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Realty411
N
ow is the best time in U.S. I recommend going by the property or
history to take advantage of properties you plan on purchasing during
published for investors by investors the bank-owned property the day on a weekday and again at night
real estate market, get some or on the weekends to really get a feel for
FOUNDER & EDITOR
Linda Pliagas
great built-in equity, cash the neighborhood. In addition, the tenants
realty411guide@msn.com flow and, most importantly, build long- you are going to rent to in these bad
EDITORIAL STAFF term wealth. However, most investors do neighborhoods are going to miss
Carla Fischer not do the right due diligence when payments more, cause more damages to
Lori Peebles purchasing properties or even know how your units, and have a higher likelihood
PHOTO EDITOR to for that matter. So, how does an investor of moving out in the middle of the night
John DeCindis do the right due diligence? Do you need and having their friends steal your water
COLUMNISTS to be an attorney, CPA or other financial heater, AC unit and all of the copper
Dave Lindahl
professional? Well it helps, but it is not piping. What do you do if you have
Charles Salisbury
necessary. If you do not feel you are already purchased in one of these
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Kelly Global Marketing
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818.974.4404

DUE DILIGENCE
StepanMarketing@sbcglobal.net
EVENT & EXPO MARKETING
Lawrence Ruano
GRAPHIC DESIGN
Susan Crowell
Lori Hampton A Step-by-Step Guide by Mathew Owens, CPA & Investor
UNIVERSITY INTERN
Kimberly Valenzuela, CSULB
CALIFORNIA DISTRIBUTION experienced enough to do your homework neighborhoods unknowingly? One way
Professional Distribution Solutions the right way, hire someone who is. The to go is to get a section 8 tenant. They are
1.877.418.6500 extra cost of hiring a professional now will required to take better care of your unit
NATIONAL DISTRIBUTION save you major headaches and possible and you get guaranteed rents. Another
KJ Banks: 805.377.6328 losses down the road. OK, so your saying: way to go is to sell as fast as possible and
DIRECT BROKERAGE DISTRIBUTION “What if I want to do it myself because I even possibly take a loss on it to get out
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do not trust even the most seasoned of the property. It’s better than losing
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professional with my money?” Well get money over your mortgage payment
PUBLISHED & DESIGNED BY
prepared because I am about to take you month after month because of the
Manifest Media Partners
through a step-by-step guide to do the extensive vacancies, bad debt and repairs!
Our Mission is to Educate, Motivate & Inspire
Phone: 310.499.9545 right due diligence on every property
Email: info@realty411Guide.com purchase. MARKET VALUE ANALYSIS
Realty411 is published in Los Angeles, Calif., by Mani- Let me start off by saying one really
fest Media Partners. Publishers are not responsible for NEIGHBORHOOD ANALYSIS important factor you need to consider
unsolicited manuscripts, photographs and/or other ma- One of the biggest mistakes you can make when buying property today: You are in a
terials. © Copyright 2009 by Realty411. All Rights Re- when purchasing property is buying in a
served. Reproduction without permission is strictly pro- declining market! What does this mean?
hibited. Realty411 strives to achieve journalistic integ- bad neighborhood. What is a bad area? It means you need to pay very close
rity; however, the opinions expressed by our colum- When you are walking through the attention to what the market value of the
nists are not endorsed by the publishers or editorial neighborhoods look for crack heads, 30"
staff. Real estate investing can be risky. Before invest- property is TODAY. Not three years ago.
ing in real estate, please seek the advisement of a
rims up and down the street, un-kept Many wholesalers, sellers and real estate
trusted financial advisor, attorney or tax consultant. houses and major foot traffic. These agents will try to sell you on the highest
PRINTED IN THE USA. GOD BLESS AMERICA. would all be pretty good signs you may appraised value ever received for that
Connect With Our Editor Online: not want to buy there. Many investors property. However, you should be buying
just starting out (including myself) have property based on what the current
made the mistake of buying in the wrong financeable value is IF you plan to sell or
neighborhoods and trusted the seller when refinance. If you are buying a property
they say that it’s a “quite family-owned with cash and holding for long-term cash
neighborhood” only to find out that during flow, it is less important if the property
the day the place looks great, but at night
Continued on next page >
it’s an entire different ball game.
www.realty411guide.com Vol 2 Issue 4 2009 | 5

