Realty411 Magazine featuring NORADA Real Estate Investments - PART 2 - FREE REAL ESTATE INVESTMENT MAGAZINE!


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Realty411 Magazine featuring NORADA Real Estate Investments - PART 2 - FREE REAL ESTATE INVESTMENT MAGAZINE!

  1. 1. FREEISSUE!FREEISSUE!Grow YourWEALTHIt’s On UsMarco SantarelliLeads NORADAReal EstateInvestmentsto New HeightsStrategies toSKYROCKETYour PortfolioPlus, Where Arethe TOP MarketsFOR GROWTH?Insider Secrets:Investors Share Tips,Trials and | Vol. 4 • No. 4 • 2013 A Resource Guide for InvestorsPrint • Online • Network
  2. 2. 07 Publisher’s note08 Insurance myths11 Meet Tim Herriage13 It’s a seller’s market14 What are tax liens?16 Photo tips for investors18 Invest in mobile home parks19 Snail mail success20 Sound advice on leverage22 Flipping Boston on A&E24 Notes with Scott Carson25 Tips on rental management27 Questioning conventionwith Marco Santarelli31 Profile of Equity Trust35 Tony Martinez and notes36 Sensei’s entrepreneurial life40 The 401(K) sinking hole42 Coast to Coast REIA44 A secure investment?46 Nick Vertucci always wins48 Market selection advice50 Q&A with IPX/AZ52 The power of direction54 Benefits for investors56 Find your partnerscontents Here’s The KeyTo Your Real Estate Insurance Needs ...“ ”The Right Coverage At The Right TimeFor a Coverage Proposal, Visit or Call:www.nreinsurance.com888-741-8454• Occupied, vacant, and renovation properties can beincluded on the same schedule• Seamless monthly billing and reporting• Realistic insurance-to-value parameters• Theft coverage available on vacant locations• Coverages underwritten by AM Best “A” or betterrated insurers, such as Lloyd’s of London, Scottsdale,Allianz/Fireman’s Fund• Insure multiple owner/controlling entities underone inventory schedule• Basic or Special form coverage options• Premises liability of $1 million per occurrence• Liability coverage only is available• Available in all 50 states• Insure properties held in IRAs, Trusts, LLCs,Corporations, etc.• Embedded program(s) available for property managers,private lenders, and turnkey operators• Coverage available for non-US citizensIRCA-LA Changed It’s Name!We are the ONLY Club in Westside Club inLos Angeles offering FREE ADMISSIONMeetings are on the First Tuesday of Every MonthLEARN MORE PAGE 5 • 2013
  3. 3. Richard DesichSr. starts Mid-Ohio Securitieson January 1,1974The IRS approvesMid-Ohio Securitiesas a non-bank, passivecustodian for IRA’sA Drug Martstore in Ohiobecomes thecompany’s firstnon-traditionalasset heldwithin an IRAThe company’sservices expand toinclude all 50 statesEquity TrustCompany isfoundedMid-Ohio Securitiesmoves its self-directed accountsto Equity TrustCompanyRapidly growing EquityTrust moves into its new16,000 square-foot facilityin Blyria, OhioNew Equity Trustwebsite created,,receives 1 millionunique visitorsEquity Trust holds40,000 activeaccountsInaugural EquityUniversity NetworkingConference bringshundreds of self-directed investors toOrlando, Florida forproven self-directedinvestment strategies,education andnetworkingEquity Trusthits the 20,000accountmilestone1970s1980s2000s1990sEQUITYTrUsTCompany founder Richard Desich realized early in his careerthat investing in real estate and other alternative investmentsin an IrA could be a valuable retirement savings tool. In 1974he began Mid-Ohio securities (which later transferred its self-directed IRA accounts to Equity Trust) and the companys firstreal estate investment in an IrA took place in 1984.
  4. 4. Equity Trust Companyhits $3 billion in assetsunder administrationCompany acquiresTexas-based SterlingTrust, bringing EquityTrust’s client to 115,000Jeff Desich isnamed CEO ofEquity TrustCompanyEquity TrustCompany’sclient basetops 130,000Equity TrustCompany opensDenver office andlaunches EquityAdvisor SolutionsCompany’s South Dakotaservice and operations centeropens - Equity Trust Companynow operates from 5 facilities in4 statesIndustry first online client portal,myEQUITY launches, giving clients accessto 24/7 networking and educationEquity Trust’s Facebookfan base surpasses 5,000Ira the bear becomes Equity Trust’sofficial mascot, takes on the task oftravelling to spread the word aboutself-directed IRA’sEquity Trust debuts a new look andenhanced services2010sAlmost 40 years later, the company and demand for self-direct-ed IrAs continue to grow. Equity Trust is the nations leadingprovider of self-directed IrAs and 401(k)s with over 130,000clients in all 50 states and $12 Billion of retirement fund assetsunder custody.Company website,www.TrustETC.comeducates and informs 2million unique visitorsEquity TrustCompany hitsthe milestoneof $12 billionin assets underadministration
  5. 5. “When you buy within a system, you benefitfrom strength in numbers!” - Nick VertucciInvestors helpingInvestorsPURCHASE: Because we buy so many properties at auction, youbenefit from our purchasing power.REHAB: Our team does a complete rehab of every property wepurchase. We save on constuction costs because we turn over so manyproperties. That’s a savings we pass on to you.MANAGEMENT: We DONOT pass you off to a thirdparty property managementcompany. Our propertymanagement was set upspecifically for our propertiesto make them more lucrativefor our investors.CASH FLOW: Our guaranteeis that your property will havea tennant in it when you takeover title. That means you startcash flowing from day 1.Call Us Today 800-328-6418www.NVcompanies.comwww.NVcompanies.comPurchase Price: $89,900Yearly Return: 13%Purchase Price: $99,900Yearly Return: 12.4%Invest in the BEST real estatemarket for cash flowand appreciation!
  6. 6. TheStateoftheNoteMarketTheStateoftheNoteMarketWhy is now the time toinvest in bank notes?For Asset Ventures’ TonyMartinez, the answer isas clear as writing on awall. Martinez enteredthe bank note business throughhis earlier experiences buyingand selling real estate — in par-ticular, short sales.“I negotiated more than 300short sales through the real estateside,” said Martinez, “and I waslooking for a better way.”And for the past several years,that “better way” has been in-vesting in notes. A mortgage note is a lien against a property,created where someone has borrowed money against it.“It’s basically an IOU, which states the terms by which theborrower has to pay back the lender,” said Martinez. “Whatwe do is buy institutional notes that were created by a bankor mortgage company.”notesThe real opportunity began in 2007, according toMartinez, when the market shifted and suddenly thosenotes were nearly worthless to banks; the unpaid balancestayed in place, but when the loans stopped performing,the banks were in a bind.“Millions of dollars’ worth of notes were no longerof any value to the banks,” said Martinez. “Remember,they used the value of those notes in order to borrowmoney to lend and make their money, and now they hadnowhere to go with all this collateral.”Imagine you’re a bank, said Martinez, and you have1,000 notes, and every one is performing. “You’re sittingin a pretty good position,” he said. “If one goes bad, it’snot really a big deal, you’ll just sell it off, or foreclose,or whatever options are available. You might spend thetime and work out something really attractive for theborrower, because you’ve got all those other notes workingfor you.”But in a major financial crisis, it’s another matter. “Whenthere’s a huge hit, and all of a sudden you’ve got 50% of yourWanttoMakeaFortuneinNotes?WehavetheBlueprintforSuccessentures LLCssetIndustry Speaker & CoachTony MartinezSound Investment StrategyProven Track Record of PH: (855)798-1411Take advantage of this unique opportunity!Call us or visit our website to receive a FREE DVD!Mentor to the note industryContinued on pg. PAGE 35 • 2013 reWEALTHmag.comby Robb Magley
  7. 7. inventory becoming worthless, and you’ve got to figure out away to create some liquidity,” said Martinez. “So you’ll startselling off your bad paper at fire sale prices.”The need for that liquidity is fundamental, according toMartinez. “If I’m a big bank, the government requires me tofreeze some of my good liquid assets to protect my bad debt,”he said. “That limits my lending power on the other side.”That’s because a bank is allowed to loan as much as tentimes its liquid assets; for every $100,000 in liquid assets, itcan loan $1 million.“Now, if I have a loan of $100,000 that’s not performing, Ihave to freeze the equivalent of $1 million in lending,” saidMartinez. “That really affects my business in a negative way.”Now, he added, imagine if the bank can sell a non-perform-ing loan that’s worth -- on paper -- $100,000 to someone for$20,000.“Suddenly I have $20,000 in liquid assets, and I can loan$200,000,” he said. “There’s a huge benefit to them to do this;the benefit to us is we can buy these notes for pennies on thedollar.”Several other factors have come into play that make this agood time to get into notes, said Martinez. Right now, he said,most of the notes that are available for investment are ones thatwere taken on originally by larger banks -- and their time isrunning out in at least two ways.“Those big banks have until the end of this year to relin-quish as much of the bad debt as they can, and still receive upto an 80% reimbursement for their loss,” said Martinez. “Sothat’s a huge motivating factor for the banks to get these offtheir books.”Also, after the TARP money runs out at the end of this year,the government is putting increasingly complicated lendingregulations in place for the following year. “So the banks wantto put themselves in as much of a liquid position as possibleright now, to continue to be able to borrow from the govern-ment at a very low rate while there aren’t as many regulatoryrestrictions,” said Martinez.Finally, banks are simply tired of the resources they expendkeeping up with non-performing notes.“The maintenance of a bad note costs them so much morethan that of a good performing note, probably 10-15 timesmore,” said Martinez. “They really don’t want to deal withthem. You have to think at their scale; while we’re looking at10 or 100 of these, they’re dealing with thousands. It makesmore sense to sell it off.” Martinez said the note market isprobably going to remain strong for several years, particularlydue to the volume of inventory.