The TOP FIVE Reasons to Consider COMMERCIAL REAL ESTATE for Your Portfolio

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By Tom K. Wilson

While many investors see single-family homes as their “bread-and-butter” investment, investing in commercial properties is an option that can also help you achieve your financial goals.

“Commercial” in its broadest lay vernacular includes multifamily apartments, however, the true industry definition separates multifamily properties (over five residential units) from true commercial, such as retail, office space, industrial, self-storage or medical centers.

I’m often asked what kinds of properties I recommend. There is, of course, no one size that fits all investors or markets. While in a normal market multifamily properties are a natural progression from single family homes, this is anything but a normal market and currently there are too many multifamily buyers chasing too few deals, so it currently has lower CAP* rates or returns than pure commercial.

Here are five reasons to consider commercial properties for your portfolio.

#1 HIGHER ROI

Commercial properties often have higher and more predictable return-oninvestment than single-family homes, in part due to the economies of scale from investing in a larger property not usually available to the small investor.

For example, a current commercial retail center that we are acquiring has an 8.2 CAP rate and a four-year internal rate of return* of 12.0%. When you can borrow money at 4.25% and invest it in something yielding 12.0%, that’s worth considering!

#2 FEWER HEADACHES

It’s generally easier to manage one large property through a professional property management firm than to manage scattered single-family homes. Also the business tenants you get in retail or office space are usually of higher quality than most residential tenants. Business tenants have higher credit/risk scores, have pride of ownership in their businesses and want to protect their livelihoods. As a result, they have an interest in taking care of the property.

Many commercial properties are NNN* (triple net), so the tenant pays most of the expenses including taxes, insurance, and maintenance making the owner’s expenses very predictable and consistent.

#3 STABLE CASH FLOW

Commercial leases are typically 5-10 years in length vs. annually for single-family homes. Additionally, commercial leases include annual bumps in rent and options to-renew. As a result of all these factors, cash flows are more predictable.

#4 NO 10-MORTGAGE FANNIE MAE LIMIT

Any loans taken by the owner or syndicate do not count against your 10-mortgage limit because they are in the name of the owning entity and not on your personal credit. This enables you to put more of your capital to work.

#5 APPRECIATION MULTIPLIERS

Unlike single-family homes, which are strictly valued based on market demand, or ‘sales comps’, commercial properties are valued as a multiple of their Net Operating Income (NOI),* which can be driven up by a good property manager’s addition of value. At a Cap Rate* of 8.0,everyone-dollar increase in annual NOI can result in $12.50 of appreciation!

Steps you can take to actively improve NOI include:

  • Upgrading the existing buildings
  • Increasing TI (tenant improvement)
  • Adding leasable square footage
  • Raising rents
  • Reducing operating expenses
  • Adding amenities
  • Adding additional revenue generating resources (ATM kiosk), and many more

Rather than wait for market forces to raise real estate prices organically, you can create appreciation using levers like the ones listed above.

ADDITIONAL BENEFITS

Of course, the five advantages of commercial real estate listed above are in addition to the usual benefits of any real estate investment:

  • Tax Benefits
  • Hedge against inflation
  • A hard asset with intrinsic value

Caveats of Commercial Investing

No discussion of commercial investing would be complete without noting a few issues that investors should be aware of.

Financing can be more challenging

Typically, the investor(s) must put down 25-30% of the sales price and finance the loan amount over a 5-10 year term with a balloon payment at the end of the term. Selling or refinancing options at that time will vary depending on market conditions. And there can be stiff prepayment penalties.

Not as Liquid

If you own 10% of a Commercial building and want to sell your interest, you can sell to your fellow investors (who usually get first right of refusal) but if none are interested, it may be difficult to get out of the investment. That is why long-term funds, like IRA money, are ideal for commercial properties.

Sale of a Commercial Property can take longer

While just about everyone wants a home, only a small percentage of the population is capable of purchasing a retail center or office building. The smaller market of potential buyers coupled with a detailed due diligence process means that the sale of the property can take longer than for a single-family home.

Syndications

Many of the challenges outlined above can be mitigated by investing with an experienced syndicator. Their knowledge, track record, and ability to qualify for the loan and manage the property, allows the small investor to participate in a high quality commercial property or to invest in multiple projects to distribute their risks.

SUMMARY

The benefits, economies of scale, opportunities for forced appreciation and higher returns make commercial properties an attractive addition to most investors’ portfolio, and one worthy of serious consideration.

For your free copy of Wilson Investment Properties article “Are Real Estate Syndications for You?” and a guide to “Commercial Real Estate Terms” please go to our website, www.TomWilsonProperties.com .

Tom K. Wilson has utilized his experience and skills acquired in 30 years of managing some of Silicon Valley’s pioneering high tech companies to buy and sell more than 2,500 units and over $130 million of real estate, including three condo conversion projects, eight syndications, and seven multifamily properties. He founded and owns Wilson Investment Properties, Inc., a company that has provided over 500 high cash flow, high-quality, rehabbed and leased residential properties to investors. Active in real estate associations, Mr. Wilson is a frequent speaker on real estate investing where his expertise and experience makes him an audience favorite. He is the weekly host of the Wed 2pm edition of KDOW’s RE Radio Live in San Francisco, the Wall Street Business Network (1220am).

*A GLOSSARY OF COMMERCIAL TERMS

CAP RATE (Capitalization Rate)

A measure of return calculated by dividing the property’s net operating income by its purchase price.

CONC (Cash on Cash Return)

A measure of return calculated by dividing pre-tax cash flow from a property by the total cash invested (e.g., down payment plus closing costs).

