Feeling a Little Lost? How to Get Your Groove Back

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By Sharon Vornholt

Do you ever feel a little lost? Like you just can’t get your groove back?

That’s not too surprising. The world is full of amazing opportunities. There are so many ways to make money in real estate investing, it’s easy for us to jump from one thing to another. Generally speaking, shiny object syndrome is not your friend when it comes to business.

However, know that you’re not expected to have it all figured out right out of the gate.

If you’re like most people, you will go down a lot of different paths before you figure out your investing strategy, and how to be your best and most authentic “you” and that’s OK. It’s all part of the process. When you’re finally in the place where you belong; the place that’s right for you, you will know it. That’s when you get your groove back, and you’re ready to rock and roll.

How to Get Your Groove Back

So how do you find the right balance between jumping from one thing to another while you’re finding your way, and staying on your predetermined path? (The path you decided was right for you.)

You slow down a look at the big picture as you begin the adventure of building a business.  This is a little like following a map to get from place A to B.   When we take a trip, we almost always take little side trips along the way.  When we look back when the trip is finished, there’s rarely any regret over these detours and unplanned stops.  It’s all part of the process in travel and in business, and it makes for a much more interesting trip when it’s all said and done.

Building a Business and a Brand that Stands Out

You’re probably wondering, “What does this have to do with building your business and your brand”? 

A lot more than you think. 

It’s important for your potential customers AKA motivated sellers, to see authenticity in your brand.  All of these little detours and side trips you make along the way while you’re growing your business, influence who you ultimately become. That person you become will be the face of your business going forward.

This is the time that the collection of experiences you had along the way begin to pay off. It’s also one of the ways you become different from your competition.

Be Bold

My advice to you is to be bold when it comes to chasing your dreams.  Take risks along the way.  Dare to be different.  Go out on a limb when you need to take a stand.

Remember the movie, “How Stella Got Her Groove Back”? Let’s just say Stella had to really go out on a limb to find it.  She had to get way out of her comfort zone.

What will happen when you do this, is you will start to build your tribe. People will be attracted to your authentic self. These are the people that will follow you along on your journey. They will be your best cheerleaders, and they will refer people to your business.

Remember, you won’t be a fit for everybody.

This confidence you’ve gained will shine through when you talk to motivated sellers, and people will trust you to help them get where they need to be. They will feel confident that you are the one to help them with their problem.  When you can’t seem get your groove back, it’s almost always because you aren’t being your authentic self.

I love this line from the book Fascinate by Sally Hogshead.

“Different is better than better”. – Sally Hogshead.

Dare to be different.

How Will You Be Remembered?

According to Brendan Burchard, there are only 3 things anyone will ultimately be remembered for:

Character, relationships and contribution, so let’s talk about these a little bit.

Character

There is little to say about character that hasn’t already been sad a million times.  Your character will determine your long term failure or success in this business. You will be quickly found out if you’re not an ethical business person. You will become invisible to people that should be part of your tribe.

Relationships

Real estate is a relationship business. Whether we are taking about other investors, contractors or motivated sellers, this business is all about relationships. It’s about having conversations that build rapport with people you do business with.

If you’re one of those folks that struggle with this particular thing, contrary to what you may believe, this is something that you can get better at with practice.  Full disclosure here: you’re going to need to be prepared to spend a lot of time outside your comfort zone in the beginning.

Contribution

When I think about contribution I immediately think about giving back. How can we make the world a better place? There are so many ways.

  • We can do volunteer work for someone like Habitat for Humanity or other charity
  • I know an investor that wrote a book and donated the proceeds to charity
  • If you are a rehabber, maybe your mission is to revitalize neighborhoods
  • How about sharing your expertise with others?

Contribution isn’t just about money.  It’s finding a way to leave the world a better place when you’re gone.  It’s how you will be remembered, and it’s up to you to decide how you will be remembered.

Giving back could be as simple as mentoring folks just getting started in this business. Be bold, get involved, take a stand and get your groove back in the process!

 

The Number 1 Risk for Real Estate Investors Now

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By Fuquan Bilal

What’s the top risk that investors in real estate are facing today?

There is still a lot of opportunity out there. There are great deals to be made. Yet, it is also true that it is taking more attention to detail and effort to find the really profitable deals. Market well, in addition to buying, structuring, and managing right, and you’ll be okay if you have good deal sources. However, there’s real risk.

