The Best Inheritance You Can Leave Your Kids

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By Fuquan Bilal

What inheritance are you leaving your children?

I know you would probably expect me to say “mortgage notes,” or “passive income properties.” Those are great investments. They might be some of the best types of assets to pass on in an estate. Yet, there are some things which are far more important!

Financial Independence

We all know school has become all but worthless. With the exception of those schools and colleges the big funds and local governments which have turned into cash flow centers and real estate investments. You can do 13 years at school and walk out not even knowing how to use a debit card.

Savvy parents are working harder than ever to teach their kids about money. About how to budget, save, invest, make sure they understand the benefits of financial stability. Some are even teaching them about self-directed IRAs.

Those things are all important. I do all of those things.

Yet, I believe there is something even MORE important. That is teaching them how to be independent.

After all, that’s our one main job as parents. It is to teach them how to survive and thrive on their own.

Instilling Independence in the Next Generation

I rented some units to some college kids. It was amazing to see how they were still clinging to their parents for support at 19 and 20 years old. I don’t know about you, but I was far more independent and had to do a lot more for myself since I was 15. Maybe even 11.

I learned the value of work and hustle at a very young age. I did my own laundry and learned how to cook at 11, and handle personal hygiene.

My kids are now 10 and 16. We used to play mental math games on the way to school. I’ve had them plan meals, go to the grocery store and hunt for deals, and now figure out how to do it all online. I teach them real estate and how to get out in the field.

I’m pretty sure they can stand on their own two feet if they had to.

I want to be sure they won’t have to depend on others for the rest of their lives. Even on me. Knowing how to invest is a big part of that, but mindset is even more important.

Take the Lead

As I reveal in my new book, you can, and should pump positivity into them as possible. Build their minds and spirit. Let them know they can do anything they want. BUT – you’ve got to live it too. Practice what you preach. You can rock their world and shake their mindset big time. Do it well, and consistently and they can also become some of your best accountability partners! They’ll keep you in check.

Lead by example. Do what you want them to do, and explain it. That means budgeting, investing, following your dreams, and stepping up to do difficult things. Teach them to embrace adversity and challenges in order to get stronger in all these areas, so they can get more of what they want and are capable of.

Teach them smart investing and money management and how to stand on their own, who they can get help from and learn from, and to problem solve. With these, they’ll be able turn the smallest monetary inheritance or property portfolio into even greater multigenerational wealth. Failing to do this, and ignoring these conversations while you have the chance, your heirs can blow your multi billion dollar inheritance, property empire and lifetime of discipline and sacrifice in a matter of months.

What inheritance are you leaving your kids? I’d love to know what do you do to build these things into them.

Investment Opportunities

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

Fuquan Bilal

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

“T” Is for “Time”

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By Jeffery Watson

Time can be the investor’s greatest ally or the procrastinator’s worst enemy.  Across America, thousands of baby boomers are waking up and realizing they have not used time to their advantage in building wealth and saving for retirement.  In my Roth Theorem, the Enhanced Rate of Interest (EROI) over a long period of Time (T) is a tool that works to build wealth for you.

I often speak to investors who have what I refer to as “one-hit wonders.”  They have been able to put some money to work for a time making a 15-18% rate of return on it, but the length of time the money was out working was measured in months rather than in years.  Compare that to another client of mine who very deliberately and calculatingly worked on an investment to have his self-directed retirement funds earning approximately a 15% rate of return for the next dozen years.  The amount of money he put to work in that transaction was sizeable, nearly a 6-figure sum.  That client understood the importance of getting time to work in conjunction with the enhanced rate of return to generate the type of wealth building he was seeking.

Time has been written about in many different ways in literature, in both negative and positive contexts.  When it comes to investing, I want you to think about how to make time an ally, something that works for you, by using it to put money to work in good investments earning an enhanced rate of interest (EROI), and then letting those investments move forward with earning you more capital to deploy into new deals.  You may want to stagger the dates of maturity of your various investments so you always have most of your money out working.

One of the best time management techniques I’ve seen is from an investor who has a “waiting list” of good opportunities and investments.  As his money comes back from his deals, he puts it back to work relatively quickly in deals that are working for 18-24 months at a time.  This allows that investor to consistently work his money while keeping it diversified and actively working.

Think about how you can make time an ally in your overall investing strategies.  If you feel you are short of time and retirement is rapidly approaching, or you may need to work beyond age 65 or 67 to accumulate more wealth to be able to retire, please remember not to sacrifice the quality of your investments in an attempt to get an unusually high rate of return.

Jeffery S. Watson

Attorney

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

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

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

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

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

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

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

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

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

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

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

Warning to All Renters: Renting a House Could Cost You A Million Dollars

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By Lex Levinrad

The Distressed Real Estate Institute has a report called “Warning to All Renters: Renting a House Could Cost You a Million Dollars!”

The report was based on the findings of a Distressed Real Estate Institute study that looked at data on thousands of single family homes in South Florida. “We looked at historical price data for these houses and completed a market analysis of how a typical first time home buyer could benefit by purchasing one of these houses today instead of renting the same house” said Lex Levinrad Founder of the Distressed Real Estate Institute.