has the right comparables for financing, estate agents and asset managers. We also thought you were getting was not what
but it still is a signification of the current take it one step further and get an appraisal you expected at year end. Many sellers
value of the property. Good wholesalers on every property before we close escrow rely on this downright lie to trick less
and real estate professionals know how as well as pull the property tax assessor’s educated or experienced investors into
to find properties with these requirements tax appraisal as a secondary check-on thinking their return on investment is
and many times you as the investor do not value. As a side note, there are many higher.
know the difference or will never check. properties that are un-financeable and In addition to the cash flow calculation,
In order to get a property financed in look like they have great cash flow on you always want to take into consideration
today’s lending market, banks require paper. However, when you get down to it the tax benefits which can easily increase
appraisers to use three comparable the vacancies, repairs and bad debts make your cash flow return on your money with
property sales within the last six months your cash flow significantly under extra tax breaks. You can even get really
and within one mile. Banks can differ on expectation if not non-existent. All of creative and do a cost segregation analysis
these requirements and personally if a these factors need to be considered when or build green for extra tax breaks, which
property does not have a minimum of six looking at the market value of your is a great way to inch up that return a little
comparables within three months, I would property and which investments to chose on each investment. Also when you are
not buy it if I am going to sell or refinance. from. computing your return on investment
If it takes three months to purchase, there are a couple of different factors to
renovate and sell the property (sometimes CASH FLOW & RENTAL ANALYSIS consider. First, you have your return due
it can take a month just to close escrow) First things first: How do you compute to the cash flow, which is basically your
then you want to still be able to use the cash flow? Most sellers will tell you, rent NET rent after all expenses and the
comparables you pulled when you sell. minus property management, property mortgage payment if you have one. Next
Keep in mind there are many professional taxes and insurance equals cash flow. You you have your tax breaks. Then you have
real estate investors that wholesale as an investor need to watch out. Do not your principal reduction on the loan every
properties, but do not assume you will be be fooled. Always, always, always include year and lastly you have the built in equity
able to find a buyer before you have to a monthly vacancy allowance and monthly when you purchase the property. All of
close escrow. You should have the funds repairs allowance when doing your cash these items should be considered when
ready to close escrow if need be. You flow analysis. If you do not include these you are looking at your return on
definitely do not want the reputation of items on a monthly basis you are going to investment and total increase in
not closing your deals with the local real find that the return on your money you
Continued on pg. 13

I
n the perplexing gious financial institutions including Wells Fargo Bank and
world of residential AmSouth. Green also served as an investment banker working
investments, two closely on retirement ac-
Ryan Hinricher, Chief Marketing Officer
Memphis-based counts at Fidelity Invest-
entrepreneurs, Ryan Hin- ments prior to embarking
richer and Stephen Green, on the launch of earlier
decided to lead the pack start-up companies includ-
and offer a concierge ap- ing Green Financial. He
proach as investment then started renovating
home advisors. This homes for out-of-state in-
“white glove” advisor role vestors looking to own in
concept is unique and the Memphis area.
Hinricher and Green agree While its headquarters
that it’s the future of in- Stephen Green, President are in Memphis, Investor
vestment realty. Nation also has satellite of-
This year, these two ambitious executives launched Investor fices strategically located
Nation, focused on providing investors with a turn-key solution in Orlando, Florida, and
by allowing them to build a diversified investment home port- Portland, Oregon, where

White-Glove Approach Positions
Investor Nation Ahead of the Pack by Carla Fischer and Marie Domingo

folio in the best real estate markets in America. In doing so, each many of their investors live. The company currently employs
investor learns how to make savvy decisions when purchasing, ten people.
renovating and renting investment property. The company’s ob- Hinricher and Green believe that Investor Nation’s unique
jectives are to help the investor maximize the benefits of real “white glove” concept is the future of investment realty. “We’ve
estate investing by offering tailored investment strategies to meet taken the approach of ‘radical transparency,’ meaning we offer
each investor’s individual an incredible amount of due
Investor Nation offers out-of-state investors choice properties.
goals. diligence, from inspections,
To date, Hinricher and appraisals and renovation
Green have sold more than bids,” said Hinricher. “We
400 properties in the last make this process seamless
36 months. As Investor and easily accessible to all
Nation launched, its focus of our investors from our
was on Memphis, but the website.”
company has since ex- Hinricher explains that
panded to Charlotte, North once the investor purchases
Carolina, and Atlanta, a home, the company offers
Georgia, and future re- pre-screened licensed third-
gions will be added. party general contractors
Prior to forming Inves- and management companies
tor Nation with Green, as resources to collaborate
Hinricher held senior man- with the investor, making
agement posts at presti- Continued on next page >


