Voice magazine April 2015 by San Jose Real Estate Investors Association

APRIL

2015 $ 4.95

VOICE MAGAZINE The Voice of the Profitable Real Estate Investor

Top Ten

Pain Points for Landlords

Masterminds:

Accessing the Collective Brain Dr. Christopher Thornberg Trading Fiction for Facts CA Housing Shortage... Dr. Selma Hepp

Eddie Speedâ&#x20AC;&#x2122;s Empire of Notes

Connecting People, Educating Investors, Inspiring Action.

Presented by Lori Greymont

SJREI, CEO

With SJREI Membership You Will...

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

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

$349 NEW MEMBERS

$299

RETURNING MEMBERS

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

Done Right, Done with Integrity, and Done Fast: By Michael Grigelevich

he market is full of companies who want to find clients the best turn-key properties and handle every aspect of the operation, from acquisition, rehab, tenant placement, and, of course, property management. As an investor, it’s up to you to do your due diligence and find the best fit for you. Two markers of a good turn-key company are experience and integrity; you will also want to see how much of the process they handle and how well they do their research when it comes to property. Alliance Wealth Builders of Birmingham, AL, have a firm handle on how the full-service turnkey business works. Founded by CEO Merv Plank, a real estate investor with a lengthy background in business and construction, and company President Jessica Brown, who has almost two decades of experience in construction and property management (not to mention the loan origination and accounting industries), Alliance Wealth Builders provides clients with everything they need, from acquisition to ongoing property management. Dealing in the Birmingham area and Alabama at large, Alliance follows a very methodical process of operations. This is a good thing for investors, since Birmingham often shows up on lists of hot housing markets. Revitalization efforts have bolstered property values and worked to make this city more desirable for businesses and residents. Capitalizing on this growth, Alliance starting with a detailed process for acquisition. They access a vast network of industry professionals to help get deals done. Each prospective property is subjected to rigorous analysis, with an eye toward key investment qualifications, such as rental income amounts and overall safety of the area. The last thing a client wants is to make a bad investment, and Alliance and their team make sure potential investors don’t have to worry about such things. Since they also renovate properties, Alliance looks at the cost of renovations and how they might affect optimal cashflow for investors -- you don’t want to overspend on a property that will simply not yield the desired monetary results. This process speaks to their organization’s integrity and careful property consideration - they don’t rush into deals. With all of these things in place, the company will close on decided proprieties. Since Merv Plank and Jessica Brown both have backgrounds in construction, the efficiency of the renovation process is a clear strongpoint of their business. Perhaps what stands out the most is the fast track process, which, as Alliance says, will usually be finished anywhere from 10-15 days after the purchase of the property, depending on the size of the job, of course. The speed of the job doesn’t mean it’s rushed; in fact, it speaks to the level of professionalism Alliance abides by -- national and local codes are strictly adhered to while a group of experienced

workers get the job done. Codes are important, and not every business will follow them, which is why it’s a good practice for clients to do their research. A simple Google query might bring up a company’s history of violations, and it’s a wise idea to ask around, too; it’s important for potential investors to look into these things, as the well-being of the property depends on it. Once renovations are completed, Alliance will offer properties for pre-sale to investors, a process which helps move things along. If buyers want to look into financing, Alliance can help them do so. Overall, their mission is to make things “simple and hassle free” for each buyer. They will even go the extra mile and follow the closing process to make sure everything goes off without a hitch. This level of care can be missing from the industry, so it’s important to take note of businesses who spend this much time focusing on client satisfaction. The buying process can be, as we all know, quite daunting. Thankfully, Alliance will help mitigate the headaches and stressors that can be a part of closings. Once clients buy a property, two important factors remain: occupancy and property management. Thankfully, Alliance has you covered on both fronts. They will screen and place tenants so you don’t have to go through the sometimes painstaking process yourself. Everyone knows tenants can be a wild card, and what looks good on paper may not always translate into real world success; therefore, it helps to have seasoned professionals on you. When to comes to property management, Alliance taps into its “sister company” REI Management to provide ongoing services. This component fits perfectly in line with Alliance’s overall drive toward client satisfaction and care. Sure, it would be easier for them to walk away after the deal is closed, but they want to ensure their client’s peace of mind. This practice shows they have full confidence in their property and will stay on to make sure things go the way they should. Many will argue that property management is the most important thing to ensure longterm success, which is something that proves difficult to refute. Without a manager and maintenance system in place, investors can see their dream turn into nightmares as problems that should have been quick fixes snowball into major issues. To take the best care of a property, you have to stay on top of it -- today’s headache could be tomorrow’s fiasco. Blending experience and full service care, Alliance stands as an operation with integrity. They have their business and strategy locked down, and they’re working in a rising market that continues to gain value and attract investors. Real estate investing can be a roll of the dice, and it helps to know who’s doing it right. April 2015 REI Voice

Welcome Publisher’s Note:

Advice: Pro Marketing Tips

5 8

By Aaron Norris Grapes of Wrath

Estate For Your Portfolio Domain Hotel Sunnyvale @ 7PM

Top Ten Pain Points

15 6

By Lucas Hall The Heart of Success In Investing Is More Than

Success the size of Texas: Eddie Speed’s Empire of Notes

Thriving Economy, Escalating Rents, Lack of Inventory: Michael Pierce Interview By Geraldine Barry

Giving Back: PCFDC invests in Change: Nancy Whit

By Hannah Ash

By Tom Wilson Helpful Pointers for Landlords

Features

By Michael Grigelevich

By Jeffrey B. Hare, Attorney at Law The Top Five Reasons to Consider Commercial Real

Contents

Mastermind: Accessing the Collective Brain By Michael Grigelevich Local REI’s: Align yourself with Success

13 18

By Michael Grigelevich

Just The Numbers By Dan Noble

Analysis: Trading Fiction for Facts

Basics:

The Numbers Work: Pam Blanco’s Strategy for Success

By Michael Grigelevich

Dr. Christopher Thornberg, PhD. What Attracts Foreign Buyers of Real Estate to the Bay Area? By Carole Rodoni How Much Money Does it Take To Invest in Rental Properties?

Alliance Wealth Builders’ Take on Turn-keys

37 3

By Brandon Turner MARCH 2015 OR MARCH 2000?

By Alain Pinel The California Housing Shortage: Time for a Change! By Selma Hepp

www.reivoice.com

Calendar Investor Resources Coach’s Corner

24 35 46

Rei Voice Magazine April| 2015 Outgoing Publisher Geraldine Barry PUBLISHER LORI GREYMONT 408.782.9162 lori@sjrei.org EditoR Michael Grigelevich michael@reivoice.com Director of Design Bach Pho Bachpho@yahoo.com Contributing Writer Hannah Ash Photographer Tiago Moules 408.763.0083 Advertising Sales Dan Noble 408.269.9777 dan@sjrei.org Affiliate Membership Sales Mark Gagner mark@sjrei.org Production Manager Loraine Cruz 408.782.9162 Loraine@sjrei.org

REI VOICE™ Magazine A Publication of SJREI Association™ Reproduction or use of any editorial or graphic is prohibited. To request reprints or reprint rights, contact info@REIVoice.com. REI Voice Magazine www.REIVoice.com 408.782.9162 SJREI Association and REI Voice Magazine make no representations or warranties regarding the content, accuracy, or validity of the advertisements or of the articles contained herein. All persons should exercise due diligence and consult with legal and tax professionals before making any investment decisions.

publisher’s

note I

t is with great delight that I share the news that Lori Greymont, CEO and President of Summit Assets Group, has formally acquired SJREI Association and REI Voice Magazine. I have enjoyed a wonderful 13 years building this organization and magazine, and I have grown so much in the process, having initially shaken like a leaf at the prospect of presenting live on stage; however, now it is second nature to me. I have had the opportunity to interview and connect with many incredibly bright people, many of whom contribute to this publication - and it has been a great pleasure for me to get up close and personal and interview our industry trailblazers. I have read many books on leadership and business in an effort to grow and create a meaningful dialogue with our members, as well as to share the wisdom gleaned so that balance, integrity, and focus were the drivers in all of our lives, personally and professionally. A book, a message, a simple insight can change a life - I shared those with you over the years. Mine was changed dramatically through leadership of this organization and the growth required to do that well. I am honored to have this wonderful woman, Lori, take the charge and look forward to seeing her vision implemented. Having said that, Lori doesn’t intend to change things dramatically, but she does bring a lot of resources, financial and otherwise, to the table. Additionally, she has a great team that she has built over the years, and with these combined assets will only improve upon what I have built. Education will still be the main driver in all of the programs and meetings. Lori’s background includes 25 years in the real estate space, and, as we know, experience is the best teacher, and she brings a considerable amount of in-the-field experience to share. Every great organization needs new leadership to shake things up from timeto-time. New leadership brings different strengths and energy to disrupt the status quo and help all concerned grow. I’ve loved every minute of building this great organization, and the biggest lesson I’ve learned over the years is that relationships matter and building those has cemented SJREI in many ways. Over the years we have helped people navigate the bumpy road on this journey called life. Some have made fortunes, and some have lost them, but along with jobs and family members, we have been there to support one another through change as it inevitably arises. Real estate is hot again, and, as we know, it’s cyclical; this too will change, but we are ready for that, too. So, it is with confidence and anticipation that I look forward to an exceptional year with a wonderful new leader at the helm. Lori is incredibly experienced and has a reservoir of knowledge that is difficult to match. She brings fresh eyes to the organization, and I know she will bring her energy, strength, and enthusiasm to all of you. Thank you again for accompanying me on this journey - it’s been nothing short of spectacular!

Geraldine April 2015 REI Voice

Advice

Top 10 Pain Points

for Landlords and How to Fix Them Lucas Hall is the Chief Landlordologist at Cozy, which offers free online rent collection and tenant screening tools, and is the founder of Landlordology.

by Lucas Hall

eing a landlord can be incredibly profitable but also very challenging. I don’t know about you, but my properties aren’t exactly on Easy Street. Over the last 10 years, I’ve experienced many of the issues that plague property investors and cast fear into the hearts of wanna-be landlords. Through endless reading, trial and error, and tenant feedback, I’ve learned that almost every rental problem has a solution. Based on my experience, here are the top 10 pain points that most landlords will eventually experience, along with recommendations to fix or prevent them.

• • • • • • • • • • •

1. Loss of Rent/Income

Solutions:

• • •

• • • • • • •

Vacancy Rent default (Tenant Stops Paying) Tenant hold-over (Tenant Won’t Leave and Won’t Pay Rent)

Solutions: • • • •

To reduce vacancy, start listing your units for rent 60 days prior to the end of the current lease. Screen tenants well - make sure you don’t let a deadbeat or a scammer into your property. Terminate the lease immediately for nonpayment - with proper notice for your state, of course. Learn about your local eviction process, and be ready to file the paperwork immediately after lease termination.

2. Eviction • • •

Court costs of eviction Strict legal rules for eviction Tenant retaliation by damaging the property

Solutions: •

• •

Require a large security deposit (1-2 month’s worth of rent, depending on what is allowed in your state) at the beginning of the lease to alleviate potential expenses of court costs and damages. Learn about your local eviction process, and be ready to file the paperwork immediately after lease termination. Include a clause in your lease that mandates court costs and attorney’s fees be paid by the prevailing party.

3. Stress of Property Management www.reivoice.com

•

Cleanliness of tenants Unintentional / intentional destruction of property Illegal drug use Lawsuits Chasing down / collecting rent Tenants lying to you Noise and nuisance complaints Dealing with disgruntled neighbors of your rental Police / domestic violence issues Ensuring tenant satisfaction Ensuring an unbiased and fair screening process

Find a rock-solid lease and be consistent with it. Stop by or drive by the property at least once a month. List the tenant’s cleaning responsibilities in the lease. Put everything in writing (or email). Ask the neighbors to call you first, whenever there is an issue. Don’t be afraid to call the police. Find a local landlord-tenant lawyer and build a friendship with him or her, before you actually need help. Use an automated tool, such as Cozy, to accept applications, screen tenants, and collect rent online.

4. Stress on Personal Life/Relationships • • • • • •

Spouse or partner worried about finances Always being on-call for rental issues Solutions: Include your spouse or partner in the financial decisions and respect their opinion. Keep a three- to six-month emergency (or vacancy) fund for each property. Yes, it takes a while to build that up, but you’ll sleep better. Ask your tenants to report issues via email or text, which only takes a second to review.

Solutions: • • •

Include your spouse or partner in the financial decisions and respect their opinion. Keep a three- to six-month emergency (or vacancy) fund for each property. Yes, it takes a while to build that up, but you’ll sleep better. Ask your tenants to report issues via email or text, which only takes a second to review.