“There’s hundreds of thousands of delinquent notes,” saidMartinez. “It’s going to be impossible to move them overnight.We’re probably looking at a year or two’s worth of inventorylagging behind, even if the market changes dramatically.”And, he said, no one he talks to thinks that’s less than 3-5years away.For more information or to receive a free informational DVDon the note market, visit: www.assetventuresllc.combring in 7-8 older repo homes to in-crease occupancy and sell them ona lease-to-own program. Then raisethe lot rents by $10-$25/month (de-pending on the market).After 18 months when you haveincreased the annual lot rent in-come by $30,000, sell the park for$450,000, which would be a 10 capfor a new buyer (don’t be greedy onthe sale — leave a nice return forthe buyer). After paying the sellerback and your investors a nice profitand returning their principal, youshould have at least $125,000 inyour pocket.Step Two of the plan is to get the original investors toreinvest their $100K along with your $125K and buy adistressed 50-space park. Use the exact same formula asStep One for the 18-month period. You should end of with$250K in your pocket after that sale.Step Three is to buy your 100-space park as notated in #2above. This business is not rocket science. Anyone can doit. A quick example: A guy I bought apark from in Raleigh, NC at the end of2009 had owned the park since 1979. Henever went to college. He raised his fam-ily in the park and the cash flow allowedhim to send three kids to college. AfterI purchased it, he netted out $3 million!I paved some of the roads, added somecosmetic repairs, and brought in 15 olderrepo homes to fill empty sites. I ownedthe park for two years and was able to netout $1 million in profit after I sold it inDecember of 2011.Mike Conlon is a President/Owner ofAffordable Communities Group, LLC,(, which investsin distressed mobile home communi-ties throughout the Southeast and theMidwest. He is also President/Owner of Carolina TurnkeyProperties, LLC, which buys distressed single-family homesin the Raleigh and Charlotte markets. He has been a full-time real estate investor for the last 10 years. He is basedin Cary, NC. He is also an author, speaker, and educator onreal estate investing. His book, “Unconventional Wealth: TheNew Main Street Millionaires,” was released in August 2012.Mike Conlon can be reached at mike.conlon@acgmhc.comThe New Main$treet MillionairesM I K E C O N L O NMike has the unique ability to provideAmericans with a realistic, no B.S. view of thefinancial world today – one that comes fromhis years of street-wise investment successin three different businesses – financialplanning, mid-sized apartment complexes,and mobile home communities that havemade him a true Main $treet Millionaire.He has bought, rehabbed, and sold over $50million worth of commercial multi-family(affordable apartment complexes andmobile home parks) involving 15 projectsover the last ten years. He was a leader inthe financial planning business in the 1990’sand early 2000’s as he grew a financialplanning broker-dealer from $1.2 million ingross revenues to $40 million in six years andthen sold it to a large national insurancecompany; he also managed over $100million of client money in his own financialplanning practice before becomingcompletely disillusioned with Wall Streetmoney machine. He is a 1990 graduate ofthe University of Minnesota Law School.Mike’s basic investing premise has broughthim success over the last decade and heforesees even more opportunities over thenext 10 years. Unconventional Wealth givesreaders insight into the skillz they need tobecome Main $treet Millionaires.UNCONVENTIONAL WEALTH:The New Main $treet MillionairesIn this book, Mike Conlon will show you an unconventional pathto prosperity in this very difficult economy by providing quality,ethical, and affordable services to America’s largest and fastestgrowing consumer group. In order to prosper on this path, youdon’t need a college degree, only the willingness to work hardand learn.UNCONVENTIONALWEALTH:MIKECONLONTheNewMain$treetMillionairesMaking $100,000 per year, pg. 18The State of the Note Market, pg. PAGE 36 • 2013
  8. 8. Why Should You Invest In AMobile Home Community?Why Should You Invest In AMobile Home Community?Log on to any websitesbelow to get more informationon investing in Mobile HomeCommunities and toscore a free copy ofMike’s new book:Unconventional WealthCreating the NewMainstreet MillionairesLearn how I made over$500,000 in profit intwo years by buyingone distressedcommunityThis advertisement is an offer for an educational product is in no wayan offer to solicit or sell any investment or security. All investmentscontain risk, including potential loss of principal. Please consult yourfinancial advisors before making any financial decisions.AFFORDABLECOMMUNITIESGROUP3 The demand for affordable housing is skyrocketing3 Very little, if any, affordable housing has been built in the U.S. since the mid-1990’s3 Much higher cash flows than apartment com-plexes as they are less maintenance intensive, have much less resident turnover, and much lower ongoing capital expenses3 Higher barriers to entry as the costs to build a new park are high and available land near larger metro areas is scarce and expensive3 Much easier to manage when the majority of residents are just “leasing the dirt”Why affordable communities group?3 10+ years experience in buying, rehabbing and selling over 3,000 units3 Have completed 15 full cycle deals (buy, rehab, sell) resulting in over $50 million proceeds3 Experts in the property management business as we self-manage all our properties - very “hands-on”3 Keep a tight geographic focus - diversified, but not too spread out3 We put our own capital into every dealMike Conlon, President/CEOMIke Conlon, aka Main Street Millionaire, has the unique abil-ity to provide a realistic, no b.s. view of the investment world today as he is highly educated but also has 15 years+ of street-wise investment success that has made him a multi-millionaire. Mike tailors his business strategy around providing outstanding customer service and quality, affordable products to the fastest growing consumer segment in the U.S., to the working
  9. 9. Entrepreneurial Lifeby Stephanie MojicaSensei Gilliland is a husband, father, real estate inves-tor and entrepreneur. He has little time to spare. Heruns businesses that are automated to pump out largesums of cash every day. Sensei is the founder and CEOfor Black Belt Investors, a real estate company that offersinvestments, education and consulting. Sensei also owns achain of martial arts schools, a marketing company and anreal estate auction bid service focused in Phoenix, Arizona.Multiple Streams of Income is the most preached aboutrule for real estate investors, but with that systems must beplaced. How can we as investors automate our real estateinvesting business or agency withother endeavors that we mayhave? Read on to find out...Question: When you first startedyour martial arts business, wereyou expecting that it would be-come a full-time business and agrowing company? Answer: At first, I started it with the idea that it would be-come an income stream, until I figured out what I wantedto do as a career. During college I realized that I was mak-ing just as much money working my part-time martial artsbusiness as the professors who worked full-time careers.I received my associate’s degree and quickly exited collegeso I could focus my attention on building my business.Q: At what point did you venture into real estate?A: I got started in the real estate because I was looking fora business that would give me a passive income stream.First my eyes were set on coin-op car washes. I understoodthe car wash business model, but what I didn’t understandwas how to lease or buy land. Now, I had to learn the realestate business. Here’s what I learned: He who controls thereal estate, controls the business. That was a big lesson forme, so I quickly dove into the real estate investing worldas I wanted that control.Q: Was there a particular real estate niche that attractedyou and why?A: Yes, I was attracted to fixing and flipping houses be-cause I wanted big paydays like I read in the books.Q: At what point did you realize that your real estate busi-ness was going to take off and decide to devote yourself tobuilding a second career?A: That’s funny you ask... I knew this business was for meright after I took my first real estate workshop. I had cre-ated such a passion for flipping houses that failure was notan option for me, especially after I had to break the news tomy bride that I just spent $30,000 on a package of real estateseminars. You men reading this article know what I’m talkingabout. After my first 5 years of flipping houses across the na-tion and continuing my education, I added other cash generat-ing real estate niches such as wholesaling, purchase optionsand rentals. I had such a momentum that many people startedto inquire about my business and that is when I decided toexpand my business to consulting, education, private moneylending and asset management.Q: I see that Black Belt Investors has many spokes to itshub. Would you mind telling us which spoke is the mostdominate income stream and which spoke captures yourpassion?A: Oh that’s easy. Buying and selling real estate is my cashmachine, rentals is my wealth builder and my passion be-longs to educating.Q: You’ve boot strapped your business, and as I understand,you run a lean and mean machine. What do you do your-self, what does your staff do, and what do you outsource?A: That’s a fully loaded question, but let me put it in simpleform. I personally like to focus on the creative side of busi-ness. I enjoy to tweaking, testing and enhancing my productsand services to stay on the cutting edge. I also love to buildnew businesses that compliments one of my other businesses.I have a powerful staff that I can rely on that enjoys theirwork. Some of my staff works in the office, some are out inthe field and many are set up to work through a virtual office.They relieve me of many duties that would normally tie medown just to maintain the business. I know that if I want toHowtoControlYourtime&moneywithsensei’ssecretstoan‘ definition of wealth is havingincome streams to control my timewithout compromising my lifestyle.’ PAGE 37 • 2013
  10. 10. grow, then I must be relieved of the work that a $10 an hour employeecan handle as ‘time is money’ and my time is much more valuable thanto do the tasks of a $10 an hour job. I will mention a few of the dutiesthat I outsource that most businesses can relate too, such as databasemanagers, internet marketing, social media managing, services andproduct sales team and transactions coordinators.Q: I know that you own multiple companies. How do you manageand control these businesses?A: I think it is very important to focus on your strengths and hire yourweakness. If you are going to own one or many businesses, then youneed to learn how to develop systems that can be operated by employ-ees. Let’s take McDonalds for an example... here you have a fast foodchain that will pull in billions in revenue each and every year op-erated by minimum wage workers. How can that be? It worksbecause of the powerful business branding and the systemsthat are in place. By having great branding and systems, itallows the owner to oversee the business and not be in thebusiness, which ultimately allows more time for the ownerto focus on business building.Q: You’re a strong advocate of “personal branding”.Could you define what that means to you?A: I had no concept what branding meant until abouteight years ago. Branding to me is a name that standsfor something in prospects’ minds. Google stands for“search”. Home Depot stands for “home improve-ment”. Redbox stands for “video rentals”. Developinga great brand and you will have what I call “positivemagnet marketing”. Prospects will be drawn to youand your business. Don’t brand yourself properly andyou will have “negative magnet marketing”, whichmeans you will push your marketing to find prospects.Q: How do you define entrepreneurship?A: I define entrepreneurship as “the passionate pursuit ofopportunity.” Entrepreneurship is not for the weak. Onemust work harder, faster and smarter than the competition.Q: How do you define wealth?A: The definition of wealth is very personal to each indi-vidual, however, my definition of wealth is “having incomestreams to control my time without compromising my life-style.”Q: What is next for Black Belt Investors?A: I am continuing my work to grow the company and to takeadvantage of the current market. I am excited to have a few ironsin the fire that will increase the value of the company and keepme challenged. I am always working to build the brand, better ourservice and products and enjoy myself along the journey.Black Belt Investors is a real estate company that offers properties,education and consulting. To learn more about Sensei and Black BeltInvestors or to sign up for his free newsletter, or call 951-280-1900photo by Nathan York