the process pain-free. time. We’ll guide you the whole
Both Hinricher and Green way. Before you even purchase
own investment homes and the home, you will know what
spent years establishing solid needs to be done, how much it
resources and consider clients’ will cost, how you will finance
access to their contacts from the renovations, and who will
their personal Rolodexes is part perform them for you.”
of the white glove service. “Our key focus is working
“Our team becomes your se- for investors who are seeking se-
nior advisor to help guide the cure assets to diversify their en-
investor, locate and screen tire investment portfolio and buy
property as well as help com- two to three investment homes to
plete the transaction,” Green Jim Williams, Charlotte Branch Manager supplement their 401(K) and
said. “It’s an ideal solution for other retirement vehicles,”
anyone currently interested or already involved with investments explained Green.
and who needs a senior advisor to handle time-consuming but Hinricher and Green plan to change the world of real estate as
deadline-oriented projects.” they’re doing their share to revitalize the economy. “The invest-
Investor Na- ment homes we purchase are primarily distressed and foreclosed,
tion identifies so we are revitalizing those homes at a rapid pace and delivering
and introduces a positive impact to local neighborhoods and the economy on a
investors to l a r g e r
third-party scale,”
finance lender Hinricher
specialists said. “The
who are famil- houses we
iar with the in- target are
vestor homes usually
in the desig- three-bed-
nated area. room, two-
Tailored programs for investors, who perhaps don’t always bath homes
qualify within the normal Fannie Mae guidelines, are also of- built after
fered as an alternative method of financing. 1978.”
Terrance Hill, Marketing
“Stephen and I focus primarily on cash flow, based on how Investor
well the economy is doing,” said Hinricher. “Our services are Nation purchases vacant and distressed properties in all the com-
perfect for someone seeking an investment property for the first munities it serves. Investors eventually restore the properties to
some of the best homes in these neighbor-
hoods. This attracts new tenants and posi-

Facts about Investor Nation tively impacts the value of the area.”
While Investor Nation realizes that
the revitalization of homes benefits neigh-
Established to deliver to each in- gies to meet each investor’s indi-
vestor a turn-key solution, Investor vidual goals. Ryan Hinricher and borhoods, members of the company go a
Nation empowers its clients to Stephen Green have sold more step further by donating time and money
build a diversified investment home than 400 properties in the last 36 to local organizations such as Habitat for
portfolio in the best real estate mar- months. As Investor Nation Humanity.
kets in America. In doing so, each launched, its focus was on Mem- “We don’t see ourselves as a sales
investor learns how to make savvy phis, but it has since expanded to organization, we see ourselves as a ser-
decisions when purchasing, reno- Charlotte, N.C., and Atlanta, Ga.,
vice organization serving both the com-
vating and renting investment prop- and other regions will be added
erty. soon. While its headquarters are munities and investors,” Hinricher said.
The company’s objective is to in Memphis, Investor Nation also
help the investor maximize the ben- has a satellite office strategically For more information or to learn more
efits of real estate investing by of- located in Portland, Ore., where about investing with Investor Nation,
fering tailored investment strate- many of their investors reside. please visit: www.InvestorNation.com

Private Money:
The Biggest Power Tool An Investor Can Have
by Dave Lindahl

T
hese days, most real estate great rate of return. Stop and think of the delighted with an eight percent return and
investors are sitting on the kind of negotiating power you’ll have plenty of collateral. That would certainly
sidelines. The daily media when you find a deal and know that you be a far better deal than they’re getting in
drumbeat scares them into can get financing for it. You can drive a other investments.
inaction. If they’re not hearing about very hard bargain when, in effect, you’re Where do you find these private
higher unemployment, they’re told how the only exit with a gas station for the next lenders? They’re all around you. Kate,
many more banks failed and how much 100 miles for a seller who needs to get one of my students, discovered from me
more housing prices have plunged. out of a property. how to do a quick, informal pitch to just
I’d have to say it’s one of the best times You can ethically drive a very hard about everyone she meets. Not pushy, but
to be an investor. You read that right: The bargain with sellers because you need to just matter-of-fact style. Her car mechanic
biggest profits are made when everyone buy the property at an excellent price in had money to lend her! With all the
else is running for the door. Competition order to get financing. After all, your potholes in New England where Kate
is much lower and so are prices. Investors private lenders have two key lives, it’s no wonder that mechanic’s a rich
who are smart right now will be extremely requirements: guy.
rich in just a few short years. Key #1: Private lenders want a high Another great source for private money
I know what you’re thinking: “Yeah, likelihood that they’ll get their money is true “self-directed” IRAs. Warning:
sure. And how am I supposed to finance back. When you buy a deal at a great Most people think they’re in a self-
my deals? At all those failed banks? They price, that’s another way of giving directed IRA when in reality, they’ve been
were bad enough in the good old days, insurance to your lenders that they’ll get fed a pack of lies by their securities firm.
and now they’re not even lending to each their money back. In other words, if they Here’s the scam: The Big Boys on Wall
other.” finance you and later the deal runs Street think we’re all idiots. They are also
You’re right. Banks are a lousy place into trouble, they want to know greedy. So this is how the discussion goes
to get financing now. The superior that the liquidation value of at one of the “Acme Financial Services”
alternative is “private money.” that property will more than off-site planning meetings:
That’s where you arrange a true cover their investment. “Hey, let’s tell our idiots — um,
“win/win”: That’s easy if you bought customers — that we’re putting them into
* You have a property that needs at a great price. the ‘Acme Retirement Security Self-
financing. You’re willing to offer Key #2: Private lenders Directed IRA,’ when in fact we’ll just
an attractive interest rate (or even want a great return on allow them to invest from among stocks
equity) to people who finance their money. Again, we sell them, bonds we sell them, mutual
it. when you buy right, you funds we make commissions on, and
* Those people are sick can afford to give money market accounts we gouge them
and tired of lenders an ex- with. We’ll get our lawyers to put in
earning close to cellent return. really, really small print whatever we need
zero on their At the right to, in order to make it legal. The idiots
money, but they price, your will never know the difference!”
also don’t want property Meanwhile, smart investors would
to take much m i g h t never dream of establishing an IRA with
risk. Private generate a one of these big Wall Street firms.
money is the 10 percent Instead, they establish a truly self-directed
way both par- return or IRA. To do that, they go with a company
ties win. You m o r e . whose only business is establishing IRAs.
get your deal T h e s e Contact me if you can’t find such
done, and your days, your companies on your own. To summarize
private inves- lenders about IRAs: In the course of your normal
tors make a might be conversations with people, just ask if they
Continued on next page 38