“What we found is that prices have actually declined so much in South Florida over the past few years that in many cases it could actually be cheaper to purchase the house than to rent it” said Levinrad. “Even after accounting for property taxes and insurance in many instances it could still be cheaper to purchase a home than to rent it”. “This is a great time to buy real estate – especially if you are a first time home buyer and you can qualify for an FHA loan” said Levinrad.

The basis of the study was a comparison of the costs of a typical 3 bedroom 2 bathroom South Florida house which would appraise for approximately $100,000. There are houses in this price point in many South Florida Cities especially in Broward County cities like Fort Lauderdale, Pompano Beach, Margate and Deerfield Beach. These houses would typically rent for approximately $1,100 per month and would cost about the same in monthly mortgage payments if they were purchased with an FHA Mortgage Loan. “Our specialty is low priced single family starter homes which are most attractive for renters and first time home buyers” said Levinrad. “We know this market well because we purchase these houses directly from the bank and we often fix them up and then sell them to first time home buyers or renters that are looking for a rent to own home”.

“Many people that are currently renting in this price point have decent credit and could get approved for an FHA Mortgage” said Levinrad. “They simply do not know that they can afford to own their own home and in most cases there is no one that is marketing to them and informing them of this fact”.

The findings of the study indicate that a typical $100,000 house could be worth as much as $1,000,000 by the year 2041. This is when the 30 year FHA mortgage would be paid off assuming that they purchased in 2011. “Owning real estate always pays off in the long term” said Levinrad. “People have very short term memories and ten or twenty years from now they will wish they had purchased a home.  Making the decision to buy a home versus continuing to rent will result in a substantially better retirement” said Levinrad.

“In many cases this will be the only opportunity in their lifetime to purchase South Florida Real Estate at an affordable price where the monthly payment could be the same amount or even less than the equivalent rent. This market crash and foreclosure crisis has created a unique situation where for the first time in many years housing is actually affordable. It is a great time to buy real estate – especially for first time home buyers” said Levinrad.

 

Choosing the Road to Wealth

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By Kathy Kennebrook (The Marketing Magic Lady)

More people are becoming millionaires today than ever before in the real estate business. So what makes these wealthy entrepreneurs so different? They chose the road to wealth and real estate as the vehicle to get there.

When choosing the road to wealth, there are some important distinctions that set the truly successful folks apart from everyone else. Some of those include the ability to visualize a specific outcome, pursuit of a dream, constant motion and a relentless determination to reach the goal. Giving up is not an option. Like the saying goes, “Quitters never win; winners never quit!”

I have found in the real estate business that there are two kinds of people, the “doers” and the “wannabes”.  There are truly focused folks who get up every morning with a clear and defined direction who want to make their business work no matter what it takes. They pursue their dream relentlessly and continue to grow on a daily basis, garnering all the education they can along the way to take them even further along in their business.

Then there are the people who go to seminars or buy books and tapes and do absolutely nothing with them once they get them home. I have personally witnessed this over and over again.  They have one excuse after another why they can’t do this business.  For them, the status quo is the easy way in any situation.

I used to be one of those people who did absolutely nothing. I continued to work day after day at a job I hated, and I had every excuse there was for not getting started in the real estate business.  So I can relate. You could say, “I’ve been there, done that.”

There were three main things that held me back:

  1. Lack of focus.
  2. A true desire.
  3. Abundance of fear.

You can absolutely tame all three. I am living proof that you can. The biggest change that occurred for me finally was the desire to succeed.  An even greater desire was to get back all the money I had spent on courses and seminars.  As I always say, “Whatever it takes to make you move forward!”

I discovered there were some very easy ways to get focused and get on track.  One was to define the specific reason I wanted to succeed.  For me it was to get back the money I had already spent on educational materials and to get rid of a job I hated.  At the time, my job entailed being on the road for long periods each week which resulted in my not being home much, something I very much wanted to change.  I spent many years in a “dead-end job” making a lot of money for other people.

For you, it may be putting money away for your kid’s education, taking a trip you’ve always wanted to take or maybe becoming involved in charities you want to support. Whatever that reason is for you, commit it to paper and out loud to those around you. There is nothing I know that will force you to take action more than committing to a goal out loud. Become persistent in the realization of your dream. Use the knowledge you already have and move forward from that point.

Visualize your success!  Every extraordinary, successful person has visualized their success in their mind and then on paper first.  Their dreams were put into action, resulting in a reality of success.  Bottom line, this is the outline of the road to wealth.  Unfortunately, most people get stuck in the “dreams” part of that road to wealth.

Enlist the help of your local real estate club or a mentor to stay on track. If there isn’t a real estate club where you live, contact other investors in your area and form your own group. This is a great way to network and get the support you need. I had a mentor early on in my business and I attended meetings of our local real estate club on a regular basis. I found this to be a great way to stay focused and excited about the real estate business.  I continued to work with other investors in my area who were already doing the business.

