REI Voice Magazine Aug-Sept 2011

www.reivoice.com

August - September 2011

WHAT DO INVESTORS REALLY WANT? SECURE NOTES • CHANGES IN LENDING RULES • TRUSTED RESOURCES $4.95 Aug. - Sept. 2011 REI VOICE

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Below are a few recent examples of trust deeds available through The Norris Group.

Location: Fontana, CA Appraised Value: $170,000 Loan Amount: $102,000 Loan to Value: 60% Payment to Investor: $765 per month

California Trust Deed Investing Not everyone has the time or the expertise necessary to be a full-time real estate investor. But there’s still a way to take advantage of the unbelievable opportunity at hand. Welcome to the world of trust deed investing.

Location: Desert Hot Springs, CA Appraised Value: $86,000 Loan Amount: $50,000 Loan to Value: 58.13% Payment to Investor: $375 per month

• 9% Return • 1st Trust Deeds Only • No Pooling

Location: Hesperia, CA Appraised Value: $92,000 Loan Amount: $55,000 Loan to Value: 59.78% Payment to Investor: $412 per month

• 8-Year Term

• Cash Flowing CA Properties • Ideal for Retirement Accounts (IRAs) • Experienced Team of Experts

• 60-65% LTV Max

Location: Victorville, CA Appraised Value: $75,000 Loan Amount: $45,000 Loan to Value: 60% Payment to Investor: $562 per month

Call 951-780 -5856 or visit our web site today for your Free Book and DVD.

To receive property information sheets of available trust deeds and a copy of our free book and DVD on trust deed investing, call our office at 951-780-5856.

Savings accounts, CDs, and stocks have offered dismal returns over the past several years. The Norris Group’s trust deed investments earn 9% return backed by discounted, cash-flowing, California real estate.

LOCATION : FONTA APPR AIS NA, CA ED LOAN A VALUE: $170,000 MO LOAN TO UNT: $102 ,000 VALUE: 60 PAYMENT % TO INV ESTOR R ENTED : $765 : $1 TER M OF ,650 PER MONTH LOAN: 8 YEARS

DESERT HOT LOCATION: SPRINGS, CA E: $86,000 ALU APPR AISED V $50,000 NT: LOAN A MOU E: 58.13% LOAN TO VALU STOR: $375 INVE PAYMENT TO 1400 E: $90 0-$ R ENT R ANG EAR S OAN: 8 Y L OF TERM

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Since 1997, our experienced team of experts has originated California trust deed investments to private individuals, corporations, nonprofits, and retirement accounts (including IRAs).

Our large network of professional real estate investors borrow millions

of dollars every month and demand continues to increase. We scrutinize every deal and every borrower before a trust deed is ever presented to our private money sources.

You can feel good knowing your resources are helping investors clean up neighborhoods and create jobs while simultaneously creating profits for both sides of the equation. It’s a win-win.

Visit our web site or call today to find out how to receive our free book and DVD on trust deed investing.

w w w.TNGtrustdeeds.com 951.780. 5856

California D epar tment of Real Es tate, Real Es tate Broker Bruce Norris Financial Group Inc .

DBA T he Norris Group DRE License 01219911 10/16/2010 10:52:31 AM

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 Analysis

B asics

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What Investors Really Want: Wealth

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Investor and portfolio manager Chris Clothier considers the difference between getting rich and building wealth. Building wealth underpins his investing strategy.

24

What’s Up (or Down) with Real Estate Prices Stuart Baeriswyl, broker and investor, charts the course of housing prices in Northern California and offers insight into housing prices.

Features

In Intimate Detail: Orlando, FL REI Voice publisher Geraldine Barry interviews Charles Fischer about the Orlando market.

8

Investors want Lending Policy Changes Investor, Tom Wilson, and others have seen how lending policies and regulations negatively impact the U.S. real estate market. The cure he advocates includes a list of investor friendly changes to energize the investor market and pull us out of our slump.

20

Investors want Funding: A Guide to Using Notes and Private Loans in Real Estate Investing Notes expert and author Lisa Moren Broma offers a clear explanation of the notes business and provides four reasons that understanding notes is important to every investor.

Adv ice

Trends

From the Trenches: Repositioning a Portfolio to Survive the Crash

Investors want to buy with No Money Down

11

One investor weathers the storm by realizing when it is time to move your assets and readjust your portfolio. Jay Hinrichs shares his highs and lows in the real estate market.

22

Real estate attorney, Jeffrey Hare, explains how “No Money Down” schemes are often too good to be true—especially with recent changes to the law. Know how to avoid bad advice and find a quality mentor.

16

What do Investors Really Want?

It’s much more than money. Meir Statman, a leading expert on behavioral finance reveals how our desires shape our actions when it comes to investing.

26

Battle of the Social Titans In the left corner of the ring, Facebook. In the right corner of the ring, Google+. Social media referee and Vice President of The Norris Group, Aaron Norris, officiates the battle of the titans.

30 Ger’s Top 5 I n v estor Resources

29

The best of the best. Phone/ email/web contacts.

Aug. - Sept. 2011 REI VOICE

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P UB L I S HE R ’ S NOT E

WELCOME

REI Voice™ Magazine A publication of SJREI Association™

Welcome to another edition of REI Voice Magazine. We have lots to share this issue in terms of deciphering your strategy and how to utilize the current market to build your portfolio. Are cash flow properties your goal? If you are not interested in being a landlord - passive investing in notes may be the way to go. Be sure to read our feature article “What Do Investors Really Want?” to truly understand what drives your decisions.

Geraldine Barry Publisher, President of SJREI Association

I’m proud to announce that SJREI Association, the premier real estate investors association in the bay area and publisher of REI Voice Magazine, won the National REIA Award for Excellence.

This award aims to encourage, recognize, and promote excellence among top performers in the National Real Estate Investors Association member organizations. Contributions to the real estate profession, innovation, and community service are a few of the criteria for success in the National REIA Award for Excellence. SJREI Association swept the 2010 awards, snagging the top honor as well as seven of the eight individual categories, including Best Print Communication for REI Voice Magazine!

Andrew Waite, Publisher of Real Estate Investor Magazine, said, “It is not unexpected that SJREI would be the winning contender for this honor.

SJREI, and their leadership, have built an investor association model that places the success of members first.

This is not lost on these clients who in turn have rewarded founder Geraldine Barry with a growing membership when many other associations are just trying to survive.”

As President of SJREI Association, I was honored to attend the June 2011 awards ceremony in Tennessee, and as I consider how we have evolved over the last nine years, I realize that SJREI has become a reliable source for solid, truthful analysis without the hype. It is a venue where investors of all experience levels can connect and become

4 REI VOICE Aug. - Sept. 2011

educated on local and national market trends and conditions; determine where and when to invest; and develop a comprehensive exit strategy for individual portfolios to minimize risk and maximize profit. I am so honored that National REIA recognized the outstanding programs offered by SJREI Association. I was thrilled to accept the award on behalf of my outstanding team, supportive affiliates, and vibrant membership.

SJREI Association’s superior publication, REI Voice Magazine, as well as its excellent speakers and member development were singled out as factors that significantly contributed to its win.