10 | www.realty411guide.com Vol 2 Issue 4 2009

Expand Your Options:
Invest in Alternative Assets with Your IRA
by Hugh Bromma rules allow you to take the actual real
CEO of The Entrust Group property as an in-kind distribution. You

O
can also liquidate all or part of the real
ver the past decade, more property.
and more people are
including alternative assets Rules to Live By
in their IRAs as a means to Another thing to consider is the applicable
diversify. Alternative assets laws and rules for the particular asset type.
include anything that is not a certificate For example, a private placement is
of deposit (CD) or publicly traded covered by securities laws and requires
security, such as stocks and bonds. Typical certain disclosures to the buyer. A note is
alternative investments include real estate, a security in many states. Offshore
Photograph by John DeCindis
private placements, equipment, leases, investments require certain reporting
and notes. If you are looking into adding requirements and, in many cases, the owner really own it? Is the private
alternative investments to your IRA, take transactions cannot be made in the same placement really a security and what are
a moment to consider these tips. way as you would for a similar type of the disclosures to be made? If the private
alternative investment in the United placement consists of real property, who
Time and Money States. There are even limitations for owns the property? Is there equipment or
You have a variety of asset types to choose buying assets within U.S. territories, personal property being sold in a
from—some are excellent for the short commonwealths, and possessions. commercial building that generates
term, others might take decades to reap You want to make sure that the person operating income? How is the security
true benefits. So first, you need to or company selling those assets is interest in personal property perfected?
determine your goals and objectives in completely aware of the rules and laws
terms of when you plan to retire or take that apply. So you need to be able to ask Making the Purchase
distributions from your IRA. the right questions so that you know that After you’ve taken your goals into
Your present age is an essential you are getting informed answers. If you account, you know the rule and
determinant of what you are looking for have any doubts, seek a professional who regulations involved, and you’ve done
in growth and income of an asset. A real can help you understand the rules and laws your due diligence, you’re ready to buy
property asset might have more growth for that asset type. Sellers and brokers the asset with your IRA.
potential if you have at least 10 or 20 years should be competent in the area of The process of acquisition is simple:
for the asset to appreciate. The big-picture specialty for the asset that they are selling. You order the administrator for the
view would be to also consider whether They should be able to provide you with custodian of your self-directed IRA to buy
it provides a positive cash flow to your any information or source to address your the asset for your IRA. You do this in
IRA while waiting for it to appreciate. Of questions and concerns. writing by fully describing the asset and
course, time can also cause physical In addition to the specific regulations the terms and conditions of the purchase.
depreciation, so proper maintenance is a regarding the asset type, you should be The administrator follows your orders
cost to the IRA. aware of the rules concerning prohibited completely, provided that you have not
If you have a traditional IRA—earnings transactions and the responsibilities engaged in an obvious prohibited
are taxable at distribution as compared to involved in self-directing your IRA transaction, which should be outlined in
a Roth IRA in which distributions are tax purchases. Your custodian and your IRA adoption agreement. Your IRA
free and not mandatory—you must take administrator should provide you with the is a legal entity and owns the asset until it
distributions when you reach age 70½. So types of permissible investments with is distributed to you or your heirs.
depending how many more years you have your IRA adoption agreement. Your administrator does not give any
until you are required to take distributions, advice about your investment choices.
you might tailor your investments Due Diligence The role of your administrator is to
accordingly or choose to convert your The questions you ask of a seller are part purchase the asset on behalf of your IRA,
traditional IRA to a Roth. Before making of you doing your due diligence for your maintain the records for it, and report the
this type of decision, consult with your IRA purchase. You should never make results to you and the IRS. What your IRA
tax advisor on what works best for your assumptions about an asset or neglect this invests in is up to you, but certainly you
situation. essential step. Some things to ask are: should consult with your advisors,
The minimum distribution requirement Does the asset exist? Does the purported attorneys, or accountants to help you