If people around you are telling you it won’t work, don’t let them “steal your dreams”. Only you can make the decision to be financially free. I know that lots of my friends and family members thought I was crazy to want to do this business. I’m glad I didn’t listen! Hang around with like-minded people, wherever you can find them. Learn from people more successful than you.  Hang around with people who make more money than you do. Decide what it is you want to do for your business on a daily basis and implement a plan of attack.

Enlist the help and support of your spouse and children or a partner while growing your real estate business. There are lots of things they can do to help and you’ll achieve a feeling of team work which will keep you moving forward. Write a specific list of goals you want to achieve, no matter how small. Set goals for tomorrow, next week, next month, next year. This is one way to create a road map you can follow toward attaining your goals and growing your real estate business.

Do whatever it is you need to do to keep moving in a positive, forward direction. Don’t let the “naysayers” get you down. They just want to keep you where they are. Don’t take advice from anyone who makes less money than you do. You have a right to live the kind of life you want, so be willing to do what it takes to attain it.

Real estate is one of the best ways I know to grow wealth quickly. If you believe you can’t change your attitude about the opportunity to create wealth through real estate, I assure you that you can. You just have to make the decision to choose the road to wealth.

That road to wealth is to stay focused and to never give up.  Success can be yours…today!

For more information on Kathy Kennebrook’s systems for the Real Estate Investor be sure and visit her website at www.marketingmagiclady.com. While you are there be sure and sign up for Kathy’s FREE monthly newsletter and received $149.00 of real estate tools absolutely FREE!!

Florida Land Trusts

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By Randy Hughes

Oftentimes I am asked, “Which state should I form my land trust in?” As a continuation of the subject discusses in my last newsletter, you now understand that you do not have to form your land trust in the same state where you live or where the property is located. In fact, there are many benefits to using an “out-of-state” trust to hold title to your investment property. I have covered these benefits in previous newsletters. This newsletter will concentrate on Florida Land Trust Law. In future issues I will explain other major state land trust statutes.

The Florida Land Trust Act, 689.071 covers real and personal property. “Beneficial Interest” means any interest, vested or contingent and regardless of how small or minimal such interest may be, in a land trust which is held by a beneficiary. “Beneficiary” means any person or entity having a beneficial interest in a land trust. A trustee MAY BE a beneficiary of the land trust for which such trustee serves as trustee.

I have talked before about Florida being the only state that I am aware of that will allow the trustee to also be the sole beneficiary (because of the Merging of Interests Doctrine). Other states allow for the trustee to be one of multiple beneficiaries, but not the trustee if she/he is the ONLY beneficiary. Personally, I would NEVER make the trustee and beneficiary one-in-the-same because it defeats the purpose of anonymity of ownership by exposing the beneficiary to public scrutiny.

Personal Property. The Florida Statute goes on to say, “In all cases in which the recorded instrument or the trust agreement, as hereinabove provided, contains a provision defining and declaring the interests of beneficiaries of a land trust to be personal property only, such provision is controlling for all purposes when such determination becomes an issue under the laws or in the courts of this state. IF NO SUCH PERSONAL PROPERTY DESIGNATION APPEARS IN THE RECORDED INSTRUMENT OR IN THE TRUST AGREEMENT, (emphasis added) the interests of the land trust beneficiaries are REAL PROPERTY (emphasis added).

This section of the Florida Statue stresses the fact the if you do not state either in the Deed to Trustee OR the Trust Agreement that the Beneficial Interest is “personal property,” it will be deemed as “real property.” Which is exactly what you do NOT want. I think to make it unmistakably clear, you should put in BOTH the Deed to Trustee AND the Trust Agreement that the Beneficial Interest is personal property!

Land Trust laws are not changed very often for any State, but three years ago Florida amended their Land Trust Statute which effectively made it not possible to sue the Trustee or Beneficiary of a Land Trust. This was a powerful change that made Florida’s Land Trusts even more popular to use. You might consider using a Florida land trust.

I encourage you to learn more by going to my FREE online training at: www.landtrustwebinar.com/411  or text “reasons” to 206-203-2005 for my free booklet, “Reasons to Use a Land Trust.” You can also reach me the old fashion way by calling me at 866-696-7347 (I actually answer my own phone unlike most other businesses in America).

How To Sell A House In A Difficult Market

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By Lex Levinrad

Are you having a hard time selling your house in today’s market? As prices have declined and as sellers have become more desperate to sell it has become increasingly difficult to sell a house for fair market value.

More than 50% of the properties that are listed on the MLS are either bank owned properties or short sales. These properties are already substantially discounted for cash buyers. This fact can make selling your property for fair market value extremely challenging.

So what do you do in this type of environment if you want to sell a house? The first thing you need to do is to think outside of the box. If you are doing what everyone else is doing then you are probably going to find it very difficult to sell your house. Why? The reason is because the strategies that worked in a good real estate market will not work in a difficult market.

If you want to learn how to sell a house quickly then the first thing you need to do is review what everyone is doing and why that is not working. So what is everyone else doing? Most sellers are listing their properties with a realtor on the MLS (Multiple Listing Service) and are waiting for a buyer. Why does this strategy not work? This doesn’t work because listings at fair market value do not seem like a great deal to buyers and because it is very difficult for buyers to qualify for conventional financing.