“At the height of the downturn, many people thought numerous real estate associations would fold. Geraldine Barry and the team at SJREI defied the odds and opened more locations. It goes to show Geraldine’s and her team’s ongoing commitment to value, quality, content, and networking has really paid off in a big way,” said Aaron Norris, V.P. of The Norris Group.

Please enjoy this issue of REI Voice and stay focused on your goals as an investor: education and knowledge of your market are the keys to your success. Collaborate with people who are like minded and take action - you will be rewarded for your efforts!

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.org Art Director Kevin Bell kbell@Western-Web.net Director, Administration Meghan Ben | 408-264-3198 Meghan@SJREI.org 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.

REI Voice Magazine c/o SJREI Association P.O. Box 90542 San Jose, CA 95109-3542 www.REIVoice.com Copyright © 2011 SJREI Association.

All rights reserved.

Geraldine Barry Publisher

Equity Day 1, True Cash Flow, Peace of Mind We are proud to offer a proven cash flow investment with substantial instant equity. The investor receives the best of both worlds a true turnkey investment backed and managed by a team of life long real estate professionals.

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True Wholesale Houses, LLC takes the work and worry out of owning a rental property, while maintaining a proven cash flow to the investor.

No more worrying about: 1. Collecting Rents 2. Maintenance Emergencies 3. Finding a Tenant 4. No more worrying about managing property and managing your managers 5. Property Taxes 6. Finding the right home in the right neighborhood 7. Insurance

true wholesale Houses brings investors wholesale to wholesale deals as opposed to wholesale to Retail HERE ARE SomE of ouR nEw AdditionS to

ouR SElEctivE invEntoRy

Atlanta, GA $19,500 Equity DAY 1 Net Investor Cash Flow $340/Mo • Note Price $51,000

True Wholesale Houses is your Equity Partner for the life-time of the transaction. Our partners on the ground have a stake in the home, the tenants, and preventing maintenance problems by doing a quality rehabilitation on the property before we place a tenant.

True Wholesale Houses pays monthly cash on cash 9% return for the term of the note. If the home has a vacancy, we still pay you every month.

As your partner, True Wholesale Houses will manage the property and sell it when the market recovers. If you wish to keep the cash flow and the 9%, you as the investor can dictate an extension on the note, holding the home in the caring hands of True Wholesale Houses, LLC. True Wholesale Houses is here to work with you to give you the best value for your money. We are your true wholesale partners so we can all prosper together.

Jackson, MS $17,500 Equity DAY 1 Net Investor Cash Flow $262/Mo • Note Price $35,000

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888 285 1900

Atlanta, GA $20,000 Equity DAY 1 Net Investor Cash Flow $309/Mo • Note Price $53,000

Join !True Wholesale Houses, LLC Now Website: http://www.TrueWholesalehouses.com

Aug. - Sept. 2011 REI VOICE

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AN ALYS I S

In Intimate Detail: ORLANDO, FL

6 REI VOICE Aug. - Sept. 2011

An Interview with Charles Fischer

by Geraldine Barry I am delighted to have the opportunity to interview my colleague, Charles Fischer, President of Central Florida Realty Investors, one of the largest investment organizations in the nation. Charles shares his insights on the Orlando market with us. As an experienced investor and someone who lives and works in the area, his take on the Orlando market is very informative. It is important for the savvy investor to consider the opportunities in all markets. Charles makes a compelling case to seriously consider Orlando. Please enjoy our interview.

Q: How long have you been investing in real estate?

I bought my first investment property in 1999. I have only had one “corporate” job in sales. I started my investment career in 1999 and retired by age 37. This downturn has created a huge opportunity to buy quality cash-flow properties and create a more solid portfolio.

Q: How would you summarize the Orlando housing market today?

I believe we are stabilizing. Demand for low/mid priced properties is strong and inventories are dropping rapidly. For example, last year at this time the MLS inventory in the Orlando area was about 16,000 units, today it is about 10,000. Investors and foreigner nationals make up a large percentage of our market.

Q: Why is the Orlando market different?

Orlando is a younger area, primarily because we have so many ser-

vice based jobs that attract younger people. We are the largest (and only) interior metro area in Florida and, I believe, we will see an influx of residents from coastal areas as property values and insurance on the coast continue to rise. We are home to world famous attractions and a new “Medical City” that is expected to pump billions into the local economy in the next 3-5 years.

Q: What is your investment philosophy?

I primarily buy and hold. I enjoy structuring transactions to create value that others didn’t see. With bank lending so hard to come by, the days of creative investing are back.

The days of speculating are over and I buy exclusively for cash-flow. We also use private lending and creative seller-held financing to create massive equity over a shorter timeline. I look for properties than can be debtfree in less than 10 years, all the while producing cash flow. Most of these are also low or no money down deals.

This can be done because of the current market conditions, motivated sellers, reduced values and strong cash flow—this is a market confluence that I have not seen before.

Q: What are you currently investing in?

Multi-family and single family, also some beach side properties for short term rental.

Q: What are the economic drivers in Orlando?

Disney, of course, and all the at-

tractions that surround it. University of Central Florida is a big boost to the east side of town, and the new Medical City is providing construction jobs now and high paying medical and research jobs in the near future.

Q: How do the employment numbers look?

Currently about 9.9%. The outlook is for improvement, but it will take some time. Florida is traditionally a high beta state and is subject to larger than normal swings in values and unemployment.

Charles Fischer 321-302-5090 president@ cfri.net www.CFRI.net

Q: How are rents trending?

Rents appear to be on the rise.

The data show a small increase in rents with demand that is growing.

I attribute this to the lack of bank financing and the large percentages of owners that have lost homes to foreclosure.

Q: Where are the opportunities in your opinion for investors?

Our market offers the opportunity for strong cash flow with double-digit returns. Motivated sellers are providing some excellent financing options on quality residential and multi-family properties. Our recent experience show that lenders are getting more efficient at processing short sales, our approval ratios are increasing, and the time to close is shrinking.

Foreclosures are experiencing more competition, but still hold strong value. All in all, the current market is providing great opportunity for the investor who sees the value and is positioned to take advantage of it.

Aug. - Sept. 2011 REI VOICE

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AN ALYS I S

Investors Want:

Lending Policy Changes Essential to Real Estate Recovery

by Tom Wilson

Delinquencies vs. Foreclosures Trustee Sale Progression (CA) Source: Source: LPS, ForeclosureRadar.com, and The Norris Group.

Tom Wilson has executed over $100M and 1,600 units of real estate deals over 35years.

He first invested as a part-time activity, and then after thirty years managing some of Silicon Valley’s pioneering technology companies, Mr. Wilson put his business and management experience toward fulltime real estate investing. Wilson Investment Properties provides highcash flow, highquality, and low risk investment properties.

This is the best window of opportunity of our lifetime to procure real estate for long-term hold.

Unfortunately, the pendulum at capital hill and Wall Street overreacted to the short-term speculative investors at the height of the bubble and has swung too far back to conservative terms for investor loans, thus impeding the ability of investors to get homes off the market and occupied.

