Skrrt, Skrrt… Cars and Real Estate…

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Exclusive Article by Fuquan Bilal, NNG Capital Fund

Before I discovered real estate I had a passion for cars. I even owned a body shop as one of my first businesses. I now keep my businesses and investments diversified within the real estate industry. Yet, I still love cars, and there are a lot of great lessons that correlate between the two.

When I was younger (and often lived above my means) I had Range Rovers and new BMWs. I would lease and trade in every year to get the latest model. I liked to live flashy, like many new real estate investors do.

I’ve learned and matured a lot since then.

I now drive this 1982 seven series BMW. I’ve had it since 2010. I restored it, and still love working on it.

It’s one of those great pet projects that is good for distraction and decompression from the business. It recharges me.

 

When I visit places like Miami, I’m still excited by new supercars and exotics. I can appreciate the appeal. But, I’m honestly much happier now with my classic.

It’s durable. It’s a vehicle that lasts. I purchased it as a long term investment. I’ll still have to keep up with maintenance and will make modifications. It’s worth it though. It’s rewarding to make a better product.

Classic cars like these go up in value over time, instead of down. This is another reason it really made sense to me.

I invest in real estate for the same reasons. It’s durable, can go up in value, lasts long term, and can be fun and rewarding to see the transformation when remodeling rental properties.

The cash flow from my apartment investments allowed me to recently purchase a car for my mom too, as she always wanted to drive mine!

I’m so grateful that my smart investments allowed me to go pay cash for a car for her. It was not a brand new car, but it was a strategic investment.

It won’t be long before my kids are ready to drive too. When it’s time, I’ll work with them to buy a mortgage note. Then they can use the income from that investment to buy a car or make payments on one if they really want to go that way.

What are you driving and why?

Investment Opportunities:

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

Invest in Overseas Real Estate to Retire Smartly

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By Matt Malouf

The 401k plan at your workplace is as traditional as apple pie. You know what it is and you can rely on it. You’ve grown up hearing about this kind of investment being beneficial in life. It’s just something everybody does, and what you should do too.

All it takes is landing a job and investing in your company’s 401k plan throughout your career. After that, you’ll have peace of mind that your retired life is covered.

Wrong!

In fact, a traditional 401k model might be jeopardizing your retirement plans and you don’t even realize it! If you too are investing in a 401k plan and not focusing on other potential investment opportunities out there, are short changing yourself.  You must know that typical plans like these only work as retirement savings plans when everything falls into the right place at the right time. That doesn’t happen all too easily.

Do you know many of these plans come with hidden expense and fees ratios attached? For instance, if you invest $10,000 in your 401k plan, over 20 years you could easily more than lose $3,000 to hidden expenses or fees. This is not at all a hypothetical scenario. In fact, many TDFs (target-date funds) have huge secondary fees attached to them.

Also, it is not at all a comfortable feeling or a smart decision to invest in a plan where your retirement depends on the words and actions of many other people. As you may know, the return depends on the month, day, political climate as well as rumors on Facebook and Twitter and so on!

So, what is the premier and smart alternative to secure your retirement while exploiting better opportunities for higher returns?

Well, let me suggest – Overseas Real Estate!

People who truly understand the potential of overseas property investment understand what it brings to your table at the age of retirement. Even if you just compare both of these options side-by-side, you will be shocked to learn how much you have already lost by letting other people control your retirement investment in a typical 401k plan.

Here are some of the endless advantages of investing in the overseas real estate;

Tap into Different Housing Markets

One of the main advantages of investing in overseas property is that you can tap into other growing real estate markets.  If you select the country wisely, you are more likely to find a market that is far more profitable than the one in your country.

You can spread your fortune by making property investments in different overseas countries. On the contrary, if you invest the same amount in your home country, the amount of money may only help you buy one or two properties. Whereas the same say USD $200,000 can buy three to five properties diversifying your portfolio even more.

All you need to get a good return is invest into a growing market and you will certainly get the benefits from capital appreciation. There is another good way to utilize your overseas property and that is by renting it out. Think about receiving rental income but in another currency. Isn’t that an excellent way to hedge your financial risk?

Holiday Properties Around the World

An overseas property provides you with different holiday opportunities all over the world. This means that if you fancy jetting off to spend summer in some other country, you have got guaranteed accommodation and that too, for free.

The story doesn’t end there.  Overseas real estate also brings another kind of stability besides a financial one. It’s called personal liability. If you own a place overseas, you can always go there if the need ever arises. In short, you can call it your ‘escape hatch’.  A place to write, brainstorm, think and get away from the daily grind.

There are many cases where owning an overseas real estate properly is the first step to fully obtain residency there. Doesn’t owning an overseas real estate property add appeal to your ‘Plan B’?

Income and Investment Diversity

For sure you must have heard of the saying ‘don’t put all of your eggs in one basket’. This saying holds true for almost every other aspect of your life and undoubtedly investment is a major part of them.

So, if you actually want to maintain a safe financial standing for yourself, especially after your retirement, put your eggs in different baskets. Overseas real estate should certainly be one of those baskets you consider in your overall plan.

Investment in overseas real estate does not only offer diversification in terms of investment but also in terms of currency. For instance, if you are a U.S. resident, then having all the money in U.S. market means you are surely at the mercy of just one economy. In other words, if you are keeping 100% of your investment in one currency (like U.S. dollar), your investment future is highly dependent on the fate of the dollar.

Therefore, in addition to having a diverse investment portfolio, if you set up an income stream abroad (like renting out your overseas property), you generate an income stream that is totally independent of the U. S economy and sometimes dominated in some other country.