The key to selling a house in a slow market is to do something differently. What you need to do is make your listing so unique, so different to all the other listings that it immediately grabs buyer’s attention. How do you do this? Do the following:

  • Price your property very aggressively i.e. way below all other retail sellers
  • Create an instant buying frenzy for your property by listing aggressively
  • Hold an open house on a Saturday and Sunday
  • Hold an auction for your property the following Saturday at 2 p.m.
  • Advertise your auction online and offline and spend some money marketing
  • Stage your property and make it nicer than all of your competitors
  • Offer to pay all closing costs for the buyers
  • Offer to pay 6% commission to buyers agents even if you are a realtor
  • Offer an incentive such as new appliances to buyers
  • Have a mortgage broker ready to pre qualify buyers on all open house days
  • Be prepared to help contribute towards the down payment for FHA buyers
  • Take a video of the property and post your video on You Tube
  • Make a postlet of your property and place the video into your postlet
  • Create a blog and syndicate your video of your property on your blog
  • Syndicate your video on Facebook, Twitter, Linked in etc.
  • Let the world know that there is going to be an auction for this property
  • Create a buying frenzy even before the auction has begun

If you do all of the above steps then you should be able to easily sell your house quickly. If you purchased a house at a good price from the bank and are selling it for a profit then your goal should be to sell it quickly and move on to the next property. Don’t let greed get in the way of common sense. Book a profit and move on to the next deal.

To your success

Lex

Should I buy my own home first, or rent and buy investment homes?

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By Adiel Gorel

A classic question I get when talking to a would-be real estate investor is: “Shouldn’t we buy a home to live in first before buying investment homes?”

The answer, of course, depends on where you live.

When considering owning your own residence, there are various layers of reasoning. Some are logic and numbers-based. Some are emotional, traditional and familial.

Owning your own home can be associated with safety, security, having “arrived”, satisfying family members’ aspirations, the stability of having a (hopefully) permanent place to live, and so on.

Of course, everyone has a different set of emotional considerations when it comes to owning a home.

These vary from person to person and, needless to say, are hard to quantify.

In this article I will address the logical, numbers-based approach to the question of whether to buy your own home as your first real estate move, or rent and buy investment homes instead.

The numbers tell the story

If you are considering buying your own home, the price of the home matters, the rent required to rent that same home matters, the local property taxes matter, the mortgage interest rates matter, dwelling insurance rates matter, and even the new 2018 tax law weighs in.

If you live in a market where property taxes are relatively low (say, between 1 and 1.7 percent of the home price per year), and insurance rates are reasonable, then if you are considering buying a home under about $400,000, that should be a “no brainer” as your first step. Between $400,000 and $500,000 would still be a reasonable range to consider buying the home. In such a market, once you step up to the $500,000 range and above, the math may well start to turn as you climb higher in price, in favor of renting a home in the area in which you live, and owning rental homes in more optimal places.

In markets where the property taxes are high (like in Texas and Oregon), and insurance rates are high (Texas again, for example), the “no brainer” number may shrink to $300,000 or so, while the range above which you may consider renting your own home while buying affordable investment homes in other markets, will likely be $400,000 or above. This is because with high expenses for property tax and insurance, (which as a homeowner you would be paying) the overall numbers and logic “turn the corner” faster.

Certainly, in expensive areas like the San Francisco Bay Area, Los Angeles, San Diego, New York City and others such markets, it is usually far more logical to be a renter, while owning rental properties in affordable markets, where rents are actually quite high as a percentage of the home purchase prices.

Buying homes in expensive markets may not make sense

If you are thinking of buying a home in the San Francisco Bay Area for $1,400,000, for example, and if that same home can be rented for about $4,700 per month (quite typical in 2018), the math is in favor of being a renter living in that house. While $4,700 per month appears to be very high (in absolute terms it is), it is actually very low compared to the purchase price of $1,400,000. While renting the house for $4,700 (and not being responsible for property taxes, dwelling insurance or repairs as a tenant), you might, (in this example) use a similar amount as a 20% down payment on the $1,400,000 home (plus closing and loan costs), to buy about SEVEN rental homes in an affordable market, using 20% down on each – all brand new in good areas, for, say, $180,000 each, in a market with low property taxes and low insurance rates.

Each one of these $180,000 homes will fetch a rent of $1,500 per month. Now that is high rent! (as a percentage of $180,000). Seven such rental homes, requiring a similar total down payment as the $1,400,000 which is rented and not bought, will fetch a gross rent of 7*$1,500 per month = $10,500 per month. That is indeed high rent. And these will be brand new homes which are fully under warranty to boot. In addition, the seven new investment homes can be diversified over a larger geographic area or even over more than one metropolitan area.

