Thursday, February 28, 2013
Wednesday, February 27, 2013
Living in Northeast Seattle
Living in Northeast Seattle brings the notion of "community" to a whole new level. This particular neighborhood boasts a community group called North East Seattle Together, which “ . . . connects northeast Seattle residents to community resources; and provides social and educational opportunities so that, as they age, members can live confidently in their homes and neighborhoods” (http://www.nestseattle.org/about/). There are many other community support groups in NE Seattle that encompass many services supportive of living in Seattle, like: Sustainable NE Seattle which is providing solar power to their neighborhoods, “tool libraries”, and more! NE Seattle residents also have greater access to Everett, Payne Field, the Kingston-Edmonds Ferry, and suburban communities in northern King County.
This area of Seattle extends from the University district up to the borders of Lake City, and although fairly suburban in its layout, has a dense population. Most of these neighborhoods are strewn with parks and green spaces, with much focus on family, community, and schools. The average home price in this area starts around $375K. Near hubs of businesses and recreational activities, many rental houses and condos are available to residents as well. Community highlights in NE Seattle include the University of Washington & its stadium, Greenlake & the Woodland Park Zoo nearby, Magnuson Park, Matthews beach, and close proximity to museums, theater, art, and downtown. Transportation in the area includes buses, biking, car-pooling, and even boating! Do you like hands-on projects, crafting, brewing, shopping, playing, learning, meeting new people? North East Seattle has got the right fit for you. Not only does this area offer a short commute trip into downtown Seattle, which is less than 5 miles away; but it also offers access to ferries, mountain passes, bike trails and more, making this Seattle neighborhood a unique convergence for tourists, travelers, and residents. The planning and cooperation of community, infrastructure, and sustainability have taken strong roots in North East Seattle. For a free list of properties available for sale in Northeast Seattle, please contact Wendy Ceccherelli, owner/broker of Home Land Seattle, at homelandinvestment@gmail.com or call 425-270-7292.
This area of Seattle extends from the University district up to the borders of Lake City, and although fairly suburban in its layout, has a dense population. Most of these neighborhoods are strewn with parks and green spaces, with much focus on family, community, and schools. The average home price in this area starts around $375K. Near hubs of businesses and recreational activities, many rental houses and condos are available to residents as well. Community highlights in NE Seattle include the University of Washington & its stadium, Greenlake & the Woodland Park Zoo nearby, Magnuson Park, Matthews beach, and close proximity to museums, theater, art, and downtown. Transportation in the area includes buses, biking, car-pooling, and even boating! Do you like hands-on projects, crafting, brewing, shopping, playing, learning, meeting new people? North East Seattle has got the right fit for you. Not only does this area offer a short commute trip into downtown Seattle, which is less than 5 miles away; but it also offers access to ferries, mountain passes, bike trails and more, making this Seattle neighborhood a unique convergence for tourists, travelers, and residents. The planning and cooperation of community, infrastructure, and sustainability have taken strong roots in North East Seattle. For a free list of properties available for sale in Northeast Seattle, please contact Wendy Ceccherelli, owner/broker of Home Land Seattle, at homelandinvestment@gmail.com or call 425-270-7292.
Tuesday, February 26, 2013
Weird Housing Market Index
The housing market is up in most major metropolitan areas and it is certainly up in Seattle. The median home price in Seattle has been bumping along the $400,000 price line for the past year, according to statistics from the NWMLS. That varies tremendously by neighborhood. But the weirdest measure of the health of the local housing market is the "honey bucket index." 
“Our ‘units rented number’ has jumped significantly since last summer, with the Seattle area being the hottest market,” said Steve Barger, Vice President of Business Development forNorthwest Cascade Inc. Honey Buckets is a division of the company. “Last June, all of sudden our rentals were up 12 percent over the previous June.” Portable toilets are a good indicator of the health of the building and construction industry, Barger said, but they also have been good at predicting the health of the overall economy, with some timing adjustments. Stephen H. Dunphy reported on these findings February 12, 2013. Dunphy writes on business and economic issues for Crosscut. He was a business editor and columnist for a number of years at The Seattle Times. View the complete story online at: http://crosscut.com/2013/02/12/econ-finance/112925/honey-bucket-index/
“Our ‘units rented number’ has jumped significantly since last summer, with the Seattle area being the hottest market,” said Steve Barger, Vice President of Business Development forNorthwest Cascade Inc. Honey Buckets is a division of the company. “Last June, all of sudden our rentals were up 12 percent over the previous June.” Portable toilets are a good indicator of the health of the building and construction industry, Barger said, but they also have been good at predicting the health of the overall economy, with some timing adjustments. Stephen H. Dunphy reported on these findings February 12, 2013. Dunphy writes on business and economic issues for Crosscut. He was a business editor and columnist for a number of years at The Seattle Times. View the complete story online at: http://crosscut.com/2013/02/12/econ-finance/112925/honey-bucket-index/
Monday, February 25, 2013
NAREIA Winter Cruise
The Real Estate Association of Puget Sound (REAPS) is a chapter member of the National Real Estate Investors Association (NAREIA). As such, REAPS members are invited to take advantage of various NAREIA-sponsored benefits, such as discounts at Home Depot and Sherwin Williams. Another benefit open to any REAPS member is to take a cruise with other NAREIA members from around the country on their annual winter cruise. This annual cruise has connected 5000+ investors from more than 70 cities on a fun-filled week at various warm and sunny ports of call, while also enjoying the opportunity to listen to and interact with nationally-known investment speakers. 