This is not just a problem for investors who want to further build their retirement portfolios and reduce their personal dependence on the country’s overburdened social programs. It is also a serious detriment to this country’s economic need to accelerate the process of rectifying our debt crisis from underwater real estate.

Currently 25% of the nation’s and 35% of California’s home loans are upside down in spite of over three years of a high rate of foreclosure sales. And yet the rate of foreclosure sales is less that a quarter of the rate that they should be relative to the rate of delinquencies (Table A). This has resulted in a “shadow housing inventory” of 42 months at the current absorption rates. So far.

As a nation it appears that if something doesn’t change it will take 4-7 years to get to a more normal and sustainable home sales environment and continuum.

And as if this situation were not enough, to further amplify the problem, only 33% of sellers and those losing their homes are willing or able to repurchase. That’s right, 67% of former homeowners have moved from buying to renting. We have an escalating problem of un-

8 REI VOICE Aug. - Sept. 2011

sold homes sitting on the market.

If owner occupants cannot absorb two-thirds of the housing inventory, who will?

Clearly the only ones who can do that are investors. Not only do they absorb foreclosure inventory and provide housing, but by using their capital for improvements they also remove blight from neighborhoods, thereby improving property values and local tax revenue.

If more investor financing is made available, the absorption rate will accelerate and with it the end of our real estate crisis becomes more tangible. Historically, the real estate economy has always played a leading roll in our national recovery from recessions.

What do investors need to move forward? I believe the following threeyear changes in loan policies: • Increase the amount of available loans to qualified investors to an unlimited number for three years (as it was in the past) • Make the 203K loan program more available to investors (loans that include funds for

improvements) • Allow “simple assumptions” of any Fannie, Freddie, or FHA loans • Allow equal access to all government-owned inventory for investor and owner-occupants alike • Accept more reasonable cash reserves requirements What do lenders have to lose by these changes? Very little. The long term investor delinquency rate is no higher than that of owner occupants and it is actually lower for FHA loans. Current and traditional investors are not speculators; they add value and experience to the process of turning empty homes into family homes.

Finally, many of the changes that investors seek are roll-backs to the policies in place before loosening of lending policies fueled purchases by under-qualified buyers.

Investors don’t just want, they know these changes are essential to the recovery of the real estate market in the U.S. To promote these ideas with

the policy makers at Fannie Mae and HUD, I recently joined Howard Blum, President of The Financial News and Information Service, Bruce Norris, President of The Norris Group, and Sean O’Toole, CEO of Foreclosure Radar, in Washington D.C. to discuss the potential of easing the requirements for investor loans.

Our audience of 15 including, 6 vice presidents, demonstrated that Fannie Mae and HUD are serious about wanting to improve the situation and are willing to consider new ideas. They felt that since multiple rental properties can be justified and supported by income rather than just borrower financials, a hybrid product could be considered that is a bridge between traditional residential and multifamily loans. The main hurdle yet to overcome is framing a policy that would be politically acceptable to both congress and the public.

Contact Tom Wilson at 408-867-1867 tomkwilson@earthlink.net

Fort Worth

Dallas

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

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.

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Aug. - Sept. 2011 REI VOICE

9

National Real Estate Investors Association Recognizes

SJREI Association

2010 Award of Excellence For Best Small REIA and

2010 Honors of Merit Award for Membership Development 2010 Honors of Merit Award for Printed Communications 2010 Honors of Merit Award for Electronic Communications 2010 Honors of Merit Award for Professional Education 2010 Honors of Merit Award for Community Service 2010 Honors of Merit Award for Government Affairs 2010 Honors of Merit Award for Finance The National REIA Awards for Excellence aim to encourage, recognize, and promote excellence among top performers in its member organizations.

Contributions to the real estate profession, innovation, and community service are a few of the criteria for success in the National REIA Award for Excellence.

10 REI VOICE June 2011

SJREI Association’s superior publication, REI Voice Magazine, as well as its excellent speakers and member development were singled out as factors that significantly contributed to its win. Congratulations to Geraldine Barry, President of SJREI Association, and her team for their exceptional contributions to the field of real estate investing.

ADV I C E

From the Trenches: Repositioning a Portfolio to Survive the Crash

By Jay Hinrichs

Jay Hinrichs serves as a managing owner of True Wholesale Houses.

Since 2003 Mr. Hinrichs has served on the Board of Directors of Silverado Group and other affiliated companies of Silverado Group—one of which is a private money lender where over 1,500 loans were made in the States of Mississippi, Georgia, Alabama, Michigan and Indiana.

As a life-long investor and private money lender, life was never better in the early 2000’s. Our companies had grown exponentially; we had amassed a sizable portfolio of real estate that was well diversified, and our private money division had grown from $5 million in loans to almost $25 million. Our specialty in the private money arena was funding investor fix and flips for resale, or to refinance and hold as a cash flow rental.

In 2006, we made a decision to sell off most of our west coast properties for the lending company, prices had just risen too far and too fast. We understood that as a lender on the west coast, if our clients defaulted, the properties would not cash flow and losses were inevitable. Then we focused on eight midwestern states and making loans at $50,000 to $75,000 per house with the strategy that if those loans defaulted we would end up with a cash-flow rental. We completed 400 loans a year between 2005 and August of 2008, and those were the very profitable years for our business.

Things changed dramatically in August, 2008 when the financial markets crashed. We had about 125 foreclosures and took some pretty significant losses, although liquidating our west coast properties protected us significantly. We dealt with foreclosures in the South East areas and we were able to get properties back in our name in 60 days. We also got a fair amount of Deed’s In Lieu and of course worked out loan modifications when appropriate.

When your borrower goes dark the only way to assess your collateral is to literally knock on doors, which is what I did. This activity opened my eyes to the risks associated with owning rental properties under the following circumstances: (Investor take note!)

1. You are under-capitalized 2. Inexperienced with property management 3. Buying property based on forecasts that grossly understate operating costs and vacancies For these reasons, and the falling prices,

investors walked away from rentals in droves.

Based on my experiences, 50% of foreclosures are on non-owner occupied properties, where the owners just give up because the experience is overwhelming and they are unprepared for the rigors of owning rentals. (It has been stated many times at SJREI events that owning rentals is a job, I cannot stress enough how true that statement is.)

When it was time to reposition our company and our portfolio, I stabilized the properties that we foreclosed on, sold a few on contract, and held on to the 60 rentals that cash flowed.

Rents are still very strong, and vacancies are very low in our target markets. There has never been a better time to buy these assets.

When I looked at the wholesale market, I saw properties on which I had written loans now available for 80% LESS than my hard money loan. Purchasing at those price points, the cash flow is off the charts. Average DCR (Debt Coverage Ratio) is 2 to 4 times our average mortgage payment, providing incredible cash flow, and security for the asset and to bank or investor. These excellent buying opportunities allow us to complete rehabs that are far above industry norm.

How did we survive the crash? We sold negative cash flow portions of the portfolio; and secured some incredible land banking properties in the Portland metro area, my home town. In the Portland market, the bank-owned new construction has already flushed through the system. However, there are still huge numbers of bank-owned lots.