Sense of accomplishment and satisfaction in purchasing rental homes

Another example could be a potential home purchase of a residence costing $725,000. That property could most likely be rented for about $3,200 per month. For the amount used to put a 20% down payment (plus closing costs), you can rent this home, and buy four brand new rental homes for $180,000 each rented at $1,500 each. Total gross rent: $6,000 per month for the 4 houses, and they can be new, under warranty, in good locations, and paradoxically each may likely be bigger in size and bedrooms than that one $725,000 home, which is also likely substantially older. Again, the four rental homes can also be geographically diversified.

Even the sense of accomplishment and satisfaction of home ownership, may be fulfilled by owning four brand new, good sized and well-rented homes in an appropriate market, while paying a relatively low rent in an expensive market. In fact, the higher the home prices in the expensive market, the lower (relatively) the rent gets as a fraction of the home price. Thus, the savvy investor can pay a bit more in rent and get a bigger, more expensive home to live in, while investing in more optimally-priced markets and choosing areas that have not yet boomed, and which can yield higher rental rates.

The 2018 tax plan

Under the new 2018 tax plan, taxpayers who itemize will be able to deduct their state individual income, sales and property taxes up to a limit of $10,000 in total starting in 2018. For expensive homes in states like California, New York, and others, the $10,000 limit will diminish deductions which could be used before, making home ownership even less logical beyond a certain home price. In states with very high property taxes, even less expensive homes will reach that limit and become less attractive tax-wise. I am seeing many smart Silicon Valley high-tech people, and others interested in living in expensive areas, opting to rent their residence, and buy several (or many) investment properties in affordable markets where the rent numbers are good.

The deductions available for rental properties have not been affected by the 2018 tax law, and in fact a new deduction, the “pass through deduction” was added, which could benefit many real estate investors. The logic behind renting your own residence while buying affordable investment homes has been taken further by the new tax law.

People do not have to buy rental homes in the areas in which they happen to live. I myself own rental homes all over the United States, as do thousands of our investors. Since we have a solid support infrastructure in many appropriate real estate markets, investing in another state becomes easier, since the local teams in that market will handle the rentals, maintenance and support for the investor.

Local infrastructure makes it doable

The local infrastructure in the various markets is comprised of property managers, local savvy real estate brokers, maintenance crews, insurance agents, and any other function needed to support the busy investor, who may live far away. We have many foreign investors, who live across the ocean, invest in multiple rental homes in appropriate markets in the United States.

Different colorful houses suit house shape holes of wooden board, 3D illustration.

Our company, ICG, has been holding 1-Day Expos for over 20 years every quarter with market teams, expert speakers, extensive Q&A and networking etc. near the San Francisco airport. During these events I always cover many subjects in detail, including the subject of this article.

You can attend for free by mentioning this article in an email to [email protected], register online (icgre.com/events) using the code FREEREALTY411, or call us at 800-324-3983.

Looking forward to seeing you.

About ICG and Adiel Gorel:

ICG (International Capital Group) Real Estate Investments was established in the 1980’s. Adiel Gorel, founder and CEO, has been helping people achieve financial security for over three decades, and in that time worked with investors to purchase over 10,000 homes. Gorel is a real estate broker in several states in the U.S., an international keynote speaker, and notable author of three books: Remote Controlled Retirement Riches – The Busy Person’s Guild to Real Estate Investing, Invest Then Rest – How to Buy Single-Family Rental Properties and Remote Control Retirement Riches – How to Change Your Future with Rental Homes. He has been featured on major television and radio networks across the country and in Fortune Magazine. He has also been featured on Public Television with his show, “Remote Control Retirement Riches with Adiel Gorel.” To invite Adiel Gorel to speak for your group, email [email protected] and visit AdielSpeaks.com. For more information on ICG Real Estate Investments visit icgre.com.

Helping Others while Making Money in Real Estate

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By Leon McKenzie, CEO, US Probate Leads

Are you looking for ways to do something meaningful with your life? Studies have shown that all of us, not just millennials, want a job that does good in the world. Helping someone who has recently lost a loved one is one way to do that.

Imagine this: Someone you loved has died suddenly. You find yourself the executor of their estate, and you are thrust into a situation where you must not only grieve the loss of your loved one, plan a funeral, but also take care of numerous legal and financial details to settle their estate. This on top of your already busy everyday life. Wouldn’t you want someone to be able to help you handle some of this work?

Now you, an expert in the real estate industry, are constantly looking for leads. Without a steady stream of properties to look at, it can be nearly impossible to meet your investment goals.  That said, there is an ongoing challenge in finding investment properties in the real estate market due to ongoing tightening on the supply side. You are also looking to do good in the world.

Probates Are a Meaningful Option

While no real estate investor should eliminate a lead source from their business as each of them can yield a gem, whether the traditional, new construction or foreclosure market, there is always room to add another option. Seasoned real estate investors, motivated by a desire to make money while helping others, are turning to probate leads.

While many people aren’t familiar with probate leads, they have been and will continue to be an ongoing source for leads. Probate leads are generated when probates are filed in a local courthouse and can be a great way to add to your options for your buying area. Included in probates can be a wide variety of investments. Having access to these leads is a great way to diversify your lead strategy and give yourself some additional options when looking for properties to add to your portfolio.