Advice 5. Tenant Turnover

Solutions:

• • •

•

• •

Trying to find a new tenant Cleaning up after a previous tenant Feeling of rejection when prospective renters don’t want to rent your place Exhaustion from showing a unit Week after week Handling, storing and disposing of abandoned personal property

Solutions: • • • • •

• • •

• •

9. Leases

Schedule showings back-to-back, every 30 minutes, in a fourhour block on a Saturday.

•

Knowing when to do it yourself and when to hire a pro Finding and evaluating qualified contractors

Solutions: • •

•

When looking for new tenants, start while the unit is still occupied. List your units for rent 60 days prior to the end of the current lease. Refresh your listing on Craigslist every three to five days. Don’t sweat the clean-up: just hire a maid service and deduct the cost from the deposit.

6. Repairs • •

•

Create a handy tool bucket that you can keep in your trunk. Your rentals will provide great opportunities to learn basic handyman skills, but don’t get in over your head. I’ve made small leaks much worse because I didn’t know what I was doing. Buy an all-purpose DIY book, and skim through it regularly. Keep it in your car, so you always have it nearby. Try to observe and learn from every service professional that comes to your property. Research contractors on Angie’s List, Handy, Yelp, and the Better Business Bureau.

• • •

•

Obtaining business licenses and/or hiring a qualified property manager Understanding landlord-tenant state laws and tenant’s rights

Solutions: • • • •

Don’t try to circumvent the government. You may get away with it for a while, but eventually it will catch up with you. Learn your state’s rental laws. Join a local landlord, housing, or REI association and network with others. Attend landlord training in your city.

8. Adequate Insurance • •

Insuring each property Insuring against rental income loss and lawsuits

Finding a state-compliant and bullet-proof Lease Explaining lease clauses to tenants Knowing whether or not your lease will hold up in court

Solutions: • • • •

Use a premium, state-specific lease that has been reviewed by lawyers. It’s worth the investment. Never use a “free lease template” that you find on the internet. Review your state laws for any required or prohibited clauses. Review the entire lease with the applications before signing. Use online document signing tools to digitally sign leases remotely.

10. Finances • • •

Keeping track of security deposits Calculating interest on deposits Commingling funds

Solutions: • • •

7. Compliance with Laws •

You might get a better rate if you insure all your properties with a single provider. Inform your provider that your properties are rentals and not homeowner occupied (critical!). Sign up for “Fair Rental Income Protection” in your policy to cover the rent during a covered loss. Make sure you have proper coverage. Consider getting “umbrella” insurance to cover excess liability and risk not covered by the individual policies

Keep the security deposit in a separate, interest-bearing bank account. Open a separate security deposit bank account for each property. Collect and give interest on the deposit money if you are required to by law. If the statutes don’t regulate interest, just give the tenant all the interest that is accrued.

BONUS: Taxes • • • •

Keeping track of income and expenses Calculating depreciation Sending out 1099s to contractors Deciding to Do It Yourself (DIY) or hire a bookkeeper or CPA

Solutions: • • •

Use an all-in-one property management software that lets you track income and expenses. If not, there are other great tools, like Freshbooks, Excel, and Quickbooks. Property Managers (not landlords) who pay a contractor more than $600 in a given year, must send out 1099s. Some tools like, Buildium and Appfolio can make this task easier. TurboTax can easily prepare and file the taxes for most small landlords. If you have multiple business entities, joint ownership, or tax shelters, then you should probably hire a CPA. April 2015 REI Voice

Advice

Pro Marketing Tips Aaron Norris Vice President of The Norris Group

he Norris Group spent much time and money this past year rebuilding our website for the third time in seven years. Last year alone, close to 20% of all traffic was coming to our site via mobile devices, and it has grown again this year. We spent a great deal of effort making sure our mobile users have a great visit. Almost eight months into the project, we’re still not finished and I’ve learned lots of important lessons. Unfortunately, some were costly. We were supposed to be finished in April 2014! Only just as we finish our website that’s pleasantly viewable via desktop, tablet or mobile device, now I have to consider designing for the iWatch!? Technology will always be evolving. Moving forward, The Norris Group is going to be about being more relevant and more specific. Here are my thoughts for marketing rock stars:

1. Do Your Homework

(Keywords = demographics, technographics, psychographics, or put simply, know your customer) Every business is different. Every owner brings something different to the table. Focus on your assets, know what’s important in the market, and ultimately what your customer really wants.

www.reivoice.com

After that, understand their preferences when it comes to communications. Always be asking the questions: Who are my customers? Which ones are the most profitable? How do they find me? How to they want to be communicated with? How do I engage them most effectively? I’ve been shocked this year how difficult it has been to reach beyond the digital noise to connect with even our best clients. We’ve leveraged email, social media, direct mail, print advertising, PR strategies, SEO efforts, online ads, and direct calling to make sure we’re reaching our customers and prospects effectively.

2. Choose Wisely, Present Smartly If you’ve done your homework, you know where your customers are and the best platforms to reach them. If you’re reading this magazine, your customers will unlikely be in newer platforms like SnapChat and/or Ello (for now). Don’t get overwhelmed feeling you have to be everywhere and join the latest and greatest. Pick one platform and do it well. Then move on to the next platform as you see the need. When you do choose your preferred channels of communications, do it well. It actually costs you money when you don’t spend a little time, effort and money to appear professional. Take a little pride in your presentation across all channels. Your “brand” is what your customer thinks about you. It’s not that difficult to help influence positive perception by putting your best foot forward. As an example, maybe that ugly sweater selfie you took during the holidays is best not used for your social media profile picture.

Advice

Pro Marketing Tips: Aaron Norris

3. Micro Marketing its searchers. It will take time to build an audience but creating a thoughtful online strategy has many benefits.

(Keywords = target, segment, relevance)

When is the last time you segmented your email marketing list by area or customer type? How about your direct marketing list? Have you ever created a Facebook list? Do you market to your entire list the same way? Is there any benefit to being your loyal customer? We’ve worked extensively on this across all communication channels this year. It takes some time and organization but let me give you an example of how this works. Next time we speak at the San Jose Real Estate Investors Association (SJREI), when Geraldine’s team creates a Facebook event page, I will be inviting only my contacts in Northern California to that event page. In my CRM, I can email a reminder only to people in the greater Bay Area. And if I wanted to do a small postcard reminder, I could pull active clients quickly and send them a little note and even give them a call. When set up correctly, we spend less time reaching the most relevant customers quickly. And they appreciate the attention to detail. Micro marketing simply means you’re being highly targeted and specific in your marketing efforts. The closer you can get to being customer specific and relevant, the higher rate of return you’ll most likely experience.

4. Recycle

(White hat strategies, content marketing, reuse) Content marketing is not a new concept but it’s one used heavily for those competing in the online search marketing space. Ranking on Google in the first page takes lots of strategy and time. And search providers like Google are on to players that try to game the system. They release constant updates with cute code names like “Panda” and “Penguin” that penalizes cheaters and spammers. So buyer beware, if you’re working with outside companies that promise top rankings, make sure they’re doing it right and practicing “White Hat” strategies! The secret to top ratings is simply good content. Google and other search engines are looking for good, solid, and helpful content for

When you create great content, don’t forget to reuse it in other platforms and cross promote your channels. When I do our radio show, I transcribe it for our blog, I create a press release, and I share it on all of our social media platforms and drive people back to our website. Never let a good piece of content go to waste! Just make sure to reuse it in appropriate ways for each channel.

5. Pay to Play

(Advertorial, Facebook ads, Adwords, SEM, conversions)

Online ad revenue continues to increase as more and more advertisers look to digital instead of print. Even in print media, the trend seems to be going more to the pay-to-play model via advertorials. Facebook advertising revenue has exploded in the past two years. If you haven’t played in Facebook’s Ads Manager, you should. You’ll be shocked to learn how targeted ads can be. Beyond age, sex, and location, categories include political leanings, philanthropic intent, and even house price. The more targeted you make your ads, the more you will pay. Google Adwords is still the online market leader. I’ve been working with them for years and it drives a great deal of online traffic. However, I’ve seen more return on investment with our content strategies. Specific terms can be VERY expensive so you really have to measure success in campaigns. When it comes to SEM or Search Engine Marketing strategies (different from SEO), novice beware. It’s gotten easier in some ways but spending time with a professional who can help you identify key words, create appropriate landing pages, create great ads, and help you tweak ads that aren’t working is important. Not doing so can be very costly. Remember on and off line, it’s all about conversions. Not impressions or click through. We want the sale. How did the customer find you, what was their path to purchase, and can you recreate that process? When you get good at identifying which channels drive your success, you create your cost per conversation. You can then easily identify the channels that are more effective and possibly less expensive, do what works, drop the rest. Measure, tweak, and repeat.

April 2015 REI Voice

Advice

Grapes of Wrath:

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

by Jeffrey B. Hare, Attorney at Law

n a terrifying moment, an investor recently found himself facing a living nightmare trying to resolve a dispute over a private loan he made to a man he trusted. Instead of turning over paperwork that would have set terms for repayment of the debt, the borrower pulled out a gun, chased and shot the investor to death in front of arriving Sheriff Deputies, then fled and committed suicide. Although tragedies of this type seem to play out on a daily basis in the urban cores over drug deals and gang conflicts, one does not expect a genteel investment in a winery in scenic Napa County to turn into a murder scene. The news was shocking to those who knew the “easygoing” and “level-headed” Emad Tawfilis, a businessman from Los Gatos. Interestingly, former acquaintances and partners of the killer, Robert Dahl, were not as surprised. Still, one has to stop and ask how a relatively straight-forward private business loan transaction could have such a tragic ending. What are the lessons here? How could this have been avoided? As an attorney whose practice includes handling dispute resolution matters, as well as representing clients involved in investment transactions and loans, my immediate reaction was to ask “What went wrong?” The violent and tragic ending of the legal dispute between Mr. Dahl and Mr. Tawfilis certainly serves to remind us why we have a legal process available to resolve conflict and disputes between parties. Our judicial system normally provides an excellent process for handling civil disputes, with a heavy emphasis on dispute resolution procedures, such that over 90% of all filed cases settle before going to trial. Investors know that risk is an inherent element in making investments. Therefore, the successful investor is someone who gathers relevant data and information, assesses the risk, makes adjustments as necessary, and proceeds accordingly. Once can probably guess that Mr. Tawfilis did not contemplate being shot to death in a vineyard trying to escape his enraged borrower as one of the risks involved in his investment transaction with Mr. Dahl! However, every transaction involving human beings carries the possibility of unexpected consequences, but one must ask the question whether there were any warning signs that Mr. Tawfilis might have missed; what could he have done to avoid such a terrible fate? Of course, we will learn more as time goes on, but several indications emerged from the initial newspaper accounts that seem to show that Mr. Tawfilis either failed to acknowledge, overlooked, or simply did not investigate certain facts or allegations. In other words, it appears that Mr. Tawfilis failed to do his due diligence

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with respect to Mr. Dahl before entering into the transaction (There is also evidence that Mr. Tawfilis made several bad decisions after he had learned more about Mr. Dahl). But for purposes of looking for lessons learned, we can presume that Mr. Tawfilis was excited about being an investor in a winery operation, and was captured by the salesmanship of Mr. Dahl, who was described as “gregarious and convincing,” with a “charismatic, dynamic personality.” We can assume that when Mr. Tawfilis agreed to loan Mr. Dahl the money, Mr. Tawfilis was apparently unaware of Mr. Dahls ’criminal background (convictions for felony theft), or the fact that his business enterprise – the one Mr. Tawfilis was loaning money to – had or was being collapsed. Mr. Tawfilis was apparently unaware that Mr. Dahl’s recent business partner had accused Mr. Dahl of

Advice acting in a manner that was “neither ethical nor legal.” A simple background and reference check would have most likely turned up enough red flags to convince Mr. Tawfilis to do some further investigation. The tragic outcome of Mr. Tawfilis’ ill-fated investment serves to illustrate the point that investors often overlook the most critical risk element in their decision making process: the human factor. The tendency is to rely on so-called “experts” who flash charts and graphs and promote market timing and other investment strategies, as well rely on volumes of data and statistical analysis to support whatever trend or projection they feel is appropriate. All of this data and information is important, but not as important as the integrity and reliability of the individuals you are relying on to make your investment a success! Investors are repeatedly warned to do their due diligence with regards to the investment; to analyze the property, the neighborhood, the market conditions, etc. The same due diligence must be done with the individuals you are relying on to make the investment work. Successful landlords have learned – often the hard way – the importance of screening prospective tenants through both credit checks and references. Property owners learn, sometimes after suffering losses, that checking the license status and references of contractors is worth the extra time. Investors who do not take the time to investigate their business partners before writing a check will often regret their haste, and even more so if they fail to take appropriate action once they learn more. In Mr. Tawfilis’s case, even after he had learned about Mr. Dahl’s misdeeds, it appears that Mr. Tawfilis continued to make questionable decisions, up to the point when he insisted on going to the winery to meet directly with Mr. Dahl even after Mr. Dahl had failed to comply with Court orders. (Hint: if your attorney gives you specific advice, you should

at least consider following it.) In the cold war negotiations with Russian General Secretary Gorbachev, President Ronald Reagan learned to say a Russian proverb which translated to “Trust, but verify.” The phrase had been taught to him by Suzanne Massie, a Russian historian, and President Reagan used it to great effect to achieve the results he obtained in the treaty. The proverb provides simple but excellent guidance for investors. To do a real estate investment, it is essential to work with other individuals, some of whom may be close friends and others who may be strangers. But the human element is both an essential and critical factor in determining the success of the venture. Without a degree of trust, no deals would get done, but just as important is the need for accountability, integrity, and performance. Running a simple background check and confirming references would have saved Mr. Tawfilis thousands of dollars, and possibly his life. Certainly, risk of death from an enraged business partner is more of a remote possibility than a realistic probability, but it happens. Human beings are motivated by both greed and fear, and real estate investors have no immunity from human nature. It is somewhat reassuring to know that Mr. Tawfilis made a number of highly questionable decisions even after learning more about Mr. Dahl’s background, and that the parties had engaged in extensive and contentious legal actions, the most recent of which led to a Court order for Mr. Dahl to appear on contempt charges. One commentator noted that this had effectively backed Mr. Dahl into a corner, and in hindsight it was probably not advisable for Mr. Tawfilis to go by himself in an attempt to resolve the dispute under these circumstances. This tragic outcome was not inevitable, and it could have been avoided at several points along the way, most significantly at the very beginning of the transaction.

