How Much Of A Threat Are Zillow & The New iBuyers?

/in , /by

By Fuquan Bilal

A new breed of iBuyers have their sites on transforming and taking over the real estate industry. How much of a threat are they really?

Hundreds of millions of dollars are being thrown into this new real estate strategy, and some of the most powerful companies are behind it. Should smaller real estate investors be worried?

The Rise of the iBuyer

‘iBuyers’ are the new name given to online home buyers who promise owners and sellers a quick transaction. The pitch is generally a cash offer and fast closing. While there are many small wholesalers across the country which may fall into this category, most notable are the big giants.

Zillow has moved into this space with its Zillow Offers program. Opendoor has attracted hundreds of millions of dollars in investment capital from funds like Softbank. Opendoor has also partnered with brokerage Redfin to buy up homes. Offerpad has partnered up with Keller Williams. Opendoor has also partnered up with home builder Lennar to promise a seamless transaction to cash in your old home and upgrade to one of Lennar’s newly built homes.

Buying the Business & Manipulating the Market

Zillow is notorious for losing billions of dollars in attempts to buy up different segments of the market. Their plans call for very slim margins and fast house flips. Opendoor smells a lot like other Silicon Valley startups which may be happy to lose a lot of money to push their competition out of the market.

Zillow is particularly worrisome due to how much influence they have over perceptions of home values. It’s easy for them to manipulate prices down when they want to buy, and up when they want to sell.

When you have a billion dollars to blow, it is pretty easy to artificially influence market prices in a given area and drown out the competition.

It’s something to watch.

Threat to the Economy

Perhaps the biggest threat these giant iBuyers present is to the housing and financial markets and the economy in general. While they may not yet be buying more than a few thousand properties each year, if they fail, they could leave many properties in foreclosure, cause huge losses for their investors, Wall Street and stockholders, and help vaporize billions of dollars from the economy.

These companies do not yet seem to have the experience to do this well. Their margins are slim. They could get stuck with a lot of inventory. Of course, this could be a great thing for those looking to buy up real estate in bulk.

Are iBuyers a Threat to Smaller Investors?

These giants may be of more help to smaller investment firms and individual investors than most realize.

It is true that they have a lot of advertising power and they may be happy to overpay for properties and can afford to outbid you. Yet, there is still a lot of room for everyone else.

To start, they are normalizing this form of buying and selling houses, which is great for everyone else.

So far the data shows that around 50% of offers they make are turned down by sellers. Plus, they charge hefty fees for the privilege of selling to them. Often 7% of the sales price or more. They still haven’t fully automated, meaning the process is much more traditional, involving inspections and Realtors, than they let on. Many sellers are going to be resistant to the fact that companies like Zillow are going to low ball them, and then put the listing on their own site for a profit the next day.

More significantly, these giants are moving slow. They are only in certain cities. Their buying criteria is pretty narrow. That leaves a lot of units for others to buy up. They may be generating a massive amount of Realtor leads in this way, but smart investors can leverage this noise to their own benefit.

Lastly, these iBuyers could become major buyers of your own real estate product too. Find the deals at the right prices and instantly flip them to Zillow and Opendoor.

It’s all about knowing who is in your market, what they are buying and for how much, and how you can use that to your own advantage.

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

Fuquan Bilal

Fuquan Bilal founded NNG in 2012 with the principal mission of capitalizing on the growing supply of mortgage notes in the interbank marketplace. Mr .Bilal utilizes his 17 years of residential and commercial real estate success to identify real estate opportunities and capitalize on them. To date, he has successfully managed three private mortgage note funds that primarily invest in singlefamily performing and non­performing mortgage notes. His financial acumen and proprietary set of investment criteria enable him to purchase underperforming real estate assets at a deep discount of face and market values, thereby increasing the value of the assets. This, coupled with his ability to maximize the use of leverage, enables him to build strong, secured portfolios with solid passive income flows.

Generational Opportunities For Creating Cash & Wealth In Real Estate

/in , /by

Featuring Gerry Guterman 

The real estate market cycle appears to have come full circle again. This is one of those moments in which many will go broke, while others achieve substantial leaps in their wealth and incomes. It’s all about knowing how to take advantage of the market and the negligent moves of others.

While there are plenty of real estate investors still blindly and bullishly thrashing away in the market, and many uneasily eyeing where things are headed from the sidelines, the truly experienced are stepping in with predictable investment strategies. They see the same careless blunders being made by many of the same characters. They know where the market is going. They see the big opportunities to buy smart and convert assets into cash.

Where We Are in the Real Estate Cycle Now

It’s not rocket science. It’s no longer a closely guarded secret that only a few have the data on. All real estate professionals really need to do is look back at what was happening in 2005 to 2010. Then compare that to what’s happening around them today. You’ll see the same glaring mistakes.

Interest rates are going up, lending is tightening, oversupply is becoming an epidemic and too many people are paying too much for units that aren’t really a good fit for the market.

There are really only one of three choices to make in this phase of the market:

  1. Keep blindly investing and hold on as the sinking ships go down
  2. Do nothing and miss out on the best asset prices
  3. Replicate the successes of the biggest winners in similar historical cycles

Gerald (Gerry) Guterman and his firm sold out all of their real estate assets in 2006. They did it again in 2016. Since 1978 they’ve delivered 58.3% returns to their investors. Now Guterman Partners is in acquisition mode again.