Never Underestimate the Security of Hard Assets

Remember that in the current economic climate, nothing is a more sensible and smart investment decision than investing in real estate. Particularly, overseas hard assets are the best and most logical investment class to secure a strong long-term value.

Even from the point of view of above-average returns and rental yields, the foreign country rental market can be a lot more lucrative if you find the right country to invest in. For instance, the gross rental yield (average) in the U.S. is around 4.2%. If you compare it with today’s emerging international market, it’s much less. Costa Rica, for instance, has a 8.4% rental yield. Other emerging economies in South America can yield you over 15%.

Let’s face it. From a smart retirement plan perspective, when you combine these benefits, there is simply no comparison. Overseas real estate investment is clearly the winner by a long shot!

The actual point of this discussion is not to discourage or dissuade you from going for a 401k plan at work but to help you think farther and smarter. Venture outside the box, think of the possibilities on how you can diversify your life and retirement. There is no harm in considering overseas real estate investment in addition to a good 401k plan.

Matt Malouf

Author-Investor-Pioneer

http://www.MyLifeWorldWide.com

 

 

 

So… You Want to be a Real Estate Investor…

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By Lou Brown

If you have the intention to be successful in Real Estate, taking a look at what is working for others may be a good place to start…

Let’s understand what you want to accomplish. Do you want to have your own business in real estate?

Do you want to buy and sell, or buy and hold, or deal in mortgages, or buy and renovate, or build, or subdivide, or some derivation of these?

Frequently I meet individuals who just think about real estate investing in terms of a way to make money, without considering the direction to take. In my mind, that’s similar to a teenager saying, “I want to get a job, so I can earn some money.” Well, that’s great… but what kind of job?

With a general goal like “making money” or “being a real estate investor” people proceed based on what they think they should do next. Which may or may not be a smart move.

Think about the traditional process we go through to start earning a living…We start with over a decade of school.

Now, did they teach us a skill to go into business at school?

No, that is NOT what is taught at school… they teach you how to work for someone else! Even courses entitled Entrepreneurship, Business Management, and Business Applications don’t teach what you need to know about creating, and more importantly… sustaining, a viable business. You see, they don’t teach what you need to know about the process of owning and running your own business. They do teach much of what you need to know about how to work for someone else, but unfortunately they do not teach us how to work for ourselves.

Not only are you not taught how to start or maintain a business for yourself, they also don’t teach how you can get wealthy. That’s the process of how to create assets that work and create income for you, instead of you working for it.

So, what can you do to learn this?

1) You must learn from someone who has done it for themselves. 2) More importantly, you must learn and adopt a process to have that happen for you without all the expensive and time-consuming trial and error that comes with creating a business without a path to follow.

Michael Gerber, author of “The E Myth,” stated that 1,000,000 people go into business in the United States each year, but within 5 years, 96% of them are out of business. I don’t know of anyone who has that intent, but that’s what happens.

They, like you, are attracted to creating a business in hopes it will provide a good living and retirement income too. But for 96% of them, that promise, or vision does not come true and they lose the chance to get freedom from the shackles of working for someone else.

Gerber goes on to say that those with the dream of entrepreneurship thought business worked one way when in actual fact successful businesses work in quite a different way… hence, the title of the book, “The E Myth.” He reports that when the entrepreneur follows a different path, 75% are still in business AFTER five years.

What he found is that those who enter business with a franchise are able to build and sustain their business because they have a path to follow… a clear, direct, tested and proven path that leads them right to the money without the risks and pitfalls that so many others fall into.

Seems sorta obvious, right? Think of some franchises…McDonalds, for example, has a system that works. It works worldwide. Follow their system and it’s almost a guaranteed succeed.

Let me relate a story. Years ago, I invested in building a Holiday Inn, (funded using private money). We could have opened that hotel and called it “Lou’s Motel”. That would have saved us a ton of expense, but would it have been an uphill battle for us to find customers? You bet it would! Not only that, we would have had to create our own reservations system, housekeeping training, accounting software, resources for supplies, and all the rest.

Instead, we opted to go with a known brand – Holiday Inn. Now at the time, this was very expensive; tens of thousands to use their name; multiple thousands for their training and more for their software and 8% of every dollar that came in, for the entire length of the franchise agreement was theirs.

Whew! But we opened the doors to an immediate 100% occupancy and understanding of the proper way to manage the hotel, staff, marketing and lots of support. We were able to take their training, tools, technology and team and have an up and running business without having to make it up as we went. That made sense to me -Doesn’t that make sense to you?

So the question you may be asking is…” Does the Real Estate business have such a path?” You bet it does! And you can actually choose the path to follow.

Your real estate investing needs to be thought of as a business – not just buying and selling a house – and just like a business, you’ll want a business plan to follow; one that allows you to build a business that will generate a good income and a future of dependable continuous cash flow for you and your family.

Your business plan needs to cover all the aspects of this confusing real estate business…

  1. Provide for safety and allow for controlled expansion.
  2. It needs to include all the possible profit centers in Buying, Renovating, Managing, and Selling.
  3. The paperwork and processes need to support all the aspects, so profits and risks don’t get overlooked.
  4. It needs to provide a business model that can be easily duplicated regardless of the size or economic condition of the market you are in.
  5. It needs to have a training and support component to allow for adjustments as the market changes.
  6. It should provide branding to benefit from nationwide recognition and marketing.
  7. It should support building a sellable business, so you can exit when you want to without having to liquidate.