GRM (Gross Rent Multiplier)

The Gross Rent Multiplier is a measure of how expensive a commercial property is relative to the gross rents it brings in, calculated as: GRM = Purchase price of the property / Gross monthly rents.

NOI (Net Operating Income)

The total income from a property minus vacancy, credit losses, and operating expenses.

NNN (Triple Net)

A commercial lease in which the tenant pays three operating expenses (in addition to rent): Property taxes, insurance, and maintenance.

ROI (Return on Investment)

ROI measures the amount of return on an investment relative to the investment’s cost and is calculated as: ROI % = (Gain from the investment – Cost of the investment) / Cost of the investment.

Retire Wealthy with IRA Investing

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By Stephanie B. Mojica

Self-directed individual retirement accounts or IRAs are rapidly growing in popularity, but experts warn that it is important to only get into such an investment with proper education and professional guidance.

Kaaren Hall, owner of uDirect IRA Services in Orange County, Calif., says even after more than two decades in the financial industry and four years of running her company she too must continually stay on top of her investment education particularly regarding Internal Revenue Service guidelines for retirement accounts.

Self-directed IRAs allow people to invest their retirement funds into a variety of options outside of the traditional stock market, including real estate, land, and private notes.

“Financial literacy is not taught in schools, but our future depends on understanding it,” Hall says. “Only about 4 percent of u.S. investors have a self-directed IRA. Why? Because most investors and many advisors simply aren’t aware of it.”

But even those who are aware of the potential financial power of self directed IRAs often do not fully comprehend is the IRS guidelines of “prohibited transactions,” according to Hall.

“You’re not allowed to have any personal benefit from your IRA prior to retirement,” Hall says.

A common misconception among investors is that they can use the self-directed IRA funds to purchase real estate or other property from themselves or close relatives such as a spouse, a child, a grandchild, a parent, a grandparent and any spouses of such relatives. These transactions are not permitted under self-directed IRAs, according to Hall. However, an investor could purchase property from a more distant relative such as a sibling, a cousin, a niece, or an uncle.

“Make sure you know what you’re doing,” Hall says. “We’re here to help people so they understand the twists and turns as much as possible.”

The term self-directed in itself misleads some people because it is the IRA doing the investing, Hall adds.

“So that’s confusing because they get into trouble by maybe signing a purchase contract (in their own name),” she says. “Your IRA can’t buy an asset that you own.”

Consequently, people should wait until they actually open an account with a qualified custodian before funding it and making transactions, Hall says. Generally, a custodian rather than the actual investor should sign purchase contracts relevant to self-directed IRAs.

While representatives of companies such as uDirect IRA do not give actual investment advice due to potential legal liability, they can help people follow ever-changing IRS guidelines.

Hall, a former mortgage broker whose work history includes Bank of America and Indymac Bank, has educated tens of thousands of investors into deciding whether self-directed IRAs are right for them. She and her associates have directly worked with thousands of clients.

To learn more about self-directed IRAs, call 866-447-6598 or visit www.udirectira.com

UNDERSTANDING Lines of Credit

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By Dr. Teresa R. Martin, Esq

There are many different ways to borrow money. You can go to a bank for various types of loans. You may choose to use pawnshops or payday loans. Credit cards are another idea. You can even borrow money from friends or family.

Another option is a line of credit. While lines of credit have been popular with businesses, they haven’t been widely used by individuals. This is primarily because banks aren’t advertising them, and most borrowers lack the knowledge to inquire.

This is unfortunate, because a line of credit has many unique features that set it apart from other types of loans. A line of credit is similar to a credit card, but with better interest rates.

Figure out if a line of credit might be the perfect source of funds for you:

  1. A line of credit is a flexible loan from a financial institution. A line of credit has a limit, just like a credit card. You can use the available balance as needed.
  • Interest is charged as soon as the money is borrowed. The borrower can repay immediately or according to a predetermined schedule.
  • These loans tend to have a lower risk for banks, so they like to provide lines of credit. The default rate is much higher for credit cards. But, it’s important to qualify because it’s an unsecured loan.
  1. There are many times that a line of credit can be useful. Banks prefer to refrain from making onetime personal loans, especially those that are unsecured. It’s pointless for a borrower to take out several short-term loans over the course of a year. A line of credit bypasses these issues by making the money available as needed.
  • Lines of credit aren’t normally used to make large purchases. They’re mostly used to even out the variability of monthly income and expenses.
  • While a credit card can perform the same function, a line of credit is usually less expensive to use. The interest rates are significantly lower and the payment terms are more attractive.
  • Events or items that require a large cash outlay, like a wedding, are one use for this funding source. Sometimes credit cards aren’t accepted by certain vendors.
  • A line of credit can be part of a bank’s overdraft products. It can be used to fund quarterly tax payments, and it can be a great source for emergency funds!
  • A credit line can also be used to fund other projects with uncertain costs.
  1. Lines of credit aren’t perfect. Like all loans, a line of credit has some potential downsides.
  • Lines of credit have higher interest rates than traditional secured loans like mortgages and car loans. Check with your bank to see just how much you can save.
  • You’ll require excellent credit to be approved for a line of credit. This type of borrowing has higher qualification standards than a credit card or mortgage.
  • Many banks will charge a maintenance fee, even if you’re not using the line of credit. These fees are charged either monthly or annually. In most cases, the interest isn’t tax deductible.

A line of credit is a lending source you can use, if it fits your needs. Borrowing too much or making unwise choices can create the same financial challenges as any other type of loan.

Like any loan, it’s important to be aware of all of the details. Ensure you understand the repayment schedule, interest, and fees. And remember to shop around for the best deal!