Mastermind:

Accessing the Collective Brain by Michael Grigelevich

usiness, and particularly real estate, often perpetuates the myth of the lone entrepreneur -- the man or woman who starts with very little and rises up the ranks to achieve ultimate success. The sole architect of his or her dreams, this person made it happen by sheer determination, hard work, risk-taking, and, of course, raw intelligence. This story of singular success is a powerful one; so powerful, in fact, many societies claim to have been created by such people -- individuals who pulled themselves up by their own bootstraps and made their inner visions come to life in the real world. While a successful individual certainly needs to possess many of the character traits mentioned, the truer -- and often undersung -- path to success hinges on one thing: collaboration. Collaborating with a select, elite group of people is certainly not an unknown concept. As a matter of fact, Napoleon Hill, arguably one of the most famous success-makers and strategic thinkers in history, often receives credit for coining the phrase “mastermind” in his revered book Think and Grow Rich (the concept, of course, certainly predates Hill). According to Hill, a mastermind results when two or more people pool their resources, resulting in a creation larger than the sum of its parts: a master pool of resources and possibilities. Far from being sales-oriented, an ideal mastermind works in the direct service of its members with an eye toward achieving the best outcomes for all those involved. Moving forward from this premise, let’s consider why joining a mastermind might be the right choice for you. First and foremost, don’t mistake a mastermind for just another networking opportunity. While networking is certainly a part of it, you should think of this group as an intensive intellectual outfit, something actively designed to challenge its members to push themselves and get tangible results. Masterminds focus on building personal, completely transparent relationships among their members, which is something that doesn’t always happen with networking. These dynamic relationships certainly counteract the lone entrepreneur myth, and, when properly nurtured, can pay healthy dividends to its members. Think of the results that could

be achieved when you’re placed in the same room with extremely talented people, people willing to push each other forward, share ideas, collaborate on projects, and, of course, hold each other accountable. When speaking about the talent pool in a mastermind, it’s important to note that exclusive membership is another defining characteristic of these groups. Hand-picking members, usually by leader-invite only, tends to be a standard practice. While this may sound exclusionary, this practice functions as a way to bring together the most diverse and mutually beneficial group of people. The goal is to get results and see each member’s success grow, and the best way to accomplish this is to bring together the right mix of members. Trust is key here, and one way to do that is to perform due diligence and recruit serious participants who will be reliable and approach meetings with passion and rigor. You can think of it in terms of an elite sports team: everyone comes together to work for the common good of the group, bringing their specific set of skills to reach the most successful outcomes. The collaborative spirit of a mastermind combats the frustration and anxiety you might feel if you’re running your business mostly by yourself. When you’re the only person in the room, or if you work with a very small group of employees, you run the risk of moving through your operations with tunnel vision. In fact, once they join masterminds, many people comment on the immense benefits of hearing and seeing other perspectives. Someone may give you advice that will significantly cut down the amount of hours you work, help you advertise, or even reduce your business expenditures; the possibilities are literally endless when you work with a mastermind. This might sound like a cliché, but I assure you it isn’t. I recently listened to a video testimonial from a very successful real estate veteran who joined a mastermind. He went on to extol the many benefits he received from it, not the least of which was a significant reduction in his operating costs after implementing a strategic business suggestion from a fellow member. (Cont. on page 14) April 2015 REI Voice

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Features In addition to the obvious business/financial benefits, one thing you may not expect is that masterminds often help members live fuller, more balanced personal lives. It’s no secret that the worlds of business and real estate attract certain type of people, those who are prone to working long hours, experiencing high stress levels, and often have difficulty balancing their work and home lives. Well, in an ideal mastermind, many members have gone through these same struggles and can offer support and guidance to help you navigate the complications of living a fast-paced, goal-oriented lifestyle. There’s no shame in asking for help; in fact, that’s the primary purpose of a mastermind: to help its members with all aspects of life.

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Accessing the Collective Brain (Cont. from page 13) your homework when it comes time to respond to an invitation or an open call for membership. Avoid anything that sounds like a sales pitch, for this is not the true spirit of a mastermind. Pay attention to its members’ areas of expertise, and decide if the group would be the best fit for you -- what can you gain from it, and what can you give to it? Remember: collaboration, when properly fostered, can be a gift, and it can make you successful well beyond the scope of your dreams. When you join a mastermind, you’re melding your brainpower and skills with those of an elite group of people. The opportunity for success is undeniable. Many members see their businesses and profits increase exponentially. The choice is yours to make!

The ideal mastermind for you is out there, and it’s up to you to do

Affiliated Masterminds: The Impact Circle: A mastermind for high-achieving women ready for exceptional business growth. See www.theimpactcircle.com for more information. SJREI Mastermind: meet-the-speaker mastermind group based in the SJREI organization. See www.sjrei.org for more information

Advice

Andy Pollack HELPFUL POINTERS FOR FIRST TIME REAL ESTATE LANDLORDS

ith rental properties in high demand, becoming a Landlord and renting out a property might seem like a lucrative endeavor. Yet, before you get into the rental business, there are a number of action items to tackle. You need to have a rental plan of attack. The following guidelines will help you prepare for the road ahead:

leases or rental agreements should be treated equally. Gain access to the appropriate documents and contracts that are enforceable just in case there is some function of a violation on behalf of the tenant.

Utilize a Property Management Company

The quickest and most simple approach to avoid making any harmful first-time mistakes is to hire a duly qualified property Individuals often miscalculate the amount of time it takes to be management company. From maintenance and repairs to credit a proper landlord. When it comes to the eviction process, local, checks, a responsible property manager can reduce the obligations state, or city regulations may allow a tenant to stay even when rent of landlord workload. money is owed. Even if you use a property management service, interviewing/background checks, finding new tenants, processing leases, coordinating repairs and collecting rent all take time.

Allocate Time - There is a Commitment

Do Your Homework - Tenant Applications Perform the necessary investigations, credit checks, and background reports, and validate past landlord references. Most owners do not have the ability to run a credit report. There are a number of online credit and background services available for a reasonable subscription fee.

Outline and Solidify a Financial Plan Take an approach to the rental business like you would any other financial investment: perform due diligence and financial analysis. Knowledge of how to analyze real estate is crucial. An immediate reference is a real estate agent or financial advisor, both experts in that area.

Gain Local Market Knowledge If the target neighborhood contains a large population of rental properties, perform your research on several real estate rental websites and check the rental price of comparable units. If the rental property is located in an area that has a high percentage of owner occupancy, talk to a real estate agent about an individual’s expectations for the local market and what is important to them. First-hand knowledge is always of the greatest value, as an individual looks to either buy a rental property or convert an existing home.

Leverage Legal Advice

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If you are a first-time landlord with no prior knowledge of legal contracts and leases, sit down with a real estate attorney. Not all April 2015 REI Voice

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Analysis

The California Housing Shortage: Time for a Change!

by Selma Hepp, Ph.D., California Association of Realtors

An economist once said: “Housing in California is free. It’s the sunshine that we are paying for!” Living in beautiful California has many advantages but also some drawbacks. One important drawback is the high cost of living. The median price of a typical home in California is about $430,000. The median price of a typical home in the U.S. is about $179,000. In other words, a home in California cost two and 1/2 times more than the average home elsewhere in the nation. The high cost of living in California also means lower housing affordability than the national average; in fact, quite a bit lower in some of the highly desirable California coastal areas. For example, the housing affordability index by the California Association of Realtors shows that in San Francisco, only one in ten households can qualify for a median price home. On average, California housing affordability is about half of that in the U.S. The difference between California home prices and those nationally was not always so wide. In 1970, the difference was only $10,000. Today, the difference is $250,000. What happened? A recent report released by the Legislative Analyst Office (LAO) titled California’s High Housing Costs: Causes and Consequences laid out some of the main drivers contributing to the drastic increase in California home prices. The bottom line goes back to the basic economic principle: disequilibrium in supply and demand for housing. In California, production of new housing has not kept pace with demand for the last 25 years, at least. The LAO report estimates that, on average, 100,000 new homes were undersupplied on an annual basis since 1980, totaling about a 2.5 million housing shortage in the state today. The reasons for this undersupply are numerous and often times result from convoluted maneuvers which both acknowledge the policies and manipulate them. The irony is that generally good intentions led to a system that has become overly cumbersome and complicated, and any noteworthy changes will require laying out all the cards on the table and starting over again. While such scenario is very unlikely, there are some steps that can be taken which would help alleviate current standstill.

So, what are the issues? There are many, and simply naming them does not show full appreciation of the complexity of the situation, but it will hopefully spur some constructive conversation. To begin with, the costs of housing development in California are very high; in fact, they are among the highest in the country. That is true for both land costs and building costs. Land costs alone are anywhere between two and four times more expensive than elsewhere typically. The cost of building a single family home, which includes the labor, development fees, and materials, is between $50,000 and $75,000 higher in California metros than in the rest of the country. Secondly, California’s local government finance structure is tilted to provide greater fiscal incentives to approve nonresidential development or lower density housing development. The state attempts to address the housing allocation need by mandating local governments to adequately plan for “housing needs of all economic segments of the community”. Nevertheless, it is widely accepted that localities ignore the mandate and do not “adopt land use plans and regulatory systems which provide opportunities for, and do not unduly constrain, housing development.” Thirdly, the California Environmental Quality Act (CEQA), passed in 1970, has since been used and abused to delay new construction. The Act requires an environmental impact analysis for every larger project and, hence, can substantially delay a project. According to the LAO report, local agencies take, on average, around two and 1/2 years to approve housing projects that require an environmental impact report. And while there are many more issues to be discussed which have limited the supply of housing in California’s coastal areas, the last one to note here is fondly called NIMBY (Not In My Back Yard) – also known as the local residents’ resistance to new housing. California residents are very protective of their property rights and are very vocal in land use decisions. Unfortunately, however, and disproportionately more often, they chose to vote against new development. Also, existing residents can use (or misuse) current systems which allow them to pursue often times unfounded litigation against new development, which consequently not only stops or delays development but also substantially increases the costs for everyone.

