THE IMPORTANCE OF A TITLE SEARCH IN BUYING INVESTMENT PROPERTIES

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By Glenn Mananeng

It’s important that when buying a potential investment property, there are no legal issues that may arise after it is purchased. With that in mind, properties with a clear title is very important. Unique Wealth Education is here to let you know the ins and outs of a title search.

Who does a title search?

Title company – they conduct extensive research on the property using public records and legal documents to identify the owner, liens, and if there are any loans and property taxes due.

Lender – they conduct a title search to verify ownership of the property and any other judgements for or against it before approving a loan that uses the property as collateral.

A buyer can also do a title search on their own, although it’s not usually recommended. Not only is the process time-consuming, you’ll be prone to making some kind of mistake along the way if you don’t have the knowledge needed when it comes to legal matters. However, this should not hinder you from wanting to know the basics of a title search. After all, you want your purchase to have no strings attached as much as possible.

Understanding the basics of a title search

This will minimize the chance of you regretting the property after acquiring it. The process won’t be as complex and tedious as it usually is if you do it the right way.

STEP 1: Chain of Title

The “chain” refers to a sequence of transfers pertaining to the historical ownership of the property. This will show the list of owners from the current one back to the original owner when the property was first built. This can be obtained from your County Clerk’s public records.

Back then, this step took too much time cause you had to check records dating back to almost 100 years in order to complete the search.

The importance of this step will determine the credibility of the property title. If you happen to pass by a “cloud” or any missing part of the chain, this might indicate that an incorrect deed was done during somewhere along the way. This could also mean that the owner changed their name to reacquire the title. In this case, a quiet title suit is done as a security measure.

Quiet title suit – this is done in order to settle any dispute over the ownership of the property. Think of it as reinforcing the weakest part of the chain so it won’t break. The owner goes to court and describes all of the title defects with an attorney. The judge will “fix” these defects with a court order declaring that the claimant (in this case, the current owner) is now the true owner of the property.

STEP 2: Tax Search

The second step of the title search determines whether the property is up to date with its taxes. Any overdue or unpaid taxes can create a lien against the property. Let’s say that you finally purchased the property and you skipped this step, this can lead to the government placing it up for sale again just to cover the unpaid taxes.

Title insurance – this is done to prevent any overlooked late or unpaid taxes on the property and make it as clean as possible. Without this, the financial burden will be transferred to you as the buyer.

STEP 3: Site Inspection

Inspecting involves a lot more than just dropping by and checking if the property is ok. This should be done to make sure everything matches the records of the property such as the lot size or any signs of an easement. When you are granted an easement, this means you have the legal right to use or enter the property of the owner without possessing it. These are typically granted for utility companies and are usually not removable.

STEP 4: Name and Judgement Search

Any judgement or state and federal tax liens against the current or previous owners must be looked up. It’s up to the current owner to settle any of these judgements or state and federal tax liens found while owning the property. Judgement decrees, unpaid taxes, and liens can have claims over the property. In other words, these defects can complicate your ownership even after purchasing it. A title insurance policy is a good preventive measure against these judgements and insures these items are removed at the time the policy is issued typically at the closing of the sale.

STEP 5: Closing the Deal

The final step is the green light for the buyer to begin the process of purchasing the property with a clear conscience knowing that all legal hurdles have been cleared. Once the deal has been closed, the title company issues a title policy.

Title policy – is the title company’s guarantee that protects you as the new owner in the event that any unknown issue affecting the property comes up after it’s purchased.

Following all of these steps will ensure a smooth transaction between you and the seller. Although we mentioned that a third-party entity usually does this on your behalf, it doesn’t hurt to know the legal aspects of this very important process. Contact us by phone: (734) 224-5454 or email: [email protected]. We also invite you to our monthly meet-up every first Thursday of each month to share experiences and hopefully do business with fellow real estate investors.

Turmoil: The Storm Of Change & How To Thrive In It

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If you’re in real estate you’ve probably smelled the storm just over the horizon. The question is where it will hit, when it will hit, and just how bad it will be? More importantly, how can your business and portfolio not only survive in the eye of this storm, but thrive?

Meet Bruce Norris

You may already be very familiar with The Norris Group and their exciting hard money lending programs. Leading the company is President, Bruce Norris.

Bruce Norris has been investing in real estate for over 35 years. He’s been involved in thousands of property and financing transactions. We could fill this page with his accolades. Yet, what he is best known and most respected for in the industry is his reports.