I was fortunate enough to participate on the thirteenth annual NAREIA cruise last month. Best of all, it was an educational experience that qualified as a business write-off! It was also my very first cruise, and I thoroughly enjoyed it. Several other members of REAPS also attended, including Angelique Tinney, Sheila Lair, Shan Whiteside, and Chizu Salisbury. Nationally-known speakers who participated on the cruise agenda included Andrew Cordle, Anthony Chara, Carl Fischer, Larry Goins, Tom Hennigan, Jillian Sidoti, Robyn Thompson, Scott Whaley, Pete Youngs, and Tony Youngs, among others. Topics included private money investing, investing with real estate funds, treating your real estate investment as a business, multifamily investing, and finding the hidden market for properties. Our cruise departed from San Juan, Puerto Rico and several of us took a few extra days to explore the bioluminescent bay of Fajardo by kayak, walk the streets of historic old San Juan, or visit the fortifications protecting the walled city. The cruise stopped at ports of call in St Thomas, St Kitts, Aruba and Curacao. I had fun snapping pictures of the many "fixers" available for sale on the islands (that is, when I wasn't hiking through rain forest, swimming and snorkeling in the Caribbean, or sightseeing on shore excursions). Two full days were spent at sea, and on those days we had full-day sessions conducted by the national speakers, anxious to promote their educational products to chapter leaders. For those of us involved in REAPS leadership, it was an opportunity to test-drive potential future speakers for our own association. I blogged about each of the educational sessions that I attended, and more detail on these sessions may be found there: www.wendywonder.blogspot.com Evening dinners were sit-down affairs (two formal nights) where NAREIA guests were able to table-hop to sit with whomever they wanted to meet or greet. There were also a few private NAREIA receptions and cocktail parties. These were great opportunities to network and learn from more savvy investors from all over the country. If you love to cruise, or are looking for an excuse to cruise, or simply want more opportunities to learn from experienced real estate investors in a relaxed environment, then you might want to consider going on next year's cruise. The cruise next year will be February 9-15 and costs $895 per person for a basic inside cabin. The cruise departs from Miami and travels to Grand Turk, Jamaica, and the Bahamas. For more information, contact NAREIA directly at 888-762-7342.
I was fortunate enough to participate on the thirteenth annual NAREIA cruise last month. Best of all, it was an educational experience that qualified as a business write-off! It was also my very first cruise, and I thoroughly enjoyed it. Several other members of REAPS also attended, including Angelique Tinney, Sheila Lair, Shan Whiteside, and Chizu Salisbury. Nationally-known speakers who participated on the cruise agenda included Andrew Cordle, Anthony Chara, Carl Fischer, Larry Goins, Tom Hennigan, Jillian Sidoti, Robyn Thompson, Scott Whaley, Pete Youngs, and Tony Youngs, among others. Topics included private money investing, investing with real estate funds, treating your real estate investment as a business, multifamily investing, and finding the hidden market for properties. Our cruise departed from San Juan, Puerto Rico and several of us took a few extra days to explore the bioluminescent bay of Fajardo by kayak, walk the streets of historic old San Juan, or visit the fortifications protecting the walled city. The cruise stopped at ports of call in St Thomas, St Kitts, Aruba and Curacao. I had fun snapping pictures of the many "fixers" available for sale on the islands (that is, when I wasn't hiking through rain forest, swimming and snorkeling in the Caribbean, or sightseeing on shore excursions). Two full days were spent at sea, and on those days we had full-day sessions conducted by the national speakers, anxious to promote their educational products to chapter leaders. For those of us involved in REAPS leadership, it was an opportunity to test-drive potential future speakers for our own association. I blogged about each of the educational sessions that I attended, and more detail on these sessions may be found there: www.wendywonder.blogspot.com Evening dinners were sit-down affairs (two formal nights) where NAREIA guests were able to table-hop to sit with whomever they wanted to meet or greet. There were also a few private NAREIA receptions and cocktail parties. These were great opportunities to network and learn from more savvy investors from all over the country. If you love to cruise, or are looking for an excuse to cruise, or simply want more opportunities to learn from experienced real estate investors in a relaxed environment, then you might want to consider going on next year's cruise. The cruise next year will be February 9-15 and costs $895 per person for a basic inside cabin. The cruise departs from Miami and travels to Grand Turk, Jamaica, and the Bahamas. For more information, contact NAREIA directly at 888-762-7342.
Friday, February 22, 2013
Treating Real Estate Investing as a Business
One of my favorite educational presentations on the 2013 NAREIA cruise was by Robyn Thompson, known as the "Queen of Rehab" for her amazing productivity and profitability in rehabbing and flipping houses. Her focus at this session was on treating your real estate investing as a business, and she offered some very practical advice. "Face what is," she advised. "Set aside a minimum of three hours every week to decide what is working and what isn't." Robyn actually sets aside 4 hours per week to plan for business; 1 of those hours is devoted to marketing. During that time, she closes her office door, and does not allow any interruptions. 
She defines the serious business owner as one who: has a detailed marketing plan for buying properties (1 hour per week to plan); Has saved up some start up capital; Has a full-time commitment; Has a support team of family and friends; and that the business owner demands alone time to plan Robyn focuses her marketing efforts on desperate sellers who live out of state and owned property for a long time. She gets a 12.7% response rate on her infamous "horsey" letter, with a hand addressed envelope, pretty stamp, and signed with a PS. (e.g. PS. If you would rather email me personally, my email address is 1wendywonder@gmail. If you would like to send me any photos or information of the house, please do so). She pays a disabled worker 37 cents an envelope to hand-address. Responses go to patlive.com. Go to patlive.com/robynthompson for free scripts from Robyn. You do not want responses to go to your personal phone. Robyn will usually offer three different buying scenarios to motivated sellers: Offer #1 $42500 cash (worth $80K) Offer #2 Split funding $10K now, $45K in ten years Offer #3 $800/mo for 100 months Her philosophy is that a "Quick nickel is better than a slow dime." She looks for property in a good school district on buy and holds; property taxes and insurance must be reasonable. For fast cash deals, she recommends that wholesalers ask fellow investors what they are looking for, where do they want to buy, how many deals per month, how much cash do they have to buy? Her secretary pulls her list from List Source. Her assistant also pays all bills; answers phones; checks emails; and gets contractor quotes. She advertised for her assistant on monster.com - using criteria such as 5 years of admin experience, good w Microsoft Word, Excel and Quick Books, lives close by, education. Patlive prescreens all responses from letters. Her secretary pulls comps; and Robyn buys one out of every ten motivated seller respondents. She has 9 types of houses to avoid, which include: busy street, mixed use/commercial property, war zone, junky neighbors, luxury homes, tiny bedrooms, and small houses. She buys houses that 80% of the buying population can afford. She strives to create "a drop-dead gorgeous house," with nicer kitchens, bathrooms,etc. than the competition. Her independent contractor agreement requires her contractor to pay all permits, pick up materials, and respond to a detailed scope of work listing every SKU # for materials. She warns investors to be sure that the contractor is not your employee; he who buys the material is your employee; have a good independent contractor agreement; never buy materials; make sure there is workmen's comp, and add yourself to their insurance policy. Never make payments equal to materials or to labor (so it does not look like you are hiring them as employees). Find the money, find the deals and let the contractor handle everything else. Robyn uses gonannies.com to take care of household chores. She likes to pull LPDU approval on her buyers, with 2 pay stubs, last year taxes, and a bank statement. LPDU-Loan processor, desktop underwriter - full-blown approval, contingent on insurance and appraisal. Until she has LPDU approval, she does not take a house off the market. Robyn believes that any serious business owner must be a leader and must focus on generating revenue every day. A serious business owner never wastes money on unnecessary frills - but asks, will it make me 3X what it costs me? Robyn also adheres to a strict detailed personal and business budget. Her mantra of "Reserves, reserves, reserves" served her well during the economic downturn. Robyn's best book recommendation is Failing Forward by John Maxwell. (This is available as a free eBook download at Seattle Public Library). According to Robyn, the serious business owner lives by these beliefs: Strong work ethic; No excuses allowed; Feed on opportunities and possibilities; Focus on strengths and hire people to cover the weaknesses; Failures are the ultimate learning lessons; accept 100% responsibility; Resilience.