develop your financial plan, and increase growth, and
select your asset type, and choose what to invest in while
perform the necessary due becoming knowledgeable
diligence. about the choices.
So if you are interested in
Self-direction investing in real property,
For many people, having a precious metals, or private
self-directed IRA means loans, to name just a few
opportunity: opportunity to opportunities, consider estab-
diversify IRA funds into a lishing a self-directed IRA.
variety of assets, reduce risk

purchase and request that you
Due Diligence, pg. 6
pay for the materials cost
WEALTH. Next, you have directly. This takes a huge
your rental analysis. When amount of risk off of you
doing this you want to ask because the contactor then
property managers that cannot hide costs in materials.
manage properties in your Take a look at the large ticket
specific areas; there are items as well. Does the
numerous sites you can go to property need a new roof,
in order to also get an electrical, plumbing, foun-
assessment. Be conservative dation, AC and heating unit?
on the rental amounts as it Look at those major items and
affects your return on any additional items and
investment significantly. compare them item by item
with the inspection report. If
there is anything on the
RENOVATION ANALYSIS
inspection report that is not on
When doing your renovation
the renovation bid, make sure
it is VERY, VERY important
the contractor is aware of it
you have good team members
and is planning on getting it
in place that know how to
fixed. Most people tell me not
renovate property and know
to over renovate. I actually do
how to cut costs. I recommend
a little extra on every
having more than one
renovation to put it above the
renovation team. If you only
rest. What does that do? It
have one team they typically
helps you sell the property
get a little sloppier and the
faster and/or rent the property
price slowly rises over time. If
faster as well, which both
you have more than one team
makes you a more successful
you can switch back and forth
investor. Also, I have found
to pressure them not to
that when you do a better job
increase the price and take
on your renovations, your
better care when doing the
tenants tend to take better care
renovation, or you can go to
of the unit and do not cause as
someone else. There are a
many damages.
million and one ways a
contractor can gouge you, but
CLOSING
if you do your homework, you
So who has ever been charged
can significantly reduce that
extra fees, costs, points or
risk. First thing you can do is
insurance while closing
get a renovation bid, go
escrow on a property? If you
through it with a fine tooth
have purchased one property
comb, and find out what
materials they are going to Continued on pg. 22

by Greg Boots
Manager of TKO Properties and

A
Anderson Business Advisors, PLLC
s an investor in long-
term holds, I know the
importance of making
sure that I am pro-
tected from any
liability exposure associated with my
investment property. The question then
becomes should I use a Limited
Liability Company or a Limited
Partnership for asset protection
purposes with my rental properties?

Having consulted and educated
thousands of investors across the
country, I have seen both LLCs and LPs

LLC or LP?
What Entity is Best to Protect My Rentals?
used to hold rental properties. Both entities are extremely The next distinction is directly related to our tax benefits
well situated to protect properties from unrelated liability of holding long-term properties. As investors, we are able
exposure (called outside liability). However, there are two to capture the depreciation of our long-term holds on our
distinctions that make LLCs better suited to hold rentals 1040 returns (subject to income thresholds). In order to
and lease options. be eligible to capture the depreciation, we must have some
participation in the operation of the investment property.
The first benefit deals with inside liability exposure. This Unfortunately, I encounter many people who have gone to
type of harm occurs within the entity itself and is associated their local attorneys and those attorneys completely ignored
with the property. In a Limited Partnership, two classes of tax consequences and placed the rental properties in LPs
partners can exist: General Partners and Limited Partners. for asset protection. If you place your rental property in a
Limited Partners are able to contain their risk exposure to LP and you are the Limited Partner, you lose your ability
what they have invested in the business because they are to capture your depreciation on an annual basis because a
completely passive investors. As passive investors, the Limited Partner cannot participate in the operation of the
Limited Partners are not able to participate in the business. This is a huge mistake when it comes to tax
management or running of the business. The General planning. However, if you use an LLC for your investment,
Partner is in total control of how the business is to be run. you do not lose the ability to capture your annual
In exchange for the control, the General Partner is subject depreciation because even a passive Member within the
to unlimited liability exposure. Therefore, if a tenant is LLC can participate in the operation to an extent that would
injured not only can the General Partner lose his or her allow for the full capture of the annual depreciation.
investment in the business, but the General Partner can have
all of his or her personal assets at risk as well. The way to When it comes to proper planning for asset protection, be
avoid personal unlimited liability is to use an entity such diligent to ensure that you will not only receive the best
as a corporation to serve as the General Partner. level of protection but that your plan does not hinder proper
Conversely, an LLC has Members and Managers who are tax planning. In almost all circumstances LLCs are the
both protected from unlimited liability exposure if an injury preferred entity to provide not only asset protection for
occurs within the LLC. your investments, but also solid tax planning.