In order for this concept to work in your real estate business your business plan needs to include all the necessary Tools, Training, Technology and Team(tm). It needs to be a holistic approach rather than a concept from here, a form from there, a piece of marketing from someplace else all jumbled together like some untested recipe. In fact, that is the recipe for disaster that so many would be investors follow.

And this is why, as Gerber explained, 96% of businesses without a plan will be out of business in such a short period of time.

Does this make sense to you?

So how do you get a true, time tested business plan that works in all locations and takes advantage of the most compelling profit centers in the business – complete with support to be sure that occurs?

You have to look at people who have and have been using a plan that survives the test of time and still produces results. Fads come and go, and so do the cycles of the real estate market, so don’t base your future on a trendy investing “flash in the pan.”

In my 40+ years of running my successful real estate business, I’ve identified the component parts to make a real estate business work – for anyone – regardless of their current net worth or monthly marketing investment.

I developed a system that allows you, regardless of income or background, to build a business that will have all the benefits a franchise offers without nearly the typical investment. It includes Tools, Training, Technology and Team™ … all in one place AND with the component that is the most important – the wealth aspect and huge profit center of holding property.

Anyone who is serious about having control of their financial future should have holding income producing real estate as the center or at least as a component of their portfolio. You need assets that will work for you for the rest of your life.

This is where real WEALTH resides… assets and equity working for you instead of you working for it.

The combination of Income, Depreciation (tax benefits), Appreciation (growth), Equity Build-up (appreciation and mortgage pay-off) and Leverage (using O.P.M. – other people’s money) makes this the IDEAL unbeatable combination of investment benefits usable by anyone in any walk of life.

Because of your involvement with Realty411, you likely have the basic tools already. That is a good start. You may be someone who can see the value in the holistic approach including branding to allow you to take advantage of all the profit centers.

If you understand the benefit of the “franchise concept” (a proven model and system of success that can be duplicated by anyone) and would like to structure your business to run systematically, then you are welcome to take a look at how I’ve structured my business. It’s a model that has provided me with a lifestyle I love and has provided hundreds of other investors with the same.
You can access a free training on this system anytime, 24 hours a day, by going online to millionairejumpstart.com/dealw.

Equipped with the right holistic tools, training and support, you will achieve your goals. My mission and prayer for you, is success in this business that will benefit you and your family for many years and generations to come.

Warmly,

Lou

Certified Affordable Housing Provider

Top FIVE Alternative Financing Available to Entrepreneurs

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by Teresa R. Martin, Esq.

Financing is indeed the most crucial of the puzzle for almost every business. Unless you have access to enough capital to bootstrap your business or raise it from family and friends, chances are, you’ll need a loan or investments.

When a conventional bank loan isn’t right for you, or if you’re looking for an additional injection of capital to grow your company, there are plenty of other options. Here are five alternate ways to finance your startup or grow your small business.

LOVE MONEY

This is money loaned by a spouse, parents, family or friends. A banker considers this as “patient capital”, which is money be paid later as your business profits increase.

When borrowing love money, you should be aware that:

  • Family and friends rarely have much capital.
  • They may want to have equity in your business: Be sure you don’t give this away.
  • A business relationship with family or friends should never be taken lightly.

RETIREMENT FUNDS

As with borrowing money from friends or family to buy a business, some might consider using money from a retirement nest-egg risky. That said , it can often be an effective way to invest in your entrepreneurial endeavors for more and more of today’s business buyers.

As laid out by the government’s ERISA law, you can invest your existing IRA or 401(K) funds to the purchase of a business without taking any early distribution and incurring penalties.

It’s even possible to combine money from your retirement fund with loans and other funding methods for greater flexibility. Many entrepreneurs choose to invest in a business they control because they believe the growth opportunity is greater; and they want to diversify a portion of their retirement holding outside of the stock market.

ANGEL INVESTORS

Angel investors invest in early-state start-up companies in exchange for a 20 to 25 perfect return on their investment. They have helped to startup many prominent companies , including Google and Costco.

Angels are generally wealthy individuals or retired company executives who invest directly in small firms owned by others. They are often leaders in their own field who not only contribute their experience and network of contacts, but also their technical and/or management knowledge.

They tend to finance the early stages of the business with investments in the order of $25,000 to $100,000. Institutional venture capitalists prefer larger investments, in the order of $1,000.000.

In turn for risking their money, the reserve the right to supervise the company’s management practices. In concrete terms, this often involves a seat on the board of directors and an assurance of transparency.

Angels tend to keep a low profile. To meet them, you have to contact specialized associations or search websites on angels.

SELLER FINANCING

Increasingly today’s more business-for-sale transactions are resting on a seller-s willingness to finance at least part of the sale. In a deal that includes seller financing, the seller takes part of the purchase price in cash and the remainder in the form of a promissory note that the buyer will pay back with interest over a period of three-to-five years.

This has become essential; buyers are having difficulty accessing funds through traditional methods, therefore there’s a natural gravitation toward seller-financed business to help offset some of the cost upfront.

Conversely, sellers who continue to say no to seller financing are finding it difficult to close a deal, and as more of them have realized this, there has been an increase in seller-financed businesses on the market. If you’re in the market for a small business it’s important to be aware of alternate funding options, but know that in some cases it’s still possible to borrow from a bank.

Government stimulus and bank policy have been trying to promote ongoing small business lending, although many banks are still more conservative than they used to be about when and to whom they’ll loan money.

CROWDFUNDING

Crowdfunding sites such as Kickstarter and Idiegogo can give a boost to financing a small business. These sites allow businesses to pool small investments from a number of investors instead of having to look for a single investment.