Our local banks are feeding us building lots and we are cost effectively building spec homes in small quantities. Lastly, we are building a very large portfolio of cash-flow rentals in the South East taking advantage of the low prices and incredible cash flow they provide to us and our investor partners.

Contact Jay Hinrichs at 888-285-1900 Jay@truewholsesalwhouses.com

Aug. - Sept. 2011 REI VOICE

11

B AS I C S

What Investors Really Want: Wealth

by Chris Clothier

Chris Clothier is a self-made entrepreneur who has worked with other members of the Clothier family to build MemphisInvest. com, the largest real estate investment firm in the MidSouth and the largest, private property seller in West Tennessee.

Along with his family, Chris is passionate about assisting real estate investors and real estate investment companies and actively supports others.

12 REI VOICE Aug. - Sept. 2011

I believe that I have the greatest job in the Real Estate industry! I spend my days talking to investors from around the country and sometimes very far away countries and get their unique perspectives on why they are investing in real estate. The list of reasons is long and varied, but one underlying reason always comes into the conversation: investors want to build wealth.

An investor surprised me recently with her personal stance on real estate.

She said “no one has ever gotten rich off of cash flow.” To me, this sounded like a statement from someone who didn’t fully understand the power of monthly positive cash flow and the impact it can have on building wealth. It sounded like a statement from someone still living in the delusional world of “I’m waiting for the market to turn around so I can get rich quick on appreciation.”

Getting “rich” could very well be a big part of the problem when it comes to understanding the power of positive cash flow and wealth building. Being rich is often defined as having the ability to purchase whatever you want when you want it. Building true wealth on the other hand, is often defined as being able to purchase whatever you need when you need it AND passing that same ability onto the next generation and the next generation and so on. Being rich is a financial ability that

many chase actively, expecting to suddenly be able to define their current situation with that moniker. Being wealthy on the other hand, takes time and planning. Building true wealth takes patience and very careful decision making. When it comes to using real estate as a vehicle to build wealth, positive cash flow is a must.

Building wealth in today’s real estate market requires an investor to look at several factors before deciding to move forward on an investment deal. The single most important to factor to consider before investing in any piece of real estate is “will this property cash flow on a monthly basis?”

Whether investing in single-family homes, multi-units or mobile home parks, it is vital that the investment lands on the positive side of the ledger each month.

Weighing factors such as price, location, potential occupancy rates and performance of a property in year three, four, five and so on, are all extremely important. But when speaking with investors I stress that the bottom line at the end of the month is what matters most when it comes to building sustainable long-term wealth. If it is not showing positive cash flow, regardless of what the future holds and the unpredictable prospects of a rebounding market, it is not a proven formula for building wealth.

Wealth is built with real estate over time by allowing a piece of investment

property to perform. If an investor makes a leveraged purchase and has a note each month, then the monthly collected rent pays down that note and the investor has the opportunity to use the positive cash flow to retire the debt quicker by making extra principal payments.

The quicker you are able to own the property outright, having used the rent a tenant pays each month, the quicker that property provides a stable monthly income. Investors who are using real estate to build wealth develop a portfolio of such properties that will provide that stable income for years to come. That portfolio can be used to supplement retirement, to provide college funding, and even to provide the opportunity to pass wealth onto future generations.

Real estate investors have been using this technique for decades to acquire property over time. Their return becomes almost incalculable as it grows. Allowing others to pay down your debt and then pay into your return is the most effective and time-tested method for building true long-term and sustainable wealth. So the next time an experienced investor tells you that cash flow does not matter and appreciation is the path to get rich, let them know you are not interested in getting rich. You are too busy building wealth.

Contact Chris Clothier at 877-773-9998 Chris@MemphisInvest.com

Aug. - Sept. 2011 REI VOICE

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Your Investing Education

You can spend thousands of dollars and hundreds of hours and still have gaps in your knowledge about real estate investing. For a solid grounding in the fundamentals look no further than SJREI Association’s JumpStart program. We bring you a solid curriculum designed both for the novice real estate investor and for investors ready to tune-up on the latest legal, financial, and practical knowledge necessary for successful investing.

EXPERT INSTRUCTION

With experienced instructors guiding a fast-paced day, you’ll gain knowledge needed to jump start your real estate investing!

LEARN

• The top 10 types of investments and how to determine which is right for you • How to find money to do your deal • How to research and find investment properties

• The critical factors to evaluating a deal • The essential members of your support team and their functions

• The pros and cons of different legal entities: LLCs, Corporations, and Partnerships • When to call on a tax specialist and tax implications of the various investing strategies

• Managing your assets for cash flow and long term gain Jeffrey Hare Moderator

Lori Greymont

Funding Sources

Geraldine Barry Goal Setting

Jeb Henley

Investment Types

Tom Wilson

Market Analysis

Nancy Chillag Legal Entities

Richard Smith Tax Issues

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• Exit strategies for when you need cash for new investments or to fund a long deserved vacation

Other day-long seminars cost $1,000 to $3,000—and then end up being no more than a pitch to sell real estate, books, or CDs. This day of pure EDUCATION brings together experts in their fields at a low cost to you, and provides an opportunity to network with both the experts and other attendees.

Before You Leap Into Investing, JumpStart Your Education!

Saturday, September 17 Cupertino Inn $210 Members of SJREI Association

$6 Com 6 bi Savi ned ngs!

$429 Admission, plus 1-year Membership in SJREI and all the member benefits

$230 Non-Member Early Bird Registration $250 Regular Admission Register at SJREI.org For more information, call 408-264-3198

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

8/3 & 8/4 East & South Bay meetings - Ken Clothier of MemphisInvest.com

»»

8/16 Mid-Peninsula Meeting - CSR – Commercial Investing Update

S epte m ber »»

9/7 & 9/8 East & South Bay Meetings – Sean O’Toole of Foreclosure Radar

»»

9/20 Mid-Peninsula Meeting – Michael Pierce – Apartment Investing/Rental Rates

O c to b er »»

10/5 & 10/6 East & South Bay meetings - TBA

»»

10/14 I Survived Real Estate Fundraiser - Yorba Linda, CA

»»

10/18 Mid-Peninsula Meeting - TBA

N ov e m ber »»

11/2 & 11/3 East & South Bay meetings - TBA

»»

11/15

Mid-Peninsula Meeting - TBA

D ece m ber »»

12/3 SJREI Holiday Lunch – Friday, December 3rd – Save the Date!

SAV E T H E DAT E !!

I Survived Real Estate 2011 October 14 Nixon Library, Yorba Linda, CA

SETTLING DEBT WITH DIGNITY Learn the Benefits of Short Sales A Free Service for Homeowners Do you know a homeowner who needs help? Are you an agent or loan I’ve p e nego rsonally officer who would like to receive over tiated a referral by partnering with me? sale 200 short app Short Sales demand a certain level of letter roval s! expertise and tenacity. I’ve procured $11,000,000 of “forgiven” debt for homeowners—that’s an 87% success rate. Call me for a free and confidential telephone consultation. For free weekly industry updates, subscribe to my blog: www.NatKnowsShortSales.com.