There have been others who appear to have successfully called downturns. Others have created names for themselves in good times and betting on the market going up.

What’s unique about Bruce is that he has proven to be able to successful predict both market crashes and upturns. He has been called on by many organizations up to the highest levels to share his expertise and insights on market trends. That includes the California Builders Industry Association, California Association of Realtors and Mortgage Bankers Association.

In our exclusive interview Bruce told Realty 411 that he started out flipping houses in 1981. He admits that like many new investors he knew little about timing the market. He ended up with 7 brand new custom homes that weren’t selling. He learned some tough lessons.

Then in 1995, his son graduates college. He bought him a Honda Civic. Then a few days later found a house for sale in California that cost even less than the Honda. He saw incredible opportunity. Yet, really wanted to dig in and understand the markets, how to time them, how not to lose money, and how to invest his own money in the safest and most profitable way.

This led to his first report that he published in 1996. In 2006 he released a report calling the most recent major housing crash and foreclosure crisis. In 2012, he invested in line with his report and went all in on real estate. The market has gone up 100% since then.

Turmoil: The Coming Storm Of Changes

Now the real estate industry is once again feeling a lot of uncertainty. Perhaps with the exception of Bruce. There has been a lot of talk about a new recession and crash. While many investors keep engaging in the market. This year’s presidential election is no doubt to to bring many more attempts to send us all on an emotional roller coaster ride full of fake news.

Bruce says “There are no real estate I am afraid of.” He’s mastered looking at historical and current charts and overlaying the data, and remains bullish on the market.

What does concern him is a new era of legislation and policies which are wild cards with the potential to be extremely disruptive to investors in some of the most progressive states, like California.

He feels this is such a pressing issue that more investors need to be alert to that he has set up a panel and new event on February 1st, 2020 to equip investors with this critical information.

Major Factors That Could Impact The Market In 2020 & Beyond

State Politics

One of the big issues today is what things can be changed by popular vote versus by proclamation of state government, regardless of how its constituents feel. This puts residents at danger of rogue actors.

California has certainly become the poster child for aggressive new rules lately. Among them are sweeping rent controls, Prop 13, taxes, and the new ban on freelance workers which has the potential to create massive unemployment.

Then there is also city and state pension issues and the fact that many are not going to be guaranteed the money they were promised, or have already been counting on.

Fed Manipulation

Student debt, health insurance, guaranteed income programs, climate change laws and other major policies could all impact the markets on a large scale. We may see a lot more of this after the upcoming election.

Technology

5G is likely to be one of the biggest game changers of the next decade. Yet, the US continues to be behind in this critical technology and factor in global competitiveness.

Other technologies may become more essential for remaining competitive and profitable in this new landscape.

Surviving & Thriving

While these factors could throw some serious curve balls at California investors, and New York is rarely far behind, Bruce is still confident in the US property market.

Looking at the charts he says even California is more affordable than it used to be. He points out that at least for now we’ve been enjoying the lowest unemployment rates in the last 50 years, and interest rates remain low. Put in perspective, he believes the market justifies more sales, more building and higher prices. He says this is even truer of Florida. The Sunshine State which is enjoying great population growth, has no state income tax and isn’t as crazy at enacting these new sweeping rules.

So, what’s Bruce doing with his money?

A look at The Norris Group website shows they are still lending to investors. In addition to their traditional rehab loans and refinancing rentals, they are also now lending to build and flip investors in Florida, and on ADUs for rent in California.

Their investors are getting attractive 6% to 10.5% returns on capital invested in first trust deeds and mortgages without pooling their money. Far better than a lot of operators are promoting today.

Get Smart

Get all the details on these factors, what to watch out for and their potential impact at Bruce’s upcoming event. Then master restructuring your portfolio and making new moves in 2020 with confidence. Register for the event at TheNorrisGroup.com/Turmoil

BUILDING WEALTH IN REAL ESTATE: HOW LONG DOES IT TAKE?

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By Glenn Mananeng

This is a question on the mind of investors. There is no definite answer for this. This topic is always up to debate no matter how you look at it, as wealth is measured differently by every individual. Here are a few factors you need to know when building wealth – allow us here at Unique Wealth Education to teach you some important pointers to consider:

#1 Wholesaling

This is the easiest point of entry for the majority of the investors, as it requires the least amount of capital. You find a seller who wants to put their property for sale and find a buyer for that property on “as is” condition without the fixing part to try and get the market value higher. After the property has been sold, you’ll get a cut on the sale. Basically you are the intermediary that builds a buyers list to locate undervalued properties using a multi-pronged approach. This relies heavily on how good and how broad your real estate network is.