What probate leads offer is a way to diversify your lead strategy and include more than just one type of real estate listing. This option can give you ways to find lower priced properties that may have more flexibility in their terms.

What are Probate Leads?

Probates leads include information on property that is part of a legal filing after the death of a loved one. These cases include many types of property that may have been owned by someone who has passed on. This can include homes, vacation homes, cars, RVs, businesses, commercial property, rental property, artwork and other personal property. These cases are listed in each county after the death of a loved one where a probate needs to be filed and are controlled by the local court.

Generally, this property has to be sold in order to pay for medical, tax, legal, and funeral expenses. The court will assign an Executor to handle the sale of the property so that these obligations can be met and the heirs can receive any remaining funds.

By Purchasing Properties in Probate You Can Help an Executor

As part of an overall investment strategy, probate leads are valuable because they often come with very motivated sellers. Executors need to deal with the property that is in the probate filing in order to meet the court requirements. Many times, they need cash in order to pay bills that have been left after the passing of their loved one. Often they find themselves with a lot on their plate in order to settle their loved ones estate while going about their every day life.

Executors may feel lost and overwhelmed and do not have the time, energy, or desire to go through all the usual steps of getting a property ready to sell. They are likely to have just inherited a property that they do not want and that needs updates in order to sell for full price. Typically, the property has a lot of equity because the owner has been making payments for years, or the property may be fully paid off.  This creates a situation where the Executor may be willing to sell the property for a discount in exchange for being able to unload the property with as little work as possible and knowing that any profit is a gift they did not expect.

Finding property at a discounted rate in today’s market is a real challenge, and that is what makes probate leads such an important part of an overall lead strategy.  These properties may be available for thirty to fifty percent off of the market price and are generally available for a quick closing.

Probate Leads are Viable for Quite a While

New users of probate leads may think that the leads would have a short time on the market.  That is not the case. Generally it take some time for Executors to get all of the paperwork filed and to go through their loved one’s things before they are ready to sell. There is also the process of grieving, which can cause Executors to hold onto a property for a time before they are willing to sell it. With these parameters in mind, real estate investors who are looking at probate leads will find that Executors who are selling property may not be ready to sell for twelve months after the filing.  In many cases, the leads are still viable eighteen months after the passing of a loved one.  This allows for plenty of time for real estate investors to make contact with the Executor.

Probate Leads Include More than Residential Real Estate

For real estate investors who are looking to diversify their property portfolio, probate leads can be an excellent source of alternative investments.  While many people start looking at probate leads for discounts on residential real estate, what they soon realize is that probates can include a wide variety of other types of investments.  These can include businesses that are up and running, artwork, jewelry, personal property, furniture, antiques, cars, vintage cars, boats, RVs, commercial property, vacation homes, and rental properties.  It is important to ask each Executor what types of property they have for sale in their portfolio rather than just assuming that it is only residential property.

Get Access to Probate Leads Today

Using probate leads is a great way to find more leads in your area as a real estate investor.  With long term viability and Executors that are motivated to sell, and your desire to be helpful, you will see that probates are a way to quickly find discounted properties.  If you are looking for diversity in your lead package, then you can get access to probate leads easily and quickly by vising US Probate Leads.  We offer county by county listings of the probate leads in your area delivered directly to your inbox.  Each county in the United States is covered by our trained team of lead specialists.  Our team makes sure that you have the leads that you need in order to make your business grow.

Want more information?  You can visit us at www.usprobateleads.com today and get more information on our lead services or sign up.  In addition to our lead service, we also offer seminars, webinars, eBooks, software, and individualized mentoring for dedicated investors.  Contact us today for more information and learn how we can help you to meet your real estate goals.  Call now!

Personal Property vs. Real Property

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By Randy Hughes

It is fascinating to me that real estate starts out as personal property (boxes of ceiling tile, carpet, lumber, etc.) and once it is assembled it becomes real estate. Then, when we place the property into a Land Trust, it again becomes personal property to the beneficiary of the trust. Why is this important? Real estate laws and personal property laws are different. As all of my students know by now, the beneficial interest in a land trust is personal property and there are significant advantages to this truth.

When a piece of real estate is held in a Land Trust and the beneficiary sells the beneficial interest this is a non-recorded transaction. It is completely private and off the radar screen of tax assessors, lenders, transfer tax revenuers and in some states (i.e. CA) sales tax withholding requirements. You even by-pass the Form 1099 requirement (you still must pay any taxes due eventually).

Once transferring property into a Land Trust, the Deed in Trust must include language that makes it clear that the beneficial interest in the trust is personal property. Likewise, the Land Trust Agreement should state that the beneficiary shall have no rights or interest in either the legal or equitable title to the property. The beneficiary’s sole interests are to the rights of management, control, operation and to the receipt of proceeds from rents, mortgage financing, sales and exchanges.

Most rental real estate investors make the beneficiary of their Land Trusts an LLC or corporation (for additional asset protection). When an entity holds a beneficial interest, it should make sure not to lose its legal standing in the state it was formed. Not keeping the LLC or corporate up-to-date (e.g, paying the annual franchise fees and state taxes), effectively causes the beneficiary to lose the rights to the beneficial interest. This is another good reason to designate Successor Beneficiaries even if your initial beneficiary is an entity.