Together we can help families take back control of their lives with dignity.

Disclaimer: We are not associated with the federal government • Our services have not been approved by the government or the lender • The lender might not agree to change the loan • A person can lose the house and damage their credit if they stop paying the mortgage • Seller has the right to reject the banks offer without any charge from us • fees can only be charged at the close of escrow. Anyone who offers you assistance is required by law to disclose the above information. Realtor Associate of USA Realty & Loans. DRE 01885366

NICK OF TIME SHORT SALES NATALIE KNOWLTON Director of Short Sales

650-900-4608

Natalie@CALSSP.com www.NickofTimeShortSales.com Aug. - Sept. 2011 REI VOICE

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WHAT DO INVESTORS REALLY WANT? Meir Statman is a leading expert on behavioral finance, Glenn Klimek Professor of Finance at the Leavey School of Business, Santa Clara University, and Visiting Professor at Tilburg University in the Netherlands. He attempts to understand how investors and managers make financial decisions and how these decisions are reflected in financial markets. In this article, Mr. Statman shares lessons from his latest book, What Investors Really Want: Know What Drives Investor Behavior and Make Smarter Financial Decisions.

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by Meir Statman Reprinted with permission from Santa Clara Magazine, Summer 2011.

At a dinner party some years ago, a fellow guest, an engineer who had learned that I am a professor of finance, wanted to know where he could buy Japanese yen.

“Why do you want to buy Japanese yen?” I asked.

“Because its value is sure to zoom past the American dollar,” he said. He proceeded to list the American budget deficit, its trade deficit, and other indicators of the advantage of the Japanese yen over the American dollar.

I wanted to tell my fellow guest quickly and gently that, while his thinking is quite normal, it is not very smart.

“Buying and selling Japanese yen, American stocks, French bonds, and all other investments,” I said, “is not like playing tennis against a practice wall, where you can watch the ball hit the wall and place yourself at just the right spot to hit it back when it bounces. It is like playing tennis against an opponent you’ve never met before.

Are you faster than your opponent?

Will your opponent fool you by pretending to hit the ball to the left side, only to hit it to the right? Think for a moment,” I said to my fellow guest.

“You are on one side of the net, thinking that the yen will go up. Your opponent is on the other side, thinking that it will go down. One of you must be the slow one. Have you considered the possibility that the yen seller might be Goldman Sachs, Barclays, Bank of Tokyo-Mitsubishi UFJ, or another of many traders in the yen market who have offices in both Tokyo and New York and know more about both the Japanese and American economies than you can learn from your morning’s Wall Street Journal?”

Yet there is more to investing and tennis than faulty thinking. My fellow guest wanted to make money on his yen trade, but he also wanted to feel the thrill of winning when the yen zooms. He wanted to express himself as a player in financial markets, not

one who stands at the market’s sideline. And he wanted to be a member of the investing community, the community of people who observe financial markets, trade in them, and share their experiences with one another.

We are intelligent people, neither irrational nor insane. We are “normal smart” at times and “normal stupid” at other times. We do our best to increase the ratio of smart behavior to stupid behavior, but we do not have computers for brains, and we want benefits computers cannot comprehend.

We want high returns from our investments, but we want much more.

We want to nurture hope for riches and banish fear of poverty. We want to be number one and beat the market.

We want to feel pride when our investments bring gains and avoid the regret that comes with losses. We want the status and esteem of hedge funds, the warm glow and virtue of socially responsible funds, and the patriotism of investing in our own country. We want good advice from financial advisors, magazines, and the Internet. We want to be free from government regulations yet be protected by regulators.

We want to leave a legacy for our children when we are gone. And we want to leave nothing for the tax man. The sum of our wants and behaviors makes financial markets go up or down as we herd together or go our separate ways, sometimes inflating bubbles and at other times popping them.

Utilitarian, expressive, and emotional

The benefits of a job come in packages, and we face trade-offs as we choose among them. A lawyer who wants to earn money but is also passionate about public advocacy can choose a public advocacy package with little money and much passion or a corporate law package with more money but less passion. Investments are like jobs, and their benefits extend beyond money. Investments express parts of our identity, whether that of a trader, a gold accumulator, or a fan of hedge funds. Investments are a game

to many of us, like tennis. We may not admit it, and we may not even know it, but our actions show that we are willing to pay money for the investment game. This is money we pay in trading commissions, mutual fund fees, and software that promises to tell us where the stock market is headed. And investments are about what we would do with the money we make and how it makes us feel. Investments are about a sense of security in retirement, the hope of riches, joy and pride of raising our children, and paying for the college education of our grandchildren.

Investments, jobs, products, and services have benefits that enhance wealth, well-being, or both. These include utilitarian benefits, expressive benefits, and emotional benefits.

Utilitarian benefits are the answer to the question, What does it do for me and my pocketbook? The utilitarian benefits of watches include time telling; the utilitarian benefits of restaurants include nutritious calories; and the utilitarian benefits of investments are mostly wealth, enhanced by high investment returns.

Expressive benefits convey to us and to others our values, tastes, and status.

They answer the question, What does it say about me to others and to me?

A stock picker says, “I am smart, able to pick winning stocks.” A Goldman Sachs client says, “My status is high enough to be selected to invest $2 million or more in Facebook shares.”

Emotional benefits are the answer to the question, How does it make me feel? Insurance policies make us feel safe, lottery tickets give us hope, and an offer to be among the first to own Facebook shares makes us proud.

What we want ... and what we should

We are not embarrassed to admit that we want our investments to support us during our years in retirement.

Neither are we embarrassed to admit that we want our investments to support our children or favorite charities.

But some of what we want from our investments is embarrassing, such as our

wanting status. We might want to mention our investments in hedge funds, knowing that hedge funds signal high status because they are available only to the wealthy. But a loud expression of status, like a loud display of an oversize logo on a Gucci bag, can bring embarrassment rather than an acknowledgment of status.

Wants are also difficult to acknowledge because they often conflict with shoulds. The voice of wants says, “I want this new red sports car,” but the voice of shoulds says, “You should buy a used sedan and add the difference in price to your retirement account.” Investment advice is full of shoulds: Save more, spend less, diversify, buy-and-hold.

Wants are visceral while shoulds are reasoned. Wants emphasize the expressive and emotional benefits of investments while shoulds emphasize the utilitarian ones. Wants often drive us into stupid investment choices, while shoulds drive us mostly into smart ones.

What should we ask, as individuals and society?

The first question I ask myself, as an individual, is, What do I want from my investments? The second is, How can I get what I want? You might wish to ask the same questions. Do you want enough money for a secure retirement, help for your children, and perhaps a contribution to Santa Clara University? Do you enjoy tinkering with your mutual funds as others enjoy tinkering with vintage cars? Do you care about the status conveyed by your hedge funds as others care about the status conveyed by luxury cars? Trade-offs are common in investments as in all of life, and most wants are reasonable if pursued in moderation. Heavy trading of investments is more likely to shrink your portfolio than expand it, but light trading might add to your enjoyment more than it detracts from your comfort in retirement. Yet it is foolish to trade retirement comfort for a vain hope for investment profits higher than their risks. Remember that there is an idiot in every trade. Are you really sure that you are not that idiot?