#2 Fix and flip

You don’t have to be an avid real estate investor to know what fix and flip is. Anyone who has cable and passed by HGTV has a basic idea of what it is. You buy a house below the average market value, renovate it, sell them for a profit! This is one of the most widely used real estate investment strategies used around the county.

Keys to fix and flip investing success:

· Preparing yourself by understanding how to locate undermarket valued properties in the right locations
· Understand values (make sure you are comparing apples to apples and going with the highest comp when doing our due diligence as a conservative approach)
· Aligning yourself with multiple capable and competitively priced renovation contractors to not only give you a bid prior to purchasing the home, but also to deliver as agreed on
· Understanding how far to go with finishes and layout changes to keep within the budget and comps in the area
· Stay away from potential losers such as foundation issues and bad layouts
· Having a sales strategy in place prior to the purchase that accounts for commissions, closing costs, holding costs, etc…
Contrary to “reality” real estate shows, getting rich doesn’t happen overnight. The longer it takes to flip the property, the more expenses you would incur for maintaining it while waiting for a buyer. Working with getting coached by or partnering with a seasoned investor is a huge advantage, as you learn best practices and pitfalls to avoid, which only years of experience can provide.

#3 Rentals

Mortgage Paydown

Let’s use a rental property as an example. In a normal scenario, you have a tenant who is essentially paying the rent in exchange for living privileges. If you bought the rental property with a mortgage, your loan will eventually cancel itself out over time. Why? The rent you receive from your tenant is basically used to pay the loan, which is increasing your equity in the property. The money left over is your cash flow divided by the amount you put down to come up with your CAP rate. This is a GREAT way to build long term wealth.

Cash Flow

We can all agree that this is very important. For those who are new in the game, cash flow is basically the income you get from your investment property (usually rental properties). This is a major factor in generating a high return for your investments and savings. Once you increase cash flow by accumulating properties, this allows you to plan your income and determine the course of future investments.

Taxes

If taken into account optimistically, you’ll see a lot of tax benefits when it comes to real estate investments. Consult your CPA to see how you can depreciate properties that you are holding onto for rental income and also discuss with them acceleration methods used to front load depreciation to give you more capital to buy more and keep building your portfolio.

The answer to how long it’s going to take, as you might’ve guessed already, is up to you. Your real estate skillset, determination, experience, and risk management are major players in this ballgame. it’s all about how smart you invest in the industry. If you make due diligence and play your cards right, you’ll one day realize that you’ve gained a considerable amount of wealth already. Unique Wealth Education can help you in your real estate career in helping you avoid common mistakes & pitfalls, is something that we take to heart very seriously. Contact us at(734) 224-5454 or email us at [email protected]to learn more.

Besides the Purchase Price, There Are Other Costs You Must Consider

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By Lloyd Segal

When flipping properties, you also need to consider repair costs, holding costs, real estate commissions, closing costs, estimated profit, and lost opportunity costs.   Let’s analyze each of these costs separately.

Repair costs.  The repair costs will likely be your largest cost, so you need to calculate them carefully.  If you’re able to inspect the interior, you’ll be able to estimate the repairs and renovations needed to make the house salable.  However, if you aren’t able to inspect the interior, use 10% of the purchase price as your estimate of repair costs.  In the alternative, multiply the square footage of the house by $7.00.  For example, if the property has 1,500 square feet, the estimated repair cost would be $10,500.

Holding costs.  It’s going to take you approximately 2-4 months to repair, market, and sell the property.  During those months, you’ll incur holding costs (i.e. mortgage payments, taxes, insurance, and utilities).  Neophyte flippers frequently forget to include these costs in their budgets.  If you’re worried about these costs, you can significantly reduce them by living in the house during this period, which is exactly what many flippers do when they are just starting out.  Instead of chalking up your monthly expenses as holding costs, simply consider it rent.  Another way to trim your holding costs is to price the house correctly the first time.  By offering the best home in its class at the best price, you’ll sell the home faster and lower your holding costs to more than cover the cost of selling the home for a little less.

Real estate commissions. You can assume you’ll pay a 6% commission to your real estate agent for selling the house when you flip it.  For that money, the agent will market your property for sale, list it in the Multiple Listing Service and related websites, advertise in local newspapers, receive and submit offers, negotiate with the buyer, and assist you with the timely close of escrow.