Experience is Everything

Guterman Partners has managed almost 100M rentable square feet of real estate since 1969.

Among the buildings and locations they’ve been involved in that you may recognize are:

  • Galt Towers, Fort Lauderdale
  • Gramercy House, New York
  • Sutton Tower, New York
  • Ibis Club Apartment, Naples
  • Memorial Building, Houston
  • The Stanhope, New York

Gerry who is Senior Principal Partner and Chief Investment Officer at Guterman Partners has what is probably one of the strongest resumes in the business when it comes to being a sought out industry expert as well.

This includes being a guest lecturer at Cornell University. Being the founding benefactor of several charitable organizations and medical research facilities. Plus trusteeships and directorships with the Metropolitan Museum of Art in New York, New York City Opera and Dallas Opera, as well as The Rent Stabilization Association of New York.

On an international level Gerry has been Chairman of the Committee on Banking and Finance at the United States Center for Strategic and International Studies in Washington, DC. He has been an advisor to the governments of Romania and Austria.

So, if anyone has the depth and breadth of experience to really understand what’s going on in the market, and the track record of knowing how to manage real estate assets during these times, Gerry is definitely up there at the top of the list. We were hugely blessed with the opportunity to catch up with him for an exclusive interview and his take on what’s happening now.

Once Again, Generational Real Estate Opportunities

Gerry recently published the latest of his white papers covering the state of the market, and where he sees the opportunities now.

Among the current challenges he tackles in his report are:

  • The increasing number of rental to condo conversions
  • Reducing value of condominium units
  • Cash flow problems due to rising costs and rates
  • Difficulty in refinance for developers
  • Over-leverage by builders
  • Lack of product to market fit
  • Reluctance of lenders to provide more debt
  • Oversupply of luxury condo units

What this all leads to is that many of these developers are sitting on a huge amount of inventory. Inventory on which they can’t really reduce retail prices on themselves. While they are facing more cash flow crunches and challenges in restructuring debt. In some cases individual developers in NYC are sitting on 1,000 or more unsold units. They need out.

It’s a repeat of 2004 to 2008 all over again.

Though when the same problems show up, the same opportunities for creating great cash and leaps in wealth arise too.

Strategies for Taking Advantage of the Current Market

Gerry told us his firm currently sees opportunities in:

  • Medical offices
  • Retail strip plazas
  • Family sized apartments

This is of course restricted to certain states and markets. Most notably outside of some of those facing some of the most fierce political and regulatory uncertainty at the moment.

Among Gerry’s favorite strategies in this phase of the market is bulk buying of condo units. For example, 80 or so units at a time. Those units are converted or resold. Typically within 19 months.

3 Big Differentiators

Three things that Gerry tells us have really helped the firm continue to excel include:

  1. Making your money on the day you buy
  2. Focus on demographics and market fit
  3. Focus on the wife as the decision maker

Gerry says you don’t make a dollar on the day you sell. It’s all about what you are buying at. Guterman Partners targets prices of 45 to 55 cents on the dollar. That gives them plenty of room to absorb market fluctuations and to move units fast at a discount from the original list price, while still enjoying hefty profit margins.

However, not any product will do. It has to be desirable to the consumer. He says many speculators, converters and developers have had no interest in doing any homework on what consumers really want. They may put up stylish buildings. Yet, there aren’t many families who are really trying to move into micro-apartments in some of the better neighborhoods of Manhattan. He adds that you also have to consider who the real decision maker will be and what is most important for them. That often includes size of the unit and security features.

Guterman Partners is now raising capital for its 47th year. The current fund is a 506c offering for accredited investors, which pays out a cumulative preferred return of 7% to 12% and 50/50 split of profits.

Find out more about the new fund, the firm’s track record and Gerry’s white papers on the outrageous pricing of real estate, the tricks funds are using to try to get investors to accept lower returns, and the rules to successfully investing in real estate at GutermanPartners.com.

Where The Mortgage Notes Are Now

/in , /by

By Fuquan Bilal

Where are the mortgage notes for investors now?

The last few years saw some compression of yields and increased challenges in finding profitable notes and attractive returns for investors. There are deals out there, and there could be many more coming up, if you know where to look.

Biggest Multifamily Servicers

Multifamily loan originations have been setting new records over the past few years. For those seeking to tap into bulk pools of notes, these are the largest commercial loan services in the multifamily space now.

  1. Wells Fargo $682B
  2. PNC $655B
  3. Keybank $273B
  4. Berkadia $268B
  5. CBRE $208B

New York

Every real estate market in America is unique. Each is at its own phase in the larger cycle and has its own dynamics. New York unfortunately, appears to have fallen over a cliff into a new mess.

In the long run people from all over the world will always want to live in NY. Yet, whether it is crazy new mansion taxes, transfer taxes, sky high and rising property taxes, and taking away tax breaks, or overbuilding and lack of fit for the market, certain segments of the Empire State’s real estate market seem to be in free fall mode.

Retail vacancies are turning once popular shopping strips into apocalyptic looking ghost towns. 25% or more of new condos built since 2013 still aren’t sold. Median residential sales prices have fallen 17% year over year.

Some very big dealmakers have recently lost properties worth tens of millions of dollars to foreclosure. There may be more individuals who decide it is easier to walk away than to stomach owing far more on their homes than they are worth. So, from commercial mortgage notes to residential ones, there is plenty of opportunity to grab assets and debt at a discount.