Dr. Teresa R. Martin, Esq. is the founder of Real Estate Investors Association of NYC (REIA NYC). REIA NYC (www.reianyc.org ) is a premier real estate investment association serving the New York City marketplace. Its primary focus and mission is “helping our members build, preserve, and harvest multi-generational wealth” in the areas of real estate investments, business ownership and personal development.

Attracting Private Money DISCLOSING RISK

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An excerpt from “The Insider’s Guide to Attracting Private Money: Five Secrets to Fast, Unlimited Capital So You Can Save Money, Buy More Real Estate, & Build Wealth,” by Mark Hanf, President of Pacific Private Money.

When you seek to attract capital from private investors, you need to disclose the risk involved in your proposed project. The reasons you need to do so are several, but one of them is that you are asking people to lend you a portion of their life savings, and they are entitled to know what happens to that money in the event that you exit the picture.

The fifth question we answer in The Five Steps to Money Method™, “What happens if you disappear?” is asking much more than just “What happens if you get hit by a bus?” Disclosing risk is a very important yet often overlooked or ignored piece of the private lending equation.

That is, risk disclosure is often overlooked or ignored by borrowers. Your prospective private lender, on the other hand, is absolutely thinking about the risks of investing with you whether you bring them up or not. And what that prospective lender wants to hear from you is, “What are the risks, and what are your plans if things go wrong?”

You can answer this question by showing your lender how you are structuring your company and what measures you are taking to protect that individual’s investment. For example, who on your team is positioned to take over in the event that something happens to you? If you can address this question and others like it, you will show your potential lender that you have thought this through, and that you take the protection of his or her capital investment very seriously.

The level of detail that you go into when disclosing risk is up to you (with sound advice from your real estate attorney). But the most basic risk disclosure essentially boils down to this message:

YOUR INVESTOR COULD LOSE SOME OR ALL OF HIS OR HER MONEY.

That is why disclosing risk is such an important factor when you create your investment opportunity presentation. Addressing and disclosing risks in your presentation will make you look professional and thorough, just as the other important components that we have discussed so far in this book have done.

Many real estate investors don’t want to include risk-factor disclosures in their presentations because they are afraid that they will scare away their prospective private lenders. They worry that if their potential lender understood the risks, then that person would decide not to invest with them.

However, just sitting back and hoping that everything goes perfectly is not a strong strategy for success. The truth is that many real estate entrepreneurs have ended up in lawsuits because they failed to provide even the most basic disclosure of potential risks.

You should strongly consider engaging a real estate attorney to advise you if you plan to raise capital from private individuals. I am not an attorney, and this does not constitute legal advice. That being said, I have attended numerous real estate conferences and seminars on the topic of private capital, and I have seen many examples of risk disclosures ranging from simple ones to explanations that were long and complicated. As an example, for my mortgage pool fund, I provide prospective investors with a memorandum that includes over twenty pages of risk-factor disclosures.

The fact is that there are basic risks that you should be disclosing to your investors. Those disclosures should be included in any write-up you create for the purpose of raising capital from private individuals.

You don’t disclose these risks to your potential investor to scare them away. You disclose them so that the investor can make an informed decision. Risk factors you might discuss could include things such as:

  • changes in the real estate market
  • cash flow problems
  • conflicts of interest
  • an unproven real estate investing company (if you’ve never done a deal before)

CHANGES IN THE REAL ESTATE MARKET

Your opportunity presentation is based on a set of assumptions. Those assumptions include things like market demand, potential market appreciation, and an estimate of the increase in value as a result of your planned improvements.

However, the real estate market is subject to cycles that can affect the marketability, pricing, and days-onmarket estimate of your project. Real estate can and does decline in value as a result of certain market forces. Rising interest rates, job growth, joblessness, new inventory, and other factors can contribute to a drop in demand and prices for real estate in a given market. Your prediction of how well your proposed project will do should be based on a careful review of local market conditions, but you cannot guarantee that the results you predict will be realized.

CASH FLOW PROBLEMS

You have proposed a budget and a spreadsheet to your lender that shows your sources and uses of funds. But what if you come across significant and unexpected cost increases? Do you have the ability to cover them? Typically, your money partner will not be under any obligation to fund additional costs beyond the agreed-upon budget unless you bring this up in your written agreement beforehand. If the project stops as a result of running out of cash, you could be faced with mounting costs and declining profits as time goes on.

CONFLICTS OF INTEREST

Are you planning to dedicate 100 percent of your time to this one project with your prospective money partner? Or do you have other projects or work obligations that might be construed as “conflicts of interest”? You can make a statement in your presentation that gives your lender notice that, while you are dedicated to the success of this endeavor, you are nonetheless free to pursue other business ventures or obligations, as well.

UNPROVEN REAL ESTATE INVESTING COMPANY

If you are new to real estate investing or if you have formed a new company to pursue real estate investments, you may not have a track record of success. In that case, your business model is unproven.

Changes in the market, cash flow problems, conflicts of interest, and an unproven real estate company are just a few examples of the risks that you may want to disclose to your lender. There are many others that you can identify and include in your proposal to give your investor a complete picture of what the project will entail. A qualified real estate attorney is an integral component to your team and should be consulted to assist you in drafting an appropriate disclosure statement.

I have been telling you to always put the best interests of your private lender first, but the fact of the matter is that a primary purpose of your disclosure statement is to protect you in case your lender chooses to sue you. If you can demonstrate that you disclosed material risks to your private lender before that individual invested with you, should things not work out as planned, you will be much better protected in a court of law.

Excerpted from the book “The Insider’s Guide to Attracting Private Money” by Mark Hanf, available at www.AttractingPrivateMoneyBook.com . Mark is president of Pacific Private Money Inc., a California-based hard money lender who has raised over $200 million in private capital since 2009.