She defines the serious business owner as one who: has a detailed marketing plan for buying properties (1 hour per week to plan); Has saved up some start up capital; Has a full-time commitment; Has a support team of family and friends; and that the business owner demands alone time to plan Robyn focuses her marketing efforts on desperate sellers who live out of state and owned property for a long time. She gets a 12.7% response rate on her infamous "horsey" letter, with a hand addressed envelope, pretty stamp, and signed with a PS. (e.g. PS. If you would rather email me personally, my email address is 1wendywonder@gmail. If you would like to send me any photos or information of the house, please do so). She pays a disabled worker 37 cents an envelope to hand-address. Responses go to patlive.com. Go to patlive.com/robynthompson for free scripts from Robyn. You do not want responses to go to your personal phone. Robyn will usually offer three different buying scenarios to motivated sellers: Offer #1 $42500 cash (worth $80K) Offer #2 Split funding $10K now, $45K in ten years Offer #3 $800/mo for 100 months Her philosophy is that a "Quick nickel is better than a slow dime." She looks for property in a good school district on buy and holds; property taxes and insurance must be reasonable. For fast cash deals, she recommends that wholesalers ask fellow investors what they are looking for, where do they want to buy, how many deals per month, how much cash do they have to buy? Her secretary pulls her list from List Source. Her assistant also pays all bills; answers phones; checks emails; and gets contractor quotes. She advertised for her assistant on monster.com - using criteria such as 5 years of admin experience, good w Microsoft Word, Excel and Quick Books, lives close by, education. Patlive prescreens all responses from letters. Her secretary pulls comps; and Robyn buys one out of every ten motivated seller respondents. She has 9 types of houses to avoid, which include: busy street, mixed use/commercial property, war zone, junky neighbors, luxury homes, tiny bedrooms, and small houses. She buys houses that 80% of the buying population can afford. She strives to create "a drop-dead gorgeous house," with nicer kitchens, bathrooms,etc. than the competition. Her independent contractor agreement requires her contractor to pay all permits, pick up materials, and respond to a detailed scope of work listing every SKU # for materials. She warns investors to be sure that the contractor is not your employee; he who buys the material is your employee; have a good independent contractor agreement; never buy materials; make sure there is workmen's comp, and add yourself to their insurance policy. Never make payments equal to materials or to labor (so it does not look like you are hiring them as employees). Find the money, find the deals and let the contractor handle everything else. Robyn uses gonannies.com to take care of household chores. She likes to pull LPDU approval on her buyers, with 2 pay stubs, last year taxes, and a bank statement. LPDU-Loan processor, desktop underwriter - full-blown approval, contingent on insurance and appraisal. Until she has LPDU approval, she does not take a house off the market. Robyn believes that any serious business owner must be a leader and must focus on generating revenue every day. A serious business owner never wastes money on unnecessary frills - but asks, will it make me 3X what it costs me? Robyn also adheres to a strict detailed personal and business budget. Her mantra of "Reserves, reserves, reserves" served her well during the economic downturn. Robyn's best book recommendation is Failing Forward by John Maxwell. (This is available as a free eBook download at Seattle Public Library). According to Robyn, the serious business owner lives by these beliefs: Strong work ethic; No excuses allowed; Feed on opportunities and possibilities; Focus on strengths and hire people to cover the weaknesses; Failures are the ultimate learning lessons; accept 100% responsibility; Resilience.
Thursday, February 21, 2013
Private Money and Private Funds
Next up on the NAREIA winter cruise was a panel of experts in raising private funds for real estate investment. The panel included Carl Fischer, self-directed IRA administrator with CAMA plans; Tom Hennigan, NAREIA founder, and former owner of a private mortgage servicing company since 1980; Jillian Sidoti, SEC Attorney; and Scott Whaley, private money association and NAREIA. 