Make sure to read the fine print of different crowdfunding sites before making your choice, as some sites have payment-processing fees, or require businesses to raise their full stated goal in order to keep any of the money raised.

Today’s business-for-sale marketplace is full of exciting opportunities that will allow you to take your destiny into your own hands and with various options available there’s no reason to let a shortage of traditional capital sources get in the way of your dreams.

ABOUT THE AUTHOR

Dr. Teresa R. Martin, Esq. is a motivational speaker, author, million-dollar real estate wealth coach, business strategist, and legal counsel. She is living the life she loves and an teach you how to do the same!

As founder of the Generational Wealth Zone Group, Teresa R. Martin formed the original vision for a group of companies that would help clients create, manage, protect and grow their wealth. She is dedicated to showing individuals and entrepreneurs how to become financially empowered by turning the work they love into a profitable and sustainable business.

 

The Deal of the Century

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By Alton Jones

Is this your last opportunity to create greatness?

For all we know, it might be. That’s certainly how I live my life. But as the holidays come up, I see more people getting into the slowdown mindset. Thinking they won’t be able to do anything between Thanksgiving and new years, they stop trying. There are no good deals to be had this time of year, right?

This mentality is absolutely wrong. I believe that every opportunity might be the last to create greatness. Life is short and uncertain. We’re always existing in one of three zones — green, yellow, or red. When you’re green, you’re kicked back. In yellow, you’re about normal. But in red, you’re working hard every minute, constantly on the move, looking for the next angle and the next opportunity. I’m always in the red zone, and I hate to see people slack off to green this time of year.

Never get a good deal this time of year? I believe that the deal of the century comes along at least once a week. But you have to be operating in that red zone to get it. You have to be looking for the great seller, the private lender who will bring you the deal of the century. You have to be willing to fight to the end to get it.

You also have to deliver value. On our first Rehabs2Riches boot camp, the hotel practically had to kick us all out at the end. I was delivering high-quality content so impactful that the attendees didn’t want to leave. They were scared they’d miss out on the golden nugget that was gonna put them over the top. They stayed until the last minute, the last second of day three, because I delivered value.

I believe that price is only an issue in the absence of value. People don’t care how much you know until they know how much you care. I’ve had people sell their home to me over other buyers not because I offered more money — I didn’t — but because I created a value for them. The home had been their mother’s, and in the family for over 50 years. They needed to know that it was going to be treated with respect.

I understood the emotions behind that, and exercised the golden rule. I asked a few simple questions about what was most important to them, and then showed them they could trust me to respect the house.

I found that deal by operating in the red zone, and I secured it by delivering value to the seller. And it wasn’t really about real estate — it was about building a relationship, because as I always say, we’re in the people business.

And if we’re in the people business, why wouldn’t you be operating in the red zone this time of year? Holiday events, family get-togethers, and business cocktail parties — they’re all opportunities to build relationships and find the deal that will put you over the top. You’re surrounded by people who you should build relationships with, even if they can’t do business with you right now. They might refer you to someone else down the line. But you can’t be dawdling along in the green zone and expect to find it.

The deal of the century is happening this week. Stay in the red zone and go get it.

 

Are You Ready To Live Overseas? Before You Move, Read This.

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-Special Submission by Matt Malouf-

The surge of Americans living full-time and seasonally abroad continues. Currently, The Association of Americans Resident Overseas (AAR) estimates that 8.7 million American reside oversees. Our editors have seen many real estate investors who read our publications make that transition.

Their reasons are varied, but have included: to retire early from a corporate job, to explore other cultures, as a way to stretch their monthly cash flow, to upgrade their standard of living, and of course, for the ever-so-popular amore.

If you’ve been considering moving to Coast Rica to escape that boring 9-to-5 or have always wanted to own a bed-and-breakfast in the Island of Santorini, read on to see if this option suits your lifestyle.

Starting a new life in a new country can be nerve-wracking. You have to understand the new culture and it is difficult when you get labeled as a “foreigner” or an “expat” on first sight. Here are a few tips that can help you adapt to a new life in a foreign county.

Trying New Things

As they say, you should always be willing to try new things, but, of course, you need to draw a line somewhere.

However, there are a lot of people out there who are afraid to eat new things, let alone experience extreme sports and adventure. This is the fear of the unknown and many research studies suggest we fear uncertainly more than a known bad outcome. Some of the questions that come to mind when people want to try new things are what if that country is dangerous, what if I drown and what if I don’t like the new dish.

It is natural for some level of fear to always be present when trying out new things; however, our overactive imagination makes it seem so much worse. Once a person makes up his mind to try new things at every possible turn, he or she will see a reduction in their fears and a thirst for new experiences.

Trying new things also makes us grow. Taking yourself out of your comfort zone and putting yourself where the action is will make us more empowered, open-minded and far from being bored. Afterall, you only live once.

Do As the Romans Do

A lot of people have trouble adapting to new places. Although living in an exotic new land may sound like a romantic notion, many people fail to make the transfer from expat to compatriots when they stick to their old lifestyles.

Most people experience culture shock after they witness a culture so vastly different from theirs. Culture shock slowly sets in and results in depression. This further alienates a person from the locals and makesthem feel lonely and homesick.

So, if you want to live abroad, make sure to open up your mind. Remember, this is not the country from where you came from and your old notions and concepts will no longer serve you. Since you will encounter different rules, observe how other people are acting in that situation so that you can understand what is expected of you.