The number one risk in the real estate market today is that 90% of investors have no plan for sustainability. None. Some may not even know what that means if you ask them.

The vast majority of real estate agents and investors in the market now are very green. They’ve only experienced the business during the great bull run we’ve had since 2008 and 2011. Honestly, while I’d like to say I’m pretty smart or talented, the truth is that you couldn’t really not make money in real estate for the past 10 years. It’s been so ridiculously easy. Anyone could do it, and they have.

That’s great for them. I love to see people succeed. There are a lot of guys and gals who have gotten into real estate in the last few years and haven’t only flipped houses themselves, but have been building spec homes, doing Airbnb, amassing a few hundred rental units, and then either offering turnkey properties or teaching others as newly minted gurus.

Some of these people really do know their stuff, but most have just been riding on luck. Worse, they either don’t believe a correction is coming, keep saying we’ve got another 12 to 18 months (which they’ve been saying for more than 18 months), or are seriously minimizing how impactful the next correction will be.

Here’s the real problem. They have no plan to hold things together when the market corrects, and if you’ve been watching the data, some markets are clearly correcting already, and have been for over a year. So, many are paying too much for properties, are basing their values and business models on rents and a resale market that isn’t there, and don’t have the reserves to survive a temporary crunch. They owe too much, and are only a month or a few away from going bankrupt if cash flow tightens up.

Now, it’s no secret that you can both make money at the top of the market, and that our most famous billionaire investors are those who made their wealth when everyone else thought the market was at its ugliest. The difference is in being prepared and pricing things right.

What can investors do to beat this risk?

  1. Before investing with anyone, ask what plan they have for sustainability
  2. Know your real estate and economic cycles (history repeats itself)
  3. Stay in tune with the market data, and what’s really happening out there
  4. Know the value before you invest
  5. Look for value, don’t speculate

Investment Opportunities

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

The 3 Things Investors Need Most in 2019

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By Fuquan Bilal

Do you have the three things you need most out of your investing for this year and beyond?

Many are finding it hard to make sense of the market right now. The media headlines proclaim the economy is awesome and supercharged with growth and low unemployment. Yet, the hard data and other signals suggest there are some corrections in the works. The bottom line though, is that you need these three things to get you through.

1. Passive Income

Time is the most precious and scarce resource we have. The only way to really get more time is with passive income. We can only become so productive. Then it is up to passive investments to make money so we can spend more time on other things. That’s true whether you are already making millions a year, or are in a high paying career, but are still trading your time for a wage. This is going to be even more critical over the next couple of years. And it doesn’t matter whether or not you own rentals right now, or you think your company is well insulated from a recession. If you’re not getting truly passive income, then it may be time to consider a fund or other vehicle.

2. Downside Protection

Who knows, we may really be in the best economy ever, and real estate prices, stock values and incomes might just keep going up. Of course, the odds are that there is some type of temporary correction in the works. That means it’s just smart to have some tangible, underlying hard assets and to be overcollateralized in order to protect wealth and capital during the months and years ahead.

3. Stable Performance

No single asset is going to perfectly and consistently perform the same forever. And it’s those fluctuations that are really tricky and usually come at the worst times. By diversifying and harnessing great management, we can keep our total portfolio performance steady, and yet without being so over-conservative that we end up with negative yields.

We believe we’ve achieved all this, and the ability to future proof your portfolio through our hybrid fund. Check out how we’re doing it today…

Investment Opportunities

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

12 Steps to the Closing Table and the Big Check

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By Kathy Kennebrook (The Marketing Magic Lady)

Okay, so your property is under contract, you’ve pre-qualified your prospect; they are working with the lender and everything is moving right along, right? Not necessarily. There are several steps to a successful closing and we are going to cover those one by one. Now remember, once you have your dream team in place, you will have the people available who will handle all of the details for you. In the meantime, you still need to know what all the steps are so you know everything gets handled properly.