Changing Real Estate Investing HANDS FREE, ANYWHERE

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By Stephanie B. Mojica

The CEO of Southern California-based HomeUnion hopes to turn the business into the Amazon.com of real estate investing.

Don Ganguly, an entrepreneur and chief executive with an impressive record of building successful businesses in the technology and financial services markets, stepped into his role as the chief executive behind HomeUnion this October. Ganguly, who earned an MBA at the prestigious Wharton School of the University of Pennsylvania, serves as a mentor for current Wharton students. HomeUnion was developed alongside three other partners, Ravi, Cpand Nani, all of whom have worked together in two previous successful startups. All four entrepreneurs are engineers with graduate degrees. What also unites them is their belief that the current experience of investing in real estate can be dramatically improved.

Ganguly’s business eyes are tuned in to providing the real estate investor a hands-free experience where HomeUnion eases all the pain points of investing in real estate.

Homeunion will provide flexible investment options. Investors can buy the whole asset or a fractional interest via crowdfunding. “Crowdfunding allows accredited investors to invest in ready-made diversified portfolios,” ganguly explained.

HomeUnion will allow people to invest according to their preferences in a secure and trusted manner.. Investors will finally be able to buy the best investment property remotely regardless of location. Investors can use cash, qualify for an investment loan or use funds from their IRAs.

Ganguly and others running the company only work with properties that they ‘certify’, located in known “cash flow zones” nationwide. Cash flow zones have excellent rental income potential when compared to the price of a single-family home mortgage, a stable job market, and an excellent rental culture, according to Ganguly.

Some of the properties, which investors can add to their general investment or retirement portfolio, are located in Chicago, Atlanta, Houston, Jacksonville, Cleveland, Indianapolis, Austin and San Antonio.

“We are making single-family real estate investment an institutional play where investors can buy this as they would any other stock market instrument. Our platform brings fully vetted investments. This is different from companies that sell opportunistic deals of the month and merely connect people with sellers and collect their money. ” Ganguly said.

Though there are, of course, never any guarantees of absolute success, representatives with the Homeunion firm utilize proprietary methods of selecting the best investment locations. Additionally, company associates work closely with clients to ensure they understand the ins and outs of the current investment and rental markets. Full management service, including collection of rents and upkeep of homes and help with tax documents is offered to all clients. HomeUnion is the only company providing a fully managed investment experience in more than 10 investment locations in the U.S.

“I recently invested in real estate using a self-directed IRA,” said p.k. Neelu. “ I had no idea how to go about this, but thanks to HomeUnion, I was able to navigate the various steps with ease. They are building the real state investment platform of the future.”

To learn more about investing in single-family homes through crowdfunding or other types of means, call HomeUnion at 866-732-3220 or visit www.homeunionservices.com

Bruce Norris and the Norris Group

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By Bruce Kellogg

Who is Bruce Norris?

Bruce is a longtime real estate investor, builder, “hard money” lender, and real estate educator with over 35 years of experience. His history includes over 2,000 real estate transactions as buyer, seller, builder, or money lender.

He was married at 17, and had two children by age 18. He has lived on food stamps, and was fired from five consecutive jobs before entering his present business. He started by flipping houses, and he opened The Norris Group in 1997 as a “hard money” lender.

What Has He Done?

Renowned for his ability to forecast long-term real estate trends and timing, the release of The California Comeback report in 1997 gained him much notoriety. The accuracy of the extensive report led many California investors to financial freedom. His January 2006 release, The California Crash, was an in-depth look into the California market correction and the statistics behind Bruce’s predictions.

Bruce speaks and debates nationally, and has been a guest speaker at the Mortgage Bankers Association, REOMAC, Inman, HousingWire, California Association of Realtors, California Builders Industry Association, California Mortgage Association, the Real Estate Research Council, and several local and national investment clubs, associations, and service clubs. Bruce has met with local and national government officials, including FHA and Fannie Mae, to discuss market solutions and insights.

Bruce has contributed articles to many real estate magazines and newsletters, including The Business Press, Scotsman Guide, Creative Real Estate Magazine, The Orange County Register, RealtyTrac’s Foreclosure Newsletter, AOA Magazine, and The Daily Commerce. He has also been featured in: The Wall Street Journal, Fox Business News, Nightline ABC, The New York Times, Time Magazine, Good Morning America, The Los Angeles Times, Fortune, Mortgage Banker Magazine, Money Magazine, Reuters, The Associated Press, The Tribune, and numerous others.

What is Bruce Doing Now?

Bruce is also the host of the award-winning series, I Survived Real Estate. The events bring together leaders from numerous real estate sectors to discuss legal regulations, stimulus-related issues, and solutions to the current market. The events have also helped raise over $860,000 for charity since they began in 2008.

Bruce hosts the award-winning Norris Group Real Estate Radio Show and Podcast, where he interviews real estate industry leaders, authors, government officials, local experts, and economists. Guests have included representatives from the FBI, the MBA, Freddie Mac, the Appraisal Institute, HUD, Fannie Mae, PropertyRadar, Auction.com, PIMCO, PMI Group, REDC, the National Auctioneers Association, and the Center for Responsible Lending, as well as Peter Schiff of Euro-Pacific Capital, and John Maudlin, to name a few. There are almost 600 shows and 250 hours of free education in the real estate radio archives.

Bruce currently serves on the Executive Board for the Real Estate Research Council of Southern California. He was awarded Educator of the Year by Think Realty in 2018.

What About the Norris Group?