Hot Flipping Cities

Watch the cities which have been among the hottest for flipping houses over the past few years. In some cases property prices tripled since 2008, with modest homes going from $50k to being flipped for $150k. There may be some substantial roll back in those prices coming. Those stuck with inventory may present prime opportunities for acquiring the property or debt at a discount.

Many new investors have tried to jump on the house flipping bandwagon inspired by ‘reality’ TV shows. Most new investors struggle with the big learning curve, and make way less than expected. They don’t have the expertise, teams, and systems to do it efficiently and are getting stuck. There will be plenty of private money loans up for sale that are backed by these properties.

The economy we live in is changing rapidly too. We are going through one of the most massive shifts in history. 80% of jobs are changing. Many property owners and buyers have over leveraged themselves in the past few years, and have been relying on outdated industries and jobs to pay the bills. Those who don’t adapt fast enough will lose their homes, unless they are fortunate enough for a new note holder to come along and provide a reasonable and attractive workout.

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

Fuquan Bilal

Fuquan Bilal founded NNG in 2012 with the principal mission of capitalizing on the growing supply of mortgage notes in the interbank marketplace. Mr .Bilal utilizes his 17 years of residential and commercial real estate success to identify real estate opportunities and capitalize on them. To date, he has successfully managed three private mortgage note funds that primarily invest in singlefamily performing and non­performing mortgage notes. His financial acumen and proprietary set of investment criteria enable him to purchase underperforming real estate assets at a deep discount of face and market values, thereby increasing the value of the assets. This, coupled with his ability to maximize the use of leverage, enables him to build strong, secured portfolios with solid passive income flows.

CARING FOR TENANTS WITH DISABILITIES

/in , /by

By Glenn Mananeng

All tenants have rights to housing and those with disabilities are no exception, additionally, those with disabilities have unique rights under state and federal law. We often hear about people being evicted from the rental property and many of these people are people with disabilities who cannot afford rent or fall behind due to medical bills or low pay from Social Security benefits.

Millions of Americans are affected by disabilities struggle to find a place to rent. In fact, 1 out of 5 people in the U.S. have a high chance of acquiring some type of disability according to the Census Bureau. It is of utmost importance to understand their rights in order to provide a proper place for them to live comfortably.

QUALIFYING DISABILITIES

The Federal Housing Act (FHA) has set a very broad description as to what qualifies as a disability. Under federal law, these disabilities have certain qualities such as:

Must limit one’s major life activities
This covers anything as simple as walking, talking, breathing, manually performing tasks, or caring for oneself. If it significantly affects at least one or more of these activities or something similar, the disability should be considered.

It doesn’t have to be obvious
The disability does not have to be noticeable to other people regardless of how much time they see or spend time with you. For example, a person suffering from asthma may seem normal to anyone unless there is an obvious breathing issue due to an emergent attack. A landlord is not legally permitted to ask a resident or prospective applicant about a disability.

Doesn’t require the use of an assistive device
People with mobility disabilities can still qualify under FHA rules even without the need of assistive devices such as wheelchairs, canes, or walkers. The same also applies for those with hearing impairments where there wouldn’t be a need for a hearing aid.

Physical disabilities aren’t the only ones included
Mental illness, chronic fatigue, and learning disabilities are included as part of the FHA’s definition.

Addictions are included as well
Individuals suffering from drug or alcohol addiction can qualify as long as they are currently part of a rehabilitation program.

EMOTIONAL SUPPORT ANIMALS (ESA)

As the name implies, they provide support and comfort especially for those suffering from mental health issues. They help their owners cope with daily life and alleviates their condition a little bit better. There is a clear difference between a service animal and an emotional support animal.

The former is well-trained to perform specific tasks to support a physically disabled person. One of the most common service animals are guide dogs for the visually impaired. ESAs on the other hand provides support and companionship to people with mental health problems.

If you’re in need of such a companion, you need to request an ESA letter from a licensed mental health professional (therapist, psychologist, or psychiatrist). The letter should confirm your mental condition, explain how limiting the disability is when it comes to day-today activities, elaborate how an ESA helps improve your well-being, and should be signed by the medical professional.

As long as one has an ESA letter, the landlord can’t deny housing to that individual. This means that the landlord cannot charge a pet fee even if the rental property follows a NO PET POLICY.

WHAT IS REASONABLE ACCOMMODATION?

This refers to modifications in the rental property which will enable the tenant with a disability to fully use amenities and features of the home as easy as possible. Some of these may include adding a ramp for wheelchair use, widening of doorways, adding grab bars in the bathroom, and even lowering kitchen countertops.

In the event that the landlord receives government funding to maintain housing, there is a chance that they have to cover the renovation costs. However, if a landlord accepts Section 8 tenants, they would not have to pay for the modification.

If a tenant needs the modification to the property but can’t afford the cost, there are a few resources to help fund it. Local fair housing centers are available in almost every community. In Michigan, most of them are divided into different areas throughout the state from Metropolitan Detroit, Southeast and Mid, Southwest, and West Michigan.

A landlord cannot deny or refuse reasonable accommodation to their rental property not unless it would somehow change the layout of the whole building, be unreasonably expensive or impossible to do so, or would pose a physical hazard to other tenants.