  11. 11. from Jason Hartman’sFinancial Freedom ReportIt’s not much of a secretthat the US governmentis in the midst of bigfinancial problems.The annual structural governmentdeficit is well in excess of $1 Trilliondollars, with no end in sight. In addi-tion to this, there are a growing numberof people who are hurtling towardretirement with insufficient assets tosustain themselves during their retire-ment years. Reports of people makingearly withdrawals from their retirementaccounts have caused some to proclaimthe 401(k) to be a failure, and have ex-pressed a desire to replace the current401(k) individual retirement accountswith a universal government sponsoredpension.Ordinarily, such a proposal would bedismissed as the pointless rants of folksfrom the far-left fringe. However, onOctober 7, 2010 Senator Tom Harkin(D-Iowa) held a recess hearing wherehe heard testimony from people advo-cating for a “Guaranteed RetirementAccount” (GRA).The fundamental feature of a GRAsystem is that the government wouldseize 401(k) accounts, set up an ad-ditional 5% payroll tax and distribute a“fair” pension to everybody. The lineof reasoning that is used to advance theproposal among its proponents is thatit replaces “market based” retirementplans with a government pension thatis “more stable.” Of course, this is alla thinly veiled cover for confiscatingmultiple trillions of dollars in privatewealth to bail out bankrupt governmentprograms and union pension plans.However, it provides a very impor-tant lesson to the people who haveinvested their time and effort intobuilding a financial nest egg to fundtheir retirement. This message is thatthe government has already preparedproposals to come after large amountsof private wealth. When the govern-ment-entitlement state eventually comesto the point of collapse, the politicalestablishment will become desperate.This creates a tremendous degree of riskfor investors, since they may end upwith a situation where their hard work tosave and invest is literally stolen by thegovernment and invested into govern-ment treasuries that pay a rate of interestbelow the rate of inflation.In this way, there is a persistent riskthat the once vaunted 401(k) couldbecome a financial sink hole thatAvoid Falling InThe 401(K) Sink Hole… PAGE 40 • 2013
  12. 12. cal landscape todetermine whenor if such actionswill be required.Furthermore, nowis a prime op-portunity to begindiversifying yourinvesting activi-ties into areas thatare not concen-trated in highlyvisible pools ofcapital.One highly ef-fective vehicle forachieving this goal is income property.Since rental real estate is highly frag-mented, it will be much more difficultand costly to confiscate than 401(k) andIRA assets. In this way, fragmentationserves as a defensive mechanism forinvestors. Another way that fragmenta-... now is a prime opportunity to begin diversifyingyour investing activities into areas that arenot concentrated in highly visible pools of capital.devastates manymillions of middleclass investors justas they are nearingthe age where theyexpected to retire.It is important forinvestors to under-stand the true na-ture and gravity ofthe situation. TheUS governmentdoes not currentlyhave the powerto confiscate yourretirement assets,but that powercould be granted by congress. Fromthere, the bill would need to be signedby the President, and would almost cer-tainly trigger a major court challenge.However, the proposals have alreadybeen advanced, and it seems to be onlya matter of time before somebody inWashington DC becomes desperateenough to come after the private wealthof the millions who have invested theirearnings into a 401(k) plan.This demonstrates two fundamen-tal truths. The first is that desperategovernments will resort to highly riskyand unethical measures to avoid theconsequences of their collective fiscalirresponsibility. The second is that ourfinancial resources may be at risk ifthey are concentrated in a place such asa 401(k) where they are easily visibleby government agencies.Now is not the time to incur apenalty and withdraw all of your fundsfrom the 401(k) or IRA plan that youhave established for your retirementassets. However, it is most certainly atime to pay diligent attention to what ishappening in the financial and politi-Action Item: Diversify yourinvestments into fragmentedvehicles such as income propertiesthat are not concentrated in large,highly visible financial institutions.This will help you defend againstthe risk of the government confis-cating retirement accounts to funda universal pension system.tion works in the favor of income prop-erty investors is because laws regardingthe landlord-renter relationship are alllocal. This means that a single sweep-ing change from Washington D.C. isunlikely to completely change the land-scape of the income property market forthe entire country.Thus, the 401(k) carries an increas-ing risk of becoming a sink hole forinvestors. The government is runningout of time before the full extent of theirgenerational financial irresponsibility isbrought to bear. The risk is not yet im-minent, but is still very real. Intelligentinvestors should understand that thecurrent world is one where the rules thatwere originally created to help peoplesecure a happy, prosperous retirementare poised to be pulled out from underus at the most inopportune time pos-sible.Jason Hartman has been involved in sev-eral thousand real estate transactions andhas owned income properties in 11 statesand 17 cities. His company, PlatinumProperties Investor Network, Inc. helpspeople achieve The American Dream offinancial freedom by purchasing incomeproperty in prudent markets nationwide.Jason’s Complete Solution for RealEstate Investors™ is a comprehensivesystem providing real estate investorswith education, research, resources andtechnology to deal with all areas of theirincome property investment needs.Contact Jason at or PAGE 41 • 2013
  13. 13. by Isaac NewkirkIt’s common knowledge that tremendous money-mak-ing opportunities exist by investing in real estate. Butquestions still loom large: Where are the best deals?Is my local community ripe for investments or doneighboring cities offer better opportunities?What’s the best way to determine pricing trends inany given community?And this is only the beginning: The deeper you go into thereal estate investing environment, the greater the number ofquestions. The ever-changing market and uncertainty can bedifficult even for real estate veterans to deal with. It is forthis reason that many savvy investors with years of experi-ence under their belt are increasingly turning back to theirlocal clubs for guidance. These groups are known as REIAs(Real Estate Investors Association). Traditionally, many havebeen under the National REIA umbrella, a non-profit tradeorganization with local chapters nationwide. However, arecent surge in industry activity has skyrocketed the numberof independent associations and networking groups.The new Coast to Coast REIA™ (commonly known onlineas C2C REIA) is one such organization. What makes thisCalifornia-based investment club organization different?“Our main focus is not selling education, but encouragingreal estate deals to be done within the group’s membership,”explains Pete Asmus, CEO and co-founder.The organization is comprised nationally of localizedC2CREIAgroups of like-minded individuals. They meet regularly toshare ideas, discuss market changes, learn new concepts andtrade industry referrals, including who to stay away from in adesignated market. Most importantly, the main objective is toshare equity opportunities within the group.Pete got into the real estate business seven years ago andbecame quite skilled at flipping houses, so much so that hewas constantly being asked to conduct seminars about theprocess. It didn’t take him long to realize that, not only did hehave quite a knack for the seminar process, it was somethingthat he also enjoyed. Last year Pete, and his longtime friendand business associate Ivan Oberon, founded Coast to CoastREIA™. Ivan handled the real estate side of the business andPete was in charge of networking responsibilities. Today, theyhave over 1,100 members and 32 chapters in many states,such as Washington, Oregon, California, Colorado, Maryland,New Jersey, New York and Washington, D.C.It may seem like instant success, but the duo have beenbuilding connections in the real estate industry circuit fornearly a decade, and they were able to tap into an existing da-tabase of thousands. Coast to Coast REIA™ also merged withexisting clubs already in place in some markets.Pete believes that investing in the success of club memberscreates a stronger organization. “The seminar companies wantto make money from just training.” He adds: “When all youdo is care about the money coming in from training, thenyou’re not going to care about the end result, which is theirCalifornia investors begin Coast to Coast REIA clubsto encourage deal participation among members.>Pete Asmus (left) and Ivan Oberon,founders of Coast to Coast REIAPhotographs by Shannon PAGE 42 • 2013
  14. 14. financial freedom.”Pete says if he is going to help teach someone, inevitably,he’s hoping his student will create wealth and “desire to be apartner” in future deals. Coast to Coast REIA™ was createdto be a network of real estate partners. An organized group ofbusiness relations across the country, Ivan says.The core foundation of Coast to Coast REIA™ is the Re-gional Managing Partner (RMP), the individual that runs theclubs in the various markets. “Part of what our organization isabout is bringing people together who are great at somethingdifferent than what you are,” Ivan confides.The organization’s mantra is “connecting people face to facefrom coast to coast.” The ultimate goal of a Coast to CoastREIA™ meeting is to connect the right market with the righttype of investor. “The one thing you need as an investor isa team. That’s what we provide,” Ivan says, adding “I’m allabout trying to get you into a network to realize that’s wherethe real opportunities come from.”While education is great, Pete and Ivan say that what makesHarvard such a fantastic school is not the professors, but theThe organization’s mantra is “connecting people face to facefrom coast to coast.” The ultimate goal of a Coast to Coast™meeting is to connect the right market with the right type of investor.Want to Connect withCoast to Coast REIA?http://www.c2creia.com register for our weekly webinarJourney to Success information email:info@c2creia.comalumni. “When it comes to investing in real estate, you don’thave to know everything, says Pete. “You just have to be con-nected to people who do. Then, you can accomplish anything.” PAGE 43 • 2013
  15. 15. What Exactlyis a SecuredInvestment?by Chris Gleason, MMG CapitalIf you stick around the real estate investing communitylong enough, you’re bound to hear the term secured in-vestment at some point. The word “security” is thrownaround all over the place with the intent of meaninga lot of different things. Unfortunately, because itmeans so many different things to so many differentpeople, it’s often used incorrectly. And since there’s nouniformity in the way that the word is used it logically followsthat there is a general confusion or a lack of understanding ofwhat the word is supposed to mean in the context of real estateinvesting.Who really cares though, right? So what if it’s used incorrect-ly? How does that affect anybody? The truth of the matter is thatit’s extremely important. For instance, if you were asked whetheror not “your investment is secured,” could you answer confi-dently? Or if you were asked “what is your investment securedby?” would you confidently know what to say? Knowing thedifference between secured and unsecured can be the differencebetween profits and losses. The economic implications can havea drastic effect on your pocketbook and the way that you decidewhat investments are appropriate for your portfolio.Here are a few ways to tell whether an investment is securedor not. Your investment is probably unsecured if:• The value of the investment fluctuates with the market.• There is risk for significant loss.• There is no limit to the investment’s upside.Some examples of unsecured investments include: stock or equi-ties, direct ownership in real estate (flipping or holding for cashflow), ownership in partnerships or entities that own real estate,most REITs, and promissory notes.On the other hand, an investment is likely secured if:• The value of the investment does not fluctuate and is notmarket driven.• The investment comes with some form of guarantee.• The downside risk of the investment is very limited.Some examples of secured investments include: bonds anddebt instruments, trust deed investments, real estate tax liens, orsecured promissory notes and mortgages.Secured Investments are not necessarily better than non-secured investments, and vice-versa. Each has their own set ofpros and cons and each is more appropriate given certain marketconditions and expectations. So again we have to ask the ques-tion, “why do we care?” To answer simply – different types ofinvestments are better suited for different types of investors de-pending on their goals and risk tolerances, and different types ofinvestments will vary significantly in their expected yields. Thereare plenty of different types of real estate investing strategies outthere, and some will be suited for certain investors and others willbe suited for the rest. What works today may not work next year,and so on and so forth.As an example of what we’re talking about, consider the com-mon case of Real Estate Investor A that has a little money in theirpocket and is trying to decide what to do with it. In most cases,this investor will go out and buy a piece of investment real estate.They may even utilize a loan to purchase the real estate, hopingto increase their return on equity. At the same time, Real EstateInvestor B is in the marketplace with some money and is trying todecide what to do with it. Rather than purchase a piece of invest-ment real estate, Investor B decides to become a secured lenderand use their cash to make a loan to another real estate investor.Continued on pg. PAGE 44 • 2013