Panelists felt that private money gave power to the investor, private money is less expensive than hard money. Hard money is a serious legal obligation; but it is possible to structure a private money deal differently so that a loss is not personal. In Private Money, the investor is dealing with an individual vs. an entity, thus offering greater flexibility in terms. The interest rates vary, depending on the deal; and are influenced by recent legislation such as the SAFE Act and Dodd Frank Act. The panel warned against using private money on owner-occupied primary residences; including seller financing on primary residences. They also warned to avoid advertising as investors looking for private monies. This is not allowed without SEC registration. Private lending has grown in last year - It is estimated that 40% comes from IRAs, 40% from HELOCs and 20% from savings accounts. Equity in the home, or in a 401K may be used to finance real estate investment. In a private money fund, the investor is diversified across many properties; their money works continuously; and they are in a fund with other investors. A private money lender needs to do due diligence on both the fund and the fund manager(s)....Ask other professionals for advice or guidance. Check the underlying asset(s). There was some discussion of how to underwrite your own loans. docmagic.com will do complete set of terms for loan guaranteed to be state compliant for $35. You may limit risk by going through a due diligence checklist: appraisal, title work, exit strategy, taxes, HOA, mechanic's liens. Do title search and pay for title insurance. Property location and condition or appraisal, previous history w lender, escrow account at bank, life insurance, these are all part of a thorough due diligence. Jillian Sidoti has a personal investment motto for her own investing: Do not invest more than 10% of your net worth in any one deal. Larry Goins, shared his thoughts on how to qualify the person and qualify the property. Larry likes to be sure that person can get a take-out loan, if necessary. Anthony Chara, uses equity groups to come up with the funds. His funds include a PPM, operating agreement for syndications, preferred rate of return, minimum annual return, etc. He has raised up to 2.3M dollars this way. The SEC requires that the fund manager prequalify investors; talk about previous deals to see if they are interested in this particular fund. If so, they fill out the investor qualification form to determine eligibility. Both Anthony's fund and my REI Capital fund can work with up to 35 unaccredited investors. The panel talked about ways to generate interest in private lending: Steak dinner invitations; talk to people that you know and trust; address why is this fund better than a hedge fund?; offer a minimum investment level;etc. Of the clients at CAMA plans, half are being sent by a fund manager; half are looking for investments, and taking classes. It may be possible to get personal loans through crowdsourcing: prosper.com and lending.com are two crowd-sourced lending sites that may be of interest. kickstarter and indiegogo are donation sites, not for-profit making. As of yet, there is no crowdfunding website for real estate; portal facilitates selling of notes; sell notes to individual investors; JOBS act rulemaking on SEC crowdsourcing is still not done, so no clear guidance on being able to advertise for private money more broadly. IRA contribution limits have gone up to $5500; an investor can contribute by 4/15; if you are over 50 years old, you can put in an extra $1000 to your retirement account for a total of $6500 annually. Millions of dollars are sitting idle on the sidelines; IRA custodians cannot introduce funders to lenders, but can offer education. The panel recommended writing articles about investing with your self-directed IRA; become an authority on how to invest in real estate. Become a big fish in your pool; volunteer for REIA; speak on stage; become authority on your real estate subject. You do not need to be an expert in SDIRAs to work w qualified plans, and have your own private lending classes; teach a class or partner with SDIRA people to have them handle this portion. Anthony Chara has always put his own money in deals; while some investors put in just a little depending on the number of other investors. His biggest breakthroughs have come with the mindset that I have all the money I need. Hedge funds are getting into real estate; and the competition for the individual investor may be challenging. Full-time employees don't have time to invest against the "big boys", so an investment fund makes it easier for them. The speed and the flow of money is the one big advantage of pools over syndication. Cash offers get the best discounts, and the best prices. Tom Hennigan was retired for eleven years, started NAREIA 27 years ago; was in note business and tax deeds for 31 years. Today he is starting a fund to purchase notes and distressed properties to wholesale to other NAREIA chapters and members.
Panelists felt that private money gave power to the investor, private money is less expensive than hard money. Hard money is a serious legal obligation; but it is possible to structure a private money deal differently so that a loss is not personal. In Private Money, the investor is dealing with an individual vs. an entity, thus offering greater flexibility in terms. The interest rates vary, depending on the deal; and are influenced by recent legislation such as the SAFE Act and Dodd Frank Act. The panel warned against using private money on owner-occupied primary residences; including seller financing on primary residences. They also warned to avoid advertising as investors looking for private monies. This is not allowed without SEC registration. Private lending has grown in last year - It is estimated that 40% comes from IRAs, 40% from HELOCs and 20% from savings accounts. Equity in the home, or in a 401K may be used to finance real estate investment. In a private money fund, the investor is diversified across many properties; their money works continuously; and they are in a fund with other investors. A private money lender needs to do due diligence on both the fund and the fund manager(s)....Ask other professionals for advice or guidance. Check the underlying asset(s). There was some discussion of how to underwrite your own loans. docmagic.com will do complete set of terms for loan guaranteed to be state compliant for $35. You may limit risk by going through a due diligence checklist: appraisal, title work, exit strategy, taxes, HOA, mechanic's liens. Do title search and pay for title insurance. Property location and condition or appraisal, previous history w lender, escrow account at bank, life insurance, these are all part of a thorough due diligence. Jillian Sidoti has a personal investment motto for her own investing: Do not invest more than 10% of your net worth in any one deal. Larry Goins, shared his thoughts on how to qualify the person and qualify the property. Larry likes to be sure that person can get a take-out loan, if necessary. Anthony Chara, uses equity groups to come up with the funds. His funds include a PPM, operating agreement for syndications, preferred rate of return, minimum annual return, etc. He has raised up to 2.3M dollars this way. The SEC requires that the fund manager prequalify investors; talk about previous deals to see if they are interested in this particular fund. If so, they fill out the investor qualification form to determine eligibility. Both Anthony's fund and my REI Capital fund can work with up to 35 unaccredited investors. The panel talked about ways to generate interest in private lending: Steak dinner invitations; talk to people that you know and trust; address why is this fund better than a hedge fund?; offer a minimum investment level;etc. Of the clients at CAMA plans, half are being sent by a fund manager; half are looking for investments, and taking classes. It may be possible to get personal loans through crowdsourcing: prosper.com and lending.com are two crowd-sourced lending sites that may be of interest. kickstarter and indiegogo are donation sites, not for-profit making. As of yet, there is no crowdfunding website for real estate; portal facilitates selling of notes; sell notes to individual investors; JOBS act rulemaking on SEC crowdsourcing is still not done, so no clear guidance on being able to advertise for private money more broadly. IRA contribution limits have gone up to $5500; an investor can contribute by 4/15; if you are over 50 years old, you can put in an extra $1000 to your retirement account for a total of $6500 annually. Millions of dollars are sitting idle on the sidelines; IRA custodians cannot introduce funders to lenders, but can offer education. The panel recommended writing articles about investing with your self-directed IRA; become an authority on how to invest in real estate. Become a big fish in your pool; volunteer for REIA; speak on stage; become authority on your real estate subject. You do not need to be an expert in SDIRAs to work w qualified plans, and have your own private lending classes; teach a class or partner with SDIRA people to have them handle this portion. Anthony Chara has always put his own money in deals; while some investors put in just a little depending on the number of other investors. His biggest breakthroughs have come with the mindset that I have all the money I need. Hedge funds are getting into real estate; and the competition for the individual investor may be challenging. Full-time employees don't have time to invest against the "big boys", so an investment fund makes it easier for them. The speed and the flow of money is the one big advantage of pools over syndication. Cash offers get the best discounts, and the best prices. Tom Hennigan was retired for eleven years, started NAREIA 27 years ago; was in note business and tax deeds for 31 years. Today he is starting a fund to purchase notes and distressed properties to wholesale to other NAREIA chapters and members.