Regardless of one’s situation, no one shouldn’t be denied housing. Landlords should always treat tenants equally despite disabilities. There’s nothing more important than working with professionals who have a deep understanding of Fair Housing Laws, especially people with disabilities.

For additional information about Michigan Fair Housing Laws, you can check out our Tenant Section here. To learn more about property management services that we provide, you can call us at (734) 744-5080 or send us an email at [email protected].

Can You Micro Flip Mortgage Notes?

/in , /by

By Fuquan Bilal

There’s a lot of talk about micro-flipping real estate out there. But can you micro-flip mortgage notes?

The Micro-Flipping Craze

If you’ve Googled anything to do with real estate lately, you’ve probably been inundated with ads for micro-flipping. Almost every podcast, email and social post out there is talking about the same micro-flipping stories.

It’s a great twist of phrase on a very old strategy. Some people have been doing extremely well at it for years. So, what is it? What are the pros and cons? Can you apply it to notes instead? If so, why should you?

What Is Micro-Flipping?

Micro-flipping is the new term for wholesaling real estate. Wholesaling means buying or contracting to buy a property, and then assigning your contract or flipping it as-is, without doing any rehab work. If you have a good buyers list and connections, or can do this effectively online, you can be in, out and paid fast. It’s a high volume sport.

This has been made a lot easier thanks to all the access to data and software and online platforms we have today.

This form of real estate investing is made to sound super easy. That may be luring in a lot of people who think it is a lot easier than it really is. Not everyone is going to get the results they were sold on. Some will find it the easiest and fastest money they’ve ever made.

The real con of this strategy is that everyone is being sold on trying it. At least tens of thousands of people are sold on using the same software, data and marketing to do this. So, what you get is a lot of people bidding on the same deals, trying to sell them to the same buyers, and engaging in long broker chains. You don’t make money when you are running with the herd.

How To Flip Mortgage Notes

So, what if you could apply the same benefits of micro-flipping houses to the less crowded mortgage note space?

There are at least four ways to try this:

  1. Acquire individual mortgage notes and flip them as-is for a reasonable markup
  2. Buy pools of mortgage notes at deeper discounts than others can, and sell the individuals notes for more
  3. Acquire non-performing loan notes, work them out, resell them as more valuable reperforming notes
  4. Use non-performing notes as an avenue to acquire the collateral property and wholesale that to all of these new micro-flippers

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

Fuquan Bilal

Fuquan Bilal founded NNG in 2012 with the principal mission of capitalizing on the growing supply of mortgage notes in the interbank marketplace. Mr .Bilal utilizes his 17 years of residential and commercial real estate success to identify real estate opportunities and capitalize on them. To date, he has successfully managed three private mortgage note funds that primarily invest in singlefamily performing and non­performing mortgage notes. His financial acumen and proprietary set of investment criteria enable him to purchase underperforming real estate assets at a deep discount of face and market values, thereby increasing the value of the assets. This, coupled with his ability to maximize the use of leverage, enables him to build strong, secured portfolios with solid passive income flows.

Allowing a Lender to Cross Collateralize Against Additional Property

/in , , , /by

By Edward Brown

There are times when a lender is going to ask for additional [real estate] collateral in order to make a borrower a loan. The most likely scenario for this is when there is not enough equity in the target property. Other scenarios include a borrower with less than stellar credit, or the type or quality of the target property may not be enough to satisfy the lender to make the loan, as most lenders are more interested in making loans that will pay them back instead of facing foreclosures. For this reason, the lender may ask the borrower to put up additional collateral satisfactory to the lender so as to give the borrower an incentive to avoid defaulting on the loan.

In many cases, this cross collateralization may not be something the borrower worries about, as the borrower intends to pay the lender in full. The general plan is for the borrower to refinance the target property at a point where a new lender does not require cross collateralization, pay off the existing lender, and the existing lender releases both properties; however, what happens when the borrower sells the crossed property, or has the opportunity to refinance the target property, and there is not enough to pay off the current lender who crossed?

The danger here is that the lender may hold up the sale because it does not want to release their lien until they are paid in full. For example, let’s say the borrower owns a rental house that is worth $500,000 and there is a first mortgage in place for $200,000. The borrower wants to buy another rental for $800,000 and has $250,000 to put as a down payment. The borrower asks a lender to loan the remaining needed $550,000, but the lender is not comfortable with the LTV [68.75%], so the lender asks what other real estate the borrower owns, so it can cross collateralize its $550,000 loan. The borrower mentions the other rental, and the lender decides to ask for crossing on the first rental. Thus, the lender has lowered its risk because of the equity in the first rental.

Now, let’s say that the borrower receives an unsolicited offer for the first rental of $525,000, and he wishes to accept it. If there was no cross collateral against this property, the borrower could accept the offer, pay off the existing first of $200,000, and pocket the $325,000 remainder. However, because the rental has been crossed, the lender has $550,000 against the property in second position. That means that there is technically $750,000 of liens showing up against the property. The borrower cannot accept the $525,000 offer without having the second [the crossed loan] release its lien.

For this reason, it is imperative for there to be an agreed upon release price in which the lender agrees ahead of time to release its interest in either properties for a specific sum. It does not necessarily have to be just the remaining equity in the first sale [$325,000 in our example]. The release price could be a smaller amount. It could also be a larger amount [up to what the lender is owed]. If the lender desires more than the $325,000, the borrower would have to come up with additional cash in order to transact the sale. This may not be all bad, as the crossed lender’s loan has then been reduced.