One of the biggest concern of foreigners is that they are uncomfortable being a “visible minority.” A white person will stand out like a beacon in Nigeria or Japan and is bound to generate some odd looks. But if you adapt to the locals’ customs and follow their lead, you will see that your differences will look less marked.

Also, ask questions. If you feel lost, there is no shame in asking for help. You can always ask for explanation if you feel you have missed something. Also pay attention to not just the words but nonverbal communication to get a better idea of what is going on.

Once you accept change and adapt to your life in a new environment, you will find it has opened venues of opportunities for you and will lead to more thrilling and interesting stuff.

Don’t Wait For Anyone Else

Once you get to your new country, don’t wait for others to give you instructions on how to go about doing your business. Take the initiative and do it yourself. Ask lots if questions. Many Americans will experience a 180 degrees difference when they come to live in India or Egypt. The best way to cope with it is to go out and participate in what the locals are doing. You can learn a lot from actually experiencing things compared to what you are just told or what you read.

Speak the Language

Many English speakers are under the misapprehension that they can get by throwing random words of English and locals will understand them. Hence, they suffer quite a shock when they realize not many people in Asian or African countries speak English.

It is recommended that people who want to live in a new country must at least learn some key phrases in a foreign language so that they can order food or drink or find their way to a hotel. However, knowing the language extensively will enable you to have proper conversations with the locals, which can help you quickly learn about their customs and traditions. It will show how interested you are in knowing about your new country.

Pursue New Activities and Hobbies

In my understanding, if you are learning to live in a new country, you should also try and pursue some new hobbies. Try to explore where you are and what your place is in the greater scheme of things. This will help you look at the world from a different perspective.

One of the best things you can do is to look for a group that matches your interests. Even if you are from the other side of the world, there are always commonalities. Are you interested in cooking and is there a group offering local, exotic cuisine classes? Is there a local who likes to travel the world like you do and have many exciting stories to share? Join them.

If you are feeling isolated, look for a community of expats or start your own group. They will be native English speakers and will understand the norms of where you came from and can offer you words of advice.

Respect Different Cultures

Remember that unfortunate photo of Selene Gomez baring her leg in a mosque while she was on a visit to the United Arab Emirates? Don’t make that mistake. Be responsible and respect other people’s culture and religion.

The first thing you need to do is to accept the fact that there are many different cultures in the world other than just our own. Even if you do not agree with a custom or tradition, remember that it could encompass the country’s value and you need to honor your role as a visitor. An act that may seem simple or trivial to you may reflect something far more significant for a person from that culture. Being open-minded can fill your life with positivity and also encourage friendships with people from different race, culture and backgrounds.

If you follow these few simple rules, pretty soon you will be able to make a new home overseas. So, do you have what it takes?

-Special Submission by Matt Malouf-

Malouf is an International Real Estate Consultant.

For more information, please visit MyLifeWorldWide.com

Malouf has also published a book, please find more information @ https://www.amazon.com/Matt-Malouf/e/B07CGHV3XJ

Dealing With “Balloon” Payments

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By Bruce Kellogg

“Amortizing” Versus “Balloon” Notes

An “amortizing” note is one where the principal amount is paid off over the term of the loan. A “balloon” note is one where the payments are not sufficient to retire the debt, and an outstanding balance is due at maturity.

What Is The Problem?

The problem arises when the borrower does not have the funds necessary to pay the “balloon” amount when it comes due. Oh, oh! So, here are some ways to deal with that!

Refinance the Property

The first recourse for an owner who wants to keep the property is to refinance either the property itself, or another property in the portfolio. This is a good approach as long as financing conditions are favorable. If conditions are not favorable, other approaches will need to be considered.

Sell the Property

If the owner does not care to own the property any longer, they can sell it and have the sale pay off the loan. Or, they can sell another property to pay off the loan. If conditions are not favorable for selling, again, other approaches will need to be considered.

Renegotiate With the Lender

This is not an ideal approach because the borrower is negotiating from an inferior position. The lender “has the upper hand” because they can always foreclose. So, the borrower should offer the lender a monetary “inducement” for an extension, either a fee, an increase in interest, or payment amount, or both. But, it gets the job done! (Unless the lender says, “No”!)

Protective Note Terms

The best way for a borrower to protect themselves from becoming in an uncomfortable position is to negotiate protective terms in the note in the first place. One might be called a “rollover clause” or an “extension”. Here, for example, the borrower gets a time extension, say two years, for a 2% interest rate increase. This must be written in the note as one of its terms.

Another approach is to convert the note into an amortizing one when the balloon payment is due. Again, these terms need to be negotiated when the note is written and included with the other terms. In some cases, lenders do not need a cash payoff and enjoy receiving reliable note payments from a proven borrower.

Bring In A Cash Partner

If the above approaches aren’t working, the borrower can bring in a cash partner. This basically involves selling a partial interest in the property for cash to pay off the “balloon”. An escrow is recommended with title insurance, and an attorney should draw up an agreement between the parties, who might not be familiar with each-other.

Return the Property to the Lender

This is the least-desirable alternative in most cases. It involves giving up. If it’s going to be done, it needs to be done right, with an escrow, deed with a “Deed-in-Lieu-of-Foreclosure” recitation, title insurance, and transfer of any rents and deposits back to the lender. The lender should cancel the note, and return the original to the borrower. The lender should also record a “Full Reconveyance” in the escrow to clear the title.