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Five Minutes with Kansas City
Missouri’s Foremost Real Estate Expert

I
nvestors looking for high returns Reedy: Our key is volume. We make a returns can be as high as 63 percent. Our
with a low entry point should smaller profit on multiple deals and leave average flip generates net profits after all
consider investing in the Kansas the lion’s share for our clients. That fees, closing costs and commissions of 20
City marketplace. The area boasts combined with our hands-on approach percent to the investor. We actually have
a stable and diversified economy and attention to detail makes it very easy one client who has made in excess of
and affordable properties with a strong for us to provide the investor with a turn- $100,000 this year alone just on flip
ROI (return on investment). Realty411 key flip or rental property with great properties we have done for him. Now
spoke with Dan Reedy, owner of Missouri returns. keep in mind, this is on value-priced
Real Estate Ex- properties in Kansas

What they’re saying...
change, to get the City. Our average buy
inside scoop on and hold property is
opportunities in about $50,000 and our
America’s “I have had the chance to work with Dan and see how he operates his business. finished flip property
heartland. I have seen several of the projects Dan has done in rehabbing homes for is in the $70,000 to
investors. His work is incredible. I was amazed at the lengths he goes to provide $100,000 range.
Realty411: What the highest quality service at the best price. I would highly recommend Dan to Realty411: What’s the
makes you so anybody who would like to find quality properties for investing.” best way for investors to
informative ~Adam Cazier, Provo, Utah, April 1, 2009 begin the process and
about the real start making money?
estate market in Kansas City? Realty411: Explain your “hands-on” Dan Reedy: They can visit our website
Dan Reedy: First of all, I have lived in approach. at www.morekc.com and look at our
this area my entire life and am very Reedy: Simply put, we handle everything current inventory, see rehab videos, and
familiar with all of the positives and from beginning to end. We find the then call me direct at (816) 564-5265.
negatives of almost every neighborhood property, rehab it, place the tenant and I will walk them thru the process and help
in the Kansas City area. Secondly, we manage on a rental or resell to the end them to determine the best option based
have done close to 1,000 real estate buyer on a flip. The key is having one on what they are trying to accomplish,
transactions since our inception in 2005. point of contact for everything. budget and risk tolerance.
We have also rehabbed hundreds of Realty411: What kind of returns are your
properties for retail and rental and also investors seeing?
mange over 300 properties in Kansas City Reedy: On buy-and-hold properties, our If you are looking for turn-key cash flow
for investors nationally. There isn’t very average ROI is 40 percent. We have a few and flip profits, visit www.morekc.com
much we haven’t seen. very safe, great neighborhood properties or call Dan Reedy direct on his cell
Realty411: That’s a lot of deals! What do that will dip to 35 percent. And, we also phone at (816) 564-5265.
you attribute your success to? work in some higher risk areas, but the

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A
few years back, when real labor into a fix-and-flip and have nothing one thing you are not likely to get, I’m
estate was doubling and to show for it except a loss on their books. sad to say, is a profit. There are too many
tripling in price in How could this be? Simply put, when variables, too many uncertainties, and
neighborhoods all across the it comes to fixing and flipping, time is overall, too much market risk.
country, flipping houses was all the rage. money. Starry-eyed newcomers to real Fixing and
In fact, there was even a TV show or two estate typically underestimate the amount flipping, un-
devoted to the practice, and it featured of time and money it will take to fix up a fortunately, is
people making money hand over fist by property. They also underestimate the not the path to
buying properties, fixing them up, and holding period. At the same time, they real estate
then selling them for huge profits. overstate the amount of money they’re wealth for the

The Truth About
House Flipping by Charles Salisbury, MBA

The concept is nothing new, it’s been going to earn when they finally sell the novice. It’s a risky endeavor that involves
around for years and has always been an property. a lot of work, a lot of time, and more than
option for making money in real estate, While they’re busy underestimating and a good share of luck.
especially for those who are handy. The over-estimating, the bank is busy The bottom line is that real estate is still
idea is that you locate a collecting interest, because as I the very best investment out there. But
distressed piece of said, time is money. The longer house flipping, buying foreclosed
property in a decent it takes to sell a property, the properties or property in probate is not a
or at least smaller the profit and the secret, fast path to wealth.
average neigh- greater the amount of So how can investors make money in
borhood, money the fix-and-flipper real estate without having to paint walls
buy it, fix it will pay to the bank. and replace tile on weekends? By using a
up so that it And then you need to turn-key approach that is disciplined yet
m e e t s consider the risk factor. very effective. If you are interested in
community What if you buy a house learning more about how my team and I
or neigh- today and the real estate invest in real estate, I encourage you to
borhood market turns even lower, so visit my website to read more information
standards, that you can’t even recoup and articles about my investment
and sell it. your initial investment philosophy.
Even in when you come to sell the
these tough economic times, adver- house? Or what if you knock out a wall
tisements abound for seminars that teach in the house and discover, to your horror, Chuck Salisbury outlines the safest, most
the secret to house flipping and help you additional repair problems that are both conservative way to invest in real estate
make your own fortune through the expensive and time-consuming? To in “The Incredible Investment Book.”
process. It sounds great, but I’m here to paraphrase Forrest Gump, a fixer-upper For a free newsletter, please visit:
tell you that more often than not, a novice is like a box of chocolates — you never www.TenPercent Down.com or contact
investor can put a lot of time and hard know what you’re going to get. But the the author at: (949) 910-6028

To paraphrase Forrest Gump, a fixer-
upper is like a box of chocolates —
you never know what you’re going to get.