  16. 16. Brian DavisDirector of Business Development(San Diego/SOCAL)3111 Camino Del Rio North Ste 400San Diego, CA 92108Phone/Cell (619)-892-2438Fax (888) 706-9556Email: briandavis@accuplan.netWebsite: are experts in Self-Directed IRA and 401 setup and account administration. A SElf-Directed IRA/401Kis a retirement account that you directly control. You direct the investments of your choosing.Bryan CalDeronDirector of Business Development(Orange County/SOCAL)Irvine Towers18100 Von Karman Ave., Ste. 850Irvine, CA 92612Bus (949) 705-4554Cell (949) 233-5866EFax (949) 242-2730Email:bryan@accuplan.netWebsite: BaxterDirector of Business Development(Northern California)9245 Laguna Springs Dr. #200Elk Grove, CA. 95758Phone: (916) 509-7150Direct: (916) 708-0235Fax: (916) 405-4000Email: lamarrbaxter@accuplan.netWebsite:’s Your Future.Take Control.Open an IRA Account online now.Get yoUr retirement FUnDs noW• NO PENALTIES • NO TAXES • NO AGE REQUIREMENTS• EVERYONE QUALIFIES • HAVE YOUR FUNDS IN LESS THAN A WEEKGot 401K/IRA?Let us teach you how!Most of our clients invest their IRA/401K’s in the following:• Real Estate - Rental Properties & Raw Land• Trust Deeds & Mortgage Note• Joint Ventures & LLC’s• Start-Up and Private CompaniesGain control of yourretirement accounts andinvest in somethingyou know.
  17. 17. Nick Vertucci knows thereal estate market has abit of an image problemin the media.“Right now, when I tellpeople I’m a real estate investor, theygenerally look at me with a face thatsays ‘Are you doing OK?’” he laughed.But between the radio shows, thereal estate seminars, and the peren-nially-active business he’s built NVCompanies into, Vertucci is doing bet-ter than OK.And he forgives his new clients forwondering.“People thought that the best realestate market was five or six years ago,Nick VertucciWINSinANYMarketprofile“I control the whole environment from start to finish”when we had the run-up to the bubble,”said Vertucci. “But the fact of the matteris, all the savvy investors were sellingtheir product when everyone else wasbuying. Those people were speculating,and they were mostly following the herd.”Vertucci said the challenge right nowis explaining that right now is actually thetime to buy. “We’ve never been in a betterreal estate market,” he said, “but mostpeople don’t recognize that, because theyonly understand appreciation.”The model Vertucci and NV Compa-nies have built their success upon doesn’tcount on an investment appreciating;rather, they advise investors to “cash-flow” properties — set them up with rent-ers, and hold on through the up-and-down.That relies upon twothings: getting a decentdeal on the investmentto begin with, and theability to manage theproperty going forward.The first, according toVertucci, has been amatter of paying closeattention to markets.Until recently, NVCompanies and itsinvestors were focusedalmost exclusively onLas Vegas — a citywith an exceptionallyhigh run-up in appre-ciation headed into thebubble, followed by aprecipitous 60% drop invalue.“It had alwaysbeen an appreciationmarket,” said Vertucci.You could never really cash flow there,because the prices were too high. But afterthe bubble, it got to a point where youcould actually cash flow at an 8% to 10%cap rate in the good areas, and then justwait for appreciation.”So a few years ago Vertucci and hisinvestors went into Las Vegas in a bigway. “We told all our investors to get inand get good cash flow, and they did,” hesaid. “And now that market — betweenthe hedgefunds goingin there andbuying,and all theinvestors,peoplefrom Cali-fornia —you can’tget productout thereany more at a good price, it won’t cashflow, the prices are too high. But everyonethat has purchased there made at least 20-30% on their money since last year.”The key, according to Vertucci, was thatthey were paying attention.“Probably about 8 months before theVegas market just stopped, we saw thewriting on the wall,” said Vertucci. “Thenwe saw Orlando shaping up with the sametype of market, just about a year and a halfbehind Vegas. So we went to Orlando tobuild the infrastructure there — and whenthe Vegas market puttered out, we werealready up and running.”That infrastructure is the other half ofthe business’ success, Vertucci explains.His company doesn’t just find and sellproperty; they offer a rehab and manage-ment package — “Soup to nuts,” he said— that includes all the ingredients neededto make the investment pay off, leveragingthe bulk buying power of the 50-70 prop-erties they take on every month to bringdown expenses — and retain control.“When my investor buys, they get aproperty that’s already been rehabbed,that has a renter in it, and is managed byus,” said Vertucci. “I don’t pass them onto third party management because that’swhere people get hurt a lot; they get allContinued on next page > PAGE 46 • 2013 reWEALTHmag.comby Robb Magley
  18. 18. So Investor A takes a loan from InvestorB and purchases a piece of investmentreal estate, utilizing 50% leverage and50% cash down for example. To makethe numbers simple, let’s say that thepurchase price of the property was$100,000. So, we have two investorsthat are both investing in real estate.In fact, both have an investment that’sbased on the exact same piece of realestate. They even put the exact sameamount of cash into that piece of realestate. So then are their investments the same? Of course, weknow that the answer is “not at all.”Investor B has made a secured investment by lendingmoney to Investor A. Investor B’s downside risk is minimalbecause they have a loan that Investor A has promised torepay. The loan is secured by the property which is valuedat twice the amount of the loan. Investor A is an unsecuredinvestor. Investor A bears the full economic risk of the realestate market in this transaction and also bears the obliga-tion of repaying Investor B’s principal plus an agreed uponamount of interest. In short, the amount of risk that InvestorA is taking is much higher than that of Investor B. Supposethat the real estate market was to decline by 10% and that$100,000 property is now worth $90,000 and Investor Adecides to sell. What are the economic implications?When the property is sold for $90,000 all secured inves-their profit taken away by management companies over-bill-ing. So I control the whole environment from start to finish,and then I manage these long-term for them.”Vertucci said it’s not just a solid business model, but alsoa great way to instill confidence in an investor: His reputa-tion rides along. “I realized that’s the only way I could getfolks to buy these without the fear of being 3,000 milesaway,” he said. “I had to account for everything — I helpthem put on the right insurance, review their documents atthe title company, help with putting the properties in theirIRAs, help them form LLCs... everything you can think offor an investor to succeed, even one with no experience.”By cash-flowing and not being dependent upon appre-ciation, Vertucci’s investors can weather a lot of financialstorms. “If the market gets worse, people still have tolive somewhere, and their first money goes to rent,” saidVertucci. “The worse the economy gets, the stronger yourasset is. Now, when the market turns, and suddenly we haveappreciation again, you’re just going to get that cherry ontop. You win if things go up or down. Holding that brick-and-mortar asset is the safest investment you can make.”For more information about Nick Vertucci, please or contact: 800-328-6418.Nick Vertucci, Wins, pg. 46The Best Kept Secret inCommercial Real EstateRICH in FivePO Box 2007Round Rock, TX 78680Ph: (512) 788-1710FREECreative RealEstate Tips!w w w . r i c h i n f i v e . c o mWhat Exactly is a Secured Investment, pg. 44tors must be paid first. That means that Investor B will bedue to receive their entire principal balance plus any interestand fees that they’re owed. In other words, Investor B’sinvestment wasn’t at all affected by the market decline. Theyreceived every penny that they expected to. Investor A on theother hand is unsecured. They own the property and there-fore bear the full risk of the investment. Since Investor B hasalready been repaid their $50,000 plus interest and fees, thatonly leaves $40,000 or less for Investor A (after all costs).Investor A has lost, at a minimum, about 20% of their invest-ment from only a 10% market decline.Now consider the alternative: Say that the property is soldfor $110,000 instead of $90,000. Investor B’s economicsdon’t change. They receive their principal plus interest andfees at closing. Investor A’s economics change drastically,however. Instead of a 20%+ loss they now have almost a20% gain (less interest, fees and costs that were paid). Inves-tor A makes a great turnaround and receives the benefit of theupside of the investment while Investor B’s economics didn’tchange.So here’s the reason behind this simple analysis as statedpreviously in this article: To become a sophisticated inves-tor, at the very least, you must be able to analyze risk and usethat information to distinguish between a good deal and a baddeal. In our scenario, Investor B took far less risk than Inves-tor A. An investor who takes less risk should expect lowerreturns. An investor who takes more risk should only do so ifthey believe that they can achieve much higher returns.So if you take one thing from this article, please take this:there are a number of different ways to invest. There are evena number of different ways to invest in real estate. Somecarry more risk than others. Some carry much more risk thanothers, especially in certain market conditions. Get to knowmore than one strategy so that one day when you’re consid-ering purchasing a piece of real estate (unsecured) and youexpect it to yield a 12% annualized return you’ll know thatyou could have achieved the same while reducing your riskwith a secured investment. If trust deed investing or securedloans are producing similar returns then you’ll know why youshould think twice about buying that property.For more information, contact Chris Gleason, managingdirector of MMG Capital LLC: 310-295-1121 (ext. 301) PAGE 47 • 2013
