VOICE June - August 2012

Offline Networking

Taking these online relationships offline and turning them into business is the most important piece of the puzzle. Buying houses isn’t quite the same as buying a sweater online (not yet at least) and an online presentation can be very different from what a person is like in real life. Most people are going to want a face-to-face meeting at some point before investing with you or referring deals your way. If you’re creating goals for all of your online activity, make sure that you structure them in a way that delivers value to you, and that you follow up in a way which makes your business grow — that’s social media done right. See you on Facebook. Contact Aaron Norris at 951-780-5856 Aaron@TheNorrisGroup.com

You Tube

June - August 2012 REI VOICE

Funding Available for real estate investors

Dr. Joshua Ben 408.340.5055

100percentchiropractic.com

100% First Experience

$100 * Initial Discovery (Exam, Consult and X-rays**) * Empowerment Session (includes recommendations) * 1st Life-Changing Adjustment ** X-rays full price of $79. If x-rays not needed then $21 for the First Experience

You’re Invited to Experience Life at 100%

Pacific Private Money makes lending easy. We fund loans on non-owner occupied single family, multifamily, mixed-use residences, and challenged townhome or condo projects. We’re fast. We’re friendly. And, we’re ready to help you get the funding you need right now.

Let us fill you in on all the details

(415) 883-2150 PacificPrivateMoney.com

1604 Grant Ave., Novato, CA 94945

PRIVATE MONEY LOANS California Department of Real Estate Brokers #1897444

MILES/BARRY CONTRACT FURNITURE Workplace furnishings to fit your business

AFFORDABLE PRICING, EXTENSIVE PRODUCT LINES, EXPERIENCED CONSULTANTS

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 efficiency of working with just one contact.

PRODUCT SALES • Ergonomic Products • Workstations-New and Refurbished • Casegoods-Veneer & Laminate • Filing Systems • Conference Rooms • Lunch Rooms • Training Table

Call Barbara Miles at 650-359-5611 28 REI VOICE June - August 2012

PROJECT SERVICES • Consultation and Project Phases • Design CAD Drawings • Installation • Reconfiguration • Affordable Pricing • Panel Cleaning • Leasing • Extensive Product Lines

bnmiles@milesbarryfurniture.com www.MilesBarryFurniture.com

Investor Resources Accounting Michael Gray, CPA 408-918-3162 mgray@taxtrimmers.com www.realestateinvestingtax.com Richard Smith, Enrolled Agent 408-446-5551 rsmithtax@aol.com www.richardsmithtax.com

Attorneys Chillag & Associates, P.C. Nancy A. Chillag 650-321-6796 nancy@chillag.com www.chillag.com Jeffrey B. Hare, APC 408-279-3555 jeffrey@jeffreyhare.com www.jeffreyhare.com

Data & Analysis Altos Research Scott Sambucci 415–931-7942 scott@altosresearch.com www.altosresearch.com

Home Improvement HD Suppy Remodel and Repair Lillian Duong 408- 330-0934 Lillian.Duong@hdsupply.com www.hdsrr.com

Insurance Brighton Financial Group Vernon Williams 408-931-6582 vwilliams@farmersagent.com www.farmersagent.com/vwilliams

IRA Entrust Administration Inc. Gary Kowalski 916-509-7271 gkowalski@theentrustgroup.com www.entrustcalifornia.com/oakland IRA Services Trust Company Michael McNair 650-593-2221 www.iraservices.com

Mortgage Brokers Joe Cucchiara Mortgage Planner/Branch Manager 408-342-3755 jcucchiara@partnersmortgage.com www.re360radio.com Michael Ryan, Mortgage Broker and Banker DRE License # 01090891 NMLS # 295351 408-986-1798 mike@michael-ryan.com

Private Financing Socotra Capital Jeff Simmons 916-617-2047 jeff@socotracapital.com www.socotracapital.com

Property Services Thrasher Termite & Pest Control Inc. Janet Thrasher 408-354-9944 info@thrashertermite.com www.thrashertermite.com

Real Estate Agents CSR Real Estate Service Stuart Baeriswyl DRE License # 01807909 408-373-6766 stuart@csrteam.com www.customerservicereality.com

Real Estate Investments Equity Transitions Jeb T. Henley DRE License # 00608973 831-419-4200 jebhenley@gmail.com www.equitytransitions.com Real Estate Structured Sales Kevin Kaaha 408-821- 4131 ressalekk@yahoo.com www.ressale.com

We lend on distressed Real Estate Investments!

Summit Assets Group Lori Greymont 888-298-0652 lori@summitassetsgroup.com www.summitassetsgroup.com The Norris Group Bruce Norris DRE # 01219911 951-780-5856 info@thenorrisgroup.com www.thenorrisgroup.com Wilson Investment Properties Tom Wilson 408-867-1867 tomkwilson@earthlink.net www.tomwilsonproperties.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 Going Beyond Real Estate Les Isralow KDOW 1220 AM www.goingbeyondrealestate.com

A program designed just for real estate investors!