(Cont. on page 24) April 2015 REI Voice

Join a Local REIA: ALIGN YOURSELF WITH SUCCESS

By Michael Grigelevich

he real estate industry can be overwhelming. The vast amount of free information online can potentially tax the most discerning minds. Newcomers may be bombarded by the advice and informational exchanges hurled around online forums, virtual group meetups, and investment sites. Many gurus, holding followers at a digital arm’s length, offer failsafe methods for financial success, but can they always be trusted? Performing due diligence certainly proves more challenging in a time when face to face meetings are rapidly receding into the past. Thankfully, many real estate insiders and general entrepreneurs, such as Gary Vaynerchuk, predict that business practices will look to the past for guidance, creating a smaller, tighter network built around trusted relationships with associates you see face to face. For these reasons, it’s time to investigate one of the industry’s most trusted tools: local Real Estate Investors Associations (REIAs). Many think, erroneously, that local REIAs cater to industry neophytes. Nothing could be further from the truth. The goals of these organizations are, in fact, applicable to all investors, even the most experienced ones. Put simply, they strive to create a safe space where investors can build lasting relationships, increase their knowledge, and maximize success over time. Let’s take a look at some of the finer points and discuss the many benefits of joining a local REIA. It’s no secret that the real estate industry can be defined by ups and downs, big successes and, unfortunately, sometimes even bigger failures. Like any industry where significant amounts of time, money, and labor intertwine to form the foundation of the process, real estate can be a risky proposition. It doesn’t help things along when, perhaps more than any other field, real estate is chock full of self-styled/self-proclaimed experts and, at times, education is not a prerequisite to get a career started. In other words, anyone with a little startup cash and basic connections can stumble into real estate, but not everyone can succeed. It takes the right amount of education, experience, guidance, opportunities, and leadership to build the framework for a sturdy, profitable career. Thankfully, local REIAs can deliver all of these things and more. Overall, an educated investor has a better chance for success. For

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this reason, every local REIA will have some educational program in place for its members, which usually takes shape in a formal series of ethically and diligently chosen guest speakers. Depending on financial resources, speakers can range from local industry insiders to national figures. No matter what level the speaker is on, he or she will have valuable information and experience to share with members. Everyone has different perspectives on the industry, so the knowledge gained from a diversified group of people with proven track records will certainly be an invaluable arrow in an investor’s quiver of resources. In addition to speakers, most organizations will offer some type of newsletter or magazine that should offer useful, practical content provided by a stable of industry experts, national or local figures from applicable fields, and knowledgeable staff writers. Having access to this material will deliver educational insights into everything one needs to know about, such as economics, political developments, personal business advice, and local market news. Anyone in any industry recognizes that reading quality literature is one of the best and most important ways to stay apprised of current trends, changes, and best practices. When it comes down to it, though, local REIAs offer the most indispensable resource: people. The crucial importance of longterm face to face interactions with people fully invested in the same industry cannot be understated. Whether it’s gleaning knowledge from someone else’s personal experiences, building a solid business network, or finding a valuable, trusted mentor, these types of quality personal interactions cannot happen anywhere else. You can learn vicariously through the experiences of others. In fact, your interactions with members can even lead to lucrative relationships with important local and national industry figures, such as partnerships with big box retail outlets and related businesses, local political affiliations, and, above all, a reliable group of people who can help guide one through his or her real estate career with an eye toward the best investments. Undeniably, these opportunities cannot be found online; they must take place in the physical world. (Cont. on page 44)

Features

Thriving Economy, Escalating Rents, Lack of Inventory…

What does it all Mean?

by Geraldine Barry

ichael Pierce, president of Prodesse Properties, a top-notch property management group based out of Foster City, CA, takes his work seriously. An investor himself, Michael is immersed in the business 24/7. His impeccable credentials, and decades in the business, make him our go-to person in terms of the rental market and what we can anticipate on the horizon. Pierce always offer enlightening reflections on the market, and here he shares his opinions and data on a variety of issues, ranging from rent trends, rent control, and the general state of the economy. With the market on the upswing, many wonder what the future holds and what to expect regarding rent trends. Pierce offers his thoughts on this, along with some interesting forecasts and data direct from the trenches: “At Prodesse Properties, internally, we are forecasting rent growth on existing rentals at 5%, and market rent growth at 2-4%. The delta between increasing jobs and supply is causing this upward momentum. The increases we witnessed this year are unsustainable, but the thriving job market is driving all the other metrics. 25,000 jobs were created in the Bay Area in the month of August alone. The supply side is not accommodating for this growth. If we look at the complete supply in the pipeline, we have maybe 15-30 thousand units for the year, depending on what area one is looking at. Noteworthy is that most new projects are being built in a condo environment, so that owners have the option of renting or selling individually.” Business and the diversified technology industry proved to be key players in this growth, as companies purchased, or leased, large amounts of office space and plan on creating a sizable amount of new jobs. Developments in the tech sector continue to pique interest in the Bay Area. Weighing in on these developments, Pierce reflects on some of the bigger changes: “There has literally been millions of square feet that were either leased, or purchased, by Google and Apple in the Silicon Valley this year. Google is planning on hiring 30,000 employees over the next five years areawide. To put that number in perspective, the Google global headcount is approximately 50,000. When you

have that kind of job creation it has a trickle down effect. If you look at Emeryville and Oakland -- just a couple of stops from San Francisco on Bart (the public transportation system) -- this is creating a surge of interest in those areas, driving prices and rental rates skyward. Oakland is doing a great job attracting this high tech demographic; simply visit the Rockridge area to see what’s happening. Additionally, the huge Brooklyn Bay project, south of Jack London Square, is thriving. This is a mixed use environment, including office, rental, and retail. During the dot com bust, there was a pop in rent growth and demand, but the difference today is that businesses are profitable. There is a very diversified economy in the Bay Area: simply look at the Google and Apple economies; they are so much broader than tech with diversity, including mobile platforms, cleantech, and biotech. The outlook is very positive for the area with this far reaching diversity.” While all this growth and development proves exciting, exploring the issues that continue to dog the economy, as well as the potential challenges they pose down the road. Pierce highlights the biggest issues he sees and considers some challenges on the horizon: “Affordability is becoming an issue for certain segments. There has to be a glass ceiling of sorts on how much households can afford to pay in terms of rent. How much do you have to earn to qualify for an apartment? The middle class is getting compressed and squeezed out of the market. We will have to address that via taxes or affordable housing. Lower fees for construction encourages development.” Although more affordable housing could be the answer, Pierce notes some particular impediments to development, as well as some possible solutions. “Housing . . . is a highly regulated area - you have issues with neighborhoods and gaining approval for development. It can take 3-5 years to get approval and complete construction. It is very complicated and difficult process to navigate. If demand increases and supply is limited, prices rise. If we had looser zoning laws and less political constraints, housing starts would rise. The problems are purely economical for developers and builders. Assembling land is expensive, rife with risk, and developers have to take a long view.” (Cont. on page 44) April 2015 REI Voice

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Advice

The Heart of Success In Investing Is More Than Just The Numbers

by Dan Noble

t’s easy to think that our relationships, passions - for ourselves and others - are only a small factor in our overall success. Not true. These bonds define our emotional core. They tell us who we are. They tell us how we are connected to the world. These bonds, these currents of love, caring and real compassion are what awaken our creativity - and carry forward to accomplish the big things in life. When you work from a place of connection with the world and yourself, you establish success that stems from your core values. Sustainable success that has the capacity to go on and on.

I do, my advice to both beginning and experienced investors who want to streamline and control their business for maximum success - is one and the same: realize that real estate investing is a business. Investing, and success, does not follow a linear path. Things occur on multiple layers and all at the same time, as with life. It’s up to us to get out the magnifying glass and have a closer look at the strengths, the weaknesses and the key connections. Seek out the heart of the matter, the personal connections and be true in your core values.

I work with investors discussing and looking for their personal investment strategy. Evaluating what’s working and finding what can work better is one of the most important places to spend time as an investor. If we are going to be successful, we must take care to construct both thoughtfully and carefully. In this work, I see missed opportunities with almost everyone. Why is that? It’s simple. They are focused on their excitement. They are enthusiastic. They’re pumped from great conversations they’ve had with friends, colleagues and fellow investors. All good stuff.Who wouldn’t be high in these times? The sad truth is: they are focused on the wrong things.

Plan well. Know what you’re getting into. How long you’ll be there. How you’ll get out. Follow through. Develop a strategy, ensure it supports your plans, and keep going with it. Most importantly, have the right reasons behind what you’re doing. When you work from the core of a situation, from your situation, you can only succeed!

A successful investment strategy has three primary components. These components can not be arrived at unless you know this: Why you are investing? Hint: it’s not the profit and it’s not the excitement. You need to connect to the core of the investment. What bonds you to an investment? Work from a place of true connection. Here are the three primary components every investor should have in their strategy.

For decades, Dan Noble has been investing, financing, coaching and creating opportunities for success. After working on his own for decades as a successful investor, industry pro and coach, Dan joined forces with Summit Assets Group and currently serves as Director of Investor Relations for the company. In this role, he brings all of his acquired skills and lessons to the front and center of the industry. Communicating, educating and coordinating investors - and their transactions - all fit right into the wheelhouse of Dan’s passions and skills.

In my experience with our Summit clients and the coaching work 1. Entry How will you connect to the investment? How will you get involved in the market and actually acquire the assets? How much money will you invest? Where will you invest? In what kind of condition will the property be, and at what price point? Who can you trust in the industry? And, finally, how will you learn all these things? 2. Holding period Is this a lifetime connection or a passing one? Do you buy & hold or fix & flip? In what time period? In what market (location and/or economic)? What matters more: income or equity growth, and how long will you count on that? 3. Exit How will you end disconnect? How and when will you sell, exchange, or give away the asset? What about the tax implications of each? How will you know when you’re done? April 2015 REI Voice

Features

GIVING BACK:

The PCFDC Invests for Change by Hannah Ash

Nancy Whit

ack on the east coast, a small organization of civic-minded developers and investors formed a non-profit to revitalize a downtrodden neighborhood in Pawtucket, Rhode Island in 1989. Over the years, the PCFDC (Pawtucket Central Falls Development Corporation) has enjoyed much success. The group has both overseen and watched the neighborhood transition from a troubled area to a more familycentered, up and coming location that attracts many first-time home buyers. In the 1980’s and into the 1990’s, if you asked a local Rhode Island resident about ‘Barton Street’ in Pawtucket, the response wouldn’t have been good. It was the kind of place where illegal activities were the norm. A place where partying was the name of the game. A place situated on two town lines, which caused confusion with local authorities about who was responsible for policing it. A forgotten place - not one to call home. The PCFDC formed with a direct mission to change that. They saw potential around every corner. Slowly they began redeveloping the numerous fixer uppers and abandoned structures that inhabited the area. Since its first project in 1990, the PCFDC has created over 200 housing units for locals to call home with both rental units and homes for sale. Today, the neighborhood is unrecognizable from its darker past. Not only did the PCFDC make the neighborhood beautiful by rehabbing it, but the organization also went to the heart of the matter and looked to rehab the human problems that were contributing to its decline. They provided women with opportunities to make longlasting changes; in fact, the PCFDC has transformed countless lives with its Project Renew. Project Renew focuses on reducing prostitution in the area through empowering women: it provides direct street outreach, referrals, case management and medical testing. The results of this long-term effort have paid off: arrests in the neighborhood have been drastically reduced. Today, the neighborhood is a mostly quiet area dotted with strategically placed trees and beautifully restored homes. PCFDC homes and buildings are reminiscent of San Francisco’s aesthetics: tastefully painted buildings and houses stretch as far as the eye can see. All of the homes, both rental and for sale, are listed at affordable price points as the PCFDC seeks to bring locals the dream of having a beautiful living space they can call their own.

The organization doesn’t believe that affordable housing and attractive housing need be mutually exclusive. Bamboo flooring, energy efficiency and luxurious landscaping are all common staples of PCFDC developments. Dishwashers, not usually included in affordable housing projects, are the norm. The capstone of the Barton Street neighborhood has to be the community playground the PCFDC created - filling a very important need for what is now a mostly family-oriented area. I had the pleasure of sitting down with PCFDC executive director Nancy Whit, having served as director since 2001, who shared her vision with me and gave me the scoop on what it’s like to be a nonprofit developer and investor. Prior to working in the nonprofit sector, Nancy worked as a property manager for many years in the Boston area. Her experiences as a property manager helped shape her future career as the head of the PCFDC, where those skills she learned early on now come in handy. She needs to know everything from renters’ rights to zoning laws, and she does.Q: What would you say to investors considering non-profit investing as a possibility for giving back?

Q: What would you say to investors considering nonprofit investing as a possibility for giving back? A: Folks who are interested in community and low-income investing should look into the low-income housing credit program. Investors are also able to get tax credits back on their investments. There’s a real need for investors to put money into these pools, and transform neighborhoods and lives.