Top10 by Scott Meyers, CSSM©
Reasons to Invest
in Self Storage
last apartment complex with all those ten-
NOW
percent planned to start a new job. What
ants and toilets and traded them for self do people do when they move? That’s
Like many of you, I be- storage units filled with nothing but... right, they store stuff. Downsizing, buy-
gan my career by build- STUFF! ing a second home, or even a like swap in
ing a large portfolio of My passion, and my company, Self Stor- houses necessitates a need for storage.
single family and multi- age Profits, Inc., www.SelfStorage One economist recently compared the
family properties. I Investing.com, is designed to share my opportunity in this industry to sitting on
spent the first 10 years experience with you so that you may find the oil industry in the 1950s or sitting on
in real estate investment the joy of running your own real estate Silicon Valley in the 1990s!
fighting with tenants business without all the hassles that the 8. Multiple Ways to Increase Value –
and toilets, and it al- traditional real estate investment pos- There’s only so much you can do to a
most drove me into the insane asylum and sesses. house or with apartments that truly adds
bankruptcy court! Chasing tenants that Now, I will share with you the top 10 value, or commands a higher rent. But with
wouldn’t pay, trying to stay ahead of ris- reasons why I decided to sell all my houses Self Storage, you can take a vanilla facil-
ing taxes, insurance, utility bills, and the and apartments and say goodbye to all the ity and create multiple additional income
ongoing, unexpected maintenance calls, tenants, toilets and trash to invest in self streams such as:
almost forced me out of the business. So storage: a. Retail centers that sell locks, boxes,
I began to ask myself, what area of real 10. Endless Opportunities – Contrary to moving supplies
estate could I invest in that could utilize popular belief, the large, public operators b. A truck rental service through a 3rd
the talents and experience I have gained, in the industry only account for about 25 party, or in-house
without all the hassles of tenants and toi- percent of the estimated 51,000 facilities c. A business center that charges for com-
lets? Well, after weighing all options, and in this country worth $22 billion in 2007. puter usage, copies, and fax
after speaking with many of my mentors That means there is a huge opportunity to d. Ebay® Add-it centers where customers
in the industry, I ultimately chose Self Stor- pursue roughly 37,000 facilities that are can pay you to sell their “stuff”
age as the area I wanted to pour my ef- available. Many of these are “mom and e. A pack and ship business
forts into and secure my future. pop” facilities that are already established These additional services can contribute
So after 13 years of amassing a large and cash flowing, and were developed spe- as much as five to seven percent of the
portfolio of single family and multi-fam- cifically to sell off to investors once they total income a facility brings in monthly.
ily apartment complexes, I began to sell were stabilized. 7. Low Operating Costs – With my
them all off and begin investing in self stor- 9. Demand Projections are on the rise – apartments, I was responsible for paying
age facilities. And as most people say once Over 23,000 facilities have been added the utility costs for many of the common
they have found their true calling, I wish I since 2000. But probably the most excit- areas and vacant units, and in some prop-
would have done it sooner! The Self Stor- ing prospect for the industry is the aging erties, the gas and water was on one meter,
age business isn’t without its fair share of of the baby boomers. There are roughly and was included in the rent. I was forced
challenges, however, and I certainly 77 million baby boomers in this country to pay for my tenants’ wasteful use of gas
wouldn’t call it easy. But my life has as of 2007, and they account for approxi- and water. With Self Storage, however, the
changed dramatically the day I sold my mately $2 trillion in spending power. A expenses are minimal to begin with. You
recent poll by will pay for lights in the parking lot, and
the Self Stor- utilities for the office, but those can be
age Associa- monitored, and increases can be easily ab-
tion of a sam- sorbed. This makes budgeting for utili-
pling of Baby ties and other variable costs a breeze com-
Boomers re- pared to properties with tenants and toi-
vealed that lets.
upon retire- 6. Minimal Collection Losses – Forty-
ment, 50 per- seven of the 50 states have a lien law with
cent planned regard to self storage collections proce-
to travel, 40 dures, and the other three provide for steps
p e r c e n t that an owner can take to collect past due
planned to
Continued on pg. 30
move, and 10