Hard Money Wholesale Lender Funding at High Speed!

Program Highlights: • No Primary Residence • No Pre-Payment Penalties! • Loan Amounts up to $400,000* • Short Term Bridge Financing* • Rates: 12.5 – 14% • LTV: 65% to 80%1 of purchase price • Points vary. Pleases see website for Pricing Information

STEVE ARMENTA 866-376-7443 steve.a@zincfinancial.net FINANCIAL, www.zincfinancial.net

LLC

Equity Based Lending Wholesale Division • California • Arizona • Nevada 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 Nevada or Arizona must be represented and originated by a mortgage broker qualified to do business in that state. 1 Up to 85% of acquisition, LTV with minimum of 5 or more profitable transactions with ZINC in the last 12 months. *Please go to www.zincfinancial.net for complete details.

SOUND OPINION—WISE DECISIONS: VOICE OF THE PROFITABLE REAL ESTATE INVESTOR

Real Estate 360 Joe Cucchiara KDOW 1220 AM www.re360radio.com

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 www.susanharemarketing.com

WHO YOU GONNA CALL? Need a house inspection, repairs, or property management? Need help from a legal, accounting, banking, or marketing professional who understands real estate investments? Ready to purchase investment property or performing notes? Make our advertisers and resources on page 29 your first call. June - August 2012 REI VOICE

Tuigim,* Ger P

by Geraldine Barry

roductivity is something that I am continually focused on. I am consistently considering how I can be more efficient. What can I tweak to make my day more productive, and ensure that I am constantly growing and achieving? My goal is to move my own business and agenda forward, not to become part of someone else’s. The key to focus is being clear on a daily basis what you need to do in very specific detail to gain momentum and accomplish rapid results. Implementing a system, if you will, that keeps your focus on the task at hand... more on that later. What I have discovered is that technology is both a blessing and a curse. It’s a blessing in that it helps us to be more productive. We can effortlessly share documents and it simplifies disseminating information. It helps me personally to stay in touch with my family in Ireland in ways that were not possible when I first came to this country, and I treasure that ability to stay connected and close. However, technology is a curse when it consumes every moment, you know what I’m talking about,—email, texts, phone calls, surfing the net—are a never ending circle. If we respond, and get distracted, every time we receive a communication, our thought process is interrupted which ultimately impacts our productivity and effectiveness. We

are human beings not computers. We just don’t have dual core processors. When we interrupt our flow while working on projects, we impact our results. If we consistently check email for example, we do ourselves a disservice by impacting focus on the task at hand. What can you do to decrease your chances of getting distracted? Manage technology in your favor: • Put your phone on silent—who says that you have to answer every call as it comes in? If you happen to take a call, be sure to mention that you are in the middle of something but, “I have two minutes for you.” Big smile and mean it! • Carve out chunks of time to work on a big project that is the only focus for that period. No technology during that time, no distractions. You will be amazed what you can accomplish when you do this. • Don’t let other people’s agenda hijack your time. Only open emails that pertain to a project that you are working on. This takes discipline, but remember discipline is a muscle and it gets stronger when you use it. Customize your system to fit your needs. Remember systems only work if you work them. Once you have your system—implement and you will see your productivity shoot through the roof!

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 three 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 the frequent host of the radio program, Going Beyond Real Estate, a regular guest on the nationally broadcasted NTDTV, 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 business principals and CEO’s, guiding them in becoming more productive in less time in their leadership positions, helping them identify their core strengths, focusing on those to achieve their vision, and delegating effectively. Geraldine resides in Silicon Valley, and is the proud mother of Colin & Claire, her two children.

30 REI VOICE June - August 2012

ONE DAY ONE EVENT THE BIGGEST NAMES IN REAL ESTATE INVESTING FEATURED SPEAKERS BRUCE NORRIS President of The Norris Group KATHY FETTKE Founder & CEO of RealWealth Network JON HAVEMAN, PhD Chief Economist with Bay Area Council Economic Institute

PLUS 21 Educational Workshops

SEPTEMBER 8, 2012 SANTA CLARA CONVENTION CENTER REGISTER NOW AT ExpoSiliconValley.com

Qualified Investors, Deal Makers, and Real Estate Pros from Across the U.S. Workshops with Award Winning Presenters, Market Experts, and Investor/Educators

NORTHERN CALIFORNIA’S ONLY REAL ESTATE INVESTMENT EXPO & EDUCATION FORUM—NOW IN IT’S 4TH YEAR!

CONNECTING PEOPLE – EDUCATING INVESTORS www.ExpoSiliconValley.com DIAMOND SPONSOR

Produced by SJREI Association and REI Voice Magazine with the support of NorCalREIA and California Apartment Association SJREI—Northern California’s Most Dynamic Investor’s Association | SJREI.org • REI Voice Magazine: Voice of the Profitable Real Estate Investor | REIVoice.com

4 REI VOICE Dec. - Jan. 2012