  1. Make sure you get a big enough deposit from your buyer so they have some real dollars invested in the deal. Even if they are going for one hundred percent financing I still get as much as I can in order to secure the deal better. If your buyer puts down a larger deposit they are usually more committed to going through with the closing, so this is a requirement for me. I won’t even consider a deposit less than $1,000.00, but I always try for as much as I can get. The higher dollar the property is, the more deposit I require.
  1. Make sure that the lender or the mortgage broker orders credit and an appraisal on the property immediately. Usually, I will not consider a buyer who has not already been pre-qualified, so usually the credit check has already been done. Many lenders will try to wait until they get the contracts and other paperwork in before ordering the appraisal. This is a no-no. If you wait on the appraisal, it can hold up your closing by two to three weeks. Plus, if this buyer doesn’t end up buying the property, the appraisal can be used for the next buyer. Most appraisals are good for six months and now you have an appraisal that has already been paid for.
  1. Follow up with the loan processor to make sure the appraisal has been ordered and that the other parts of the closing are moving along. Many times your title agent or your Realtor or your sales person will do this for you, after all they want to get paid too. Make sure they have everything they need from the buyer regarding loan documentation.
  1. Follow up and make sure that title work has also been started. You want to make sure that everything is done in a timely matter so that there are no holdups when you go to close. Every once in awhile you may discover some small glitch in the title work that needs to be addressed, such as a deed that wasn’t done correctly. There would need to be an additional quit claim deed done to correct the mistake. Make sure the title agent understands the contract paperwork and what entity the funds are to be paid to. You also want to make sure they do the 1099 correctly so the right entity gets taxed. You will also want to provide the title company with a copy of the existing title policy. This means that they will be able to come forward from the date of your policy which takes less time and this may make the title search cheaper. Make sure the title agent understands who is going to pay for what regarding closing costs.

  1. Call the loan processor to make sure the property appraised for at least the amount of the contract. Make sure your buyer has ordered a termite inspection, a survey, a radon inspection or whatever else is required by the lender in order to close. Is there anything you can do to move things along? If you have a copy of a fairly recent survey, you can provide a copy. This will also save time and move you closer to the closing. Has your buyer’s deposit been credited? Have they gotten the paperwork they need to the lender including employment verification and rental history? These are all things you need to stay on top of.
  1. If your buyers are using city or county funds to supplement their loan, there will need to be another inspection done by the city or county. This is a stipulation of their program. Make sure this gets done quickly in order to address any issues that could come up with the inspection. If your buyers are having a home inspection done, make sure it is done right away. Not getting it done in a timely manner can hold up your closing.
  1. Does the lender have your information in order to be able to order a payoff on any underlying loans on the property? Have they received the payoff yet and have you reviewed it to make sure it is correct? Don’t just assume that just because they have been given figures that those figures are correct. Make sure they fax you a copy of the payoff for you to review. Double check the per diem amounts and make sure you aren’t being charged a prepayment penalty if there isn’t one due. Make sure the most recent payment has been credited against the amount due. These are problems I have had to deal with. If the loan is with a private lender, sometimes it takes even longer to get a payoff from them. Some of them don’t know how to prepare one, so they need the help of the title company or their real estate attorney for this. This is also the time you might be able to negotiate a discount with them. This works especially well if it was a seller held mortgage. We have gotten private lenders and sellers to negotiate discounts on loans on several occasions which just made our paycheck bigger.

  1. Has the buyer’s loan been approved? If not find out what the problem is and how to fix it if it can be fixed. If the loan has been approved find out what the proposed closing date is going to be. Has your buyer ordered insurance yet? You need to check this out and it needs to be done as soon as possible. This is another area where you could have a glitch. Sometimes the age of the property or the location of the property becomes an issue. For example, here in Florida where I live, if there is a hurricane brewing, we end up in a “box” which is a period of time where you can’t buy insurance until a hurricane passes. This can hold up a closing for several days unless the insurance is already in place. A buyer must purchase a homeowners policy for one year and it must pre-paid at closing.
  1. If you are selling a condo or a home with a home owners association, make sure the lender and the buyers have a copy of the home owner association rules and documents and that the buyers have set up their appointment for their meeting with the condo association or home owners association. If they are not approved by the condo association or homeowners association, the rest of the closing is a mute point. You need to make sure your buyer’s get through this process successfully.
  1. So now we have a set closing date. Make sure you contact the closing agent to make sure you get a copy of the HUD or closing statement before the closing takes place and before you arrive at a closing. Very recently we had a closing that didn’t take place because once we got the HUD all the figures including the asking price and seller assisted closing costs had all been changed. The closing price listed on the HUD was several thousand lower than the contract had called for. I have never seen anything like it and the deal never closed. Check the numbers! If there is a Realtor fee involved make sure the percentages are correct. Check the pro rated amounts you are being charged for property taxes or association fees. When you close on a property during the year, say in June and property taxes are due in October; you have to reimburse the buyer for the property taxes from January until the closing date in June since they didn’t own the property during that time period. The same would go for any association fees there might be. You will have to reimburse the buyer for the period during the month that they did not own the property. Double check to make sure these figure are correct. In my contract, if we are assisting the buyer in any way with closing costs, the buyer can’t walk away from closing with more than five hundred dollars. So this is another figure we check. Any amount over the five hundred dollars is credited back to our side on the closing statement.
  1. Call your buyer and make sure they have gotten a cashiers check for any monies they have to bring to closing and make sure they know where it is and what time the closing takes place. Make sure they bring a photo ID with them. The lender will require this. Believe me when I tell you that these are all lessons learned from experience.