After 46 years of investing in real estate and being a landlord, I can attest to the many benefits of using a trust to hold title instead your name personally. There are only risks and no rewards to owning real estate in your name. Crazy things happen in the real estate business and if you intend to succeed long term you must learn how to protect your hard-earned assets. The least expensive and easiest way to begin your asset protection plan is by using a trust to hold title. Be a smart investor, use a trust!

I encourage you to learn more by going to my FREE online training at: www.landtrustwebinar.com/411  or text “reasons” to 206-203-2005 for my free booklet, “Reasons to Use a Land Trust.” You can also reach me the old fashion way by calling me at 866-696-7347 (I actually answer my own phone unlike most other businesses in America).

 

 

Risk Associated with Selecting Third Party Vendors

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By Dan Harkey

Where does risks begin in commercial real estate lending business?  It begins with your process of hiring highly competent third-party vendors.  Your job is to assemble the most qualified real estate support professionals to eliminate costly mistakes and to ensure the best quality closing.

This includes service providers who originate new loans, process, underwrite, appraise, and eventually close the transaction. This sounds like a broad statement since the process also requires your participation in marketing, to procure the transaction.   Your competency is displayed throughout the process by understanding the borrower’s wants and needs, the loan programs and requirements, property types and characteristics, underwriting skills, geographic locational differences, government regulations, and then hiring professional service providers to match.

  1. Appraiser(s)

It is your responsibility is to identify a well-qualified, licensed, and insured appraiser who is familiar with the geographic location and property type, and various methods of valuation. Hire someone who follows the requirements of Uniform Standards of Professional Appraisal Practice (USPAP). USPAP can be considered to be the quality control standards applicable for analysis and reports for appraisal of real property, personal property, intangible assets and business valuations in the United States and its territories.  A state licensed appraiser must adhere to USPAP standards.  USPAP provides the body of knowledge and performance standards for the appraisal process as authorized by the US Congress (this was part of FIRREA in the early 1990’s and arose from the Bernard Amendment). As noted above, this legislation contains standards for all types of appraisal services, including real and personal property, business enterprises.  It is reviewed annually and revised and updated every two years.  The Real Estate Broker/Mortgage Loan Broker must establish that the appraiser is qualified by license and specific certification to accept the assignment and must be sure the appraiser is state licensed for the type of required appraisal.   This is a mandate by the Bureau of Real Estate Appraisers in California and their equivalent in all states and required in California pursuant to Business and Professions Code Section 10232.6.  In most cases the appraiser must also be approved by or acceptable to the lending source.

The first document you will use is an “order form”, which will document the type of appraisal, by whom and when the appraisal will be paid and “what parties rely on the appraisal”.  If you, as a mortgage broker/lender, are acting as an agent on behalf of private investors/lenders who intend to fund the loan, or you intend to sell or assign the loan following funding the loan with our own capital, then the appraiser needs to be informed that the private investors/lenders have a right to rely on the appraisal report.

You must identify all intended users of the appraisal report or you need to specifically direct the appraiser as to whom the report should be addressed.  To comply with appraisal standards and requirements, and depending on property type, the appraiser will typically conduct a rent survey and an absorption study and will additionally research various market rates for additional indicators such as capitalization rates and discount rates to establish market conditions applicable to a subject property.  In appraising the property, the appraiser typically will research market rents for the property type, research market rent trends in general and analyze historical lease-up or absorption rates for the subject property type.  Depending on the type of subject being appraised the appraiser may also need to include personal property value or may find that the appraisal requires a going concern valuation for an operating business wherein there may be additional value elements such as FF&E, good will or intellectual property.

Choosing an appraiser for a federally insured home loan differs.  It is important to note that neither mortgage brokers, loan officers nor homeowners may select the appraiser for the property on which they want to lend/borrow such funds.  At the current time all such appraiser selections and appraisal orders are handled by Appraisal Management Companies (AMC’s).

“Assumptions and Limiting Conditions” are sometimes thought of as the “legalese” or “boilerplate” of appraisal reports. The “assumptions” relate to the concept of scope of work identified in the appraisal process. The appraiser will lay out in writing assumptions such as the correct legal description, that the zoning is correct for the property use and that the information furnished is true and correct. A “limiting condition” is one that limits the use of the appraisal, primarily by specifying the use and intended users of the appraisal report. That is, who may rely on the contents of the report. However, each assumption or condition must be reasonable and supportable in the context of the appraisal, and not conflict with the “Extraordinary Assumptions or Hypothetical Conditions.”

It is important to review the appraisal section, “Extraordinary Assumptions and Hypothetical Conditions”. This means the appraiser has taken some action or used a method that departs from USPAP standards. The appraiser may have made assumptions that could render the appraisal of little or no value by following outside standards. You may find this when the property is zoned incorrectly for the neighborhood or the property’s intended use, or when comparable are extremely difficult to locate. Some examples of extraordinary assumptions may be: whether all entitlements are complete for a construction project, there is adequate absorption for lease up, that the building conforms to zoning and usage ordinances, that the property construction will be completed timely and on budget, and that there are no environmental concerns.  The appraiser may need to invoke certain hypothetical conditions under some directives by the client.