“The sum of our wants and behaviors makes financial markets go up or down as we herd together or go our separate ways.”

The question I ask myself as a member of society is, Should government regulations lean toward libertarianism, freeing us to invest as we wish, or should government regulation tilt toward paternalism, constraining choices to protect us from ourselves and from others? Should government protect home buyers from the cognitive errors and emotions that lead them to sign mortgage documents before they have read them because the stack of documents is too high and the emotional pull of homeownership is too strong? And should the government protect us, the neighbors of foolish and emotional homeowners, from the consequences of their likely defaults and foreclosures? Changes in regulations over time reveal our continuing attempts, through the legislative process, to find the right balance in the tugof-war between those who pull toward the libertarian end and those who pull toward the paternalistic end.

That tug-of-war goes on because we cannot agree on the perfect balance between them. The awkward balance between them is reflected in a government that provides both Social Security and lotteries. The first is paternalistic, forcing us to save when we are young, and saving us from poverty when we are old.

The second is libertarian, giving adults the freedom to spend as much as they want for hope at riches.

Investments are about life beyond money, and that we should enjoy all the benefits of investments—utilitarian, expressive, and emotional. We can enjoy these benefits ourselves, indulging in a few luxuries, or we might enjoy them with family, friends, and people in our neighborhoods and faraway continents. But, in the end, we cannot take our investments with us.

Aug. - Sept. 2011 REI VOICE

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A Powerhouse Lineup of Top Industry Experts Presents the Insider’s Edge on The State of Real Estate 2011 The Norris Group’s award-winning event returns October 14, 2011 to the Nixon Library in Yorba Linda, California. We’re assembling an incredible line up of accomplished industry specialists to discuss the state of the real estate including on-going industry regulations, upcoming legislation you have to know, bailouts, and opportunities for real estate professionals.

100% of all proceeds go to Susan G Komen for the Cure. Together, we’ve won numerous awards and raised over $180,000 in three years. Our Who’s Who Round Table for 2011 Includes:

Bruce Norris President The Norris Group

Vicki Golder Immediate Past President National Association of Realtors

Eric Janszen Economic & Financial Analyst of iTulip

Sara Stephens President Elect Appraisal Institute

Doug Duncan Chief Economist Fannie Mae

Sean O’Toole President Foreclosure Radar

Deb Still 2011/12 President Elect Mortgage Bankers Assoc.

This is a rare opportunity to see a multi-sector real estate panel bat around industry issues and solutions while offering unparalled insights. It’s also a tremndous opportunity to network with hundreds of other fellow real estate professionals from all over California.

MVT PRODUCTIONS

Along the way, you’ll help raise funds for a tremendous cause. Since 2008, I Survived Real Estate has been responsible fpr raising over $180,000 for Susan G Komen for the Cure, the largest nationwide breast cancer research nonprofit.

www.ISurvived2011.com or 951-780-5856 Aug. - Sept. 2011 REI VOICE 19

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20 REI VOICE Aug. - Sept. 2011

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INVESTORS WANT FUNDING:

A Guide to Using Notes and Private Loans in Real Estate Investing

by Lisa Moren Bromma Many successful real estate investors use notes as a strategy to acquire property, and some have even developed a note brokering investment business. Often landlords who have held property for years, will create a note and continue to collect income from the same property. Instead of rental income, they developed income based on paper. I would like to share some basic information on notes, how real estate investors use them, and ways you can create paper to increase your yield.

What is a Note?

A Promissory Note is an IOU. Let’s say you purchased a property for $100,000. You put $10,000 down, and the owner of the property financed the sale for $90,000. You signed a Promissory Note, which basically states that you promise to pay back $90,000 over 30 years at 10% interest.

If you default on your payments, the security interest in the form of a mortgage, deed of trust or land contract (depending what state you reside in), allows the seller to foreclose on the said property.

The promise of repayment was broken,

therefore the seller, thanks to the security instrument, has the legal right to take back the property.

Why is a seller-financed note important to a Real Estate Investor?

There are several good reasons why real estate investors should not only understand notes, but by learning how to create a marketable note you can build business, close on transactions faster, and increase your profit.

1. If you are looking for financing, convincing the owner to finance a sale for you allows you to tie up a property and flip it whenever you are ready.

2. As a rehabber or flipper of property, imagine the number of buyers who will line up to purchase your properties since you are willing to owner-finance the sale.

There are institutional buyers of notes out in the marketplace ready to assist your need to convert payments to cash.

3. Savvy real estate investors use notes to increase their profits. They will take back a second since, if the buyer defaults, they can take their property back and resell it again.

4. If you finance the sale of your investment

property, you can sell only the stream of payments you need. You do not have to sell the entire note. Note investors will buy partial payments, split payments as well as balloon payments. Many successful real estate investors will keep tail ends of payments, meaning they will sell the first 12 of 15 years of payments to the institutional investor, and keep the last 3 years of payments in their IRA. If the payer of the note refinances the property with a bank or the loan paid off early, look at what your return would be!

By knowing a little about the note business, you enhance your real estate investments. Next time a property becomes available and you need financing, go to the seller. When you have a property for sale that has been lingering on the market, try offering seller financing and see what happens. If you are looking for a dependable passive income, look at note investing as an opportunity for the safety and security of the investment.

Lisa Moren Bromma is the author of Promote Your Note Business, a marketing program for the private mortgage industry; Soup to Nuts, a CD series covering everything you need to know to become a successful real estate investor; Real Estate Investing for the Utterly Confused; and Wise Women in Real Estate.

Contact Lisa Moren Bromma at lmorenbromma@gmail.com

Aug. - Sept. 2011 REI VOICE

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TR EN DS

INVESTORS WANT TO BUY WITH NO MONEY DOWN

by Jeffrey Hare

Jeffrey B. Hare, Attorney at Law, provides outcome-oriented legal services to real estate investors, commercial and residential property owners, and real estate developers.

As a land-use attorney and real estate investor, Mr. Hare provides clients with a pragmatic but thorough approach to due diligence, contract review, and negotiations.

He has vast experience in entity formation (LLCs, etc.) for checkbook IRAs and other business purposes.

“No Money Down!” Can a clever investor realistically expect to make money in today’s real estate market with no money down?

Each year, thousands of people sign up for seminars to learn about wholesaling and similar techniques that promise to make them wealthy without having to invest their own money. These programs are promoted at seminars which often sell books, CDs, and tapes, as well as “coaching” and “mentoring” programs.

Are these programs legitimate?

Sometimes promoted as wholesaling, the “no money down” approach has been around for years.

For the new investor with little or no money to invest, this approach offers an opportunity to get started in real estate investing.

Here’s how it works: You find a property owner willing to sell for substantially less than full market value, make an offer, and get the seller to sign a contract.

You then assign this contract to an investor – most likely a rehabber – and collect a referral fee, or sell the property for a profit. You invest nothing but time and effort to find the deal, and collect cash. In theory, you could earn a fair income without having to pay a dime of your own money. Slick brochures and flashy web sites promise to teach you all the tricks, provide all the forms, and for only a few dollars more, be your Coach or Mentor.