For example, if the crossed rental was sold at a 5 CAP rate, and the crossed lender’s interest rate was 7%, the borrower may choose to sell the rental and come up with money to satisfy the lender should the lender want more than the $325,000 net proceeds from the sale. In other words, there are times when it makes economic sense to come up with money in order to sell property. Another similar scenario like this occurs when there is a blanket loan covering multiple properties, as is the case when an apartment building has been converted to condos and the owner of the building desires to sell off one condo at a time. A typical lender on the building will usually have release prices [agreed ahead of time] under which the lender will allow each unit to be sold and the lender takes a specific amount [or percentage of each sale] as a pay-down of its loan.

The release price can be negotiated between borrower and lender. Because the lender did not take the new property alone due to the high LTV, many times the lender will reduce its pay-down to where it feels comfortable with a specific amount of its loan on the remaining property. To make this point clear, let’s say that the lender usually makes loans for rental properties at an LTV of no more than 55%. Since the new rental was purchased for $800,000, the lender would be fine with a loan balance of $440,000. Thus, in order for the lender’s exposure to be reduced from its original loan of $550,000, it may be willing to accept $110,000 from the sale of the first rental in order for the lender to release its crossed lien. In this case, the borrower would sell the first rental for $525,000, pay off the first mortgage of $200,000, and pay the lender in second position $110,000 [to release its crossed lien of $550,000], and pocket the rest of the proceeds from the sale [$215,000]. The borrower would keep $215,000 from the sale, and the only debt on the second rental would be the lender [who crossed] of $440,000.

Borrowers who overlook release prices [a specific clause in the loan documents] risk having to ask the crossed lender after the fact under what circumstances the lender would be willing to release the first property. If there is no agreement ahead of time, the borrower runs the risk of being at the mercy of the lender, as the lender does not have an obligation to release its lien for less than what it is owed.

Many lenders may be willing to work out a reasonable amount for releasing either property, as it is in the lenders best interest to reduce the borrower’s default risk. Having more than one property as collateral sounds good in principle, but the added exposure of having a loan spread out amongst more than one property may not be worth the risk. Each situation will be different, but, as a general rule, it is more conservative from the lender’s viewpoint to have a low LTV on one property compared to having crossed on one or more additional properties that have a higher LTV. Additional costs of foreclosure, if needed on more than one property, as well as having to deal with an existing first mortgage [keeping them current, so that lender does not foreclose] may not be a desirable solution to protecting the lender’s interest.

This is the primary reason why typical banks do not usually cross collateralize their loans. Most banks do not like a lot of moving parts. They want to focus on one property and the risk associated with it.

Borrowers should make sure that the lender does not hold any of the borrower’s properties hostage and that release prices are set at a point where the borrower feel comfortable.

Edward Brown

Edward Brown currently hosts two radio shows, The Best of Investing and Sports Econ 101. He is also in the Investor Relations department for Pacific Private Money, a private real estate lending company. Edward has published many articles in various financial magazines as well as been an expert on CNN, in addition to appearing as an expert witness and consultant in cases involving investments and analysis of financial statements and tax returns.

5 Ways of Getting $10M to Invest in Real Estate

/in , /by

By Fuquan Bilal

Need more money to invest in real estate? Where can you get another $10M in capital from?

The ironic thing about money for real estate is that you rarely have too much of it. You can for a little while, especially if you’ve raised a lot and have your latest deal oversubscribed to. It’s happened to many funds recently. Though sooner or later, the reason for not doing more always comes back to “If only I had a little more money I could…”

Maybe you want to take down a big commercial building, or need to have millions to earn a seat at the table and ability to bid on the note pools and bulk REO deals with the most profit. Or perhaps $10M is just the next milestone you’ve set for yourself. Where do you get it?

Commercial Real Estate Loans

$10M is a very small number in commercial real estate. In fact, there are many, many lenders who don’t want to touch small balance deals for less than that. It’s their minimum loan amount.

You may have to find a great deal with lots of equity, or raise $1M for down payment, but this kind of money is out there to borrow.

Real Estate Crowdfunding

This can be done publicly or privately, and for debt or equity or even donations. If a prototype for an off brand smart watch (not even Apple) can raise $10M in a few hours on a crowdfunding platform like Kickstarter, shouldn’t you be able to raise a lot more than that for some prime real estate with great yield or value add potential?

Here’s the thing. Most crowdfunding campaigns fail. Either because there was no strategic roll out, or the organizers didn’t have the marketing budget designated to invest in it. It might cost you $100k or $1M to raise $10M, but that may still be worth it.

Partnerships & Syndicates

Partnerships are probably the most obvious way to raise capital to invest in real estate. At least after loans. Depending on who your contacts are, that may come in $50k or $1M or $5M increments.

If just being involved in a deal of this size is what you want, then maybe you don’t even need the $10M. Maybe you can put your $1M into an existing syndication with the right connections, management and systems in place – and benefit from big deals like this, without having to raise money at all. You might even be the one getting the preferred return, without any of the work.

Launch a Startup

As crazy as it may seem, there are still billions of dollars being plowed into startups. It may make little sense given the risk of volatility and how poor and low value you think the ideas that are being funded are. So, why not do better than them? If you can make contacts that want to invest in startups instead of just real estate, give them a startup to put their money into. You can call it a tech company in the real estate space, or a real estate or finance or fintech startup. Put a nice appealing twist on it, get help with a great pitch deck and float the opportunity.