Tuesday, February 19, 2013
World Heritage Site - City of Willemstad, Curacao
How many cities in the world can claim to be world heritage sites, because of their stunning architecture? We visited one on our Royal Caribbean cruise: the "little Amsterdam" city of Willemstad on the Caribbean island of Curacao. The waterfront is pictured here.
Monday, February 18, 2013
Finding the Hidden Market for Real Estate Investment
Tony Youngs was aboard Royal Caribbean's Adventure of the Seas to discuss "Analyzing Your Deal w Confidence." 
First deal Tony bought was a pre-foreclosure purchased for $65K w no money; wholesale? take over loan subject to (and lady owed $62K); worth $120K. Had to come up with $3032, borrowed from an investor; he painted it in and out, cleaned the kitchen and cut the grass; It was refinanced in 88 days and Tony pulled out $27K. He rented the house out and kept repeating the process. Everything changed in 2007; "subject to" no longer works if market value is less than the loan. So Tony started making offers on REOs; and in the course of doing that, discovered three times the profit in the "hidden" market, those properties not listed, no signs. Every Sunday he plots every recently-repossessed house and looks at all properties and makes offers; finds out several "hidden" properties while looking at these. Hidden market may even be occupied; but not well-cared-for. Tony sends letters or knocks on doors, talks with neighbors. Tony's strategy for the hidden market: See if sellers want to sell. Look for distressed properties. Give them a little cash. Get signed contract and sell immediately. Tony goes to foreclosure auctions in his county to sell these distressed properties. These investors have to pay cash for properties. Hedge fund buyers are outbidding local investors in many auctions. Local individual investors are desperate for deals. Banks have slowed down on foreclosures. Many investors face more competition, as Wall Street investors are coming into the market to buy. Banks know they can sell to hedge funds. There are thousands of vacant or distressed properties in every market. Aren't these upside down? Sometimes, and these can be purchased as a short sale. Sometimes the owner died and left property to heirs. Tony bought five probate properties in 2012. Sometimes the owner is in bankruptcy. Use pacer.gov website to look at bankruptcy case, for Order for Motion of Automatic Stay (then house may be bought directly from owner). bankruptcydb.com will sell leads of people in bankruptcy. Knock on doors, leave flyer on door, or send a letter to owner. POA to sell house for someone in jail. Seller thought it had to be fixed up first to sell. How to do your own title search. Learn how to do. Know how to do research and buy title insurance. Will save you a lot of $ to do your own title search. Deed/record room where you can find mortgages and liens. Use title company to do search. Federal tax lien is recorded against person or business, but attaches to personal property. Cannot be sold without paying lien. Recommendation that everyone pay title insurance. Buy one of those liens and wipe out the others. Only junior liens get wiped out, so try to buy first lien. Quiet deeds in one state may be different from other states; homestead state vs. commonwealth state vs. others, just does not work in every state. Buy title insurance for protection. Close through attorney or escrow agent; do not do table top closings. Google (state) foreclosure laws. Tony Youngs is a national speaker on finding, buying and selling distressed properties.
First deal Tony bought was a pre-foreclosure purchased for $65K w no money; wholesale? take over loan subject to (and lady owed $62K); worth $120K. Had to come up with $3032, borrowed from an investor; he painted it in and out, cleaned the kitchen and cut the grass; It was refinanced in 88 days and Tony pulled out $27K. He rented the house out and kept repeating the process. Everything changed in 2007; "subject to" no longer works if market value is less than the loan. So Tony started making offers on REOs; and in the course of doing that, discovered three times the profit in the "hidden" market, those properties not listed, no signs. Every Sunday he plots every recently-repossessed house and looks at all properties and makes offers; finds out several "hidden" properties while looking at these. Hidden market may even be occupied; but not well-cared-for. Tony sends letters or knocks on doors, talks with neighbors. Tony's strategy for the hidden market: See if sellers want to sell. Look for distressed properties. Give them a little cash. Get signed contract and sell immediately. Tony goes to foreclosure auctions in his county to sell these distressed properties. These investors have to pay cash for properties. Hedge fund buyers are outbidding local investors in many auctions. Local individual investors are desperate for deals. Banks have slowed down on foreclosures. Many investors face more competition, as Wall Street investors are coming into the market to buy. Banks know they can sell to hedge funds. There are thousands of vacant or distressed properties in every market. Aren't these upside down? Sometimes, and these can be purchased as a short sale. Sometimes the owner died and left property to heirs. Tony bought five probate properties in 2012. Sometimes the owner is in bankruptcy. Use pacer.gov website to look at bankruptcy case, for Order for Motion of Automatic Stay (then house may be bought directly from owner). bankruptcydb.com will sell leads of people in bankruptcy. Knock on doors, leave flyer on door, or send a letter to owner. POA to sell house for someone in jail. Seller thought it had to be fixed up first to sell. How to do your own title search. Learn how to do. Know how to do research and buy title insurance. Will save you a lot of $ to do your own title search. Deed/record room where you can find mortgages and liens. Use title company to do search. Federal tax lien is recorded against person or business, but attaches to personal property. Cannot be sold without paying lien. Recommendation that everyone pay title insurance. Buy one of those liens and wipe out the others. Only junior liens get wiped out, so try to buy first lien. Quiet deeds in one state may be different from other states; homestead state vs. commonwealth state vs. others, just does not work in every state. Buy title insurance for protection. Close through attorney or escrow agent; do not do table top closings. Google (state) foreclosure laws. Tony Youngs is a national speaker on finding, buying and selling distressed properties.