  19. 19. One of the most important deci-sions a real estate investor canmake is choosing which real estatemarket(s) to purchase investment proper-ties. All too often I see investors focus onshort-term high cash flow without consid-ering the long-term outlook or high riskfactors.Let’s start out by listing a few of the main criteria for buy-ing safe real estate investments that generate passive cashflow month after month after month.•Inventory of homes for sale (current inventory, averagedays on market, upcoming foreclosures,...)•Pro-landlord laws and regulations•Good school systems and a focus on universities and col-leges creating a skilled work force•A strong and diverse economy with multiple employmentsectors, including high tech, finance and health care•Low crime•Housing affordability•Vacancy rates•Good rent ratiosNow, just because you can buyan inexpensive property in a mar-ket with good rent ratios doesn’tguarantee high cash flow. Manyinvestors purchase in areas suchas Detroit, Cleveland, Chicago,Buffalo, and Pittsburgh with theexpectation that the cash will be rolling in each month. Unfor-tunately their reality can be vastly different.With over 1,400 property transactions, I have personalexperience investing in each and every one of these citiesand a few battle scars to prove it! Here is just one example ofa scenario that can be devastating to a real estate investor’scash flow.In many of these cities a Certificate of Occupancy (read:tax) is required. A COO is where a city or county officialinspects your property and hands you a list of repairs that mustbe completed before they return. Usually there is a fee for eachinspection, plus there is a fee for the COO. Unfortunately, theseofficials are not business people and the improvements requestedcan outweigh the cost of the property.I had one house in Chicago built in the early 1900s that wascalled out for a full “green” initiative requiring new windows,doors, and insulation in the walls and ceiling. By the time I wasdone with the quotes, it would have cost me over $40,000 just tocomplete the requests. Ouch! This was certainly not practical foran investment property so the house was sold to a homeownerwho didn’t mind making that kind of an investment for theirprimary residence.I know that many people have lost substantial wealth in thedown turn and feel like they need to “catch up”. In turn, theyare taking risks by going into areas that claim to have unusuallyhigh cash flow on paper. The truth be told, year after year, anysolid cash flow market will yield 6-12% cash on cash returns.Anything higher than that will usually turn out much lower afteryou take into account vacancy, repairs, regulation and taxes.Bottom line, when you invest to “catch up”, invest in themarkets that will be strong in 5 to 10 years from now and wherethe monthly cash flow allows you to keep the property.One of my favorite sayings is “You won’t lose money in realestate as long as you aren’t forced to sell.” So, as long as themonthly cash flow covers the cost of holding the property (anda little more!) and you are in the right market with the right typeof home, you are in the right spot to grow your wealth and catchup. Taking the time to research and make smart decisions beforeyou purchase can save you from costly and stressful situationsafter you purchase. For more information on real estate marketselection, download a free copy of my new Real Estate InvestorChecklist on my website.Take Care,Lori GreymontP.S. Our team of experienced real estate professionals can helpyou create a customized investment plan and find properties inthe best rental markets in the country that fit your plan.To reach Summit Assets Group, please call: 408-782-9162 orvisit: www.SummitAssetsGroup.comInvestor Beware!Real Estate Market Selection Advice by Lori Greymontmarkets“You won’t lose money in real estateas long as you aren’t forced to sell.” PAGE 48 • 2013 reWEALTHmag.comimagebyJosephMercier
  20. 20. Hitting the High Notes, pg. 24changed their tune dramatically over the last coupleof years.”There’s obviously a method, even an art to pick-ing up property for fifty cents on the dollar; aftera few years of doing it successfully, Carson said itonly made sense to start teaching. The “Note Buy-ing for Dummies” workshop was launched in 2008,and Carson has taught hundreds since, building anetwork of trained investors all across the country.“I teach people who to call, what to say, how toevaluate the notes from different banks, differentpools,” said Carson. “I teach them how to cherry-pick, how to market the deals they find, how to findbuyers for them.” Carson said he also gives ideason how to raise private capital, to leverage whatyou’ve got to take advantage of the deals you find.Note buying has been around for years, Carsonsaid; banks have been selling pools of mortgages toother banks and other entities for decades. But a lotof his students had always thought you had to have$5 to $10 million to even get in the game.“And sure, to buy from Bank of America, Chase,or Wells Fargo, yeah, you do,” said Carson. “Butbesides those big banks, there’s a whole lot of otherbanks that will sell you stuff at a smaller level.They’re not trying to close a $20 million deal,they’re saying, ‘Just buy something from us.’”Carson stressed his workshop is a hands-on fourdays. “It’s not a pitch festival, it’s a workshop,” hesaid. “I bring in real asset managers and hedge fundguys, and we get on the phone and make calls infront of everybody so they can see what to say, andhow I do it. I give them scripts to start from, theyget a nice 200-page manual of contracts and forms.I get online and show them how to find these phonenumbers and email addresses for asset managersand mortgage bankers, and give them an idea ofsome of the resources that are out there.”And if you’re looking for an even more intensivelearning environment, Carson offers 1-to-1 coach-ing. “This is for someone who’s willing to work,because it does take work,” said Carson. “You’vegot to make the calls, you’ve got to follow up. It’snot something that will just happen overnight.”But, for someone who’s motivated and ready toput in the time and effort, Carson said it again: It’s agreat time to be in the note business.“There’s a lot of inventory still sitting out there,plus we have a huge commercial foreclosure wavethat’s still going to hit us,” said Carson. “You canmake a ton of money on this by working diligently,and when it starts going, it’s really a lot of fun, too.”For additional information about Scott Carson andInverse Investments visit: PAGE 49 • 2013 reWEALTHmag.comEconomical, cash-flowing Georgia propertiesgFor your protection, all homes are sold on a 15-day escrowg“No Questions Asked” refundable depositgNo Hassle 12 month Home WarrantygHeadache-free, call us anytime, post sale support
  21. 21. Question & Answer withInvestment Property Expertsby Stephanie B. MojicaWith significant apprecia-tion since 2010, Phoe-nix remains one of thestrongest real estate markets in thecountry thanks to an influx of new-comers moving in from around thecountry in lure of warmer climatesand stronger job markets. To getthe latest pulse on Phoenix realestate, we interviewed Daniel But-terfield, owner of IPX (InvestmentProperty Experts). He has been investing locally for fifteen yearsand gave us great insight on this important market.Question: Tell us some highlights about the market. What haschanged since last year?Answer: The market has changed significantly. Since the marketin Phoenix has increased 44% (Monthly median sales price inMaricopa county per the Cromford Report) and inventory levelsare at an all-time low, many of our purchases arecoming from pre-foreclosures with equity opposedto short sales or lender-owned property. In addition,there has been a huge increase in traditional sales.Q: What type of opportunities are you seeing now?A: We are in a seller’s market, however we are stillable to find great cash flow investment property, aslong as we buy properties in distress in high demandareas and do the remodel ourselves. This is preciselythe value we are able to offer our investor clients.Q: What is the best part of being an investor in yourarea?A: Cash flow real estate still exists and appreciation is constantlygrowing. For a very modest investment you can purchase aninvestment property, have your tenant pay-off your investmentproperty, obtain a great cash-on-cash return, qualify for numer-ous tax write-offs, sell your property for a profit all while hedg-ing against inflation and increased taxes.Q: Currently, how is the rental market doing?A: The rental market is solid and consistent. It is not growingbut definitely not decreasing. We are starting to see more rentersbuy properties, which is good for investors as this creates higherdemand and appreciation for starter home investment properties.Q: When did you start your investment career and how?A: I started investing in real estate 15 years ago, my objectivewas to obtain tax write-offs to reduce my W-2 taxable incomefrom my day job as a consultant for Andresen Consulting (Ac-centure). Since then I made substantial money in real estate andturned my real estate investing activities into my full-time jobwith my focus being helping other investors obtain the samegoals I have personally created using my existing infrastructureof real estate professionals and service providers.Q: What makes your company unique in the marketplace?A: Our company is the only company that offers turn-key realestate investment services to investors, which allows them topurchase renovated and occupied properties that cash flow. Inaddition, we also help investors roll over their retirement ac-counts, obtain conventional financing as well as lease and man-age their investment properties.Finally we are able to help our clients also sell their invest-ment properties when the time is right so they can capitalize onthe appreciation in the market place, then re-invest their moneyagain if they want. We also offer alternatives to traditional realestate investing, such as Deed of Trust Investing where youcan earn a constant 12% annual return on your money whileinvested in a Deed of Trust.Q: Tell us why investors should investigate your market?A: The Phoenix Metro market has the perfect balance when itcomes to an attractive real estate investment: Cash flow alongwith an appreciating marketplace. Phoenix has been rankedin the top 20 cities across the nation for many months and willcontinue to be one of the best places to invest for a minimum oftwo more years due our economic growth.Q: Can you give our readers some sound advice that can helpthem in their investment careers?A: Work with professionals who have proven track record.Don’t try to do it all yourself in this marketplace. Watch out for“new” investment groups and agents who lack the investmentexperience to help you achieve your investment goals.To schedule a complimentary investment consultation with IPX,visit: or call PAGE 50 • 2013 reWEALTHmag.comDaniel Butterfield
  22. 22. IPX is your true turn-key solution provider...all under one roof!CALL 602.254.6244 · www.AZInvestmentPropertyExperts.comReserve your seat at our next Investor Roundtable - Check us out for FREE!Within over 15 years in the property investment industry, we are focused on maintainingmargins through our proprietary acquisition model.Disclaimer: All information and materials are for educational purposes only. Returns displayed are estimates only. All parties are encouraged to consult with theirattorneys, accountants, and financial advisors before entering into any type of investment. All services displayed are OPTIONAL. Some of the real estate related servicesoffered by IPX are provided by entities that are: 1) managed or controlled by or under common control with IPX or 2) Not owned, managed or under common control withIPX. Clients of IPX may utilize non-affiliated service providers for any professional services offered by IPX or its affiliatesReal Estate BrokerageRenovation CompanyMortgage BankProperty ManagementMarketing & TechnologyARE YOU MAKING AT LEAST 12%ON YOUR MONEY?