  1. Now, Show up at the closing and don’t forget to bring the keys or garage door openers. Take several deep breaths and try to relax. Once you get through the closing take another deep breath, call your spouse and go out to dinner to celebrate.

Here is another point for you to consider. In my business, it is rare that I go to closings anymore since the whole closing process is outsourced. The funds from the closing are directly wired to an account for us so we get paid right away.

If I do go to a closing, I don’t go at the same time as the buyers. I usually go right after they are done with all their paperwork. The paperwork on a closing for a buyer is fairly time consuming and needs to be explained to the buyer by the title agent. I don’t like sitting at closings for an hour or more until I need to sign my documents. If you have done your due diligence and followed all the steps in the closing process, there isn’t really anything that can go wrong at the last minute, so breath easy but expect the worst.

Then when you get through the closing, cash your check or make sure your wire has arrived and go to dinner to celebrate!! For more information on Real Estate Investing tools and Marketing to Find Motivated Sellers, Buyers and Lenders visit Kathy Kennebrook’s website at www.marketingmagiclady.com. While you are there sign up for the free Monthly Newsletter and receive $149.00 in real estate investing tools absolutely FREE!

Due Diligence – What it is and Why it Matters!

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By Laura Alamery

 

Buying real estate is not as simple as having enough money to purchase the property. It requires time and effort to check and make sure that the condition of the property is good and the title is valid before making the final decision. That is what you call due diligence.

In case the buyer discovers that something is wrong with the property, he may give suggestions to the seller so that the latter can act on it by addendum to the contract, or the buyer can decide not to buy the property.

Contractual Due Diligence

There are certain elements within the sales contract or purchase agreement which are critical to the ‘satisfaction’ of due diligence. Let’s take a closer look at each of them.

Contingencies – Any contingencies which the buyer wants performed prior to finalizing the purchase must be stated on the sales contract. Some examples of these conditions may include: inspections, partner’s approval, financing, research of code violations or permits – and, of course, a clear and marketable title. At the end of the contingencies timeline, the buyer must either release the them and proceed with the sale or cancel the purchase.

Time is of the Essence – Due diligence supported by contingencies comes with a definitive timeline in the sales contract. If the buyer cannot complete his/her due diligence by the deadline, he/she will have to renegotiate with the seller. The seller has the choice whether or not to agree to the extension; which in turn may compel the buyer to follow through with the purchase regardless, or cancel the contract.

Title Discovery – Whenever you purchase real estate (especially as an investor) a marketable title is the most crucial element. Without it, an investor cannot sell or transfer the property. There are several types of title discovery searches which look into a chain of title; as well as liens or judgments against the property. The following are 2 main types of searches performed; keep in mind these may go by different names according to the title company and location:

  1. Full Title Search – the most complete of the two, this search checks into everything affecting the property’s history. It is the only one that will be used prior to issuance of title insurance, and is of course the most expensive to perform.
  2. Letter Report – a summary of what’s on the title; which reveals any possible liens and judgments.

Please note: Securing title insurance is an important step. Though title insurance for cash transactions is optional, it is mandatory when the buyer must obtain a mortgage to purchase the property. In my professional opinion, an investor should always acquire title insurance. According to Wikipedia, “Title insurance is a form of indemnity insurance predominantly found in the United States which insures against financial loss from defects in title to real property, and from the invalidity or unenforceability of mortgage loans.”

Due Diligence Questions & Answers

 

Q: Should an investor perform due diligence on every property before purchasing?

A: Yes, and no. When an investor is looking at several possible deals at the same time – and not sure if they will go through with a specific contract, holding back could be wise. For example, it would be prohibitively expensive to perform even a Letter Report (average cost is $150) on every single property. These actions are also time consuming: even a title report will take 3 business days to be issued.