Sunday, February 17, 2013
Finding Private Money
Legalities of Private Money was covered by Jillian Sidoti during our NAREIA cruise. 
Most investors are interested in raising money. Yet under the Uniform Securities Act, at what point does the law come into effect? The test that governs securities law is the Howie case from the late 1800s. It states simply: Is there investment in a common enterprise with expectation of profit through a promoter? One private lender per house will generally keep investors out of trouble; yet "common enterprise" could mean when you are doing more than one house rehab. Asset backed security; must disclose risks to a lender. The investor must do more than a promissory note; the investor must disclose that funds are at risk; house may burn down, etc. Prepackaged websites may violate securities law, so be careful when purchasing from national speakers. Late filings may trigger fines; Not filing Form D exemption from registration to file with SEC will also trigger scrutiny. So what is the process and cost to stay legal? When using private lenders, try to limit one property per lender - rather than pooling funds. File Form D, quarterly and annual reports. Owner financing is exempt from SEC requiremets; one private lender on top of that is fine. Be sure to disclose risks to lender. How to raise private dollars: Jillian then gave several examples of how her clients raise private money. Chris Yates, who had 100 lenders on 100 properties, qualified investors and provided disclosures, used the internet to promote investing with a SDIRA. People signed up for his newsletters, saw properties that were being rehabbed and spoke with him about investing with their SDIRA. He never asked for money. Another client in Beverly Hills raised money for the fashion industry; his goal was to talk to 50 people before he went to bed every night. His strategy was all about making friends; he raised $2M from three people in a month. Jillian recommended writing a great blog; give a lot of information talk about your market, hang out at swanky places; Warren Buffet approach, folksy, personal; send out a newsletter - give a tip, talk about market, something funny (Employee of the Month - same employee every month); bulky mail; exclusive wine and cheese parties; Make your gatherings as glitzy as the corporate annual meetings where prospective investors buy one share of Microsoft, Google, Amazon, etc. just to go to annual meetings. Start your private placement memorandum by writing a business plan: Who, what, when, where, how? How much do you need? How much will I make? When do I get my money back? Offer investors a promissory note attached to risk factors; plus document your pre-existing relationship with your lenders. Are you intimately aware of your investor's ability to invest? income? net worth? verify that this is true. Know your investor. Scott Whaley also announced plans for an Association for private lenders, association on private lending; National Private Money Institute (non-profit association). Stay tuned for more info on this.
Most investors are interested in raising money. Yet under the Uniform Securities Act, at what point does the law come into effect? The test that governs securities law is the Howie case from the late 1800s. It states simply: Is there investment in a common enterprise with expectation of profit through a promoter? One private lender per house will generally keep investors out of trouble; yet "common enterprise" could mean when you are doing more than one house rehab. Asset backed security; must disclose risks to a lender. The investor must do more than a promissory note; the investor must disclose that funds are at risk; house may burn down, etc. Prepackaged websites may violate securities law, so be careful when purchasing from national speakers. Late filings may trigger fines; Not filing Form D exemption from registration to file with SEC will also trigger scrutiny. So what is the process and cost to stay legal? When using private lenders, try to limit one property per lender - rather than pooling funds. File Form D, quarterly and annual reports. Owner financing is exempt from SEC requiremets; one private lender on top of that is fine. Be sure to disclose risks to lender. How to raise private dollars: Jillian then gave several examples of how her clients raise private money. Chris Yates, who had 100 lenders on 100 properties, qualified investors and provided disclosures, used the internet to promote investing with a SDIRA. People signed up for his newsletters, saw properties that were being rehabbed and spoke with him about investing with their SDIRA. He never asked for money. Another client in Beverly Hills raised money for the fashion industry; his goal was to talk to 50 people before he went to bed every night. His strategy was all about making friends; he raised $2M from three people in a month. Jillian recommended writing a great blog; give a lot of information talk about your market, hang out at swanky places; Warren Buffet approach, folksy, personal; send out a newsletter - give a tip, talk about market, something funny (Employee of the Month - same employee every month); bulky mail; exclusive wine and cheese parties; Make your gatherings as glitzy as the corporate annual meetings where prospective investors buy one share of Microsoft, Google, Amazon, etc. just to go to annual meetings. Start your private placement memorandum by writing a business plan: Who, what, when, where, how? How much do you need? How much will I make? When do I get my money back? Offer investors a promissory note attached to risk factors; plus document your pre-existing relationship with your lenders. Are you intimately aware of your investor's ability to invest? income? net worth? verify that this is true. Know your investor. Scott Whaley also announced plans for an Association for private lenders, association on private lending; National Private Money Institute (non-profit association). Stay tuned for more info on this.
Saturday, February 16, 2013
Multifamily Investment Trends
Next up on the NAREIA cruise was a panel of multifamily investors. 