Q: Are there any other ways investors contribute? A: Investors can also support the nonprofits who put money into community investing and development by helping with overall operating expenses, because, unlike for-profit developers, we don’t get any profit back until the end of the deal. Usually that happens when our apartments are all rented or they’re sold, depending on what we’re involved in. Non-profit developers need to be able to pay staff, and we need to be able to pay salaries until the deal is complete and those profits replenish our funds. (Cont. on page 31) April 2015 REI Voice

Analysis

Selma Hepp (Cont. from page 17)

Where do we go from here? To begin with, we must recognize that there is an issue with the insufficient supply of housing in places in California where people want to live. Addressing affordability constraints in California cannot be done by only talking about housing affordability funds or programs, or much less by assuming that all affordable housing should be located in the Inland Empire. We need to increase the supply of new housing. If only 3 out of 10 households in California can qualify to buy a median priced home, that sounds like an issue that concerns all of us California residents. And the forecast for housing affordability suggests that affordability constraints are going to grow larger with fewer households being able to purchase a home in the state. Housing purchase activity in 2014 has dipped to lowest levels since the recovery. Two main drivers of lower sales activity were the lack of housing inventory and lack of housing affordability. Solutions to our housing crisis may be hard to digest but beginning the conversation is critical. In the very least, the cumbersome and

extensive approval processes need to expedited. Possibly, there needs to be a sort of accountability system put in place that tracks approval times and identifies greatest sources of bottlenecks. Expediting the approvals alone decreases overall costs, which, as noted earlier, are higher in California than most anywhere else in the nation. And we will have to start talking about density, whether we like it or not. Analysis of web traffic activity by realtor. com showed that millennials are most likely to be searching for homes in highly urban areas. On the other hand, sellers, IF they are selling, are most likely to be baby boomers living in less urbanized areas. And there is a great potential for infill development and redevelopment. Downtown Los Angeles teems with spaces that could be turned into residential living. But, before doing that, we have to revisit our antiquated zoning rules, some of the CEQA requirements that were put in place in 1970s, and generally accept that we need more housing in California!

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SUCCESS THE SIZE OF Eddie Speed’s Empire of Notes

by Michael Grigelevich

t’s 5:30 pm, and I’m on the phone with Eddie Speed, the esteemed owner/founder of the Colonial Funding Group, Colonial Capital Management, and NoteSchool, the educational arm of his operation. He’s been on conference calls all day, but you’d never know it: he’s gracious and still crackles with energy, vacillating between humorous and serious takes on himself and the industry. As we talk, I’m struck by the passion he still has for his work, despite being in the business of discounted notes for over 30 years. He tells me he wakes up every day thinking about this business, and I don’t doubt him for a second; he clearly loves his work. Speed speaks about his genuine desire to help people change their lives through practical investing, a path that will help them sleep at night, knowing that they have safe, self-directed retirement funds. At one point in our conversation, he asks me a question that strikes at the heart of what’s made him, and others, so wildly successful: “Would you rather be the bank or the landlord?” I answer, almost instantly, “Well, the bank.” “Exactly,” he responds. “Everyone would be the bank -- that’s the answer I get whenever I ask that question, no matter what part of the country I’m in.” Speed’s question and answer highlight the strength of the discounted note business, as it allows its participants to “be the bank” and collect money on purchased loans without the day to day hassles and headaches of being a landlord; they also receive full payment on the loan, despite what they paid for it. Speed firmly believes discounted notes are the future of smart investing, a claim he supports through his years of seasoned experience as a note trader and educator, as well as his bottomless knowledge of the industry. As we talk, our conversation moves through his personal history, an overview of the business, and many strong cases for why we should all seriously consider getting involved in note investing. According to Speed, he found his way into the discount note business by accident. In the early 1980s, he searched for different

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entrepreneurial pursuits and stumbled into notes: his father in law, a pioneer in the field of seller-financed notes, offered to show him the industry ropes. With real estate in Speed’s blood -- his father dealt with owner-financed farmland -- the move made sense. Before getting into the business, Speed jokes, “I thought a loan was being by myself.” Despite his initial inexperience, he applied himself with rigor and learned the ins and outs of the industry; in the end, it proved to be a perfect fit. Now, decades later, he sits atop Colonial Funding Group, Colonial Capital Management, and NoteSchool, all of which are the go-to groups in the discounted note business.

Due to the “subprime lending debacle,” he says, there’s been an admitted 4.5 million defaulted notes floating around the market; he quickly adds, though, that his diligent research puts the number much closer to 9 million. Put simply, education is the most important step for those looking to get started in notes. According to Speed, buying performing or non-performing notes without proper education is like “driving on the highway without driving school.” Founded 15 years ago, NoteSchool, Speed believes, is “thee university on buying notes.” Taking a simple, down to earth approach to education, the school aims to “take people and remove the cloud of confusion” and give its students whatever degree of knowledge they seek, be it to the junior high or PhD levels in note investing. Once NoteSchool gets students to commit to whatever level of understanding they desire, it gives them knowledge by telling stories and making analogies in ways they can remember it.

Features The school deals in tangible, practical knowledge and advice, and hopes its graduates will choose to work with Colonial Funding and Colonial Capital Management in the future. This type of holistic practice builds a rare relationship with Speed and his clients -- as he says, “it’s not just about notes; we become friends. We like each other.” It’s this genuineness that helps set Speed apart from the rest of the investment pack -- he has a real passion for this business and wants to help people get ahead. Speed’s other businesses, Colonial Funding, which buys and sells notes to investors, and Colonial Capital Management, which manages funds that invest in notes and primarily single-family real estate, work in concert with NoteSchool, offering educated investors chances to find success; however, one need not be a graduate of the school to work with Speed. His description of an ideal customer is characteristically no nonsense: “Most people need to reposition themselves - it’s hard to buy properties in the market today where the math will work.” Speeds notes that many people don’t trust the stock market anymore, yet they want stable, selfdirected retirement funds. As Speed sees it, notes are the answer. When I ask him about the risks and merits of notes, he offers some key insights. Quick to point out that notes are not inherently riskier than any other investment proposition, Speed says that “You can lose money in any investment if you do foolish things.” When it comes to the possibilities in the note industry, Speed displays the knowledge that has helped place him at the forefront of the industry. Speaking about the state of the market and the availability of notes, he tells me “I always tell audiences that I could not write a script better than what’s happened in the past five years,” which refers to the continued fallout from the housing crisis and the growing inventory of discounted notes for sale.

“Most people need to reposition themselves it’s hard to buy properties in the market today where the math will work”

Eddie Speed Due to the “subprime lending debacle,” he says, there’s been an admitted 4.5 million defaulted notes floating around the market; he quickly adds, though, that his diligent research puts the number much closer to 9 million. Also, the first 3 months of 2015 saw about $5 billion worth of defaulted notes hit the market for sale. With this amount of inventory in the stable, Speed feels that the time to act is now.

“You can lose money in any investment if you do foolish things.” So, what would it take for someone to get started in the discounted note business? After education, of course, Speed tells me that with $25,000, he can show people how to use leverage to control a lot of notes. One need not have a spare $25,000 kicking around, either: he explains that you can get creative with funding, such as applying for a line of credit. In other words, it doesn’t need to be a personal check cut from your account If buying notes doesn’t seem to be a fit for you, Speed’s Colonial Capital Management can do the investing for you. Making a solid cash investment will help clients in the long run, as Speed says he doesn’t position his business as a “start with nothing and get rich” type of proposition; instead, he trains potential investors who are in the position to make a smart, considered investment, and then he takes them there. When you work with Speed, who characterizes himself as the voice of his businesses, you also access his executive team and staff, people he characterizes as “the best of the best in our industry.” He feels fortunate to work with such a talented pool of people who all bring their special strengths to the table. In fact, they’ve closed tens of thousands of transactions. Speed feels that investing in discounted notes proves to be a wise decision for many reasons. The real estate business was doing better for investments when properties were cheaper, but that type of inventory is drying up, and IRA companies suggest that customers start diversifying their investments. According to

Close bonds: a Speed family wedding April 2015 REI Voice

Features

Eddie Speed

Speed, many IRA companies will tell customers that notes are the superior investment to any that they see out there, because the IRA becomes its own bank. Speed has the experience to back up these claims: after all, he’s educated more than 20 IRA companies about the business. Another plus side to being your own bank goes back to Speed’s question about banks vs landlords: banks don’t face the day-to-day challenges of being a landlord. As a note investor, you won’t be woken up at 2 am over a leaky pipe or broken stove; instead, you can sleep soundly on your investment. Although Eddie Speed lives and breathes the discounted note business and has enjoyed an incredible amount of success with it -- not to mention his position as a key influencer and architect in the field -- he has a remarkably full life. When it comes down to it, the things Speed holds closest to him are his family and his desire to help people. His business is, quite literally, a family affair: his wife, to whom he’s been married to for over 30 years, works in the business; while his daughter is a full time ballerina, her husband works with Eddie; one of his sons, who’s pursuing work as a firefighter, wants to get into the business part time; his younger son plans to join the note business as well.

philanthropic work: one of his charities raised almost $100,000. When it comes to working one-on-one with clients, Speed tells me “I truly feel like I have a chance to change people’s lives.” Judging by his track record, he certainly does -- he received the 2006 Note Industry Achievement Award. The worlds of real estate and investments are full of opportunities, and they can be overwhelming for some. Thankfully, with someone like Eddie Speed and his team as your guides, things can be a bit easier. A truly genuine figure in the field, Speed’s seasoned experience and sincere desire to drive people ahead help him stand alone in a crowded field. See page 38 for details on Eddie’s Upcoming Seminar at SJREI & join us live with Eddie, the featured speaker at the May 7 SJREI meeting.

Notes are dyed into the fabric of Speed and his family -- he tells me he even got his father into the business at the age of 68. He goes on to say “we’ve been blessed to be in a business that’s been good to us and to others.” From here, he uses his fortunate position for

For more information, see the following: Colonial Funding Group: colonialfundinggroup.com Colonial Capital Management: colonialcapitalmanagement.com NoteSchool: noteschool.com

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Analysis

Alain Pinel MARCH 2015 OR MARCH 2000? General Manager of Intero Prestigio International

arch came & went, leaving quite a few financial experts and market observers scratching their heads. Many are those whose mind wandered on a 15 year time-travel, all the way to March 2000. Déjà vu? What do I remember about March 2000 in the Silicon Valley? Lots. Images & feelings are rushing back, like flashes in the brain, together with jolts of adrenaline. What comes to mind? Euphoria… …Exuberance…Let the good times roll…Don’t worry-be happy… Don’t wake me up! March Madness it was. Techies were taking over the world. Any good idea found cash. Angel investors were hunting for innovators. VC people were fighting to bring start-ups to the market. The Valley was on fire. Real estate prices were moving up monthly. IPOs were piling up weekly. The dot.com revolution was running the land. The 3 key words of those times: Money, Money, Money. Reality outshined dreams. Ambitions were inflating on the run. Make your wish and live it. Then came a cloud. Doubts. Fears. The bubble burst. The engine stopped. Prices went South on Wall Street and on Main Street. After the Ying, the Yang. 2000 was a tale of two halves: the rise and the fall. What goes up is supposed to go down, according to the popular saying. I don’t agree with that fatalistic view, but this time it did turn out that way. As I write this, today is April Fools’ Day. I bet a lot of people, in the Valley and all over the US, are thinking: are we re-living the March 2000 episode? Have we not been there before? What’s next? Today, the economy has fully recovered. Unemployment is down to 5.5% nationally. The stock market, which has been warming one month at a time for the last few years, is now steamy. The Dow put a new record on the books on March 2. As for the tech-heavy Nasdaq, which came a hair short of a new high a couple of times last month, it is still flirting with its March 10/2000 peak, in spite of a knee-jerk-type behavior last week. Hundreds of IPOs are in the pipeline. VC money is waiting in the bank. There is plenty of fixed mortgage money available at less than 4%.... So, the question is: are we in the midst of a growth cycle, or is it the end of the beginning, or is it the beginning of the end? Relax. The ride is not over, far from it, and there is nothing significant on the horizon that suggests otherwise. However, we are not in March 2000. We are on April 1, 2015. All is well in the Valley & beyond, but we are not (and we will not be) re-living the 2000 follies. Here is why:

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The economy as a whole, and the stock market in particular, are not exactly exploding as they were in the late 90s and 2000. We have been grinding, inch after inch. We have not been building a sand castle this time; we have been slow, patient & wise. We learned the hard way. Over the 2 year stretch between 1998 and 2000, the Nasdaq jumped about 150% (2000 to 5000). Growth, however palpable it is, is more reasonable now.

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In 2000, 446 companies went public in the US, including 131 in California. The Silicon Valley got the lion’s share of this total. The 2014 numbers were more modest. IPOs were down 33% from 2000 and the proceeds were down 12% from the 2000 level.

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Back in the days of the dot.com boom, most companies on the IPO block were not market-tested and were financially weak. Today, the large majority of the candidates are actually generating revenues and, for many, substantial profit. Different ballgame.

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In 2000, the price-earnings ratio (about x90) was roughly 4 times what it is now.

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In 2000, the Nasdaq was fragile and unpredictable, as nearly 2/3 of the index was in hi-tech. Today, this sector does not even represent 50%, and the companies have real products/services and proven marketing success

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Today, investors are more knowledgeable. They are picky. They don’t buy fairytales like a good many did 15 years ago.

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Today, the Fed is watching the market with eagle’s eyes, ready to intervene on a moment’s notice.

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Low inflation, a strong dollar & an imminent rate hike by the Fed, contribute to the cooling of the bullish economy.