Closing costs.  You will incur closing costs when it comes time to sell the property.  These costs include escrow fees, title insurance, transfer tax, recording fees, and other miscellaneous charges.  For a rough estimate of closing costs, figure 2% of the anticipated selling price.

Estimated profit:  While we’re at it, let’s factor in profit.  You want to make at least a 20-25% profit on each of your flips.  In that way, if unexpected expenses do pop-up, you’ll have some margin before you lose money on the deal.  (And if you sell the house for more than you expected, or your expenses are lower, you’ll make an even better profit.)

Lost opportunity costs:  Opportunity cost is the cost of pursuing one investment choice instead of another.  Every investment you make has an opportunity cost.  With respect to flipping, lost opportunity cost boils down to making choices between various deals.  For example, if you are considering two potential deals and can only make one, which one is likely to generate the greatest return?  Which fits best into your workload, your skill set, and the time you have available?  If you can spend the same amount of time and money on a property that will generate a 20% return instead of another property that will yield only a 10% return, which would you choose?

Time:  Another cost that you may not have considered is your time.  Successful flipping takes time.  If you buy a property and plan to do some repairs yourself, you will save money on repair costs but you’ll also spending your time.  How much is your time worth?  If you’ll spend 300 hours repairing and renovating a property and will make $3,000 in profit, your time was worth $10 per hour.  If that sounds good to you, great!  If it doesn’t, you’ll need to adjust your cost estimates accordingly.  For example, if your time is worth $50 per hour, you should factor $15,000 into your budget for those same 300 hours.

Lloyd Segal

Chief Cook and Bottle Washer
Los Angeles Real Estate Investors Club, LLC
310-409-8310

www.LAREIC.com

 

 

How To Get Back Your Passion For Real Estate

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By Fuquan Bilal

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Want to feel that real passion for real estate investing again?

Whether you got stuck spinning your wheels before you really got started, have taken an extended break or are just going through the motions now that the money is coming in too easily, it’s important to keep your passion on high.

If you’re not passionate about what you are doing, people will notice, and it won’t be long before things start to slide. You can lose your passion from discouragement or just because you’ve automated everything and it’s become dull.

Whether you crave getting that mojo back or you just want to be sure you are maintaining it, try these strategies…

Remember Your Why

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Why were you investing in real estate or what excited you about it in the first place?

Maybe it was for your lifestyle or for your family, or to help other people. Chances are that you haven’t crossed the finish line yet. You may have run into challenges, or it may have become very transactional. Yet, the odds are that you haven’t made enough money to future proof your family wealth for the next few generations yet. You probably haven’t run out of people to help.

Remember your why. Realize there is still a lot to do. Get moving on that.

Set Bigger Goals

You can make a million dollars a month in real estate and get bored. There is only so much shopping and golf you can do. Set bigger goals.

You might be the biggest investor in your town, in your niche or even Manhattan. There is still more that can be achieved.

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It doesn’t have to be about the money. It’s more about knowing you’ve really pushed the limits as far as they can go.

Billion dollar companies are almost becoming common. If a billion is too small for you, then think globally. Can you build a portfolio of income properties in every state or country or major city? Can you diversify your brand from just flipping houses to new construction or something else?

You don’t have to do it all yourself. Ask who you can connect with, align with or hire to get you there.

Hang Out With Amazing People

It’s important to spend time with your peers and passing on your learnings to help others. Firstly though, be sure to spend a third of your time with inspiring and uplifting people who will challenge you to level up your game. Do that and everything else on this list should fall into place. And if you can’t do so in person for some reason, engage on social media, tune into a great podcast every week, and find ways to do it virtually.

Do Something New

Constantly doing new things is important. It has countless mental and physical benefits. It will also fuel your passion in a variety of ways.

Maybe you’ll travel and have your eyes opened to just how much real estate there is out there. Or you’ll realize how much you really love home.

Find new ways to look at real estate. Take the plunge into new asset classes and strategies. You may find something you are even more passionate about once you taste it.

Go take on new activities and meet new people. Treat yourself to new adventures. Otherwise what’s the point of it all?

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Ask Who You Can Help

We tend to lose our passion when we focus too much on ourselves. Instead, ask who you can help. Get out there and ask everyone how you can help them in regards to real estate.

Who can you help find a home? Sell a home? Generate more income from real estate? Diversify their portfolio? Raise money?

Challenge yourself to deliver. Push your limits. You may find it incredibly rewarding and a new fuel for your passion.