Re/Max wanted NAREIA to write curriculum for working with investors, as it is now a landlord's market. Rebecca MacLean presented slides on "To Rent or Not to Rent." Many baby boomers are ready to downsize and not wanting to buy again. Gen Y has a lot of student debt and job insecurity; they are doubling up with housemates as rental rates go up. Gen Y is less likely to buy and more likely to move for new jobs. Anthony Chara owns 9 SFRs and 1300 units. During the pre-bubble, he found it easy to find renters, long-term renters until 2010-11. But now he is finding so many new rentals in volatile markets like Vegas and Florida that make it difficult to find stable renters. Prokash, a building contractor in LA since 1995 owns 45 units in ten buildings; most of the rentals are Section 8. After bubble, many investors have moved into rental market to rent to Section 8. Rents had to be reduced. Biggest problem is getting capital to build. He has been setting up limited partnerships to provide financing (20/80% each partner in). Darrin Carrey owns 45 units in Dayton, OH. Stable rents there , but starting to see rents go up in nicer areas. Today he finds it easier to find qualified tenants. Laura See, Chicago, owns 260-300 units in nice locations. Rents never dipped, but quality of tenants has improved. 0% vacancy rate currently. Her rentals are mostly condo and commercial townhomes, all higher-end, more professional tenants. Anna Mills, 37 years as contractor, investor, owns over 50 SFRs and small multis. She does her own rehab, repair, and management. The quality of her tenants has improved in suburban school districts. No vacancies in 2 1/2 years. General comments were that landlords were not worried about tenant credit ratings. There is a different market for small multis vs SFRs such as allowing pets, parking, lesser rules. Class A do rent concessions, but B&C take less-perfect tenants. Different markets. No hard crimes, out of all properties. Lower quality tenants in apartments vs SFRs. Chara stated that he was getting rid of concessions on apartments now.Vegas is flooded with rentals and high unemployment rates. Phoenix and Nevada multifamily markets are great deals. Economic loss = concessions.
Re/Max wanted NAREIA to write curriculum for working with investors, as it is now a landlord's market. Rebecca MacLean presented slides on "To Rent or Not to Rent." Many baby boomers are ready to downsize and not wanting to buy again. Gen Y has a lot of student debt and job insecurity; they are doubling up with housemates as rental rates go up. Gen Y is less likely to buy and more likely to move for new jobs. Anthony Chara owns 9 SFRs and 1300 units. During the pre-bubble, he found it easy to find renters, long-term renters until 2010-11. But now he is finding so many new rentals in volatile markets like Vegas and Florida that make it difficult to find stable renters. Prokash, a building contractor in LA since 1995 owns 45 units in ten buildings; most of the rentals are Section 8. After bubble, many investors have moved into rental market to rent to Section 8. Rents had to be reduced. Biggest problem is getting capital to build. He has been setting up limited partnerships to provide financing (20/80% each partner in). Darrin Carrey owns 45 units in Dayton, OH. Stable rents there , but starting to see rents go up in nicer areas. Today he finds it easier to find qualified tenants. Laura See, Chicago, owns 260-300 units in nice locations. Rents never dipped, but quality of tenants has improved. 0% vacancy rate currently. Her rentals are mostly condo and commercial townhomes, all higher-end, more professional tenants. Anna Mills, 37 years as contractor, investor, owns over 50 SFRs and small multis. She does her own rehab, repair, and management. The quality of her tenants has improved in suburban school districts. No vacancies in 2 1/2 years. General comments were that landlords were not worried about tenant credit ratings. There is a different market for small multis vs SFRs such as allowing pets, parking, lesser rules. Class A do rent concessions, but B&C take less-perfect tenants. Different markets. No hard crimes, out of all properties. Lower quality tenants in apartments vs SFRs. Chara stated that he was getting rid of concessions on apartments now.Vegas is flooded with rentals and high unemployment rates. Phoenix and Nevada multifamily markets are great deals. Economic loss = concessions.
Thursday, February 14, 2013
What is Cap Rate?
Happy Valentine's Day! 
Sam Sant from Pasadena, California introduced himself to me on the NAREIA cruise after the presentation on multifamily investing by Anthony Chara. “I have the PhD of cap rates,” Sam told me, in response to my questions about fluctuations in cap rates in the Seattle area. Here are the five items that Sam explained affect capitalization rates: 1) Interest Rates: the higher the interest rate, the higher the cap rate. 2) Risk of Income: A “C” property has a higher cap rate than a “B” property, because of the higher risk. 3) Supply and Demand of Properties: the more demand for properties, and the more limited the supply, the lower the cap rate will be. 4) General Investment Environment: Other investment opportunities (such as the stock market) are paying more, then the higher the cap rate required to entice investors; and 5) Future Growth in Rents: the higher the expected rent growth, the lower the cap rate.
Sam Sant from Pasadena, California introduced himself to me on the NAREIA cruise after the presentation on multifamily investing by Anthony Chara. “I have the PhD of cap rates,” Sam told me, in response to my questions about fluctuations in cap rates in the Seattle area. Here are the five items that Sam explained affect capitalization rates: 1) Interest Rates: the higher the interest rate, the higher the cap rate. 2) Risk of Income: A “C” property has a higher cap rate than a “B” property, because of the higher risk. 3) Supply and Demand of Properties: the more demand for properties, and the more limited the supply, the lower the cap rate will be. 4) General Investment Environment: Other investment opportunities (such as the stock market) are paying more, then the higher the cap rate required to entice investors; and 5) Future Growth in Rents: the higher the expected rent growth, the lower the cap rate.
Wednesday, February 13, 2013
Multifamily Investing
Next up as a speaker on the National REIA cruise was multifamily investor Anthony Chara.
Anthony Chara has been investing since 2000 as a successful apartment investor with 1300+ units; He found a mentor in metro Denver who owned 450 units; he receives $140K/mo passive income; and teaches students long-term strategies. Average appreciation on his properties equals 5% per year through forced appreciation. His definition of cap rate = what property pays you if you buy all cash; aim for 8% or more, at least 2 points higher than the cost at which you can borrow money. 70% of commercial loans are upside down in the US. These cannot be refinanced; $1.3 trillion of commercial loans. Chara and a student set up a $5M fund to take advantage of underwater commercial loans. Most lenders require a capital reserve account upfront at closing; either an escrow capital reserve account where the lender will pay capital expenses or you will be reimbursed once per quarter. Chara listed the best ways to find properties as follows: Buy the first one in a particular market (you will be solicited to buy more) Buy from another investor seller with multiple properties Loopnet, to find brokers Create a personal relationship with commercial brokers Chara focuses on very stable markets in the midwest and sunbelt. Management of properties, finding a competent property manager, is critical. He recommends contacting irem.org or ccim.com and look for a cpm (certified property manager). Typically, 15-50% is required for an apartment down payment. Chara sees maximum cash flow from midwest to southeast, and focuses on areas that Chara wants to travel; Florida, Nevada, Arizona, where he is buying B and C properties. I asked about volatility of cap rates in some markets, which sparked quite a discussion. In my next blog post, I will provide a better explanation of what cap rates are, how they are determined, and how they are used to determine value for income properties like apartments.