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Today, commercial banks are more discriminating when it comes to making loans to homebuyers. Buyers actually have to qualify for the money they borrow. Nice concept. Hopefully this scrutiny is here to stay. It is a guarantee that the last financial crisis we finally recovered from will not resurface anytime soon.

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In 1999 and early 2000, real estate prices in the Silicon Valley were moving up at the rate of 20%+/y. Last year, prices jumped about 10% on average. Still huge, but smaller appreciation nonetheless. And I will argue that much of such appreciation was due to the acute shortage of inventory in the face of a robust demand.

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On the other hand -and contrary to the 2000 era- foreign buyers are keeping the market active and stable. Considering that the lion’s share of this demand is fueled by growing economies (China, India, etc.), it is comforting to know that the market will neither overheat nor collapse.

No, it is not March 2000 all over again. We are OK. Repeat after me.

April 2015 REI Voice

Features Q: What kind of profits do you see? A: Usually the profits, which go toward future deals and operating expenses, are restricted to 10% of the total cost of the development because of the federal funds that we’re using. That can mean years as we recently saw.

Q: When do you receive developer fees? A: It depends. We finished a project in 2007 as the market was falling and we had to wait until the final unit sold in 2014 to get our developer’s fee. It took 6 full years to sell them all. We ended up only receiving a quarter of the fees we were supposed to receive, because we had to drop the prices and we still had construction loans that were outstanding so we took a hit on our profit. With our other developments, if we don’t meet certain thresholds and deadlines, we also don’t receive the anticipated developer fee. Because of that, we always welcome charitable giving and donations which double as tax write-offs for those who donate.

Q: What kinds of neighborhoods attract non-profit investors?

Nancy Whit (Cont. from page 23) A: Non-profits like ours are usually located in neighborhoods which are hardest for investors to invest. Neighborhoods with higher crime rates, less affluent people and fewer job opportunities. Places where people don’t want to invest because the return is not very high. The nonprofits know that if we are able to make a change the neighborhood will come back and be attractive to for-profit investors as well.

Q: What does the future hold for your organization? A: PCFDC wants to continue our mission of elevating neighborhoods, empower residents by providing a higher quality of life and opportunities for homeownership and to make these neighborhoods appeal to for-profit developers and investors as well who will continue our work.

Giving back Locally Like PCFDC, Summit Assets Group makes it a practice to give back to the communities in which they invest. Investors changing and building communities one house at a time

Analysis

Trading Fiction for Facts: a Fresh Perspective on the Port Labor Disputes

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

by Dr. Christopher Thornberg If you haven’t caught the news, which would be tough given recent press exposure, it looks like the ongoing conflict between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) has finally come to an end. The last contract between the two expired in mid-2014 and the parties had been unable to reach an agreement on a new contract for months. The dispute led to delays in the movement of products in and out of west coast ports and culminated in a short lockout over Presidents’ Day weekend. If you listen to the rhetoric about the slowdown, and the potential for a full closure of the ports, you might think that the U.S. economy has avoided a near existential crisis. Little wonder that President Obama dispatched Labor Secretary Tom Perez to mediate the dispute. And in turn, Mr. Perez was not shy about the magnitude of his intervention: “a significant potential headwind for this economic recovery has been removed,” he said. Did the U.S. economy dodge a bullet? Candidly, no—not even close. For all the hype in the press and hyperbole happily doled out by those in the industry, the reality is quite different. Even if there had been a major strike that dragged on for a few weeks, it would have been very difficult to see the impact in any of the major economic numbers regularly used to measure the health of the broader economy. This doesn’t mean there wouldn’t have been some cost to the economy and certainly some individual businesses would be negatively affected, perhaps dramatically. But overall, the numbers just aren’t large enough to move the collective needle. Heresy? How can I be so blasé? Four reasons. First, the movement of goods through West Coast ports relative to the overall size of the U.S. economy has been highly overstated. Second, companies mitigate. In other words, they work to find alternative solutions to supply chain issues they are facing rather than sitting around helplessly. Third, there are winners and losers, and for every loser in the disruption there is a winner somewhere else, offsetting the damage to some extent. And my final reason is the most convincing of all—history. Neither the data to date nor data surrounding past port closures suggest anything close to the potential cataclysm being described by many pundits. The following choice quotes from published stories about the ports in recent weeks show how distorted much of the commentary and reporting has been relative to the reality:

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“The West Coast ports, responsible for 43.5 percent of U.S. trade, have been operating at reduced capacity since late October.” (www.bloomberg.com/news/ articles/2015-02-21/west-coast-ports-shutdownaverted-with-five-year-labor-agreement) “The West Coast port slowdown could reduce fourth quarter GDP by 1%, according to Deutsche Bank’s Joe LaVorgna.” (www.businessinsider.com/westcoast-port-strike-hurts-gdp-2015-2) “Manufacturers in just about every industry, from electronics to home goods, are feeling the pain.” “While unions and terminal operators go back and forth on contract negotiations and possible solutions to the slowdown, manufacturers are caught in the middle losing millions of dollars, because they’re not able to meet their customers’ demand.” (www. ebnonline.com/author.asp?section_id=1056) “The dispute now costs the economy about $2 billion a day, estimates Kevin O’Marah, the head of research for SCM World, a group of senior supply chain executives from companies that include Barnes & Noble, Nike, Microsoft and Shell. O’Marah bases that figure on a 2002 work stoppage, which cost about $1 billion a day.” (www.ibtimes.com/west-coastport-slowdown-labor-dispute-hits-us-economyhard-1820740) “…the disruptions have already wreaked havoc on multiple industries. Honda recently announced it was curtailing production at Midwest facilities because the port crisis had squeezed its supply chain.” (www.foxnews.com/opinion/2015/02/18/ how-obama-is-allowing-union-to-hold-economyhostage)

Analysis You often hear the statistic that the Ports of Los Angeles and Long Beach alone handle over 40% of U.S. trade. That is true—if you are counting shipping containers alone. A lot of “trade” isn’t moved in shipping containers. It comes and goes in tankers or trucks or airplanes, or is a service that isn’t carried at all. And the products that are moved in containers on boats actually tend to be lower value than other kinds of trade. By value, the Ports of Los Angeles and Long Beach carry about 10% of goods in and out of the U.S., while the balance of West Coast ports carry another 5%—only 15% of total of goods trade overall. Throw in service trade and the share drops to 7% and 4%, respectively, just over one-tenth of our nation’s economic interaction with the rest of the world. Moreover, the U.S. isn’t terribly trade dependant relative to other nations because of our location and the sheer size of our economy. Add together all U.S. imports and exports and it accounts for about 30% of GDP. For places like Korea and Germany this figure is well over 100%. What this means is that the value of goods that flow through West Coast seaports are a slightly over 3% of national GDP. Not that big of a number suddenly. But it is also true that a small number can end up being bad for the overall economy if we are talking about critical linkages in the supply chain. What about all the disruptions referred to in the comments above and others? While anecdotes are always a bad way to measure the broader economy—in this case even the anecdotes can’t be believed. Has the slowdown cost the U.S. economy? What of the Deutsche Bank economist’s claim that 4th quarter GDP could have been negatively impacted? While GDP growth was reduced by a full percent because of our external accounts in the last part of 2014, it was not because of shrinking trade as a result of a port slowdown. Quite the opposite. In real (price adjusted) terms both imports and exports grew in the last part of 2014 according to the official statistics from the U.S. Bureau of Economic Analysis. But imports grew a lot more than exports, hence the negative number on the economy overall. Yes, the trade deficit opened sharply. This had nothing to do with the port slowdown and everything to do with the fact that the U.S. economy is now growing faster than much of the global economy. And there are plenty of other numbers to suggest that little has happened to the U.S. economy since the West Coast port disruptions began. Manufacturing output growth accelerated from 3.2%, yearon-year, in the 3rd quarter of 2014 to 4.5% in the 4th quarter, according to data from the Federal Reserve. And this is despite the slowdown in energy exploration. Jobs and layoffs? The last 4 months have seen the fastest pace of job growth in the U.S. since the late 1990s. Layoff notices and initial claims for unemployment have similarly dropped to their lowest levels in 10 years. Consumer spending has been on fire recently and it was a great holiday season for retailers. None of these statistics suggest that there has been any impact on the broader U.S. economy. Was it just that the nation’s economy was at a tipping point? After all it was only in recent weeks that Honda announced it was slowing production due to lack of parts. But while much ‘news’ was made about the carmakers announcement, the numbers were actually

Trading Fiction for Facts pretty minimal. Honda announced that their production schedule was behind by about 25,000 units. To put this in perspective, last year Honda sold 1.4 million cars and light trucks in the U.S. Those 25,000 units are less than a single typical week of sales. And those won’t be lost sales. Auto companies have plenty of slack in their production system. It makes sense in a world with periodic issues (strikes, supply chain issues, weather, etc.), and where some seasons are big selling periods (summer) and other times are quite slow (now). Honda may be a bit behind on their production schedule now, but they will have plenty of time to catch up before they lose any sales—ports or no ports. Honda acknowledges that over 80% of the parts that go into cars assembled in the U.S. are also produced here. And as a billion-dollar auto company they have plenty of ways of getting the remaining 20% of parts into the U.S. other than through West Coast ports— including by air freight, shipping them through East Coast ports, or wheeling them through Mexico or Canada. And there is evidence that this was happening. The volume of trade through West Coast ports slowed at the end of 2014—but it increased overall in the nation. And in the worst case, Honda might even hire a company domestically to produce the additional parts. In other words, they can mitigate the potential impact of a West Coast port closure. Critics of my point of view will counter that all of these sources of inputs are more expensive. Yes, of course. The reason the Ports of Los Angeles and Long Beach are the busiest in the nation is because they represent the cheapest option for many firms. But “cheapest” doesn’t mean “exclusive”. And mitigating is likely to be less expensive than losing a sale to GM, Ford, Toyota or the plethora of other auto companies with lots full of cars for sale. Which brings us to the winners and losers discussion. Many small firms are indeed being caught up in the slowdown and they will not likely have the resources Honda does to find alternative options. But for every small retailer unable to bring shirts in to sell at their store, there is another that can. There are no shortages in U.S. stores right now—just look around. For every loser there will be an offsetting winner and, and on net, there is little change. This is true for exports as well. One of my favorite anecdotes regards a large soy exporter here in California who was unable to ship his crop to China. Putting aside the question of how we have so much excess crop to sell overseas in the middle of a major drought (see my earlier post on this silliness), the farmer did finally acknowledge that his crop did not go to waste. Only that he had to sell it at a lower price to a middleman on the East Coast. As with most of these stories, a small scratch at the surface and the whole disaster narrative quickly falls apart. Take for example the idea that a closure of West Coast ports would cost the U.S. economy $2 to $2.5 billion per day. Impressive, considering that the ports only move $1.6 billion in goods on an average day. And studies I have conducted on past strikes (Protecting the Nation’s Seaports: Balancing Security and Cost, Haveman & Shatz, editors, Public Policy Institute of California, 2006) find little evidence of any major macroeconomic disruption. The same applies to the 12day closure of West Coast ports that occurred in 2002—there is no data, except regarding shipping containers, that suggests any slowdown in the U.S. economy. April 2015 REI Voice

Analysis

Trading Fiction for Facts

Why all the rhetoric? For the simple reason that mitigation efforts are costly, uncertain, and a giant headache for the managers of companies that use the ports on a regular basis. Ultimately it’s cheaper to make hyperbolic claims to the media to force public intervention and have the situation dealt with—as has happened. Am I glad the port strife is over? Of course. I’m mainly thankful because even if there have been no major macroeconomic implications, many small firms have suffered unfairly as a result of the ILWU’s ridiculous demands on the ports and, by definition, on the rest of us. This small group of overpaid, over-coddled union members is not a bastion of the middle class, as they like to claim. Average pay on the docks runs just under $150,000 per year for relatively blue-collar jobs, according to port management, and this doesn’t include some of the best pension and health benefits around. Their efforts to preserve union jobs have reduced productivity at the ports relative to their global peers. This represents a tax, which we all pay, for the benefit of these 20,000 people.

they are willing to leverage through periodic labor disruptions to pressure public officials into pushing for compromise. But therein lies the rub. We have allowed the mass of media stories about the ports’ “critical importance” to the month-to-month functioning of the U.S. economy to become conventional wisdom, and as such we have strengthened the ILWU’s position of power, ensuring they will continue pushing for even more over time. We have five years now until the next contract negotiation. I hope next time we go into those discussions with a firmer sense that it is okay to stand up to a bully.