Does it work? Like most programs that promise you the opportunity to make money in real estate, the answer depends on several factors, including quality of the program, real estate mar-

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ket conditions, and the amount of time and effort you are willing to commit. Unfortunately, under current market conditions and recent changes in State laws, wholesaling can be extremely challenging – and put you at risk of serious fines and penalties if you are not careful. This is not to say that you can’t make money wholesaling, but you’ll have to work twice as hard for half the profit. Be very skeptical of any claims or testimonials made before 2008.

What has changed? For one, the entire housing market. Prior to 2008, the ideal wholesaling deal involved finding a motivated

property owner with lots of equity willing to trade profit for the convenience of a quick as-is sale.

Today, most sellers are underwater or have very little equity, effectively reducing the potential profit margin to zero. Almost half of all home sales are short sales, which require longer escrows and often fail to close. As housing prices continue to drop, investors are cautious. Quick flips are scrutinized. The days of the double escrow are over.

To succeed, the wholesaler must cast a wider net to find suitable properties. This increases the probability that they will end up in the crosshairs of State and Federal

regulatory agencies armed with new and tougher laws aimed at protecting distressed homeowners from scams. The California Department of Real Estate is actively prosecuting unlicensed individuals who they determine are engaged in real estate activities that require a license.

The Attorney General’s Offices requires anyone who meets the definition of a “foreclosure consultant” to register and post a special bond (CC §2495). Homeowners who have been issued a Notice of Default have a 5-day right of cancellation of a sale, and must be provided a special Notice of this right (CC §1695).

Violations could result in fines and even jail. Some out-of-state wholesaling training programs fail to address these new California requirements.

To summarize, times have changed. Perform due diligence before you pull out your credit card for a no-money-down training program. If the program makes promises that sound too good to be true, it probably is.

Be patient, get the facts, read the reviews, and consult with a professional. Make certain the materials are current and relevant for today’s real estate market. Join a local real estate investment association that promotes education and networking. There are affordable, legitimate programs that do a great job of teaching new investors how to get started and succeed in this turbulent real estate market as long as you do your homework to find one.

Contact Jeffrey Hare at 408-279-3555 Jeffrey@JeffreyHare.com

THE CREDIT RESTORATION EXPERT HANNAH FLIEGEL FICO Pro

The current economy has left investors reeling – Hannah has the expertise to assist with increasing your credit score.

PRE-PAID CREDIT CARD $29.95 Discount for SJREI members $399.00 for credit repair program.

Protect your credit profile with LifeLock for $99 per year.

CALL FOR DETAILS

415-999-9348

BEGIN REBUILDING YOUR CREDIT RATING AFTER BANKRUPTCY TODAY! www.HowDoYouScore.com Hannah@Marinreia.com

Aug. - Sept. 2011 REI VOICE

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TR EN DS

WHAT’S UP (OR DOWN) WITH REAL ESTATE PRICES

By Stuart Baeriswyl

As an investor himself, Stuart Baeriswyl of CSR Real Estate Services, makes good use of his understanding of the various markets in Northern California to help other investors locate and purchase cash-flowing rental properties. Mr. Baeriswyl offers professional services for investors and home owners, conventional and private money loans, and business broker services.

For the past two or three years, since the dramatic 2008 through early 2009 real estate price bust, residential real estate inventory levels have normalized in many Bay Area cities. So the question is this, why have we not seen any corresponding responsiveness in the form of price stability or perhaps early signs of modest price appreciation in those markets?

One widely reported reason for lack of appreciation is that there are too many of financially distressed properties on the market.

If a neighborhood has a significant number of short sale and bank owned (REO) properties for sale in it, there are good reasons to expect that home values will be low. This is common sense because many of these properties are priced at a discount.

Tara Cook, an REO Agent with the real estate Brokerage firm Customer Service Reality (CSR) revealed recently that in Silicon Valley one in every 223 housing units had received a foreclosure notice in March (Nationally, it’s one in every 542 housing units).

Also, she found that only 19% of Silicon Valley’s foreclosure inventory is currently in the “bank-owned status” in the Multiple Listing Service (MLS), with most volume still described as pre-foreclosure. It does seem clear that there is a very real and looming shadow inventory of distressed properties.

There are some very good reasons why prices have not yet gone up in bay area markets. First of all, it has become much harder for potential home buyers to qualify

24 REI VOICE Aug. - Sept. 2011

for a loan, including a significant segment of the population who now who have damaged credit after having just previously gone through a foreclosure or short sale.

Additionally, loan limits are trending downward which is an issue for the expensive housing markets, such as those in the bay area.

Second, historically it has been shown that economic recoveries follow a housing recovery. If this is the case then we really do have a problem. Bruce Norris, of The Norris Group (TNG), an experienced investor, private money leader, and real estate educator has stated that for a price recovery to occur for any given area, a strong employment base must be in place or growing. The availability of jobs creates a migration to that area, which then attracts home buyers, which in turn leads to property price appreciation.

We have not seen an increase in jobs in California.

Additionally, Bruce Norris also mentioned what is probably the main reason why we haven’t seen any real price stability or appreciation yet in our housing markets, and it is in accord with what

Tara Cook stated regarding the fact that there is a significantly big shadow inventory of foreclosures. Norris stated at the July meeting of the San Jose Chapter of the SJREI Association that REO inventory levels indicated in the MLS are “phony” and what is seen as a reasonable six-months of unsold inventory should, in reality be considered four times that number.

Why haven’t bay area housing prices gone up or stabilized? It is really a function of generally hard economic times all around. Banks are not making loans like they used to, and potential buyers find it difficult to qualify for a mortgage. Yet, the main issue is the real and serious problem of having significant numbers of foreclosed properties in the pipeline, but not yet actually on the MLS. Until real and true inventory levels are revealed and can be shaken out and sold, then we should not expect to see housing prices increase anytime in the near future.

Contact Stuart Baeriswyl at 408-373-6766 stuart@CSRteam.com

▲ Residential property inventory and median sales price for the greater San Jose, CA area. Five years of quarterly data.

Source: MLSListings Inc., Sunnyvale, CA.

Going Beyond Real Estate your number #1 source for all your real estate needs

Every Sunday at 10am on KDOW 1220 AM For more information on the show call 408-892-3376 email: les@goingbeyondrealestate.com http://goingbeyondrealestate.com/

» 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

As the Executive Director and Co-Founder of the SJREI Association, let Stuart Baeriswyl be your all-purpose Real Estate Broker.

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EMAIL: stuart@CSRteam.com Aug. - Sept. 2011 REI VOICE

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FE AT U R E

The Battle of the

by Aaron Norris

I

n the last few issues we’ve covered lots of great business information about Facebook: how to use it, how to protect your privacy, and the growing importance of showing up on the social network scene. Now that you’re on track and ready to take full advantage of Facebook, welcome Google+ to the scene.

While this might be just what the doctor ordered for those suffering from Facebook fatigue, the ramifications of this new network could be quite exciting as the battle heats up between two Internet giants.