File Bankruptcy

This is an alternative, but a risky one. The day a bankruptcy is filed, a 30-day “Automatic Stay” of all collection actions is established. After 30 days, the lender can file a “Relief from Stay” request to foreclose on the property. There is a hearing, and in the case of homeowners the bankruptcy judge will urge the parties to work something out. In the case of investors, the “sympathy factor” is usually low because investors are considered to have resources and several years to handle the “balloon”. The lender is due the money, the judge is likely to rule. (i.e., no relief!)

Conclusion

A “balloon” payment is one of those things that isn’t a problem, until it becomes a problem. It is best to deal with it up-front, in initial negotiations, when the note is originated. During the term of the note, keep working to pay it off. If the due date comes and the payoff funds are not in-hand, find expert help. You’re going to need it!

Good luck!

 

Bruce Kellogg

Bruce Kellogg has been a Realtor® and investor for 36 years. He has transacted about 800 properties in 12 California counties. These include 1-4 units, 5+ apartments, offices, mixed-use buildings, land, lots, mobile homes, cabins, and churches.

Mr. Kellogg is a contributor and copy editor for two national real estate wealth-building magazines: Realty411, and REI Wealth Mag.

He is available for listing, selling, consulting, mentoring, and partnering. Reach him at [email protected], or (408) 489-0131.

Yield Compression – Why are rates in California for alternative real estate financing declining in a rising interest rate market?

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By Edward Brown

 

The Prime Rate has been slowly increasing over the past six months, but real estate financing in the alternative sector in California has actually decreased. Why?

Competition between private lending companies in real estate [also known as hard money lenders] has increased over the past five years. This has led to brokers shopping around on behalf of their borrowers to get the lowest rates and points. Too many lenders have had a tremendous influx of capital from the private sector [investors] because of the low rates that banks pay on deposits as well as the volatility in the stock market that has spooked investors.

Prior to 2013, the difference in rates charged by private lenders and the Prime Rate was about 5%. Although the Prime Rate stayed stagnant up until 2018, the rate differential shrunk to about 3.5%. This yield compression was primarily due to the typical economics of supply and demand. There was too much of a supply of money pouring into California by investors, as these investors saw that real estate in California had not only stabilized [since The Great Recession], but had increased substantially, lowering the perceived risks of making private loans.

The default risk of making fairly conservative loans [less than 70% LTV of purchase] was minimized even further by an increasing real estate market. By the time the loan was eventually paid off due to refinance or sale of the underlying property, the LTV had gone down to as much as 40-50%. This was especially true in the fix and flip market for seasoned borrowers with good track records. Although real estate prices seem to have cooled off from the frenzy of buyers [especially those who continually paid over asking price], many of the larger lenders in the fix and flip market have gone as far as lending over 80% of purchase and up to 100% of the anticipated rehab. The amazing part is that these lenders are willing to lend their money out to these fix and flippers at rates as low as 7% and 1 point; this is unprecedented. Not only are these lenders taking more risk than in previous markets, but they are doing so at extremely favorable rates. One can only come to the conclusion that these lenders have a tremendous supply of capital that needs a home; especially those lenders who have investors who are promised a preferred return [usually in a Fund vehicle]. In these cases, idle money is a yield drag to the Fund and jeopardizes the payout to not only the investors but the profit to the manager as is typical in a mortgage pool Fund.

Idle money in a Fund is usually held in a low interest bearing account at a bank awaiting deployment. These deposits need to be liquid, as most private lenders market themselves as speedy – one of the advantages over a typical bank. In addition, their private placement memorandums dictate that idle funds be held in an FDIC insured account; thus, the low yield on these deposits to the Fund.

When borrowers shop around for California lenders, they may find two to five lenders willing to make them the loan they need at favorable terms. Most of the time, the borrowers enlist a mortgage broker who does the shopping for them. Although the mortgage broker may have favorite lenders he/she works with, the broker also knows that many sophisticated borrowers work with more than one broker, so it is the first one who can get the deal done who usually wins out. In addition, the broker realizes that some commission is better than none. Many times, these brokers quote lower than normal rates and points in order to secure the deal. What once might have been quoted as a 9.5% and 3 point deal is now hovering around 8.75% and 1.5 points. [As pointed out earlier, certain fix and flip lenders are charging even less.] The lender usually charges points, so both the broker and the lender are earning less on each transaction because of the lowering of the points that have to be shared between them. Most of the interest rate is earned by the lender’s Fund, but there is overhead that needs to be subtracted as well as the preferred return promised to the investors of the Fund. A 7% preferred return is not uncommon, but, the economics appear to dictate that a preferred return of closer to 6% may be on the horizon.

If interest rates paid by banks to depositors stay relatively low, then investors may not balk at a lower preferred yield; however, if the Prime Rate continues to rise, one might believe that interest rates on deposits at banks will follow. At some point, in order to attract investors, private lenders will have to increase the rates paid to their investors. The only way to do that would be for these lenders to start increasing the rates they charge borrowers, as profit margins to the lenders have been squeezed to its lowest level in many years. It will be those lenders who can run their companies “lean and mean” who will have the advantage in this market and the one to come.

Outside of California, lenders have enjoyed higher yields, but that comes with the potential instability of the real estate market. Many investors have chosen to take the path of least resistance – location, location, location, and stay conservative by earning less than other states may provide, but potentially reducing the risk. Generally, stable California markets have severely reduced the risk of loss of principal and, consequently, produced lower yields to investors/lenders. However, since a loss of 20% of principal in one year means that one has to make 25% the following year just to breakeven over the two year period, the prudent investor/lender might be wiser to accept a lower yield and not balk too much at a lower yield; thus the quandary of investing in California.

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.