Besides making “hard money” loans in California and Florida, The Norris Group educates investors. Their training is unique in that they created the Quadrant System, which takes a lot of their market timing research and layers buying and selling strategies to the market. Their learning management system has over 60 hours of content, but an investor won’t use all of it at one time. In addition, they consider the investor’s skillset and personality, and can do one-on-one strategy sessions that consider who the person is, where the market is, and how they will most likely best succeed in the business. The Norris Group recommends exploring their free content, like their radio show and weekly real estate news videos, and then explore their VIP Subscription.

What About Bruce’s Market Predictions

Bruce is worried that markets have become hot in California. Affordability numbers suggest we could still experience price increases in many areas of California. We have never had “full employment” and a great economy while experiencing a decline. However, Bruce is concerned about a number of issues including interest rates, and in some markets how hot prices have become. His long-term and short-term outlooks for California differ. He wants investors to really think about protecting themselves in the next few years, and avoid buying into the hype.

The Norris Group in Florida

Bruce has been investing in Florida since Hurricane Andrew. Over 20 years, he and the Norris Group have built houses, done “flips”, and acquired rentals, along with establishing a “hard money” lending business. Bruce exchanged some California properties into new construction rentals over the last four years and expects to see many California investors diversify by using Internal Revenue Code (IRC) Section 1031 to exchange into Florida properties.

The Norris Group offers readers to visit their website, www:TheNorrisGroup, to take advantage of the free items available there.

 

 

An Industry Leader Discusses His Deals

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By Hannah Ash

Larry Goins doesn’t know it all. “When it comes to real estate, the learning never stops,” he tell me. When one of the country’s leading investors pauses for a moment of self-reflection, it’s worth a listen.

“You can learn something from everybody you meet,” he tells me. It’s one of the secrets to his success in real estate; he’s always on the hunt for a way to do it better. “Just this week, I attended two webinars,” he casually remarks. I must admit: I’m taken aback.

For someone who has been engaged in all aspects of real estate since the 1980’s, Larry Goins isn’t full of the slam-dunk advice one might expect; instead, his advice is to ask questions and keep an open mind. That’s what he does, he says. He wants to know how he can do better and wants to meet people who can teach him how; he is full of stories of things he’s learned this week and this month.

For a man who once served as president of the Metrolina ReIA and is a mortgage lender, real estate broker, agent and licensed general contractor, one would think he might just want to rest. Mr. Goins, however, is one of those rare breeds who love what they do so much, it doesn’t feel like he’s working a job. Goins’s work is stacking up success after success and helping others find their own successes along the way.

Mr. Goins has a motto, “People and principles before profits.” When he’s not working, he’s with his family. I ask if they share his interest for real estate. His 17 year old daughter loves equestrianism, he says, “and she regularly takes to the ring, riding in shows”. Goins also has a son and wife. “My 9 year old son is already a hard money lender,” he laughs. When it comes to his wife, it’s not much different, “Pam is a hard money lender too. She also gives of her time generously by leading her church’s food pantry organization.” Both altruistic and driven to succeed, it should come as no surprise that he’s found a way to marry his two loves together; family and success. Following in suit, Goins has seamlessly merged his love of successful real estate investing and his love of educating into a dream job. He works with a large team of professionals who are all as excited about real estate as he is. Based in his scenic hometown of Lake Wylie, South Carolina, The Goins Group focuses on education while his Investors Rehab is all about actively buying and selling a lot of real estate.

A published author, his first book, Real Estate Day Trading, is available in bookstores everywhere. HUD Homes Half Off, his newest release, is available on Amazon and through his website. In his free time, Goins regularly hosts seminars, webinars and gives interviews as a way to motivate other investors to get serious about their money. Goins’ real estate blog is full of well-crafted tips for new and seasoned investors.

An apprenticeship in real estate investment is the best way to describe what Goins and his team offer students. You can’t get a college degree in real estate investing, but, Goins says, “you can latch onto someone experienced whom you trust to start learning.” He and his team, in many ways, operate like a trade school. There are books to read, active mentors, seminars and real-world investing experience through Investors Rehab.

For investors looking to get started or looking for a new edge, The Goins Group aims to serve. Each week, the business advisors Larry trusts to work alongside him in his office, check in with students to touch base, answer questions and provide some motivation. Goins says he too gets on the phone and talks to his students whenever necessary.

The skills his investors learn, Goins says, can change lives. “Real estate is what you make of it”, Goins explains, and his programs work for everyone; his clients come from all walks of life. One of his students, Alon, a pediatrician currently living in New York City, is working with Larry to diversify his investments and bring in some extra cash flow. Another client is a former prisoner who was able to change the direction of his life forever. “Do your techniques work?”, I ask. The proof is in the pudding: the hundreds and hundreds of letters and video testimonials that Goins and his team proudly receive each year say it all. As an active real estate investor, Goins has a simple approach to buying real estate; his philosophy is one that most investors can rally behind, “I buy houses. I don’t get sold houses.” Goins says people often say to him, “Wow! That’s a great deal. Where’d you find it?” goins explains, “I tell them: it wasn’t a good deal when I found it. We created the deal.” Investors Rehab, the investing arm of his business, attracts all types of investors. Whether it’s an investor looking for a great deal or someone he’s mentored, Investors Rehab has no shortage of buyers.

To create such good deals, Goins and his devoted team are always on the hunt for property to buy. He estimates they make a jaw-dropping 2,000 to 3,000 offers a week; they purchase 10-15 properties a month through their office. Once an offer has been accepted, his dedicated team gets three repair estimates and conducts a comparative market analysis. The properties Goins buys and sells aren’t “turn-key,” he says, they are what he has dubbed, “learn-key.”