The Players

First, it’s important to understand the landscape and what I refer to as the Battle of the Social Titans. If you’re not in the marketing field you may not real-

ize there’s been an amazing struggle for years between Google and Facebook.

Like most consumers, you probably start many searches for information on a search engine like Google. Google is so strong in the search category that if I “googled” something, most would understand I’m doing a search online at Google. As far as branding is concerned, it doesn’t get any better.

Facebook, on the other hand, is where you’re connecting with friends you haven’t seen since high school, spying on old crushes, deleting Grandma’s ALL CAPS nags, and building a network for your business. Facebook is about collaboration and engagement. It is the most visited site on the web and people spent extraordinary amounts of time on the site. Why the rivalry with Facebook?

Bing came onto the battle field in 2009 as Microsoft’s serious attempt to

compete with Google.

Within a year, it was being praised for not only taking traffic away from Google but also delivering great search results.

It also hasn’t wasted time picking sides in the battle, and in October of 2010, Facebook and Bing teamed up to launch a social search partnership that allowed each to utilize data and search results from the other.

On the other team, until very recently, were Google and Twitter. The two had a deal where Twitter status updates were included in Google Realtime Search results. While Google recently reported it doesn’t rule out further collaboration, it appears they are now focusing more on Google+ and wooing weary Facebookers with the promise of something more technologically advanced -- and perhaps with less Farmville (one can hope).

At the core of the war is the battle for

your dedication and trust in their network. They both will continue to deliver increasingly relevant search results and targeted ads -- as well as an improved user experience -- in exchange for the ability to draw from your personal details, preferences, and network.

Social Search

If you’re in front of a computer, log in to Facebook and then switch over to Bing in the browser of your choice. Do a search in Bing for “real estate.” At the top of my search results is Realtor.com and all my friends who have “liked” that website. Bing is trying to not only deliver what it thinks is relevant but what my friends like. Welcome to social search.

The semantic web, Web 3.0, and artificial intelligence are terms that get thrown around when the future of the web is discussed. At the core of each is the idea of relevance. When Google delivers 12 million results on a search, all but a handful of results are helpful and truly relevant.

Google knows full well we rarely go beyond the first page of results.

With Bing infusing social data from our Facebook network, searches become richer and hopefully more relevant. If you’ve developed a true network of friends and like-minded and trusted colleagues, Bing is hoping their algorithms and your network’s preferences will help deliver exactly what you’re looking for. Why would you ever need Google? Hence the need for Google to come on strong with Google+.

Business Takeaways Show Up – You don’t even have to

build a website these days to have an online presence.

Having a business page on Facebook is absolutely free. At least do yourself a favor and tie up your brand name online. There’s nothing more frustrating than showing up too late

26 REI VOICE Aug. - Sept. 2011

Social Titans and finding your identity has been hijacked.

Build Relevant, Strong Networks – Size may not matter when it comes to social networks.

While search engines currently might consider quantity, eventually they’ll turn their focus to quality in both content and network. Search is going away from the mantra “content is king” to “relevance is king.” Creating strong networks and outstanding content will help you in the long run.

Pay Attention to Online Ads – While on Facebook or doing a search on Google, take a little extra time to review the results and ads that come up.

What catches your eye? Why do you click on the ads that you do? Do you trust natural search items more when friends like them?

Do you trust paid ads? Taking a little more time to monitor your own behavior might give you insights into your potential audience online. If you haven’t considered online advertising, both Facebook and Google Adwords have extensive free learning materials about advertising on their sites.

A wise professor once told me that the best thing that ever happened to Coke was Pepsi. Competition forces innovation, efficiencies, and progress.

We the consumers are the beneficia-

ries of this competition. The battle raging between Google and Facebook will be fascinating to watch and will absolutely change the face of social networking and advertising. We won’t know if Google+ is a Facebook killer right away, but giants have fallen before. (Remember MySpace?)

As the skirmish carries on, continue to focus on your core business, show up strategically on social sites, and put your business in the path of adoring fans online.

Contact Aaron Norris at 951-780-5856 Aaron@TheNorrisGroup.com

Aaron Norris is Vice President of the Norris Group where he is responsible for business development and production of TNG’s award winning radio show, events, and educational seminars. Mr. Norris is also principal at Palisoul, Norris, + Conroy, a marketing and strategy team based in Southern California and hosts the marketing and business podcast, The Cocktail Party Statement.

branding. social media. logos. websites.

How are you spreading the word about your business? Old-school yellow page ads no longer draw the business you need to grow, yet cost thousands of dollars a year.

A social media campaign costs a fraction of that amount and pays huge dividends. At Susan Hare Marketing we evaluate your business, understand your goals, and then update your marketing methods and message. We engage social media. Develop websites. Write compelling copy. Design logos, brochures, and presentations. And we ensure that all of your marketing activities build on each other. When you’re ready to paint the town with your message, call us.

SusanHareMarketing.com 408-391-8068

Susan@SusanHareMarketing.com

Aug. - Sept. 2011 REI VOICE

27

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29

Ger’s Top 5

by Geraldine Barry

Given the rocky road that investors have had to navigate for the past several years, their priorities have changed. This issue of REI Voice provides some insights into what investors want, namely security, and the lessons they learned from the current crisis. Learning is key: it not how you fall, it is how you recover from a set-back that predicts your future success. With that in mind, here are the top five tips I learned from investors who have been in the trenches and are re-designing their strategies to mine the current market opportunities.

1 2 3 4 5

The note business (where you are essentially the bank) is a way to create passive, dependable income. Lisa Moran Bromma shares how the property secures the note, creates income, and involves no landlord headaches.

Chris Clothier ’s long term strategy is a wealth-builder. He recommends building a portfolio for cash flow—appreciation is never guaranteed so this plan makes great sense no matter your long-term strategy. .Re-balancing your portfolio and making appropriate changes based on what the market is telling you is critical. Jay Henrichs learned that lesson and explains that hoping things self-correct, or relying on a turn-around, is not a strategy.

Understanding the dynamics of the location where we invest empowers good decisions. Charles Fischer illustrates the power of knowledge in his perspective on the Orlando market.

Real estate investors can positively impact market recovery…if we are allowed. Tom Wilson makes the case that lending polices need to change in order for investors to do what they do best—turn vacant or at-risk properties into tax-generating, constructive influences on a community.

Geraldine Barry is founder and president of SJREI Association, the premier educational and networking association for real estate investors in Silicon Valley. Under Geraldine’s leadership SJREI has grown from a half-dozen investors to an award winning vibrant three chapter organization with over 400 investors attending monthly meetings. She has interviewed many real estate pros such as Bruce Norris, John Schaub, and Jon Freeman all of whom have been guests of SJREI. In addition to leading SJREI, Geraldine is an active real estate investor, guest host of the radio program, “Going Beyond Real Estate,” a frequent guest on the nationally broadcasted NTDTV, Publisher of REI Voice Magazine, and producer of the acclaimed annual SF Bay Expo. Geraldine is also a principal in Miles Barry Contract Furniture.

30 REI VOICE Aug. - Sept. 2011

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