Make $100M for Someone Else

If you make $100M for someone else, they shouldn’t have a problem cutting you a check for 10% of that, right?

Maybe you don’t want to do all the work involved in acquiring, managing and disposing of $100M worth of real estate. Yet, it may be far easier to help someone else raise that kind of money, sell that much real estate or buy that much property. Then get some reasonable compensation for that. Or you can leverage arbitrage and invest that money into another fund and keep your slice. Then you can invest your $10M in whatever you like.

It’s not that much when you really start looking at the numbers. That much property can change hands in a day in Manhattan alone. These days $1B seems to be the new minimum property price tag for Google and Apple. $100M is loose change for them.

How will you raise your next $10M?

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

Fuquan Bilal

Fuquan Bilal founded NNG in 2012 with the principal mission of capitalizing on the growing supply of mortgage notes in the interbank marketplace. Mr .Bilal utilizes his 17 years of residential and commercial real estate success to identify real estate opportunities and capitalize on them. To date, he has successfully managed three private mortgage note funds that primarily invest in singlefamily performing and non­performing mortgage notes. His financial acumen and proprietary set of investment criteria enable him to purchase underperforming real estate assets at a deep discount of face and market values, thereby increasing the value of the assets. This, coupled with his ability to maximize the use of leverage, enables him to build strong, secured portfolios with solid passive income flows.

Mortgage Free Real Estate

/in , /by

Matthew Pillmore

Disclaimer: I am not a lawyer or an accountant. Nothing here should be construed as professional advice. I suggest that you always retain the services of a competent professional to provide advice on your transactions.

If you have a loan on your primary residence and/or rentals, you may have considered whether it would be worthwhile to pay it off ahead of schedule. And if so, you’re not alone.

The debate over whether to prepay your mortgage is perpetual in the personal finance world.

Pay Off Your Mortgage or Invest? The Math Says…

On one side, some experts argue you should NOT prepay your mortgage if you are locked in at a low interest rate. Their reasoning: You would be better off INVESTING your money where a reasonably diversified stock portfolio can expect to earn at a higher rate of return on average over the long run.

Add in the home mortgage interest deduction you can take on your federal taxes and, they say, you would be silly to prepay your mortgage and miss out on those perks.

To this group, the question is just about math. After all, why would you prepay a loan at 3% or 4% and lose out on part of a valuable tax deduction when you could invest that money instead and earn considerably more?

But There’s a VERY Important Side to Prepaying Your Mortgage, Too

Still, there are plenty of experts who forge ahead with their mortgage prepayment plans. My parents (including a CPA father) fell squarely in that category. Instead of taking the standard 30 years to pay off their mortgage, they paid it off in well under 10 years.

Ask him if he cares about the tax deduction they missed out on, and he’ll probably look at you like a crazy person. Why? Because the decision to prepay was never JUST about the math to them; it was about their financial freedom. And math aside, they have never regretted their decision to pay off their home and become entirely debt-free.

Most people agree with that sentiment, eventually. Most, just don’t like debt. It’s as simple as that.

But others prefer a deeper analysis.

Analyzing the Pros and Cons

For starters, let’s take a look at what the home mortgage interest deduction really means.

The easiest way to figure out your home mortgage interest deduction is to look at your effective tax rate. Say your overall tax rate is 22%, for example. On average, the home mortgage interest deduction reduces your taxes by $22 for every $100 you pay in mortgage interest.

That’s a nice perk, but there’s a caveat. Your home mortgage interest deduction is only valid for the amount you deduct over and above the standard deduction, which is available to taxpayers who don’t itemize their returns. The standard deduction for married spouses filing jointly was $12,400 in 2014.

So what does that mean? Simply put, if you don’t itemize your taxes, your home mortgage interest deduction is worth nothing. And even if you do, it’s only worth what it helps you save over the standard deduction that anyone can take. In many cases, this drastically reduces the value of the home mortgage interest deduction to the point where it’s barely worth considering.

But what about those lost investing returns? When you ask people whether or not they prepay their mortgage and why, you’ll find plenty of skeptics who balk at the idea of carrying long-term debt in favor of investing their extra dollars in the stock market. And when it comes to who is “wrong” or “right,” there are several ways to look at it.

The interest you save by prepaying your mortgage is a “sure thing.” Many people are happy prepaying and banking the extra money they save on interest, even if it’s less than they may have earned by investing their extra dollars instead.

A Balanced Approach

As someone who loves leverage but despises (ALL) debt, I see both sides of the issue. And that’s why I personally take (and teach) others to consider a balanced approach.

My only debt includes what is used to advance the assets and income growth of my plan, but is paid back strategically to $0 as quickly and safely as possible. I don’t see the reason to choose between investing extra money OR prepaying my mortgages, so I rely on Debt Weapons™ to do both faster.

What About Debt Weapons™??

Debt Weapons™ are tools that allow any consumer to achieve 1 or more of 7 highly financially beneficial purposes.

1) Maximize Cash Flow
2) Compress Amortization Schedules
3) Replace Inadequate Bank Accounts
4) Invest More Quickly & Safely
5) Minimize Total Interest Costs
6) Enhance & Protect FICO® Credit Scores
7) Quickly Increase Financial Safety and Emergency Reserves

To be clear, VIP Financial Education does not provide or offer Debt Weapons™.