With that said, there are times when some basic due diligence is an important decision factor; for instance, when an investor is considering a property coming online at a foreclosure auction. The investor will want to know what potential issues there might be on title (liens, judgments) and whether the title would be marketable.

Q: Is it necessary for a title company to perform the due diligence for any sales contract?

A: The investor can actually perform a lot of their own basic due diligence without hiring a title company or spending any money. Checking with the appropriate government offices (most of them can also be accessed online) for some basic discovery is the simplest way to gain confidence in proceeding with your purchases.

Q: Which government agencies do you recommend searching to complete due diligence?

A: I don’t check with all the government offices for each property. If my discovery at the Recorder of Deeds Office comes out clean (with no red flags) I will stop there; unless I see a spotty history of liens and releases on title. This is also a useful means of locating properties undergoing issues that have kept them off the MLS. Here is a list of searches available in the public domain, and what you can expect to find:

  1. Recorder of Deeds Office – Will have record of liens such as: Mortgages, Federal & State Income Tax Liens, Sewer, Water, Judgments, HOA (Homeowner’s Association); and other property document history.
  2. Collector of Revenue – Lists any Back Property Taxes and Tax Liens
  3. Building Inspections Office – Data on any building violations and inspections.
  4. HOA – If the property is within a subdivision or a condo development, there are probably Homeowners’ Association Dues.
  5. Clerk’s Office – Mechanics Liens (filed by contractors for unpaid work on the property).
  6. Comptroller – City liens, for unpaid taxes and fees.

Due diligence is a must when it comes to purchasing real estate. Though a preliminary search can be performed at no cost before making your decision to proceed – it is my opinion that a full title search and insurance are necessary prior to final purchase.

 

This is the Best Day of the Year for Real Estate Investors

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By Fuquan Bilal

What is the best day of the year for real estate investors?

I think Mother’s Day is a strong contender. It’s hard to beat from both a business point of view, and in being personally meaningful.

If you’re not a mother yourself, then you’ve got mothers in your life. Either they work with or for you, rent from you, support you in your investing, or are your grandmothers, daughters, cousins or just your neighbors. Everyone can relate.

The Start of a New Season in Real Estate

Mother’s Day really marks the start of a new phase of the market each year. New property listings are popping up to get ahead of the peak buying season. Serious buyers are coming out to sign contracts and set up their summer moves so they are all settled before school starts again in the fall. It can be a fantastic time for Mother’s Day themed open houses.

What Real Estate Investors Can Do For Mothers

The first and most obvious thing we can all do is celebrate and honor the mothers in our lives. That can be in your office, at home and out in the community.

Housing them is a huge deal. One of the best benefits of being in real estate for me is what I can do for my mom. I can house her, and recently bought her a car. I’ve also really enjoyed just taking time to intentionally spend quality time with her to learn from her years of wisdom.

Housing and keeping a roof over their family’s heads is a top concern for moms out there. It keeps them up at night, and working hard. I love giving them a chance to put their families in a safe, healthy and attractive looking place in our rentals and when we sell properties.

As a real estate investor, I believe one of the greatest gifts you can give is sharing your knowledge and experience, and giving the mothers out there the chance to own those benefits for themselves and their children. Host an educational lunch, or turn them onto the PFREI podcast, or take them to an industry event with you.

The workforce and housing market is changing a lot in many cities. That can mean some transition time while getting reskilled for modern jobs, and trying to hang onto homes, and keep up with all the mail and mistakes that some lenders, insurers and tax authorities make in their paperwork. This can all lead to loan defaults and distress, that could have been avoided. If you are investing in mortgage notes this is a great time to do a cash for keys deal, or to modify loans and help moms have a fair chance to get back on track and have a fighting chance to keep their homes.

Let us know what you are doing in real estate around this Mother’s Day on your favorite social media networks and tag us so we can like your posts!

Investment Opportunities

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

Approaches To Real Estate Negotiation

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By Bruce Kellogg

Introduction

Negotiation, unfortunately, is not taught much to real estate professionals, or to investors. International, corporate, and purchasing courses exist, even to the extent of Master’s degrees, but real estate has not received the same coverage. This article aims to help that.

Start Out Early

Negotiations begin at the first encounter (e.g., phone inquiry). Many people think the initial pleasantries are just that, and the formal negotiations will begin later. Not so. The superior negotiator will have already begun gathering information and setting expectations. Start early so you don’t have to catch up.

The Three Elements

There are three elements to any negotiation: 1) Information, 2) Time, and 3) Power. These will be described below.