Anthony Chara has been investing since 2000 as a successful apartment investor with 1300+ units; He found a mentor in metro Denver who owned 450 units; he receives $140K/mo passive income; and teaches students long-term strategies. Average appreciation on his properties equals 5% per year through forced appreciation. His definition of cap rate = what property pays you if you buy all cash; aim for 8% or more, at least 2 points higher than the cost at which you can borrow money. 70% of commercial loans are upside down in the US. These cannot be refinanced; $1.3 trillion of commercial loans. Chara and a student set up a $5M fund to take advantage of underwater commercial loans. Most lenders require a capital reserve account upfront at closing; either an escrow capital reserve account where the lender will pay capital expenses or you will be reimbursed once per quarter. Chara listed the best ways to find properties as follows: Buy the first one in a particular market (you will be solicited to buy more) Buy from another investor seller with multiple properties Loopnet, to find brokers Create a personal relationship with commercial brokers Chara focuses on very stable markets in the midwest and sunbelt. Management of properties, finding a competent property manager, is critical. He recommends contacting irem.org or ccim.com and look for a cpm (certified property manager). Typically, 15-50% is required for an apartment down payment. Chara sees maximum cash flow from midwest to southeast, and focuses on areas that Chara wants to travel; Florida, Nevada, Arizona, where he is buying B and C properties. I asked about volatility of cap rates in some markets, which sparked quite a discussion. In my next blog post, I will provide a better explanation of what cap rates are, how they are determined, and how they are used to determine value for income properties like apartments.
Tuesday, February 12, 2013
Business Fundamentals to Flip This House
Just back from my Caribbean cruise with the National Real Estate Investors Association. We had several nationally-known real estate investment speakers aboard, with nightly Q&A panels and day-long sessions while we were at sea. 
I will be reporting on what was covered during my "Adventure of the Seas" investment cruise. First up as a speaker was Andrew Cordle, Cash Flow Investing specialist, Investor, Author, Educator Hedge funds are changing the dynamics of the residential market today. Andrew Cordle went from broke to flipping 22 houses simultaneously by focusing on the business of rehabbing house, rather than on individual deals. Hedge funds do not want to do more extensive repairs; homeowners want out. This provides great opportunity for real estate investors. Flippers can put great inventory on the market now and sell it fast. Andrew Cordle looks for $30K profit on every flip. His formula for becoming financially free in five years is as follows: Purchase house at $65K, owning F&C Year One: three flips, one rental (buy F&C; live on $25K) Year 2: quit job, 6 flips, buy two rentals F&C 3: 8 flips, 3 rental 4: 9 flips, 4 rentals 5: 10 flips, 5 rentals What is your one year, three year, five year business plan? How many investors have $500K to buy property? How many know where to invest? Leverage? buy all cash? what type of rentals? 3 steps to create financial momentum: Change Capital Cash flow Cordle asserts that the main difference between occasional flips vs 8-10 is systems and organization 1. Organize materials by SKU list (acquisition managers) Stop being all persons to all things; must have team Cordle used custom designers who built SKU list; design features, that the investor then creates a scope of work for Project Manager Entire process of rehabbing house should be systematized, using checklist and SKU #s 2. Organize procurement Email to rep at Pro Desk in 24 hours with price 3. Delivery to job site; all materials delivered from store 4. Organize your recordkeeping Hire bookkeeper (account temps.com); separate binder for each property (w duplicate at office) - with at a glance summary; legal paperwork; contracts; receipts; before, after and progress photos Project manager gets copy on job site, and one at office; one central location for all important papers; "Car Office" to keep in car from job to job - good for real estate business This binder is a real time Saver - with tax information all in one place Create Change Mindset, Map, Mentorship Mindset: Organization, direction, motivation, education Map: Business Plan Mentorship: where to find who you need Creating Capital: Rehabbing is the best way to create capital fast Investors can make more profit using systems to cut rehab time in half Excel spreadsheets of what needs to happen each day- too difficult to keep up with spreadsheets, created software to do this; Cordle tries to keep Days On Market as short as possible; he had three properties selling this week in absentia and bought house without seeing it through his acquisition team. When he is finished rehabbing, his goal is to have the best house for sale in his neighborhood; and to move as fast as possible. $100-150K is his list price point; do not cut corners in bathrooms and kitchens; buyers getting ideas from TV design shows; Cordle recommends pendant lights, custom mirrors, two vanities for $250@, mosaic tile wall ($350), glass tile floor; different shower tile w accent tiles and big shower heads- white subway tiles, grey grout, accent tile off mosaic wall. These finishes cost a little more, but really sell a house. Cordle also recommends using local furniture stores to stage houses and they are able to advertise at the house. 20 wow factors that sell houses can be found on Cordle's website: financialmomentum.com His website also shows list of projects coming soon; case studies on market, and more. Four pipelines of real estate business -find, fund, fix, flip Marketing: $0 spent on marketing to acquire deals, by using wholesalers, FSBO, agents, REO brokers Monies to do flips; right now Cordle has more money than houses Price, product, promo, presentation - the four p's of marketing
Friday, February 1, 2013
Adventures at Sea Real Estate Seminar
Tentative Schedule
Here is the tentative schedule of nationally-known real estate investment speakers and their topics during my Royal Caribbean cruise this week, sponsored by the National Real Estate Investors Association. February 6th- Day 1 at Sea 9-10 AM – Forum: Industry Update 10 AM- 12 PM – Andrew Cordle 12 – 1:30 PM – Break for Lunch 1:30 – 3 PM – Panel- Creative Deal Making 3-4 PM – TBA February 9th – Day 2 at Sea 9-10 AM – Forum 10 AM – 12 PM – Anthony Chara: Multifamily 12-1:30 PM – Break for Lunch 1:30 – 3:30 PM – Robyn Thompson 3:30 – 4:30 PM – Panel *Q & A’s will take place every eveningCheck this blog post for updates on my adventures in real estate investing at sea!