Learn key? “That’s right,” Goins tells me, “Learn-key means you learn as you earn.” Investors buy properties for great prices that need a bit of work, and thanks to the research the Goins team does beforehand, they know about how much work will be needed before a property is rental-ready or can be flipped. The legwork goins’ team does takes away some of the risk for new investors and is a great help to seasoned investors. “Learn-key properties come with instant equity while turn-key properties come with instant cash flow”, goins explains. He wants investors to get the most equity they can out of a deal. Simply stated, learn key teaches investors to fish whereas turn key gives investors the fish.

Larry Goins, and his career in real estate, stand apart from the rest. His continuous drive to perfect his craft, learn better ways of doing things and new challenges to win is both inspirational and rare. Though his son and wife have an obvious interest in real estate, perhaps his daughter’s interest in horseback riding indicates that she too hasn’t fallen far from the Goins tree either; in both real estate and riding, there are always different horses to tame, new challenges to tackle and techniques that can be improved upon.

“Keep Learning. Take action.” Goins says. Just as in horseback riding, in real estate you can’t go far unless you saddle up and start riding. Since this is an article about a man driven to help others, it should come as no surprise that he’s decided to offer our readers his book about buying HUD Homes Half Off free of charge to our readers. Think of it as a nudge to take action from Larry himself.

To receive your copy, simply visit Amazon or get your free copy via this website: http://freehudbook.com/

Taking Title

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By Garrett Sutton, Esq.

houseTitle to real estate sounds grand. As you think of titles let your mind wander back again to medieval England when titles such as Baron and Duke meant you were part of the nobility and peerage system. And not coincidentally, if you had such a title you also owned land. As our legal systems evolved, real estate title–the means by which you owned valuable property rights – remained ever so important. Because title conveyed power (and with power came corruption and fraud), a system to accurately record the chain of title developed. Over time you had to defend your title with the proper paperwork. The ‘checking system’ that evolved means that there are two steps for the transfer of title.The first step is the granting of a deed whereby the grantor transfers the property to the grantee. An investigation of the sequence of deeds to establish an accurate chain of title is then performed. If the grantor actually has clear title, according to the public records, a policy of title insurance may be issued and the property transferred. (Please note that property can be transferred without title insurance but that most banks won’t take the risk in making a loan without it.)A noticeable break in the chain of title means that the buyer–even though they believe they are the rightful owner–can be subject to the possible claims of others contesting the title. It can also mean that the property is now very difficult to sell, because future potential purchasers don’t want any doubts about clear title.

Accordingly, title insurance is important. Before insuring you against the risk of future claimants, a title company is going to check the public records to see if there are any troubling gaps in the chain of title. If gaps exist they won’t issue a title insurance policy. If they won’t issue a policy you won’t buy the property. It is that simple. Follow their lead. Transferring Title

The specter of title insurance affects the way you will transfer title to property.

There are two ways to transfer title:

1. a grant Deed. this deed (or ‘Warranty Deed’) implies or warrants that:

a. The Grantor (the person granting the property) has not transferred the property before, and that absolute ownership (‘free and clear’ title) is conveyed.

b. Unless the Grantee (the person receiving the property) agrees otherwise, the property is free from any liens or encumbrances against it.

c. Any after-acquired title (ownership that goes to a Grantor later) is also conveyed to the Grantee.

2. a quit Claim. this much weaker deed only:

a. Transfers whatever present right, title or interest the transferor may have. (If the transferor doesn’t have any rights, neither do you.)

b. No warranties are made as to any liens or encumbrances. (So if there are undisclosed mortgages against the property it’s not the transferor’s problem – as it is in a grant deed. Instead, it is now your problem.)

c. No after acquired title is transferred.While often advocated by promoters as the easiest means for transfer, the quit claim deed is not your best choice. First, know that in many bank involved ReO (real estate owned) transactions the ReO lender selling a foreclosed property will only use a Quit Claim deed.

Why is this?

It is because the lender has no idea what happened on the property prior to foreclosure. During the boom documents were not properly kept or transferred, the banking industry’s MeRS electronic recording system failed to keep up with it all, and many documents were just plain lost. This is no way to maintain a good chain of title on the nation’s real estate.

It was so bad in 2009 that a large national title company announced it would no longer issue title policies to two large national banks. These lenders’ records were just not trustworthy, and the title company was not going to take the risk. Know that for years to come there are going to be title issues arising from the real estate collapse in 2008.

It is for this reason that sellers (mainly banks) of foreclosure properties are using quit claim deeds. They don’t know what happened and they aren’t about to warrant or guarantee that they have a clean title to convey to you. The quit claim deed they use instead says, “We don’t know what we’ve got but whatever we’ve got we’re giving to you.”

What is offensive is the lengths that some of these lenders will go to get you to bite on a quit claim deed. They will tell you that it grants you full rights to the property. It doesn’t, because neither you nor the bank really knows what those rights are.

To further get themselves off the hook after taking your money for the property these banks will bury the fact that they don’t warrant good title in an Addendum at the end of a sixty page contract. They want you to waive any rights you may have in the matter. They may or may not know that the title is so defective that the property will be severely devalued. But they want you to release them from any future problems and sign off that everything is okay. There have been reported cases where the Addendum is intentionally withheld and only provided to you at the closing. (You know, at that last meeting at the title office where you are expected to sign 47 documents without reading them.) Accordingly, please be very careful and have your own attorney review such transactions.

The second reason a quit claim deed is not preferred is because the quit claim deed severs an express or implied warranty of title. (Remember, you are just granting whatever you may own which may be something, or nothing.) As such, the title insurance doesn’t follow. While this may not seem like a big deal, let’s consider an example.

garrettYou buy a property in your name. Part of your closing costs includes a policy of title insurance. Several years later you want to transfer title to an LLC for asset protection. Your friend says a quit claim deed is the easiest and quickest way to go. You file the quit claim deed and now the property is titled in the name of your LLC. Later, you learn that the boundaries weren’t properly surveyed. You seek recourse from the title company since they insured the boundaries were correct. But you now learn that by quit claiming the property into your LLC you have unwittingly cancelled your title insurance policy. The boundary issue is no longer insured.