We do the research for our Coaching Members in order to help them decide where to go to get the right Debt Weapons™, at the right time, to accelerate their unique goals.

Just like exercise equipment can injure you when used incorrectly, Debt Weapons™ can also be quite harmful if you access the wrong one or use the right one the wrong way.

Applying for any Debt Weapon™ without knowing the proper questions to ask, can lead to several negative consequences. For example, credit scores can rapidly decline, you could access the wrong Debt Weapon™ for your intended purpose leading to unforeseeable costs and terms, possibly delaying your goals even further.

That seems like a good compromise to me. Still, there is nothing wrong with taking sides on this issue.

When you hate debt, you want to put it behind you once and for all, and that’s understandable. But it’s also understandable for someone to make their decision based solely on the numbers. After all, it’s hard to argue with math. At the end of the day, we all have to do what is best for our families – and what helps us sleep best at night.

So, should you pay off your mortgage quickly? It is, and always has been, up to you, yet by joining us at the upcoming event with Realty 411 you will learn how YOU too can rely on Debt Weapons™ to take a more advanced approach and achieve BOTH simultaneously, far more quickly.   

 

Matthew Pillmore
President
VIP Financial Education

Assign or Double Close: The $9,000 Question

/in , /by

By Jeffery S. Watson

In a conversation I had with a real estate investor regarding the differences between assignments and double closings, we talked about the cost associated with double closing a transaction. When you close two separate real estate transactions involving the same property within a short period of time, say 30-45 days apart, there are certain inescapable costs incurred twice. The title and escrow company or closing attorney is doing almost twice the amount of work.

The general rule of thumb I have given investors has been that if the assignment fee is $9,000 or less, then go ahead and assign the contract so there is only one closing and the assignee (the new buyer stepping into the shoes of the first buyer) completes the transaction with the title company or closing attorney. If, however, the assignment fee is greater than $9,000, then it’s time to examine if a double closing should occur.

In certain jurisdictions, that $9,000 number would change. For example, in Cook County, Illinois, I would recommend it be $15,000 or higher because of the extraordinarily high cost of closing a real estate transaction in that jurisdiction. In some states, many of my clients wisely choose to double close on all transactions due to the large spread between what they are buying it for and what they are ultimately able to resell it for.

In your market, the best thing to do to determine whether to assign or double close is to have conversations with various title and escrow companies or closing attorneys. Do some cost comparison as to the usual and customary fees and whether those fees can be negotiated down. Find out the basic, unavoidable costs of closing a real estate transaction.

Until you have that information readily known to you, you cannot make an intelligent decision as to whether you should assign or double close on a particular transaction. With that extra information, you become more effective in managing your real estate business.

Jeffery S. Watson

Attorney

Jeffery S. Watson is an attorney who has had an active trial and hearing practice for more than 27 years. As a trial lawyer, he has a unique perspective on real estate investing, wealth building and asset protection. He has tried over 20 civil jury trials and has handled thousands of contested hearings. Jeff has changed the law in Ohio 5 times via litigation or legislation:

Smith v. Rudler – 70 Ohio St.3d 397
In re Hugley – 629 N.E.2d 1136
Bahr v. Progressive Insurance – 2009-Ohio-6641
Snyder v. Snyder – 865 N.E.2d 944
H.B. 463 amending the Ohio Civil Rights Act

Jeff has also been a real estate investor since 1994, investing in both residential and commercial properties. He currently represents established real estate investors in commercial and residential matters when the transactions involve self-directed retirement accounts. As a frequent and popular guest speaker and teacher on stages and webinars, he is a recognized thought leader and innovator in the field of real estate investing, wealth building and self-directed retirement account transactions.

He is a nationally-recognized authority regarding regulatory concerns with wholesaling. He was the co-creator of the Option Contract method that revolutionized the short-sale flipping process. Thousands of investors have used documents created by Jeff to flip properties.

Jeff is general counsel to the National Real Estate Investors Association. Jeff is general counsel to and a cofounder of Realeflow, LLC, which made the Inc 500 list in 2011. He currently advises six different national organizations with a combined membership of over 250,000 investors.

From 2010 to present, Jeff has led lobbying efforts in Washington, DC on behalf of real estate investors which has brought about several changes in both government regulation and policy on distressed property purchases and resales. In 2014 and 2015, his efforts on Capitol Hill helped bring about change in the U.S. tax code and helped reinstate the Mortgage Debt Forgiveness Act. Since 2015, Jeff has worked to secure passage of the Seller Finance Enhancement Act.

Jeff’s efforts to secure reform in the real estate arena aren’t just on Capitol Hill. In his home state of Ohio, he has worked with the Ohio Division of Real Estate teaching on the legality of wholesaling.

He is a part owner of Venture Land Title II, LLC, and his law firm prepares deeds and other documents for two title companies. He is also legal counsel to a number of other organizations including Eagleville Bible Church, Inc.

Jeff is the author or co-author of 6 digital books:

  • “Understanding Self-directed Individual Retirement Accounts”
  • “A Guide to Private Lending”
  • “Short Sales Done Right – How to Profitably and Legally Navigate the Short Sale Jungle”
  • “Death of the Land Trust … in Short Sales”
  • “How to Hire Your ‘Dream Team’ ”
  • “Understanding the Foreclosure Process”

In addition to his digital books, Jeff authors an email newsletter twice a week and maintains a blog at WatsonInvested.com on investing, business and entrepreneurship which are read by thousands of successful investors.