 

Texas Cash Cow Arrest — Beware of Real Estate Fraud

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By Kathy Fettke
The arrest of a Texas developer, who’s well-known in the real estate industry, is a big reminder to thoroughly vet the people and deals you are working with. Phillip Carter of Frisco is accused of taking $17.5 million dollars from investors for development projects in North Texas but authorities say he used much of that money for his own personal needs. His wife, Shelley, and alleged accomplice, Richard Tilford, also face charges.The Texas State Securities Board lists almost a hundred victims, many of whom are reportedly elderly and probably trying to boost their retirement portfolio. Now they face financial loss, and are likely wondering where they went wrong.

Who is Phillip Carter?

Carter is the owner of Texas Cash Cow Investments, Inc., although the website for that company no longer exists. He’s also the owner of North 40 Developments, LLC, which does have a website. It doesn’t mention Carter’s name anywhere, however, but it is located in Frisco.

According to Texas authorities, Carter and Tilford told investors their money would be used for the development of commercial and residential properties. The indictment says Carter used at least some of those funds for unrelated purposes, including personal expenses and the payment of an IRS tax lien.

It also says that Carter lied about his personal background — that he falsely claimed to have a chemical engineering degree from the University of Virginia and had worked as a project manager for Texas Instruments. It also says he made up the story about working and traveling with “Rich Dad, Poor Dad” author Robert Kiyosaki.


Trouble Begin in Early 2016

The indictment lists the names of all the people who invested with Carter in early 2016. Some contributed as little as $12,000 while others gave Carter as much as $700,000. It says that Carter held the money as a fiduciary for the purpose of funding investment opportunities that would result in a profit for investors. Instead, Carter is accused of using the money for personal reasons that have now put those funds at “substantial risk.”

Carter was apparently attempting to move forward with the projects but came up short on funds. Authorities say a $6 million check for labor and materials bounced in December of 2016. He reportedly borrowed $32 million from a Seattle-based private equity firm more recently to pay for construction costs on two properties. But, as one news story points out, the lender holds the first lien, which means that investors will only get paid if there’s any money left over.

His wife is accused of money laundering and the misuse of investor funds. Investigators say his alleged accomplice, Tilford, raised $6 million from investors, who are listed in his indictment. They say the funds raised by Carter and Tillman were mostly in the form of promissory notes.

Red Flags for Real Wealth Network



Investing in real estate is one of the most stable ways to build wealth, but it can also be one of the fastest ways to lose money if you have the wrong property, and worse, the wrong team. Unfortunately, these Texas investors are finding out the hard way, what they should have done differently.

If you were a Real Wealth Network member during the Great Recession, then you probably heard of Texas Cash Cow and Phil Carter. Back then, he was one of the largest turnkey operators in the country. He would buy large tapes of REO property from banks at highly discounted prices, renovate to like new condition, and offer on-going property management.

Many of Real Wealth Network members purchased property from Texas Cash Cow, and initially, we received rave reviews. But then something changed and we started to get complaints about property management. At that time Phil came to us and said he was no longer focusing on single family rentals but instead was creating a new model. I don’t remember the details but it had something to do with buying or building apartments or condos and selling the individual units to investors. I told him that was something we would not endorse, and that was the last I heard from him.

It just didn’t make sense that a bunch of investors who don’t know each other could successfully own their own units in an apartment or condo complex — plus, I didn’t think any legitimate bank would finance it.

There are many lessons here that I would like to share to make sure investors don’t make similar mistakes.

  1. If something doesn’t make sense, don’t do it. Just because you don’t understand it doesn’t mean you’re dumb. It might mean the deal just doesn’t make sense!
  2. If someone is trying to do something new, something they’ve never done before — don’t let them use your money to figure it out. 
  3. When you lend money to a developer, make sure your funds are recorded in first lien position. Do not sign a promissory note that is not tied to property.
  4. When someone is raising money from investors, they must file with the S.E.C. even if it’s for a promissory note. I recently saw an email go out from another turnkey company in Texas saying that they were now doing syndications. I called them to find out more, and they told me they had a new opportunity, where investors could earn a flat return by investing as a private lender on their commercial property in Houston. I asked if they had filed with the S.E.C. They said they had not because it was a note and therefore they didn’t have to. I told them that was illegal. Apparently they didn’t trust my opinion as I saw another email go out with the same message.
  5. When you buy rental property, you can get inspections and appraisals to verify that what you are buying is indeed what you thought you were getting. It’s pretty straight forward. When a turnkey company starts doing something different than normal real estate, question it. Just because someone is an expert at one thing does not make them an expert at another. I heard that some investors bought property from a turnkey company in Chicago and closed on the property before the repairs were done, and the seller gave them a promissory note. That note was never paid when the company folded. Now why would anyone do that? Why would you close on a property before the work is done? Never pay any contractor before the work is done!
  6. Finally, if you do invest in a syndication, make sure the Use of Funds section is spelled out clearly. 

Links:

https://www.ssb.texas.gov/news-publications/north-texas-developer-indicted-alleged-17-million-real-estate-fraud

https://www.ssb.texas.gov/documents-carters-tilford

https://smcorridornews.com/texas-developer-indicted-for-alleged-17-million-real-estate-fraud-from-elderly/

https://www.yelp.com/biz/texas-cash-cow-investments-frisco

http://www.northfortydevelopment.com/about/

 

Kathy Fettke

Kathy Fettke is Co-CEO of Real Wealth Network and best selling author of Retire Rich with Rentals. She is an active real estate investor, licensed real estate agent, and former mortgage broker, specializing in helping people build multi-million dollar real estate portfolios that generate passive monthly cash flow for life.