The way to avoid this problem is to use a grant deed or a warranty deed. A title insurance policy isn’t extinguished in such a transfer. As well, a grant deed is just as easy to prepare as is a quit claim deed. But in either case, remember that easy isn’t always best. If you are not an expert at title transfers, I would have a lawyer or title company handle them.

For more information on this and other title matters, please read my book Loopholes of Real Estate or visit: www.CorporateDirect.com

Why do We Seek Security? (And how a Land Trust can help us find it)

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By Randy Hughes,

“Mr. Land Trust”

We all want it, we all need it, and we all look for it in every aspect of our lives…security. We seek security in our relationships, in our personal lives and in our financial lives. But why? What is it about feeling “secure” that makes this emotion the base of all human needs?

Have you ever been out late at night on the streets and found yourself in fear for your life? Or, maybe you have experienced the fear of foreclosure, lawsuits, judgments, liens or financial doom? Sure, we have all felt fear in one form or another, but facing your fears and taking action to reduce or avoid fear is what a mature person does. As a parent, I know it is my job to protect my family from all threats (personal or financial).

Security is the opposite of fear. Our primal instincts teach us to fear the unknown and protect what we have. Because the loss of what we have (or will have) makes us feel insecure. Nobody likes to feel insecure. As real estate investors we think differently than the average citizen. We take on more risk to ourselves and our family for the possibility of a brighter future. Risk and security are opposites. Yet, as investors, we try to balance these two concepts to yield maximum results with minimum loss.

Finding security in your financial life will help you find security in your personal life (how many divorces result from bankruptcy or money problems?). Personal security and financial security are intertwined.

So, what does “finding security” have to do with using a Land Trust to hold title to your investment property? A lot. When you hold title to investment real estate in a Land Trust you do not own the real estate…you own the Trust.

Not holding title to your real estate in your personal name keeps you out of the public records (your Trustee’s name is in the public records instead). Ninety percent of the information gathered about you (and often used against you) is mined through the public records in your town. Always ask yourself before signing any document, “Is this going to be recorded?” And, if it is, try to find another way to proceed.

Should you use an LLC to hold title to your investment property? Absolutely NOT! Yes, I use LLC’s and they are good asset protection devices (as long as they are formed in the right state…which is not necessarily the state YOU live in or your property is located in), but LLC’s are registered with the State and are easily tracked. Putting more than one property into any entity (LLC, Corporation or Land Trust) will create a nexus for a lawsuit. Most (smart) real estate investors will title each of their properties in the name of a separate Land Trust and then make the beneficiary of the Land Trusts their LLC.

Imagine how secure you would feel if you went to bed tonight knowing that you did not “own” any real estate. There are NO benefits to owning real estate in your own personal name…only risks. If you use a Land Trust you will still receive all the same tax benefits, etc. So, if you are feeling insecure and doubtful about owning investment real estate please consider a Land Trust. To reduce the risk of owning real estate and increase your feelings of security, use a Land Trust. You (and your family) will be glad you did.

It is difficult to convey all of the benefits of using a Land Trust in a short article like this. I have been using (and writing about) Land Trusts for the last 37 years.

If you would like to learn more about how to create your own Land Trusts, for FREE training go to: www.landtrustwebinar.com/411 or email me at: [email protected] for my FREE booklet, “50 Reasons to Use a Land Trust” or contact me the old fashioned way by calling 866-696-7347 (I actually answer my  own  phone!)  Randy  Hughes,  aka, Mr. Land Trust™

Finding Residential and Commercial OPTIONS in PROBATE REAL ESTATE

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By Leon McKenzie, U.S. Probate Leads

Whether you are new to the probate business or consider yourself an experienced professional, there are times when you need to take a step back and make sure that your business model isn’t missing a potentially profitable option. Probates, with their deeply discounted prices and motivated sellers, can provide opportunities that you simply can’t find elsewhere. These properties exist in a wide variety of formats, from small residential properties, to dream homes to office buildings, and even strip centers and warehouses. There are many ways to find residential and commercial options in probate real estate.

WHY CHOOSE PROBATES?

In thinking about probate real estate, it is important to understand why so many investors are now specializing in this industry. While there are many options in real estate if you choose to become an investor – everything from foreclosures to working with traditional buyers and sellers – there are few areas that offer the deeply discounted prices and flexible terms that can be found in probate work.

The selling of probate real estate and other property is handled by a court appointed representative, called an Executor. This individual can be a family member, trusted friend or professional, such as an attorney or an accountant. As part of their responsibilities, they have to find buyers for the property that was left behind by a family’s loved one. The proceeds from these sales go to not only the family members, but to pay taxes, court costs, medical bills, funeral expenses, and other items such as past due credit card charges. This property needs to be dealt with in order to pay for these financial obligations.

The process to buy or sell a probate home is much the same as many other types of properties. Brendan DeSimone said, “In a probate sale, the property is marketed just like any other property. The probate attorney or the estate representative will hire a local real estate agent, sign a listing agreement, and show the property, just as they would a traditional listing. Generally, the list price is based upon the listing agent’s suggestions as well as an independent appraisal ordered and issued by the court.” During a private sale, there would be no court oversight, but in a probate sale, there is a need by the Executor to quickly find buyers and get the property sold. This is one reason that the pricing can be so flexible in probates. Additionally, if the Executor lives out of state and tires of coming back to deal with estate issues, they may be willing to take a lower price on a property if the terms are favorable and allow them to wrap up the probate more quickly.