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

How do they get away with it? Because they have a singularly unique position in operating these facilities on the West Coast—a position

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Analysis

Carole Rodoni What Attracts Foreign Buyers of Real Estate to the Bay Area? by Carole Rodoni

hat groups of foreign buyers are most attracted to the Bay Area? I find that mainly the Asian buyers, especially the Chinese, buy properties in the San Francisco Bay Area. They love it here: San Francisco is the gateway to the Pacific Rim; our weather is the best in the nation; we have Silicon Valley and the best universities in Stanford and Cal; and, outside of China, we have the largest Chinese population. In fact, according to a survey done by the National Association of Realtors, almost 20% of the $60 billion dollars they spent buying real estate last year was here in our area. The projection for this year will be 20% of $90 billion dollars.

was decreasing in value. Today the opposite is true. This puts heat on foreign buyers to buy quickly and to pay a premium. They also want entry into the American marketplace, to our educational system for their children, and the ability to live the American lifestyle.

As buyers they are particular and they should be. They have the money and often pay top dollar, usually in cash, and they often donâ&#x20AC;&#x2122;t ask for terms and conditions.

Also, their market is dominated by institutional developers who often over-buy, over-build, and under-sell. They are playing the market but not really investing in it, and their time frame is very long so that over time as more people in China gain wealth they figure they cannot go wrong (millionaires are growing at the rate of 20% a year). They are, of course, also romancing American and European buyers to put money in their real estate market.

What they are looking for is quality in terms of location, trophy or one-of-a-kind properties, and low maintenance since they may not be living here full time, if ever. For them bigger is better. Newer is nice; brand new is nicer. They rely on our real estate professionals for expert advice and they want someone who is an expert in the area in which they are buying or selling. If, over time, you earn their trust, you will have a client for life. Today real estate for them has become a driving force. Why? Just a few years ago the yuan was getting stronger while the the dollar

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But what about Americans buying real estate in China? It is very different. For one thing, at this point in time, what you buy is really just a long term lease as you cannot own the land itself. Also, they are currently in a real estate bubble: right now, prices in the best locations right are usually exorbitant, and, of course, one wonders whether these prices are justified or sustainable.

How different the two markets are-- here they are coming, searching, and competing to get our properties, while there they are seeking us out. The real question is which properties will be the strongest over time? Time will tell -- so goes the world. Here are some questions to ask yourself: Is where you come from home today? Is home where you are currently living? Or, finally, is home everywhere you invest? Today we live in a global world moving in the fast lane. Are you on board?

Basics

Pam Blanco The Numbers Work: Pam Blanco’s Strategy for Success by Michael Grigelevich

exas has a lot going for it. Boasting 31 Fortune 500 companies, the 3rd busiest airport in the country (Dallas-Fort Worth), and the soon-to-be Toyota headquarters in Legacy Park in Plano, it’s no surprise that Texas stands as “the business capital of the south.” Such economic stability and growth, as well as affordable properties, consistently make Texas an attractive place for real estate investors. When it comes to sales and property management companies, it can be difficult for investors to make the best decision; however, in this bustling market, Pam Blanco’s Professional Management & Sales (PAMS), a full service real estate and property management company, stands out in the crowd. Let’s explore why, and see what we can learn from her well established “oil machine.” Family-owned and operated, PAMS employs a comprehensive approach to find investors the best properties. According to Pam Blanco, the president and broker for the company, her business stands apart from the rest because they do, quite simply, everything. Blanco’s team researches properties and puts together comprehensive Return On Investment (ROI) reports based on their findings; they sell properties to investors; and when the deal closes, they manage the property. The company holds a vested interest in the properties they sell, as their relationship with clients continues after the sale. Service offerings includes a full rehab team that can handle minor or major property renovations -- a component that can be riddled with headaches for the clients. When it comes to researching properties for clients, Blanco and her team take a scientific approach to their data mining. Focusing on important things like school districts and average rents, Blanco’s team looks deeper and considers other aspects, such as whether or not a neighborhood is saturated with rentals and how long rental properties sit on the market. When research is complete, the client gets a detailed ROI sheet, sharing with full transparency the process, as well as providing, according to Blanco: “a detailed breakdown of cash flow for both cash and financed offers. To further evaluate the property . . . we give a breakdowns of insurance, taxes, maintenance repairs, vacancy loss, HOA costs and closing costs.” These detailed reports contain the most recent information available; after all, Blanco’s staff conducts daily research. They know their market inside and out and are aware of the most current data and happenings. When the purchase is complete, the property management wing of the company helps market clients’ properties to get the cash flow rolling. The company employs a full time marketing and

leasing manager that strategizes ways to fill properties as quickly as possible, which, Blanco says, helps “reduce days on market which increases cash flow.” The marketing and leasing manager also creates programs to help thwart vacancies, such as staging vacant properties to entice potential renters. Once a client’s property finds a stable renter, Blanco’s company manages it; currently they manage approximately 500 doors. Blanco states, “Our goal is to delight our clients, our point of difference is that we are very involved in the day-to-day operations of each property. We have an all-inclusive team that performs every aspect of the process.” They walk each property monthly and take photos; this documentation becomes part of an end of the month report given to clients/owners. Every 6 months, the company conducts interior inspections of all properties. All this work serves one clear objective: “to keep the out-of-town investor as well-informed as possible.” It’s rare to find a full service real estate company, particularly with the property management component, that has a clean, clear mission to service their clients, investors, and tenants as professionally and cost effectively as possible. The secret to success? Her systems as outlined above, which include the following: attention to details; continual reevaluation to improve the operation; regular property management inspections; solid tenant screening and selection practices; and, finally, a long time horizon regarding their clients. When clients purchase properties that require renovation, Blanco provides services from basic to major rehab, simplifying the often complex process. A complete property rehab department handles any job, large or small. Blanco makes a point to say that they will never put an investor into a situation where a property cannot perform; due diligence is key for her. However, vacancies happen and expenses arise; this is a business, after all. The unexpected can and does happen, but Blanco has the experience to handle problems and strives to make the process easy and effortless for clients. In short, analyzing PAMS gives the opportunity to see how the best gets the job done and incorporates those practises into our business as investors. Locating a top-notch, comprehensive real estate service that sets a high water mark for professionalism and efficiency in the industry is difficult. But, under Pam Blanco’s leadership, the company can only continue to thrive and offer clients quality service. In the fast-moving market of the Lone Star State, Blanco and her business stand alone thanks to their peerless performance.

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

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Analysis

How Much Money Does it Take To Invest in Rental Properties? Brandon Turner Senior Editor and Community Director of BiggerPockets.com, a wonderful online resource for investors.

by Brandon Turner Now, I only need to save up $40,000 instead of $200,000.

randon Turner is an active real estate investor in the Gray Harbor, Washington area. Brandon is also VP at BiggerPockets. com, the real estate investing social network and the author of The Book on Investing in Real Estate with No (and Low) Money Down, available on Amazon. This article originally appeared on BiggerPockets, the real estate investing social network. © 2014 BiggerPockets Inc. How much money does it take to invest in rental properties? Probably not as much as you think.

Yes, I need to pay the bank each month for many years, but hopefully I’ve done my math right and I’m making far more income than I’m spending on that loan payment. Of course, saving $200 a month (as I mentioned earlier) would still take many years to save up that $40,000. However, there are other strategies for using even more leverage or finding lower priced properties. (Like you’d hear about if you picked up a copy of The Book on Investing in Real Estate with No (and Low) Money Down.) Yes, this is pretty basic stuff, but you might be surprised at how many newbies fail to realize that this is how the game is played.

In the history of the world, perhaps nothing has killed more real estate ambitions than the belief that one does not have enough money to get started.

The Dark Side of Leverage

In fact, I speak with people all the time who don’t know it’s even possible to invest in real estate without having the full 100% purchase price of a property. They look at a $200,000 property and try to do the math in their head, thinking,”Well, if I saved $200 per month from my job, I could start investing 83 years from now. But that’s never going to happen, so I guess investing in real estate is only for the privileged rich.”

The more leverage you use, the greater risk you may be placing yourself in.

Not so! Enter: Leverage Using Leverage to Reduce the Amount of Money You Need to Invest in Real Estate While yes, it is true that some investors pay for properties in all cash, the majority of investors utilize leverage when buying rental properties. Leverage is a term that simply means applying a small amount of force to achieve far greater results. With real estate, leverage usually comes in the form of loans. A small down payment is supplied by the borrower, a lender provides the remaining balance of the purchase price, and you pay that lender a small amount each month until the loan is paid off. For example, I might look at that same $200,000 property but get a bank to lend me 80% of it. They would supply a $160,000 loan, and I would need to only come up with the $40,000 down payment (plus closing costs, which we’ll cover in a moment.)

Leverage, of course, can be both a blessing and a curse.

For example, if you paid 100% cash for a property, you wouldn’t have a loan payment due each month, so a three month vacancy on your property wouldn’t hurt as badly. Or if you bought a house with just 5% down, and the value of that property dropped 20%, you are now “underwater” and owe more money on the house than it’s worth. This limits your future options and can make it difficult to sell, refinance, or do much of anything with the property. This leveraging is what caused much of the housing collapse and glut of foreclosures in the market in 2007 and 2008. Homeowner Hank purchased a home for $100,000 and used 100% financing, putting down $0 on the property. When the value of that property dropped to $80,000 and Homeowner Hank lost his job, he couldn’t sell the property because he owed far more than what he could get. The bank needed $100,000 to be satisfied, and the most he could get is $80,000. As a result, Homeowner Hank and millions of others simply allowed the bank to foreclose and take back the house. So, was leverage to blame? Should we NOT pay 100% for rental properties? What is the magic number? I’d like to reframe the question and force you to think about it in a little bit of a different light. Rather than discussing how much to put down, I like to think “How secure can I be?” (Cont. on page 45) April 2015 REI Voice

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Advice

Tom Wilson The Top Five Reasons to Consider Commercial Real Estate For Your Portfolio

hile many investors see single-family homes as their “breadand-butter” investment, investing in commercial properties is an option that can also help you achieve your financial goals. “Commercial*” in its broadest lay vernacular includes multifamily apartments; however, the true industry definition separates multifamily properties (over five residential units) from true commercial, such as retail, office space, industrial, self-storage or medical centers. I’m often asked what kinds of properties I recommend. There is, of course, no one size that fits all investors or markets. While multifamily properties in a normal market are a natural progression from single family homes, this is anything but a normal market and currently there are too many multifamily buyers chasing too few deals; so, they currently have lower CAP* rates or returns than pure commercial properties. Here are five reasons to consider commercial properties for your portfolio:

1. Higher ROI

Commercial properties often have higher and more predictable return-on-investment than single-family homes, in part due to the economies of scale from investing in a larger property not usually available to the small investor. For example, a current commercial retail center that we are acquiring has an 8.2 CAP rate and a 4-year internal rate of return* of 12.0%. When you can borrow money at 4.25% and invest it in something yielding 12.0%, that’s worth considering!

2. Fewer Headaches

It’s generally easier to manage one large property through a professional property management firm than to manage scattered single-family homes. Also, the business tenants you get in retail or office space are usually of higher quality than most residential tenants. Business tenants have higher credit/risk scores, have pride of ownership in their businesses and want to protect their livelihoods. As a result, they have an interest in taking care of the property. Many commercial properties are NNN* (triple net), so the tenant pays most of the expenses, including taxes, insurance, and maintenance, making the owner’s expenses very predictable and consistent.

3. Stable Cash Flow

Commercial leases are typically 5-10 years in length vs. annually for single-family homes. Additionally, commercial leases include annual bumps in rent and options-to-renew. As a result of all these factors, cash flows are more predictable.

4. No 10-Mortgage Fannie Mae Limit

Any loans taken by the owner or syndicate do not count against your 10-mortgage limit, because they are in the name of the owning entity and not on your personal credit. This enables you to put more of your capital to work.

5. Appreciation Multipliers

Unlike single-family homes, which are strictly valued based on market demand, or ‘sales comps’, commercial properties are valued as a multiple of their Net Operating Income (NOI)* which can be driven up by a good property manager’s addition of value. At a Cap Rate* of 8.0, every one-dollar increase in annual NOI can result in $12.50 of appreciation!

Here are steps you can take to actively improve NOI include: •

Upgrading the existing buildings

•

Increasing TI (tenant improvement)

•

Adding leasable square footage

•

Raising rents

•

Reducing operating expenses

•

Adding amenities

•

Adding additional revenue generating resources (ATM kiosk)

•

and many more

Rather than wait for market forces to raise real estate prices organically, you can create appreciation using levers like the ones listed above.

April 2015 REI Voice

Advice

Tom Wilson

Additional Benefits of Commerical Real Estate Of course, the five advantages of commercial real estate listed above are in addition to the usual benefits of any real estate investment: • Tax Benefits • Hedge against inflation • A hard asset with intrinsic value

Syndications

Caveats of Commercial Investing

Summary

• Financing can be more challenging Typically, the investor(s) must put down 25-30% of the sales price and finance the loan amount over a 5-10 year term with a balloon payment at the end of the term. Selling or refinancing options at that time will vary depending on market conditions. And there can be stiff prepayment penalties.