  23. 23. toolsThePowerofDirection(The Iron Fist Inside the Velvet Glove)as well as a majority before any directive can beissued to the Trustee.For example, you might appoint seven Direc-tors who would only issue directives arrived atin formal meetings of at least 5 of them, with athree-fifths majority required to take any action.This would obviously take a lot of “cooperative”people to construct and might not be worth thetrouble unless a lot of money is involved.One of the advantages of using a Board of Di-rectors is that you could place younger inexperi-enced heirs on the Board and provide Land Trusttraining via the Board meetings. Eventually theheirs would “graduate” to understanding the for-malities of Land Trust administration and beginforming their own Land Trusts for privacy and asset protection.Oftentimes a Land Trust has multiple Beneficiaries and to des-ignate just one to hold the POD is a matter of convenience andpossibly business acumen. A Land Trust will operate much moreefficiently if only one person holds the power over the Trustee(especially if that person has more business and life experiencethan the other beneficiaries).Occasionally, Land Trusts are established to hold income pro-ducing real estate to provide support for minor children or men-tally handicap adults. In this event, the minor or incapable adultwould serve as beneficiary (receiving all the proceeds and availsfrom the trust property) and the parent or benefactor would serveas Director making all critical decisions over the trust assets.The POD is a Property Right and as such is considered per-sonal property. This Property Right can be assigned away fromthe beneficiary temporarily, permanently or conditionally. Forexample, if the Beneficiary currently holds the POD s/he couldassign this right to another party for one day, for the life of theTrust or until Bakersfield, California receives 10 inches of rain ina twenty-four hour period. Conditional rights like this can be funto create and a night-mare for your adversaries to penetrate.It would be prudent at this point to mention that anytime thebeneficiary or holder of the POD is changed, the Trustee mustbe notified in writing. It also is important to always protect thepersonal liability of your Trustee and this can be done by writtennotification (to the Trustee) and acceptance (by the Trustee) ofby Randy Hughes, Mr. Land TrustMany people (especially someattorneys) do not believe thereare any benefits to using a LandTrust to hold title to your real estate invest-ments. After 44 years of investing in SingleFamily Homes (and using Land Trusts for30 of those years) I have found that thepractical (and often unforeseen) benefits tousing a Land Trust are not always obvious.Using a Land Trust to hold title to yourinvestments is like using a gun to protectyourself. Your adversary must ask, “Is thegun loaded?” If the gun is not loaded theremay or may not be much protection. But, if the gun IS loadeddoes your adversary really want to take you on? A smartadversary will move on to the next target. Case in point: Hereis an example of how to put bullets in your Land Trusts.In my Land Trust seminars and home study courses, I talka lot about the many benefits to creatively using the Powerof Direction (POD) in a Land Trust. This article will addresssome specific advantages of the POD and how you might useit for privacy and asset protection benefits.The Power of Direction is the steel hand inside the velvetglove. The Director of your Land Trust (which might be youas the beneficiary or someone else who is not the beneficiary)holds all power over the Trustee. Remember, unlike manyother types of trusts, the Land Trustee cannot act withoutspecific direction (in writing) from the person or entity thatholds the POD.Typically, when a Land Trust is formed the Beneficiaryalso holds the POD, but this is not mandatory. The POD canbe designated to the Beneficiary at the inception of the trustor assigned to another (person, corporation, partnership oranother trust) immediately or subsequently to forming thetrust agreement.There are many strategies that you can employ when set-ting up your Land Trust and designating a Director. If youdo not trust any one person to hold the POD, you can set upa Board of Directors and mandate what constitutes a quorum‘One of the advantages of using a Board of Directors is that youcould place younger inexperienced heirs on the Board and pro-vide Land Trust training via the Board meetings.’ PAGE 52 • 2013
  24. 24. Mobile Gadget Apps isPartnering with Realty411To make being mobile within your reach!Your customers are mobile are you?Every business needs an app and a mobile websiteto stay competitive and stand out amongst all thecompetition. We Can Help!Our Business Package IncludesAn iPhone App, Android App, Mobile Website and aRealty 411 bonus that includes a Press Releaseabout your new mobile app when published.Get your FREE DEMO APP at411.MOBILEGADGETAPPS.COM(type address in browser exactly as shown)972-652-0929any and all changes to the Trust Agreement.With partnerships and corporations or other trusts assingle or joint beneficiaries, the POD can be assigned to aspecific individual (in each) acting as a representative ofthe organization, or by the organization itself upon properresolution of the individual partners or Board of Directors.Or, the whole problem might be resolved with a BeneficiaryAgreement.A Beneficiary Agreement (BA) keeps multiple benefi-ciaries from suing each other over the POD of a trust. TheBA would set forth rules for apportioning the POD amongthem, provide for resolution of problems and for the broadpolicy pertaining to administration of the trust by theTrustee. Then the only Directives would be “as needed”exceptions rather than having every decision require a vote.It is VERY important to note that when the BeneficialInterest of a Land Trust is transferred, it has the effect ofcancelling any previous assignment of the POD (unlessthe assignment was irrevocable) and it then belongs to theassignee. Because this POD is not based on any documentother than the Trust Agreement, which is not made publicor placed into the public records, it is an easy thing forlawyers and courts to overlook.By adroitly controlling the POD through contingenttransfers, assignments and use of other Irrevocable Trusts(as holders of the POD) unique asset protection benefitscan be obtained without public knowledge for the PrimaryLand Trust. For example, by designating the POD to an Ir-revocable Trust any legal attack on the Primary Land Trustcould trigger a contingent transfer of beneficial shares toanother trust with another Trustee in another jurisdictionwith another POD in another Irrevocable Trust.Further asset protection benefits can be obtained via thePOD by using non-citizens as co-directors. If a US courtordered the citizen co-director to make a disposition of thetrust property (which would be against the best interests ofthe beneficiary), the foreign non-citizen director could re-fuse to cooperate and no legal directive would have effect.As you can see, the sky is the limit when it comes tocreative uses of the Power of Direction over a Land Trust.And, the POD is just one of the many parts of a Land Trustthat will allow you to be creative in your structuring ofasset protecting concepts. It is important to point out thatI teach these techniques to honest law abiding real estateinvestors to protect themselves against contingency feelawyers and their clients (and others who view real estateinvestors as easy targets for a lawsuit). If you are seriousabout protecting your assets, you need to learn how toform your own land trusts for privacy and asset protectionnow before you lose your life’s saving to the unscrupulouspeople in our society.For more Land Trust knowledge, please go to: or call me, Mr. Land Trust, at 866-696-7347. If you would like a FREE copy of my booklet,”50 Reasons to Use a Land Trust” send me an email PAGE 53 • 2013 reWEALTHmag.comWith the right tools and education,your experience as a Self StorageManager & Owner can be the startof a rewarding career.PurchaseaSelf Storage FacilityPurchaseaSelf Storage Facilitywww.selfstoragefacilitymanagement.comcall us today @ 1-800-884-0065Kevin Rollings, CSSM,has over 25 yearsrental experience
  25. 25. SignificantBenefitsforInvestorsLegal Shield is a beneficialtool for landlords, brokersand real estate investorsby Christy-Ann OlivaresWithout a doubt,investorsneed qualityattorneys that are avail-able to answer unlimitedquestions on any subjectmatter, i.e., real estatequestions, taxation, in-terpretations of laws andusury rates, just to namea few.If you have never needed legal repre-sentation for your investing business orfor yourself, believe me it is just a matterof time. Buying property in this day andage can most certainly be a liability inevery sense of the word.The word “Attorney” puts a feeling ofuncertainty and fear into our very being.Not many of us like to call an attorney foradvise or help of any sort, as we know upfront, the charges we incur can be of anamount extremely large. This puts manyof us in a difficult situation of whether weshould spend the money for attorney feesor to take the risk of not having council,by doing without the cost or expense, andunfortunately, without the professional as-sistance that we might need or require.Many of you have heard of LegalShield but really know very littleabout how it can help you inyour business.Legal Shield offers a planthat is called “The HomeBased BusinessRider” in theUnited Statesand Canada.This Riderattachesto the“ExpandedFamily Plan” andin combinationenables the investorand his family tohave significant benefits, such as:Unlimited questions answeredfor business or personal matters. Threeletters drafted per month on behalf of yourbusiness. Unlimited calls or letters madefor you and your family, one per subjectmatter. Plus, up to three initial debt col-lection letters written per month on yourbehalf for your business.You can have three contracts or docu-ments up to fifteen pages in length, permonth, reviewed by your provider lawfirm. Also included with your BusinessRider is unlimited small business consult-ing service through in your coverage with the“Expanded Family Plan” is pre-paid trialprotection that is included as part of yourmembership. This benefit grows each yearyou stay a member with Pre-Paid Legaltotaling up to 335 hours by yourfifth year. It also includes auto-mobile representation for youand your family no matterwhere you had the accidentor the ticket occurred. Youcan have your Last Willand testament and yourLiving Will created aspart of your familyplan benefits. If youalready have these im-portant documents in placethen they can be updatedfree of charge with yourmembership.As part of the business rider you willhave consultation service for your smallbusiness. This service is provided free aspart of your membership through only $40.50 per month is there anyquestion why an investor would not wantor need this type of coverage and repre-sentation?I wish you all the best and I’m confidentthat you will find a tremendous asset andtool for your business in Legal Shield Ser-vices.To learn more about how Legal Shield cansave you and your family money and grief,then feel free to call Christy-Ann Olivaresat 415-902-8772. If you like what youare reading and you want to get signed upnow then go to, www.ChristyAnnOlivares.LegalShield.comMEMBER BENEFITS:• Trial Defense• Debt Collection Letters• Telephone Consultation• Legal Correspondence• Legal Documents Reviewed• IRS Audit Protection• Reduced Fee Services @25%• Expanded Family Plan BenefitsChristy-Ann OlivaresInvestor - Connector - MotivatorIndependent Associate “SmallBusiness & Group Benefits”Call 415-902-8772 for your FREE45 minute “Private Session”SFBAREIA offers seriousreal estate discussionsin a relaxed setting andsocial environment.Connect with us onlineto learn more about ourmonthly mixers.Held on the 1st Thursday of Every MonthLOCATION - THE VINYL ROOM221 Park Road, Burlingame, CA 9410 • 7 pm to 9 pmVisit us @ PAGE 54 • 2013