Gather Information

The negotiator who gathers the most information usually has an advantage. Interview people, obtain reports, do inspections, use the MLS (Multiple-Listing Service) and other online resources. Hire a private investigator on the seller if the deal is large enough, looking for vulnerabilities (e.g., bitter divorce). You can’t know too much.

The Factor Of Time

It helps to know if the other party has any time constraints, along with your own, of course. Pending foreclosure, divorce, condemnation proceedings are some examples. If the property is “a steal”, scoop it up fast. If it’s priced at or above “market”, then “grind real slow”. Use time to your advantage.

The Factor of Power

In some negotiations the power levels are uneven. One party has more leverage over the other. Seasoned negotiators assess power levels and devise strategies to take these into account. Then, even the weaker party can optimize its outcome.

Be Generous When Selling

Some sellers believe in “Win-Lose” negotiating. They want “top dollah”. This apparent greed and intransigence grates on everyone involved, sometimes to the extent of legal action or retaliation. Be generous when selling. Paint that bedroom. Purchase a Home Protection Plan for those first-time buyers. You’re on your way to wealth. Don’t be cheap!

Keep Your Word/Perform And Smile

Keep your word. Perform everything you’ve agreed to do. And smile as you do it, even if the deal is going against you and you are taking a loss. Don’t whine. Smile. Builds character….and your reputation.

The “Concession Pattern”

In the back-and-forth of negotiations, your “concession pattern” is very important because it sets up expectations in the other party. Always negotiate fairly tightly. Don’t concede too much because the other party will see that as an opening to seek more. Go back-and-forth more times if need be. Try to set things up so you take the other party’s counteroffer rather than force them to take yours. This way they will feel they won, and you will have less trouble with them the rest of the way. And, please, don’t arbitrarily “split the difference”. Amateur negotiators do that.

“Sharp Practices”

The day will come, if it hasn’t already, when the other party will bring “sharp practices” to the table. If these are illegal (e.g., undisclosed money back after the close), call them on it, and refuse to participate. If these are not exactly illegal, then counter them as best you can, or walk away. Life is too short, and your reputation is too important. Always “take the high road” in negotiations.

Re-Negotiating After Inspections

Y’all know to re-negotiate after property inspections, right? ‘Thought so.

Reading List

Included here is a list of Recommended Reading. Buy all of them, used. Read and highlight them. Then, once a year, re-read the highlights. You owe it to your clients, and yourself, to be in tip-top shape a as a negotiator.

Recommended Reading

Negotiate This, Herb Cohen, 2003

Everything’s Negotiable, Eric Wm. Skopec and Laree S. Kiely, 1994

Guerrilla Negotiating, Jay Conrad Levinson, Mark S. A. Smith, and Orvel Ray Wilson, 1999

The Negotiating Game, Chester Karrass, 1992

The Only Negotiating Guide You’ll Ever Need, Peter J. Stark and Jane Flaherty, 2003

Seal the Deal, Leonard Koren and Peter Goodman, 1991

You Can Negotiate Anything, Herb Cohen, 1980

How to Win Friends and Influence People, Dale Carnegie, 1936

Garage Sale Real Estate – Make Money in Real Estate and be Dead Broke Doing It!

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By Jimmy V. Reed

Folks are always telling me I would love to make money in real estate but “I’m just too broke” And I would respond every time, so was I. Back in the late 80’s I started reading books on how to make money in real estate. Every time they kept telling me you find a good deal, then you go get a loan and buy it, fix it, sell it or hold it. That’s when I would say to myself well it sounded too good to be true.

Later I learned it is too good to be true. I learned how to Wholesale Properties. I learned what I would say was the greatest technique in real estate. How to buy a house without actually buying the house. Now let me tell you how that works. I compare it to when I would go garage selling with my wife on the weekends. We would drive around looking for SIGNS! You know Garage Sale Signs. We would find a sale and then look for a deal, and we always seem to find at least 1 deal. However once we started making offers and negotiating, By the way I have taught thousands of students whose number one fear is to make an offer. But the second you put them in a garage sell they start making offers so low it was like kicking the seller in the knee cap. Any way we would finally agree upon a price. And many times realize we didn’t have enough money on us to purchase the item. So we would ask the Seller to hold it until we came back with the money. And wahlah Garage Sale Real Estate!