WHY LOOK AT BOTH RESIDENTIAL & COMMERCIAL REAL ESTATE?

What many investors don’t appreciate is that there are far more options in probate real estate than just single family homes. While there are many investors that specialize in residential real estate, there are also ways to profit in commercial land and buildings.

Residential real estate has some obvious advantages. There is more demand for residential homes; and therefore, it is easier to find properties that may fit your investing profile. Investing in a single home is also more affordable as the price point for a residential property is generally less than the investment in a commercial property. Luba Muzichenko writes, “Probate sales are ‘as is’ sales, and… the estate does not have to disclose anything about the property. Does that mean you have to make an offer on the place blindly? Not a chance! You have every right to fully inspect the property. Bring a contractor, bring a friend, bring an architect, bring your mother! It doesn’t make a difference who you bring, just be sure to bring them BEFORE you write your offer. Also, one thing to keep in mind… with your offer, you will have to submit a cashier’s check for 10% of your offer price, payable to the estate.”

There are cases where you can have the property professionally inspected. Everything depends on the laws of the state that you are working in, the terms of the probate and the desires of the court. As you are learning the probate business, take the time to find a mentor who can help you to understand the process of a probate sale. Part of that process is the submission of earnest money. This deposit is traditional in any real estate transaction and applies to both residential and commercial real estate. The amounts in commercial real estate would obviously be higher due to the increased purchase price.

While some investors focus on residential real estate, there are options in commercial properties as well. In fact, one of the most profitable areas in probate is working with commercial real estate. The researchers at Inc., said, “Buying commercial real estate is a complex undertaking that is difficult even for experts to time right to maximize their investment value, let alone entrepreneurs or business executives whose areas of expertise are in different industries. It’s also a venture rife with risk, as buyers, sellers, agents, and renters alike can suffer the consequences of a dip or spike in demand. At the same time, for a business, on the upside the potential rewards can be substantial.” If you are interested in a “substantial” reward, as the authors indicate, then commercial might be for you.

What kind of commercial properties might you find in a probate? If an individual owned a business or was a real estate investor and held them personally, then the properties may end up as part of the estate that is being handled by the court. These properties may include everything from apartment buildings to undeveloped land, strip centers, office buildings, stores, restaurants, warehouses, industrial properties, doctor’s offices and medical facilities to malls and hotels. There is a wide variety of buildings that are considered commercial property with an equally wide range of pricing. Each of these properties has advantages to the investor depending on what your long term goal might be.

One of the best advantages in business property is the increased income potential that is present in commercial real estate. Matt Larson said, “The best reason to invest in commercial over residential rentals is the earning potential. Commercial properties generally have an annual return off the purchase price between 6% and 12%, depending on the area, which is a much higher range than typically exists for single family home properties (1% to 4% at best).”

Knowing that there are both residential and commercial options in probate real estate investing is one thing. Finding them is something completely different.

HOW TO FIND OPTIONS

Probate real estate investors have discovered that there are key ways to find out about residential and commercial options. Here are a few of the ways:

  • USE A LEAD SERVICE. There are professional services that are available that can give you the information you need in order to pursue properties in probate. While you could go to the courthouse yourself and look through documents to try to identify which leads are worth pursuing, you can save yourself a lot of time and frustration by having a lead service deliver that information right to your email. These services are both economical and helpful in that they provide information you might not otherwise find on your own.
  • REAL ESTATE AGENTS. You can work with a real estate agent in order to find a residential or commercial property. Said Muzichenko, “Most probate sales end up listed in the Multiple Listing Service (MLS), but those that don’t are listed on the BlueSheet, which can be found at the California Superior Court in San Francisco. Of course, if you are a buyer working with a REALTOR® that knows you are interested in probate property, your REALTOR® will do the searching for you.”
  • CONTACT PROFESSIONALS IN THE FIELD. As your business develops, you may want to work with local estate attorneys or accountants. They would have firsthand knowledge about properties that may become available due to a change in family status. Building a relationship with them and offering them a finder’s fee can be a great way to add to your portfolio.

THE BEST WAYS TO FOLLOW UP

Once you do find a property that you are interested in pursuing, the next step is to follow up. Generally, probate investors have found that a professional letter directed to the Executor is a good way to start the conversation.

There are several critical components to your communications with an Executor. A short introduction of who you are and why you are contacting them is a good way to start. Adding information about what you do and how you can help them may spark some interest. Inserting a comment about how you found their information, such as, “Your property was listed as part of a search I was doing through public court documents,” will help them to understand that you are simply contacting them to see if they are interested in selling their home or commercial property. Make sure to add in all of your contact information, including your email, website address and cell phone number so that they can reply to your letter.

Understand that an Executor may not contact you after one mailing. Plan to follow up every thirty to forty five days for a period of about six months. These repeated mailings to residential and commercial Executors will help establish you as a serious investor and will be respectful of the many steps that these administrators have to take to close an estate. When someone does reply to a mailing, call them back right away. Once they have made contact, they are clearly ready to have a conversation, so promptness is key.

Finding the best options in residential and commercial probate real estate is a blend of knowing what you are looking for and reaching out into the community. While residential real estate may have a lower sale price, it may also not yield the same rents and income that a commercial property might. Take this into consideration when deciding about your next property.

For more personalized advice, call the team at US Probate Leads. We offer a professional lead service that can get you the most up-to-date, viable leads for the counties that you work in and provide additional support. We offer a wide range of tools that includes communications software, ebooks, webinars, seminars and even an individualized mentoring program. When you are ready to take your business to the next level, call (877) 470-9751. We can give you more information on how we can help you build your probate real estate business.