Why Invest In Costa Rica Real Estate?

/in , /by

By Jimmy V. Reed

Why all the Fuss about Costa Rica Real Estate Investments?

Have you heard all the buzz in the last few years about investing in Costa Rica? If not, you may be missing some of the best opportunities to make money in real estate right NOW!

Why Costa Rica?

Costa Rica affords a stable, growing economy in an outstanding environment. Only a few hours from the U.S., the “secret” of Costa Rica’s allure is becoming common knowledge, which is increasing tourism and development. Property values, once renowned for their incredibly low prices, are now rising with the increased housing demand. In short, the window of opportunity for major profit is right now!

About Costa Rica:

Costa Rica is flanked by the Pacific Ocean and Caribbean Sea. With a distance of approximately 155 miles between coasts, Costa Rica is well known for the premium it places on peace, education and democracy. In 1949 the government abolished the Army, allocating all would be military expenses to education and health care. As a direct result the literacy rate rose to 95% and continues to be one of the highest rates in the Americas. International ports on coasts, air and freight transportation services, and a well developed infrastructure and a strategic location at the crossroads of two continents make Costa Rica a contender in world markets. The government’s receptiveness toward new business ventures and excellent incentive plans have lured a growing number of multinational corporations to the country.

Spectacular natural beauty and peaceful atmosphere attract residents and tourists year after year. Nine active volcanoes, diverse forest environments, hot springs, wetlands, lakes, island reserves and 600 miles of beaches on two coasts account for the dramatic increase of tourism and residency in the last decade. Costa Rica’s varied terrain provides endless possibilities for activities ranging from hiking and white water rafting through national parks to snorkeling, scuba diving, and surfing off of the Pacific and Caribbean shores. Whether your interest is business or pleasure you will find Costa Rica a country of unequalled beauty.

Last year some statistics showed that there were 89,000 ex patriots living in Costa Rica. They find that the price points and cost of living put them way ahead in living standards and allow for the purchase of houses priced way below that of the United States. These properties are in gated communities with ocean, mountain, and rain forest views. This coupled with very favorable tax situations make it the idea place to invest. I see this first-hand as a developer there myself, because we are able to put our investors around the world into projects that will earn them double and triple returns of  those they may find in the States.

Why You Should Invest in Costa Rica:

There are several projects currently in process in Costa Rica and due to the recent US economy; there is an influx of investors now wanting to participate. As Investors, you should always keep in mind that your goal is to make the safest investment possible with the greatest return to you, in the shortest time period. You should analyze the investment, use your intelligence and make a calculated estimate based on the information you have available. That’s Investing 101! Costa Rica is now one of those investments that make a lot of sense for both the novice and seasoned investor.

Investors I know that have been involved in several development projects in Costa Rica from as small as 100 acres to as large as 1,650 acres. All said they needed expertise help when closing on these projects; they needed a team to help them with everything from writing contracts to title companies. Now there are two to three different American companies in Costa Rica that provide title guarantees. Those corporations provide foreigners with a title land guarantee.  Therefore, if there is a problem with fraud or problems in the title, they can be identified and the buyer can be paid back.

We also want to stress a crucial point to overseas investing and that is taking a little trip to the property you intend to buy or invest in. Now many investors we know have invested in Costa Rica and did not visit the properties firsthand. However some have visited since their purchases and found that they really enjoyed going to Costa Rica and seeing first hand where they have invested their money. One of our goals this last year was to inform investors of the opportunities in Costa Rica by encouraging them to take a FAM trip. A FAM trip is known in the travel industry as Familiarization and Marketing: it’s a trip you take to learn about the area and have a vacation at the same time. I would encourage investors who invest in these countries to hook up with a group that can show you the area, understand the investment, and at the same time give you a little cultural immersion while having fun at the same time.

In the future these types of trips will help the investor who never thought they would invest in another market become more comfortable and familiar with the market they have an interest in.  It’s true that with the help of the internet you can gather plenty of information on markets like Costa Rica fairly easy. Fact is for the first few years of International investing I did all my research on different markets via the internet.  But we also know the value of seeing an investment with our own eyes. Some Investors I know finally took a little trip down to Costa Rica to learn more about the projects. At the same time they had a blast riding around the projects on ATV’s and later on boat trips through the rivers and ocean of one of the most beautiful countries they had ever been to. Now that’s Cultural Immersion!

In closing, the returns are looking incredible. The market and demand are there. All you need to do is fill the demand just as many other investors are doing. Keep this in mind; investing should be, and can be fun. If you find yourself not comfortable with the investment then walk away. But don’t be like some investors who find something wrong with every investment and so end up never investing in anything. A true investor analyzes the project for what it is and then with all the facts he has moves forward or backs away. Moving forward though may sometimes require a little Leap of Faith.

 

Jimmy V. Reed         

Jimmy V. Reed of Fort Worth, Texas has been investing in real estate since 1987.  In 1991, he started conducting full-day training sessions on Wholesaling.  He then began teaching and mentoring others throughout the country. He is currently the founder of the Fort Worth R.E. club www.1REclub.com and has his own real estate training company that includes Wholesale, Probate, Mentoring & a Biblically based Debt Free training course and more!

More info available at www.JimmyReed.net