I know you’re thinking what? Well let me tell you the secret to this. At the garage sale we would run to the ATM get the money come back and pay. Now take this principal a little deeper as we teach in our Wholesale Classes. Tell the seller to hold it, how? A simple Purchase Contract. That’s when you tie up the property until you have the money. I know I know you’re broke! That’s ok because while it is under contract we contact other investors who are looking for deals! That’s right we are deal finders finding deals for our customers. These investors have CASH! Now we just assign the contract to them for a fee. And now you just got Paid!

Sometimes we even use a double close to close on the property because the profit margin is so large. That one is a lot of fun. Well hopefully by now you at least can see a glimpse as to how so many investors can make money in real estate without having money. Did you know when you go to a car lot, or even Wal-Mart, the items you purchase from them has most likely not even been paid for by them yet. That’s right Wholesaling has been going on in most business forever. Now the question is are you up for some Garage Selling? Well it’s all up to you, but if you need a little help look us up, we’ve been teaching Wholesale to investors since 1991.

jimmy

Jimmy V. Reed

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

More info available at www.JimmyReed.net

IS A REAL ESTATE FUND INVESTMENT RIGHT FOR YOU?

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By Fuquan Bilal

Is investing in a real estate fund the right financial move for you? Who is it for? Who isn’t it for?

Real estate funds have been proving to be both attractive and profitable vehicles for many investors. For many sophisticated investors, family offices and even larger and broader funds and endowments, they are now one of the main staples in their portfolios. More recently they have become one of the most important and vital parts of a well diversified, sound and high performing financial plan.

Some people though, haven’t hit the gas pedal on these investments yet. Real estate funds may be a new concept. Or perhaps they just haven’t taken the time to dig in and really figure out the advantages and why others love them so much.

ALL ABOUT THE YIELD

I’ve met a lot of people over the years. Of those that do make alternative investments, the choice becomes really about the type of yield that gets them excited. The sophisticated, passive and strategic investors intelligently spread their risks. They may have some investments that ‘promise’ the chance of higher returns which are riskier. Others are more conservative and are happy with lower yields – and may choose a solid fund with a 7% to 9% return to help keep them in that target performance circle.

DIVERSIFICATION & STABILIZATION

Funds are frequently a stabilization and diversification play for strategic investors. They may have turnkey rentals, do some private lending and hold some notes. They know they can be very exposed with these investments. Funds give them much deeper and broader diversification, which in turn lower risk and keep cash flow consistent.

Let me explain. By investing in a fund, individuals may have 100, 500 or more assets collateralizing and protecting their investment. That’s versus the one or few assets that flippers, landlords or hard money lenders have. Would you rather put $150k or $500k into a single asset and cross your fingers as insurance that nothing goes wrong, or have a $5M or $25M or even larger pool of assets protecting that investment?

ARBITRAGE

The smartest investors know they aren’t going to be as successful as they could be by themselves. This not only applies to building a strong inhouse team, but looking at all options. Some are great at playing the arbitrage game. They may be great at raising capital at 6% returns. Then they just delegate that capital and invest in a fund for higher yields. The fund does all the hard work of sourcing and managing the assets. The arbitrage investor gets cash flow on a platter to pay out returns to their investors.

Is a fund investment a good fit for your portfolio? If the yields are right, the diversification is a good match, and passive investing is a priority, then this could be the piece of the puzzle you’ve been missing…

INVESTMENT OPPORTUNITIES

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

10 Things to Look for When Comparing Real Estate Syndications

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The increase in popularity of real estate investment syndications in the last few years has presented huge opportunities to investors looking to invest in commercial, multifamily, or industrial properties in a passive way.  As a review, syndications are a way to pool money from multiple investors to accomplish a common investment goal.  In real estate, this typically involves pooling equity to purchase a property with the intention of improving or holding it for appreciation and cash flow.

With opportunity, however, comes the need to know what to look for when comparing opportunities.  I have compiled 10 of the most important factors to look for in a syndication when evaluating them in order to make the most informed investments possible.

1)    Qualifications.  Check and see if the syndication deal requires you to be a sophisticated or accredited investor. Syndications structured under SEC Regulation D, exemption 506(c), require investors to be independently accredited via a CPA or 3rd party service.  This confirms an investor meets minimum net worth and/or income requirements in order to legally take part.  506(b) offerings, on the other hand, simply require an investor to be sophisticated which is simply a broad definition meaning an investor possesses sound financial education.