•

No discussion of commercial investing would be complete without noting a few issues that investors should be aware of:

• Not as Liquid If you own 10% of a commercial building and want to sell your interest, you can sell to your fellow investors (who usually get first right of refusal) but if none are interested, it may be difficult to get out of the investment. That is why long-term funds, like IRA money, are ideal for commercial properties. • Sale of a Commercial Property can take longer While just about everyone wants a home, only a small percentage of the population is capable of purchasing a retail center or office building. The smaller market of potential buyers coupled with a detailed due diligence process means that the sale of the property can take longer than one for a single-family home.

Many of the challenges outlined above can be mitigated by investing with an experienced syndicator. Their knowledge, track record, and ability to qualify for the loan and manage the property allows the small investor to participate in a high-quality commercial property or to invest in multiple projects to distribute their risks. The benefits, economies of scale, opportunities for forced appreciation and higher returns make commercial properties an attractive addition to most investors’ portfolio, and one worthy of serious consideration. For your free copy of Wilson Investment Properties article “Are Real Estate Syndications for You?” and a guide to “Commercial Real Estate Terms” please go to our website, www.tomwilsonproperties.com. About the author:

Tom K. Wilson has utilized his experience and skills acquired in 30 years of managing some of Silicon Valley’s pioneering high tech companies to buy and sell more than 2,000 units and over $100 million of real estate, including three condo conversion projects, several syndications, and seven multifamily properties. He founded and owns Wilson Investment Properties, Inc., a company that has provided 400 high cash flow, high-quality, rehabbed and leased residential properties to investors. Active in real estate associations, Mr. Wilson is a frequent speaker on real estate investing where his expertise and experience makes him an audience favorite. He is the weekly host of the Wed 2pm edition of KDOW’s RE Radio Live in San Francisco, the Wall Street Business Network (1220am).

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Features Today, everyone wants to maximize value. Clearly, joining a local REIA is one of the best ways to get value in the world of real estate. Whether one is a newcomer to the field or stands as a time-tested success, there is always something to be gained from one of these organizations. When it comes time to choose a local REIA, there are a few things on which one should focus. Take a look at membership numbers and remember that bigger is not always better; smaller numbers can often lead to more close-knit relationships. Take note of the event schedule, too: does the organization routinely attract quality speakers? Do speaking events regularly occur? Also, one should see if the organization offers motivated seller leads. The final thing to look at would be the language on the website, particularly the mission statement and member testimonials. Do they avoid sales pitches? Do they offer non-members access to

Features In addition to the complications of development, the rising cost of rent poses problems for the future. Pierce shares some numbers to help us comprehend the scope of this issue: “There is growing political pressure to do something about rent growth. The supply side can’t happen fast enough. Let’s look at the numbers: to pay $4,000 a month in rent, a monthly income of $12,000 is required to simply qualify. Not everyone is making six figures plus. That is where I see some problems on the horizon. The areas that are being built include high end class A, or subsidized housing; what about the middle class? Middle class housing does not pencil out for developers; it’s too expensive with land acquisition and development costs $450k-600K per door in the Silicon Valley ($650,000 - 1 million in San Francisco to build new housing.) Amenities to the max need to be provided at this price point. How many can pay that price?”

Join a Local REIA (Cont. from page 18) events? All of these things speak directly to an organization’s integrity. In any field, the best learn from pooled resources. Just like a college study group, a local REIA can give you strength through numbers. For local readers of REI Voice, please keep in mind that this magazine speaks for SJREI (San Jose Real Estate Investors Association) and consider joining. This awardwinning organization offers speakers on a variety of topics, quality investment leads, and a network of trained professionals to help guide or mentor others, or even just share ideas. Ultimately, one should find the best local REIA that meets his or her investment goals and join it. Success may depend on it!

Michael Pierce (Cont. from page 19) builds goodwill with tenants when owners make improvements. If landlords neglect to keep on top of maintenance, they will be punished when the economy changes, and it always does; tenants will move to renovated buildings. Improving your asset and keeping on top of maintenance results in decreased turnover. Landlords who do that tend to be more successful over time. They will have higher occupancy rates and less vacancy issues. He cautions landlords to be mindful of the following: “Be kind and aware of the effect that this economy is having on our tenants; every unit does not qualify for top notch rental rates. Just because you can do it does not mean one should, every 2 bedroom is not worth $5K. Landlords would do well to be fair and aware with rents for existing tenants.”

Rent control discussions are something that generally come along when rents escalate, especially over a relatively short period. Pierce frames rent control as “a political, and social, storm brewing.” He adds that, “there is enormous pressure to relook at this when rental rates increase dramatically. There is a move to implement stricter rules for existing rent controls, and more pressure to implement in other cities that don’t currently have it. This is the root of the protests for Google and Facebook bus drivers here in Silicon Valley. ($20 an hour is not a sufficient income to live on, and service the tech workers in the Silicon Valley.) Ironically, the same people who are crying for affordable housing don’t want that housing built next to them.” When it comes to what’s on the horizon for 2015, Pierce shares some predictions and some important things for landlords and property managers to be aware of: Increase in rents 5% next year, flattening out, due to the spectacular growth we have experienced over the last 24 months. The savvy landlord is putting more cash flow back into buildings to upgrade and maintain properties. When cash flow is strong, it

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Geraldine Barry,

Real Estate Commentator & Investor

Analysis

Brandon Turner (Cont. from page 39)

Two Important Truths About Risk There are ways to increase your security when using leverage, so let me cover the two main points. First, the down payment is not as important as the deal you get. If you purchase a house for $100,000 and put 30% down (thus obtaining a $70,000 loan) and I buy an identical house for $70,000 with 0% down (thus obtaining a $70,000 loan), who is at more risk? I’d argue that YOU are at the greater risk because you have more cash invested, but our loan amounts are identical. I just did the upfront work required to pay $70,000 and you didn’t. I leveraged my creativity in place of a down payment. Secondly, when investing in rental properties, knowledge can help decrease the risk of leverage. The better you understand the market, your investment and how to manage that investment, the lower risk you have of something going wrong. For example, if you do the math correctly before buying an investment property and you know that you need to account for the property sitting empty a certain percent of the year, then that vacancy, when it occurs, won’t sting. It’s just part of the business. Your knowledge helped secure the investment against the things that WILL go wrong. For this reason, we built the BiggerPockets Property Analysis Tools to help you run the numbers on any potential deal, to help you avoid buying bad deals and focus on the good ones.

around 20%, as long as you qualify. Much of the discussion in the real estate community revolves around 20% down payments as the norm for planning and strategizing for the future. This is definitely the most common, but please understand that the dollar amount or down payment percentage is not as important as the concepts that lie below the surface. If you want to read everything I know about investing with creativity, don’t miss my first book, The Book on Investing in Real Estate with No (and Low) Money Down available on Amazon or at BiggerPockets.com/nomoney. I have no problem with people who want to use 100% financing on their real estate. I am a big fan of the personal finance advice given by Dave Ramsey, who is a staunch advocate for paying only 100% cash for all investment properties. However, I also recognize that for many, myself included, waiting to invest until I have all the cash needed would require decades of sitting on the sidelines. What About Reserves? This piece has focused primarily on the down payment needed to invest in rental properties. However, there is another purpose for your cash… and that is for reserves.

So, perhaps you can see now why I can’t simply give you a clear answer to the question, “How much money does it take to invest in rental properties?”

The fact is, when investing in rental properties, things will go wrong. You’ll have good months, bad months, and average months — and you never know what you are going to get. This is why it’s imperative that you have cash reserves to cover any problems you might face.

However, I don’t want you leaving this piece without having a good number in your head, so let me offer two of the most common scenarios:

It would be terrible to buy a rental property and, in the first month, be forced to evict a tenant and make thousands of dollars in repairs, but this kind of thing could happen.

House Hacking

The amount of cash you should have in reserves depends on a number of factors, most notably the number of properties you own, the condition/age of those properties, how much it would cost to fix the property up (will you be doing the work yourself?) and your management abilities.

How Much Money Should You Put Down?

If you plan to purchase and live in a small multifamily property between two and four units, you could obtain a bank loan for as low as 3.5% down through the FHA loan program. This concept, known as “House Hacking,” is a great strategy for those just starting out with real estate and have limited cash and experience. However, again, you are required to live in the property (for at least one year). Also, when using a low-down loan like the FHA, know that there is an additional fee charged to the borrower each month known as PMI that can increase your loan payment by around $100 per $100,000 financed, so just be sure to include that in your math. Conventional Loan Most banks want a 20% down payment, at minimum, for rental properties. There are a number of banks which will allow less, such as 10%, and some banks will require more, such as 25% or even 30%. Each bank will have their own requirements, but as of the date of this writing, it should be possible to obtain financing for

I would encourage you to start with six months of expenses per unit you have. For example, if you have a single family home that costs you $800 per month in expenses, I would recommend having $4,800 in savings for that property. As you get more and more properties, you may be able to decrease this amount, but it’s a good starting point. So, how much money should you have to get started investing in rentals? You tell me.

April 2015 REI Voice

Coach’s Corner

by Lori Greymont

t’s an understatement to say that I have a lot of priorities. I’m a mom to four children. I have a mini-farm. I’m the owner of not just one - but two! - businesses now. Having so much on my plate, it’s easy to get overwhelmed and to feel, sometimes, out of balance. What to do? First: accept.

There will always be many priorities that come up. Those little todo’s like email, meetings and so on. These small items may not be the best use of your time.

Balance? What’s That!?

My recommendation for dealing with all those smaller things while focusing on the big picture? Make a list of everything you have to do each night or each morning. Run through the list. Mark each item as eliminate, delegate, automate. What you have left should be 20% of the list you created. Next, pick the one thing that, if you do it, will make everything else easier. Most likely, that will be a sales activity. Focus on that one item until it is done. Fight for the time to finish. Do nothing else until it is done. Fight for your success.

Accept that there will never be balance. I know that’s a strong statement but it’s a true one. “Balance” is just another way to keep you average - and, like most of us, you probably want an extraordinary life! How do you get to be extraordinary? By defining what ‘extraordinary’ means to you. What do you want in life? If you don’t know the answer to that question, you aren’t living the life you want. I’ve had to watch many of my dear family members pass away early in life. I remember how they used to talk about what they were going to do in life...after they retired. They didn’t make it to retirement, and they didn’t get to do the thing they really wanted to do. These experiences changed me forever. I vowed never to do that. I knew I would find a way to achieve what I wanted now and not to put it off. Rethink balance. Think: full.

Eliminate. Delegate. Automate.

Focus on Success We typically avoid sales to one reason: fear of rejection or actual rejection. What’s more important to you? To your business? Is it success or rejection? Focus on your success, put your fears aside and push forward to achieve the results you want. Build the business you want. Create the lifestyle you deserve.

Prioritize

Rethink ‘Multitasking’

As a mother, it’s always been important for me to spend my time with my children; I really fight for that time. Now that they are older, they aren’t available as much. But I know how I was there for them in their early years because of deliberate choices I made in lifestyle, education and business. I learned how to live the life I wanted by focusing on my priorities. Deliberate choices led me to the life I wanted and to be the mother I wanted to be. When you make deliberate choices, you live a deliberated life.

We’ve been trained to multitask and to look for balance. We’re taught it’s a virtue. In reality? It’s the opposite. The true sign of a genius is someone who can stay focused on one task until it’s completed. When you multitask, you don’t actually do any one thing well. All the things you are doing suffer. Get multiple tasks done by focusing on what you must do, what you can eliminate, what you can delegate and what you can automate.

What You Focus On Grows In business, I must focus on sales. If you want your business to be more than a hobby, the focus needs to be on sales. What you focus on grows, so you absolutely want to be deliberate in your focus.

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Don’t be fooled by the allure of accomplishing small things such as replying to an email. Yes, it’s a completed task, but does it really get you from point A to point B? If it doesn’t, find another way to stay focused on the things that do get you there. When you focus on the road to success, the smaller issues are just that: small.

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

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

1. Property Acquisitions 5. Property Management

The AWB Turn Key Process

4. Property Sales

2. Property Renovation

3. Tenant Placement

Our goal at Alliance Wealth Builders, Inc is to offer our valued clients a simple and hassle free experience when purchasing one or more of our Turn-Key income properties. By purchasing one of our high-quality, turn-key real estate income properties, youâ&#x20AC;&#x2122;ll benefit from our teams handling of every aspect of the investment process; starting with property acquisition and property renovation, and continuing throughout the process of tenant placement and ongoing property management.

(205) 552-7009

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

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

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