  26. 26. 6. A claim that occurred before I (or myentity) owned the property shouldn’taffect MY insurance rate…7. All policies and coverages are createdequally...8. Self-insurance is too risky…9. I need “builder’s risk” coverage for avacant or rehab project/deal/property…10. It is worth it to hire the “handyman”to do work on my rentals…11. If I use my personal vehicle toservice my properties, my personal autopolicy is sufficient...12. It’s enough to simply require renter’s insurance in my lease...13. Cheaper is better…The National Real Estate Insurance Group covers more than12,000 investors each year. Norris says even experienced realestate gurus tend to believe myths such as “cheaper is better” aswell as “all policies and coverages are created equally.”“The attitude that insurance should be treated as a commod-ity can be blamed on the industry itself, who, as a knee-jerkreaction and effort to grow market share, seem to not reallyunderstand the needs of the public. Their ‘contact us to save$XXX on your coverage’ advertising campaigns reinforce the13 Insurance Myths Debunked, pg. 8public attitude that insuranceis a ‘one size fits all’ industryand getting the lowest ratemakes the most sense. Un-fortunately, when you reallyneed it, this planning, orlack thereof, has hurt moreconsumers than it has everhelped,” Norris says.Norris and his highlytrained employees workclosely with each client todevelop unique insuranceplans. Some investors donot need liability insurance.Other property owners needliability insurance to protectcontractors as well as renters. Every real estate investor at leastneeds to cover the property against acts of God or criminal activi-ties, according to Norris. “As part of your business plan, insur-ance can help you when you need it, but not drain you when youdo not,” Norris says.To learn more about the National Real Estate Insurance Group,call 800-900-5324 or visit Years of WORRY-FREE Reliable Rentals!CallToday for a FREE Reporton Selecting Reliable Rentals!513-275-1512 or email:JustAskMissy@aol.comRetireWithRealEstate.Biz• No Vacancies• No Maintenance Costs• No Management Fees• Already Rehabbed• Already Rented– Missy McCall Hammonds, CEOOurTurn-Key homes arereally that simple. Wehave a time-tested systemto assure that you haveworry-free rentals. Our re-peat buyers are our proof! PAGE 55 • 2013 reWEALTHmag.comTim NorrisNational Real EstateInsurance Group offersflexible services to realestate investors, such as:• No minimum premiums.• No required property inspec-tions.• Polices appropriate for differ-ent types of occupancy phases,including vacant, rental, orrenovation.• Multiple properties can becovered under one policy.• A monthly, pay-as-you-goreporting form.
  27. 27. Often, I am asked how I can find raising capital tobe relatively easy. There is a lot of money sittingon the sidelines. But many investors are so waryof losing money that only the most compellingprojects attract their attention.It seems like people with deals are always chasing money.But it’s not actually that way. A small percentage of dealsexperience the opposite. These are great deals. I believe thatall great deals get funded. The only question is, “Who willfund the deal? Will it be me, you, or someone else?” Greatdeals experience a lot of competition. Money will chasegood deals. Raising capital for weak projects is difficult.An investor in New Orleans recently told me: “I had agreat deal on a townhouse complex, but it fell through be-cause I couldn’t get it funded.” My contention is that it mayhave looked great on paper, but probably wasn’t a great dealin the eyes of the person considering investing their ownfunds. That’s why it didn’t get funded. Again, all great dealsget done.OK. Let’s say you have a great deal. Now what? How doyou go about raising capital?I’ve raised several hundred million dollars in my career.In my experience, raising capital is based on three funda-mental elements:•Relationship•Trust•ResultsRELATIONSHIPIf someone you didn’t know approached you and said, “Ihave a great deal. There’s an opportunity to make a lot ofmoney. All I need is $2 million to make it happen.” Wouldyou commit $2 million of your own cash with someone youdidn’t know? I know that I wouldn’t, and I believe that mostpeople wouldn’t do it either. I raise capital from people thatI’ve developed a relationship with.The relationship comes first. As part of building thatrelationship, I know what is important to my potential fund-ing partner. All money has an agenda attached to it. If theagenda for the money and the goals for the project don’talign, then don’t take the money. It won’t work in the longterm.Let me give two examples. I have two funding partnerswith vastly different goals.1. One of them wants to make high rates of return on ashort-term basis. They’d like to recycle their money into adifferent project every 90 to 120 days.strategyFINDYOURFUNDINGPARTNERSVictorMenasce,authorof“TheGreatCanadianTakeOver:HowSavvyCanadiansareProfitingWildlyfromtheMeltdownintheUSRealestate” PAGE 56 • 2013
  28. 28. “I’ve raised several hundred million dollars inmy career. In my experience, raising capital isbased on three fundamental elements...”2. I have another funding partner who believes that short-termprojects can make high returns, but that money will sit on thesidelines between projects earning zero. He prefers to make amore modest return, but wants his money working for him inlonger-term projects. His philosophy is that he will make moremoney and have lower risk by keeping his money at work.I can’t say that one is right, and the other is wrong. They’rejust different. I’m not going to try and convince a short-terminvestor to make a long-term investment, and I’m not going toconvince a long-term investor to do a short-term transaction. Itwouldn’t make any sense. Always take care to align the goalswith the agenda associated with the money.I never ask a potential funding partnerfor money. I’m never desperate for cash.Instead, I offer funding partners theopportunity to collaborate on a proj-ect. That’s a completely differentposture. When partners worktogether to create value,great things happen. I in-vite my funding partnersto become full partnersin a project. I’m never offer-ing a passive investment for a sharein the profits. This is required to bein compliance with securities laws. Apromissory note with a fixed rate ofreturn is perfectly legal and protectsthe funding partner. I will often securethe funding partner’s interest in theproperty by granting a mortgage on title,or a membership pledge in the event of defaulton the terms of the promissory note.TRUSTTrust is at the foundation of raising capital. Trust has a lot oflayers. There’s much more than “Are you an honest person?”The astute funding partner wants to know:•Can I trust you to ask the right questions about a project?•Can I trust you to put together a good plan?•Can I trust you to execute that plan?•Can I trust you to manage risk appropriately?•Can I trust you to communicate openly & transparently?•Can I trust you to communicate when there is a problem?•Can I trust you with my money?•Can I trust you to hire good people?If the answer is “no” to any of these questions, then the fund-ing relationship will run into difficulty. If you’re interested inlearning more about this aspect, I recommend a great bookby the son of Stephen Covey of “7 Habits of Highly EffectivePeople” fame. Stephen M.R.Covey wrote a wonderful bookcalled “The Speed of Trust”. It isa powerful book that will changeyour perspective on all relationships, personal and business.RESULTSWhat results can you show? Show me a track record of suc-cess. Show me what you’ve done, mistakes and all. Past resultscan often be a predictor of future results, but not always. Willyou invest with someone who has lost money on eight out oftheir last ten projects? I wouldn’t!E-Bay uses a rating system and enables customersto choose their seller based on theirrating. This rating documents theirtrack record. Reputation in businessis part of that all-important founda-tion of trust. Some new investors seea dilemma in what I’m proposing.“How can I raise capital without atrack record? How can I develop a trackrecord if I can’t raise any capital?” Myresponse to that is simple. First of all,investors prefer to invest in businesses,not the self-employed. Business is ateam sport. If you’re not part of an in-vestment business and you’re just start-ing, then join an established business witha track record of success. Work in that business fora period of time. You can then legitimately borrowsome of their credibility and track record. Whileyou don’t own that track record yourself, you canshow that you have played a key role in successfulprojects. This is often enough to show a funding partner thatyou know what you’re doing.It’s important to be aware of securities laws and make surethat you’re in compliance with Securities and Exchange Com-mission (SEC) rules. The SEC has strict rules on securities andsolicitation for investment. It is illegal to solicit for investment,unless very specific criteria have been met to market a securityto the public, or to accredited investors. Canada has similarlegislation that is administered by the provincial securitiesregulators such the Ontario Securities Commission (OSC) andthe Alberta Securities Commission.The keys to developing funding partners for life are: rela-tionship, trust and results. Always be mindful of these threefactors. They are foundational to raising capital.Victor Menasce teaches workshops on raising capital acrossthe United States He can be reached via email PAGE 57 • 2013