Extraordinary Assumptions are specific assumptions made and utilized in the development of the estimate of value and which, if found to be false, could alter the resulting opinion or conclusion.  Hypothetical Conditions are assumptions made which are known to be contrary to fact, but which are assumed for discussion, analysis or formulation of opinions.

As a final comment, it is important that you read the entire appraisal. There are issues such as the amount of area vacancy, the applicable capitalization rate, and a discussion regarding verification of zoning or permits that you may want to personally verify. These are not always clear in the first reading. For example, the area vacancy and the application of a capitalization approach may be different in Riverside, CA. than in Newport Beach, CA.

  1. Documentation/ Legal Counsel

I have combined these two together for this reason, some lenders farm out their legal documentation preparation to a third party. Since it is the lender who is responsible for state and federally required documentation, a third party legal counsel or knowledgeable consultant is advised.

Commercial lending is sometimes characterized by loaning to entities such as trusts, corporations, limited partnerships, and limited liability companies. There is a required technical understanding of the laws relating to these entity types, and the documentation differences that each will require. There is another matter of the issue of lien priority. Documentation complexity can be compounded when the issues of lien priority and tenancy are added to the mix. Your borrower may own a property in a family limited partnership, occupy the same property as an operating business which is a corporation, and have other unrelated tenants, who may also own their businesses in different forms of entities.

  1. Escrow Companies

All escrow officers are not alike. A competent, experienced, and highly technical escrow officer is a must. Escrow acts as an intermediary and dual agent, between the principal parties to ensure that instructions and agreements are carried out correctly. The lender’s final closing instructions to the escrow officer should summarize all the conditions that have been met and under what conditions he/she may close the transaction, using the correct title insurance policy and endorsements in place at the recording to ensure lien priority.

  1. Commercial Real Estate Broker(s)

In metropolitan areas, finding a real estate professional who has the background, knowledge and experience of the product type and geographic area is a matter a good referral or inquiry. If the subject property is in a sub market or a rural market, the time should be taken to locate a broker on the front end while the loan transaction is being processed. Brokers in these areas tend to be generalists who list and sell whatever kind of real estate is available. Your job is to locate that one broker who has the specialized skills you may need.

  1. Environmental Engineer

As a lender you have the option of a quick public records search to identify any properties around the subject that may have used contaminants which could affect the property or that would call attention to the need for further inquiry. An example, a data base in California is the State Water Resource Control Board is known as a “Geotracker”. The lender also has an option for a limited phase I, or full phase I to determine whether the property contains or has ever contained identifiable contaminants. The environmental engineer will report that information and will comment on how it may affect the desirability and salability of the property. For properties built before 1978 the issue of asbestos arises. Also lead based paints were commonly used in construction before 1978. Today, the common approach is to do nothing about asbestos or lead based paint if it appears that they are contained or sealed. Adverse findings by the environmental engineer may lead to the need for soils borings, a phase II, or a phase III. Some properties are purchased with the knowledge there is known environmental issues, and that the purpose of the loan may be for mitigation.

  1. Credit report and credit reporting agency

Very little needs to be said about credit reporting agencies. They all use the same data bases to accumulate the historical credit background of a borrower. However, Real Estate Brokers who make or arrange loan transactions in California are subject to 10232.5 of the Business and Professions Code which consists of a summary of disclosures and requirements to investors who may purchase a portion or all the trust deed investment. Section 10232.5 subsection (4) states that the Real Estate Broker must provide the “identity, occupation, employment, income, and credit data about the prospective borrower or borrowers as represented to the broker by the prospective borrower or borrowers”. This is easy to comply with when the borrower is either an individual or a seasoned entity with years of financials, history, and credit. A standard credit report should provide all the information you need. However, loaning to an entity newly formed for the sole purpose of purchasing or holding a property creates an additional question. Do you need to run a credit report on the entity knowing that nothing will show up? The answer is “yes”, and as an abundance of caution, you should also run a credit report on the individuals who created the entity.

  1. Property Inspection/Property Condition Assessment

Some lenders will require a property inspection by a third party who is trained in that field. The Property Condition Report (PCR) is used by purchasers and lenders who take property back in foreclosure, as part of the assessment of value for resale and limiting liability on resale. These reports tend to be very detailed and may require several specialists to evaluate the various components of the property, both real and personal. The process can be expensive costing from $20,000 to $100,000. This form of third party assessment is rarely used in private money loan transactions because of the nature and purpose of the loan request. Limited condition assessments may be available for much less expense.

There are many risks associated with commercial real estate lending, many of which will be written about in subsequent articles. None, however, quite rise to the level of the need to use highly competent and highly skilled third-party vendors. You are the one who has the option to search and hire the most professional vendors. You, your company, and of course your investors, will also be stuck with the results if substandard vendors are used.