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.

IS IT POSSIBLE TO INVEST IN REAL ESTATE PART TIME?

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By Glenn Mananeng

Real estate investing is a great way to build wealth. This is an opportunity to invest your savings while working, studying or just enjoying life with family and friends as a passive investor and spending minimal or spending more time on projects as an active investor. This surely is a big decision; therefore, you need all the pros and cons from experienced individuals in the real estate industry.

New investors often find themselves lacking in time or resources to commit 100% in the business, leading them to ponder if it’s possible to do it part time. But is it possible though? Short answer, of course it is! Allow us here at Unique Wealth Education to show you the pros and cons of real estate investing.

PROS

Supplementary income – If you have another job on the side, you basically have two sources of income. This gives part time investors the advantage of having steady cash coming in while your real estate investment is generating cash flow or appreciation.

Fallback career – Part time investing lets you test out the waters. As good as it may seem, no industry is perfect and some have more risks involved compared to others, especially if you don’t have a mentor guiding you. Your investment properties will generate the income by itself and you can continue your current job. A win-win situation if you ask us!

Brand new network – Since you’re doing this part time, you probably have someone working with you. This gives you the opportunity to meet up with clients and fellow investors who can share valuable experiences. You might even pick up life lessons that will help you in other aspects along the way.

Flexibility – If you decide to have your investment driven by a reputable property management company with a reputable track record, you can go on your with your daily routine and agree on a convenient time to address any questions/issues. This is the case with many investors and it works out great.

CONS

Time-consuming – If you are a landlord, handling two jobs isn’t easy, especially if you decide to oversee your investments, such a rental homes (depending on the # of properties/units) without the expertise of a property management company. Dealing with the issues of getting a qualified tenant, maintenance issues that arise, and bottom line keeping your property rented continuously is a job.

Avoiding bad deals – If you are flipping, it is crucially important to be able to locate and asses properties in the right location, that has either a high rental demand or saleability. This is something that you can learn by being around experts that can help you assess the property by using current and future projected market data, a proforma and specific strategies. You will lose a lot of money if you buy in the wrong location and use the wrong (highest or wrong comparables) comps.

Not having a reliable construction contractor that can give you an accurate bid for the renovations prior to the purchase, can really hurt you if your budget is off. This is why investors (wholesaler or fix and flipper) should learn how to roughly budget the cost of renovations, as you never want to have the fate of my investment put into 1 contractors hands.

Lastly, weather your renting or flipping, have the right finishes. Take great pictures (before and after) when the project is completed, try to time the listing between school years which is the hottest selling and rental season.

By now, you probably realized that doing this part time or not, you need guidance from experienced real estate investors. Real estate investing can demand a lot of work part time or full time and this is particularly true when you have multiple properties already. Here are a few tips to do it effectively:

Find the right niche

You’re going to have to look into a strategy that has a more hands-free approach. It can get hard to choose from a vast array of real estate strategies out there. You only have a limited amount of time to commit therefore try looking into one what works for you and stick to it. The more you familiarize and master that particular niche, you’d be surprised how much less time you’re able to spend to produce results.

Generate leads

Focusing on lead generation can score you with the best deal in the real estate industry. Setting at least an hour or two a day (preferably at least 20 hours a week) marketing your business to generate leads can be a good start. Just a reminder, you have to understand that not all goods leads convert into successful deals prompting you to work even harder. You can ask around for suggestions to an effective lead generation program that can help you have a source of qualified leads and help yourself to a lot of data that meets your business criteria.

Expand your network

You need to have a network of professionals in real estate. Investing in this industry is a “people” business. You need to work with different types of people such as buyers, sellers, loan officer, mortgage brokers, appraisers, and the list goes on. Each person can provide a link for you to build a strong network.

Find a reputable mentor

Even the best investors were under the tutelage of a mentor. Joining a real estate team or finding a partner who does investments full time can provide insight and many benefits. These professionals are experienced, they know amazing deals. Factors like the right time to buy or sell, managing any risks that may come along the way, and increasing your chances to close the deal is a daily routine for them.

MORE INFORMATION:

Unique Wealth Education has a broad network of individuals who share the same passion in the real estate business. To help you expand your knowledge about the industry and be involved with professionals who are already active in the business, we invite you to our monthly meetup every first Thursday of each month. To learn more, call (734) 224-5454 or email us at [email protected]

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

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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

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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.

Allowing a Lender to Cross Collateralize Against Additional Property

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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

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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.