  29. 29. actually lists reasons not to. Now, themortgage is not one of his reasons, butwhy would it be? Like I said...he isone of the wealthiest men on earth!The point is that a 30-year mortgagehas become standard and not onlystandard for what companies want toshow, it has become standard for whatinvestors want to see.How Do Investment Compa-nies Show their Numbers?Many companies, who provide invest-ment opportunities, including mine, willshow a mortgage projection based onthe 30-year mortgage.  Why?  Because itis what the average, every day investorwants to see.  It is how we have beenprogramed.  A simple search of theInternet will return article after articleextolling the benefits on using a 30-yearmortgage, especially for the positive ef-fects it has on an investors’ cash flow. When I first started investing, I wascoached to use the 30-year mortgageas a tool to boost my monthly incomewhile allowing a renter to pay down mynote.  When I first started, I loved theidea of using a 30-year mortgage andputting 20% or less down as a GREATtool to boost my cash flow. And it did.It made my cash flow go up and I had acertain level of comfort with that. Theproblem is, unless you have significantreserves in place, heavy leverage cancome back to bite you on investmentproperties.Another major point that I missedwhen I first started investing and hasbeen taught to me over the years fromsome investors much smarter than me,was that for the first 25years of my ownershipof that property, I wouldbe paying more in interestpayments than I was earningin cash flow.  In the first 15years it would be substan-tially more!Own PropertyOutright AndReap The RewardsI am a big proponent ofowning real estate out-right. I have used leveragesparingly over the last fouryears and only as a tool toacquire properties and notas a tool to own proper-ties. I have put everyproperty that I have usedleverage to purchase on aquick pay off schedule.Many homeowners and realestate investors will tell youthat there is a simple strategy thatmakes a 30-year mortgage a goodinvestment.  You simply place a 30-yearmortgage on an investment property andpay it off like it is a 15-year mortgage.  Iam neither for nor against this strategy,I just do not use it myself for the reasonsI will expand on below. I know as I writethis that there will be some readers whowill comment that yes, this is the precisestrategy that they use and that theycalculate each month exactly how muchmoney to pay to reduce the principleeach month.  They feel that they get alower rate since a 15-year mortgage cancost as much as .25 to a .50 point more. To those readers that follow this strat-egy and actually follow through on thisstrategy, Iwill say thatI believe youare in the minor-ity and congratu-lations!  It takestremendous self-discipline to be able tomake that strategy workand I have met many inves-tors who claim this will be theirstrategy only to find that they likebragging about higher cash flow morethan they like bragging about owningthe property. The discipline it takes tocarry out this strategy is often missingfrom many investors.Put Your Self In PositionTo Own Your PropertyOutrightAs I stated earlier, the better strat-egy and the one that I am seeingmore investors come around to isusing leverage to purchase proper-ties, but not necessarily carryingthat leverage for long periods oftime. In fact, many investors arechoosing to structure deals so thatthey are paying off the properties assoon as possible.  Investors takingthis route are usually financiallysecure and are not necessarily realestate investors.  Often times, theyrecognize the need to diversify into realestate, but are often passive investorslooking for the security and consistentreturn that real estate can give them.They see real estate as a secure invest-“...I am seeing more investorscome around to using leverageto purchase properties and cashto hold them long-term.”Continued on pg. 60Surprising Investors with Sound Advice..., pg. PAGE 58 • 2013
  30. 30. Investor Education a Top Priority for Equity Trust, pg. 31Learn from THE National Experton how to use Land Trustsfor privacy & asset protection.Visit Randys website for FREE LandTrust information or call him now @866-696-7347 with your questions.Meet Randy Hughes in Person!Attend his nextLand Trust SeminarFor Information, Visit Online:Randy HughesMr. Land Trust40 Years ExperienceRealEstateforProfit.comThe Choice Is YoursDo You Want the Pain ofPaying More Taxes?Or, We Can DoAdvanced Tax Planning for YouCallnowat805-898-9177•www.abwtax.comABW Tax &Consulting, IncGlenn R. Wilson,EA, ATP, ATA, ABAIn less than 3 years, Victor amassed aportfolio spanning 3 time zones fromhis office in Ottawa Canada. Learn howitʼs done at:Buy his best selling book at amazon.comCanadians are the #1 group offoreign investors in US Real Estate.They have cash. Are you qualifiedto work with Canadians?www.greatcanadiantakeover.comassets from investors in all 50 states. “People have a lot of fearabout the economy, but this is truly a great time to invest espe-cially in real estate,” Desich said. “Without a doubt, the overalleconomy is difficult for everyone, and with the stock market notdoing so well, it brings a sense of distrust or lack of confidencein clients. But this is a benefit to us because we offer customersto take control of their retirement investments and invest in amarket they know and trust, rather than just stocks.”While exact statistics vary according to the investor, even be-ginners regularly see “double digit” returns, according to Desich.Since Equity Trust does not charge transaction fees for normal activities such as purchasing or selling an asset, that helps its130,000 clients see more revenues. While other brokerages typi-cally charge $175 for the purchase, sale or re-registration of realestate interests; Equity Trust offers this service free of charge toits clients.“We don’t nickel and dime you,” Desich said. While IRAs arethe bread and butter of the firm, Equity Trust handles other typesof retirement vehicles including 401(k). Every client regardlessof portfolio size can take advantage of a wealth of informationalresources ranging from personalizedaccount managers to virtually instantaccess to one of 400 highly-trained self-directed IRA specialists. Each EquityTrust account executive team membercompletes at least 160 hours of rigoroustraining. Training of employees and cli-ents has been instrumental to the successof the company, which Desich’s fatherRichard founded in 1974.“I have always been extremelyproud of my father and the companyhe started,” Jeff Desich said. “As morepeople get burned by the stock market,(self-directed IRAs) becomes a way forthem to take control” of their financialfuture.For a complimentary consultation with aself-directed IRA specialist, callEquity Trust at 888-382-4727 or visitwww.trustetc.comMarck de LautourWealth Builderph: (816) 994-9401marck@sbdhousing.comwww.SBDHousing.comCall us for upcomingseminar informationor a personal tour ofKansas City Property!Building Wealth forOur Clients Since PAGE 59 • 2013
  31. 31. Surprising Investors with Sound Advice..., pg. 58ment and rental properties as a product that will have contin-ued demand in the foreseeable future. I have a good friendhere in Tennessee who is a very successful executive and hehas recently made moves to acquire property as he seeks todiversify. When he and I had lunch, he explained his veryreasoning and his absolute distaste for taking on credit risksand leverage.  This is a common theme among more and moreaffluent investors looking to diversify. They are using severaldifferent strategies to purchase the properties.1. They are purchasing properties for cash and holding for aconsistent rate of return recognizing that they can place mini-mal financing against the property in the future to assist withleveraging a larger portfolio.2. They are purchasing property using a 15-year mortgage. They then take the cash flow each month and use it to reducethe principle.  In some cases, this can reduce the term of theloan to less than eight years.3. They are structuring the term of the loan tomatch the monthly note to the rental amountreceived.4. They are purchasing using a mixed bag ofoptions including cash purchases, refinancingexisting properties at low leverage, bundling aportfolio to acquire leverage for new properties.Regardless of the scenario that investors arefollowing, they are using leverage to increasetheir purchasing ability and using the cash flowproduced from each investment property toreduce the principle. The idea behind affluentinvestors purchasing plans are to own the assetsoutright in the shortest amount of time. Thisenables them to keep as much of the return on the investmentas possible.The Single Biggest ExpenseIn A Leveraged PropertyThey recognize that there is only one fixed expense that theinvestor can be in direct control of and that is interest.  Man-agement, taxes and insurance are all fixed costs, which theinvestor has little to no control over.  Vacancy is a variable costthat even with the most prudent management is going to affectan investor at some point and there is nothing an investor cando to prevent.  Routine maintenance and major replacementcosts are also variable costs that, while an investor can preparefor and take steps to reduce, there is still little an investor cando to limit and nothing an investor can do to eliminate thesecosts.  That leaves interest costs as the only major expense thatan investor has control over as it relates to earnings potentialon a property.Many investors that I am talking to today are choosing todo everything possible to reduce the over-all costs of interestincluding choosing higher interest rates to secure shorterterms and buying cash flow properties not for the cash flow,but to purchase more properties faster.  I want to make sureeveryone caught that last sentence.  While in San Francisco,this was a big point I was trying to get across to the audienceand based on their reaction, it made sense to them.How I Buy PropertiesAs an investor, I believe in buying properties that makesense based on what I have experienced as an investor.  Ihave bought junk properties.  I have bought “cheap” proper-ties.  I have bought properties and done the minimal amountof work to get them “rent ready.”  I have bought propertieswith creative financing such as ARM mortgages and evenbought a couple with interest-only loans.  Every one of thosestrategies was aimed at producing Higher Monthly CashFlow.  And every one of those strategies almost sunk mecompletely as an investor.Today, I buy properties where the fundamental econom-ics make sense.  I told the crowd in San Francisco that whenbuying properties that produce a monthly positive cash flow,they should consider using that money to reduce principle. I cautioned them that if they were attracted to real estateand cash flow because they needed to pay bills, then, in myopinion, they really needed to be positive they were gettingsound financial planning before buying.  I told them that inmy opinion, real estate purchased for buy and hold is a greatway to build and maintain long-term wealth, but a lousy wayto earn short-term money.  I told them that real estate hasthe greatest pay-off when you own it outright and that as aninvestor, getting to that point should be your highest priority. Using leverage to build your long-term portfolio is a greattactic.  Using leverage to build your short-term monthly cashflow is not.Am I off my rocker?  Am I spot on?  Let me know whatyou think…Chris D. Clothier is a Partner at andPremier Property Management Group. He can be reached or PAGE 60 • 2013