With a passion for researching real estate market cycles, Kathy is a frequent guest expert on CNN, CNBC, Fox, Bloomberg, NPR, CBS MarketWatch and the Wall Street Journal. She was also named among the “Top 100 Most Intriguing Entrepreneurs” by Goldman Sachs two years in a row.

Kathy hosts two podcasts, The Real Wealth Show and Real Estate News for Investors — both top ten podcasts on iTunes with listeners in 27 different countries. Her company, Real Wealth Network, offers free resources and cutting edge education for beginning and experienced real estate investors. Kathy is passionate about teaching others how to create “real wealth,” which she defines as having both the time and the money to live life on your terms.

 

 

The Secret Sauce to Managing Your Wealth…Do You Have One?

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By Anita Cooper

“To say that I was a failed investor is putting it mildly…”

Steve Rozenberg, founder of Empire Industries, LLC and full time commercial airline pilot, knows what it’s like to have your property investing aspirations crash and burn.

After 911, the airline industry was very shaky…he wasn’t sure he’d have a career or be able to enjoy a retirement, so he started looking for other ways to grow his wealth.

Enter real estate investing…

Like many new investors, he bought a lot of wrong properties…properties that management companies didn’t want to touch because they were low income.

Empire Industries, LLC was born out of the need to manage his own properties to keep his business intact.

Using the procedures and processes he’d learned as a pilot, Steve and his business partner – an IT whiz – created their property management company for their own preservation so that they could keep their properties afloat.

Self management vs property management

“I’m often asked if it’s smarter to self manage your properties instead of hiring a property manager and my answer is always that it depends on your end goal.

“So you know, many people focus so much on the acquisition of the deal they never think about how they’re going to get the return month after month, year after year. And normally, managing the asset is an afterthought, when it’s actually the most important part of the puzzle. This is because it’s what actually gets you the return.

“If you’re willing to commit and put the time in and learn the laws and regulations and create all of these procedures and structure, then yes, you can certainly self manage.

“But if it’s not something you want to commit to and if you don’t have a plan to succeed, then you’re planning to fail. That is why landlords are among the highest sued individuals in real estate, because they don’t go into this with a business plan of how to succeed year after year. They’re so focused on the purchase they never think about the month to month…they always look at the ROI and the cash on cash return and look at all of these big numbers, but what they never think about is how do I get those numbers in my pocket?”

Whether you have one or one hundred plus properties, Steve says it all boils down to one thing…treating your property investing efforts like a business.

“If you have one property or you have 50 properties, you own a business.”

“It has profit, loss, income, expenses, legal obligations…and you know the tenants that live in your property have rights. And as an owner, you are obligated to protect, to make sure that you’re working within the confines of the law. So yes, you could manage your own property as long as you’re willing to commit the time to educate yourself on the laws and regulations, fair housing , discrimination, etc.

“Here in Texas, we have Texas property code, so these are all the things you need to think about if you’re going to self manage one…50…100 properties, it doesn’t matter…a business is a business.”

What to look for in a property manager

Having a conversation with a prospective property manager is one of the best ways to zero in on the company that will be your partner in success.

“I would first make sure that your business model aligns with the property manager’s business model,” said Steve. “By that I mean, do they manage prices in the same price point that you own a property in?

“If you want to be a “hands-off” property owner, do they want you to be “hands-on?”

“I think it’s very important to have an initial meeting with the property management company and set the proper expectations with them, meaning what is it I can expect of you and what is it you expect of me?”

“A lot of times people go with the cheapest property management company and then they end up realizing that cheaper isn’t cheaper…it actually becomes more expensive because the company may be cutting corners, cutting costs, when for an extra dollar or two dollars a day you could of had a reputable property management company that is aligned with your business goals.”

Moving forward

Although Steve experienced great success managing his own properties, he and his business partner knew they could do even more to help other investors, so they sought the help of a business coach.

“We went to a business coach – Doug Winnie of Action Coach – five years ago, who told us that yes, we have a business because we have opportunity, scalability and marketability. However, based on what we’d done so far, we probably wouldn’t succeed as a business. So we hired him on the spot.

Then we attracted the founder of Action Coach, Brad Sugars and went from zero to about 850 properties in 5 years. In fact, we’ve won the North American Marketing Campaign Award from Business Excellence, with 1471% return for our efforts,” said Steve.

“Brad is the founder of the whole coaching franchise and he became a partner of ours in the business and he is now the one [who’s] helping us grow this nationally, with his guidance,” Steve continued. “So because of him we are now in Houston, Dallas and Ft. Worth…and now we’re starting to open up more cities this year; Austin and Ft. Hood/Killeen.

“We’re going to keep opening offices and continuing to grow under his mentorship and his strategy as we start the licensing model.”

What does this mean for you as a property investor?

As the fastest growing property management company in Texas, with offices in multiple cities, Steve and his team have proven that their property management process works…and works well.

That’s why they’ve decided to begin duplicating their process under a license or franchise model…so that other investors can do what they’ve done.

“We are spanning across Texas…we’ll be in almost every city in the next 5 years. This means we’ll be able to help even more investors succeed in growing their business.

“Our goal is to have your business succeed…for you to become wealthy through real estate. You need more than someone ringing the cash register and collecting the rent…you need someone on your team…like Empire to help ensure that success.”

Anita Cooper is the founder of Northwoods Writer, a marketing resource for real estate professionals. She lives with her family in the beautiful Northwoods of Wisconsin when they’re not cruising the highways and byways on the lookout for something new and interesting or at least calm and relaxing.