2)    Track Record. Syndications are passive, so it is extremely important that the sponsors have a proven track record and knowledge of the industries and areas they are choosing to invest in.  Good syndication sponsors will partner will experts when bringing new category deals to their investor pools.  Due diligence is key, and sponsors should be able to clearly articulate why they like a deal and what sort of risk mitigation exists.

3)    Preferred Returns.  Many stabilized properties are generating revenue via rents collected from tenants, and the sponsors of these syndications will structure a preferred return to investors.  This return represents an annual return on the principal amount invested by the investor (i.e. 8% returns on a $100,000 investment would represent $8000/year).  This return accrues at a predetermined rate, and must be paid before any sort of profit-sharing takes place upon the sale of the property.  Some deals will have a set preferred return pegged to an investor’s initial investment, while others will establish this return as a percentage of actual net cash flow received.

4)    Dividends.  Often confused with preferred returns, dividends differ in that they are the actual payments made during the hold period of a deal.  These are often paid out monthly or quarterly.  Certain value-add deals that require increasing occupancy or rehab work may delay paying dividends until cash flow of a property is sufficient to cover these payments.  Dividends are ultimately paid at the discretion of a sponsor, and can be interrupted due to unexpected expenses or vacancies that arise during the course of the holding period.

5)    Taxes.  Good sponsors will actively work to reduce the amount of taxable income received from real estate deals.  Dividends are tax reported on a K-1, which has the advantage of reducing the amount of taxable income due to the depreciation of the property.  Good sponsors will perform cost segmentation studies, where they bring on a 3rd party to accelerate depreciation, further mitigating taxable obligation on dividends paid out.

6)    Reporting Periods.  Many sponsors elect to provide progress reports on the status and management of the property during the course of the investment.  Some provide extremely detailed tenant by tenant accounting, and others simply provide a cash flow or overview of the property.  It is helpful to ask a sponsor for previous reports to see what kind of reports they typically provide.  Most of the time these are provided at the same interval as the dividends being paid (monthly or quarterly).

7)    Profit Split.  A common feature in syndication deals is for the net profits upon sale to be split with a portion going to the sponsors and the balance to the investors.  These profits are what is left over after closing costs and fees are paid, preferred returns are paid, and original investor principal is returned.  The percent of profits that get split among investors can vary significantly on a deal, based on risk, sponsor involvement, and overall return structure.

8)    Sponsor Fees.  Syndication sponsors get paid through three main ways, and investors should be aware of these when evaluating deals.  Sponsors may derive compensation from one or more of these categories.

a.     Upfront Fees.  These fees are built into the amount of money raised and help compensate sponsors for time and money invested to get the deal secured and put together.  There is no formal terminology, but this money is commonly called sponsor fees, acquisition fees, or due diligence fees.  These are separate from 3rd party fees from entities such as lenders, attorneys, title companies, and inspectors.

b.     Asset Management Fees.  During the hold, some sponsors will take compensation for management time and costs incurred to keep the property running successfully.  These are typically a percentage of rents collected or net cash flow that the syndication receives and are paid at the same time as dividends to investors.

c.     Profit Splits.   Typically, most of the value of a property is derived at the time of sale.  A successful syndicator is incentivized by a percentage of net profits to help close a deal out and maximize profits.  These will vary by deal, but should be high enough such that a sponsor is motivated to invest time and effort throughout the entire hold period to maximize returns.

9)    Exit Plan.  Syndications are illiquid and passive investments, meaning sponsors retain the final decision of when to sell the property.  A good sponsor will have an exit plan that has a projected hold period or range of years, contingent on market forces and occupancy being favorable for a property sale.  Most value-add deals will be shorter in length due to most of the value being created in early years.  Many stabilized property deals will be longer in order to take advantage of increasing rents, equity build up through debt payoff, and stabilized cash flow.

10) Voting Rights.  Most syndications are structured through an LLC.  The LLC buys and sells the property with the sponsors being Class B managers.  The Class A investors will be formally included in the company/operating agreement of the LLC that outlines their portion.  Some LLCs will give members voting rights as well, which can be used for large decisions such as changing management, restructuring returns, or dealing with death or transfer of existing members. It is important to understand the type of rights you have as an investor and what types of transferability, if any, your shares have.

These are just a sampling of the many differing components of a real estate syndication savvy investors should be educated on when evaluating opportunities.  Knowing how syndications are set up will allow you to make smart investment choices in the future.

Best regards to you and your investing,
Tom Wilson
CEO and Founder of
Wilson Investment Properties