Due Diligence, pg. 13 package before purchasing. Get the agreement, void the contract without
in your lifetime you probably have been appraisal, before pictures and video, notice and take over the management of
charged extra. Did you really think it cost inspection report, renovation estimate, the property im-mediately.” This little
$200 to pull your credit report? Well, do cash flow and profit analysis, assessors wording saved me a few times and is a
not feel too badly about it. The fact is report and do your neighborhood analysis great clause to add. Now we have our
that pretty much every single fee, point all before closing. These things are key own in-house property management
or cost on the closing statement is and you do not want to slack off on them company, which is, in my opinion, the
negotiable. So negotiate! Review the or you will find yourself losing money on only way to go once you have enough
HUD closing statement in detail for fees. your investments very quickly. properties in your portfolio.
Some of them hide themselves as “lender
fees, broker fees, loan charge fees, MANAGEMENT CONTINUED ANALYSIS
processing fees, broker origination fees, Property management is the single most Never forget: Your investment needs to
settlement or closing fees, document important factor in owning property. If be analyzed on a quarterly and annual
you do not basis to determine if you are getting the
have good return on your money that you are
Never forget: Your investment needs to be property expecting. Review those statements on a
analyzed on a quarterly and annual basis... manage- monthly basis and contact the
ment in management company with any questions
preparation fees, notary fees, shipping and place, you will have major problems down as well. This helps with decision making
handling fees,” just to name a few. You the road. Make sure you find a down the line and helps mitigate any
also want to make sure on every closing management company that has the right inefficiencies early to increase your
that your closing statements are correct incentives in place. No mark ups on returns.
and reflect the entire transaction and have repairs and man-agement fees only when
FULL disclosure with the lender and the property is rented are two major must- OCG Properties, LLC, helps clients do
seller/buyer. This will get you out of any haves in the contract. I also write in every all of the right due diligence on every
problems down the line and make sure you management contract, “If ever I feel that investment. If you would like to talk real
do not cross those legal bear traps. For the manager is not acting in my best estate, call (424) 757-4680 or visit online:
the closing make sure you have had the interest at any time, I have the right to www.ocgproperties.com. Or, feel free to
time to complete your entire due diligence cancel the property management email: invest@owenscg.com


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RE Club Founder Ponders Meaning of LIFE
A few months ago, wild horses. Again ence: unpredictability, uncertainty, and in-
Bruce Norris was a neighbors gathered security. Worrying about future events is
guest speaker at my around him, offered unproductive. Thinking that we are in
club in Los Angeles. I their sympathy and charge is futile. Believing we can predict
call him Nostradamus told him how unfortu- the future events based on series of num-
because he predicts nate he was. His bers and stats can be detrimental to our
future events based on usual reply was, mental health. What we need to do is to
past performances. “Maybe and who surrender instead of worry. Go on out
He did a fabulous job knows.” A week later, there and do what you do best everyday,
of predicting the fu- the soldiers came and then surrender to Life for the final out-
ture of real estate in drafted every able come. Welcome Life’s challenges, as they
California and the na- male body for an im- are part of your continual growth. Your
tion, but I simply minent war with an- only certainty is uncertainty. And, if you
couldn’t help but re- other country but really wish to have security then seek in-
mind myself that the spared the peasant’s security! One more thing, no matter how
Life I know is highly son. Once again, his “bad” your life is now or has been so far,
unpredictable. His predictions were rather neighbors called him very lucky. The mes- it can turn on a dime and be completely
scientific, based on numbers, graphs and sage here is loud and clear: Every event different tomorrow. As a matter of fact,
stats, but I am not ready to give up my that happens in our life is not to be judged things are never as “good” or as “bad” as
notion that nothing is written in stone. The as good or bad because we simply do not they appear to be. They’re usually closer
nature of Life is not all scientific, you see. know what’s coming next. There are no to the middle, but our judgmental minds
Life is non-linear and follows the Chaos direct correlations between events and no cannot understand the concept of balance.
Theory. This means that although num- one really knows what the future holds. The only catalyst to a better, more fulfilled
bers do play an important part in shaping It’s the same thing with Life. Past does life is your knowing that you’re protected.
our decisions, no one knows for sure not equal the future. You can make all the The more you come to peace with your-
what’s in store for us in the coming months predictions you want but Life remains self, the more you look at Life as a play-
or years. Chaos Theory, which is popu- mysterious and people are unpredictable. ground, the more you project positive
larly referred to as the Butterfly Effect (a Who’s to say California real estate won’t thoughts, the more you realize your seren-
butterfly flaps its wings in the Amazon, make a full recovery in one to two years.
and two years later there’s rainfall in Kan- I know stats state otherwise, but no one
sas) simply states: The only prediction you knows what Life will bring tomorrow. It’s
can make about anything is that it’s un- entirely possible that lower home values
predictable! in our state could bring in thousands of
In essence, things are not directly caused people from all over the country and the
by other things. Life is not boring and globe to miraculously turn things around
translucent; instead, it’s marvelous and for us. After all, Life is a field of all pos-
mysterious. The mysterious nature of Life sibilities. This is what Werner Heisenberg,
is what allows the future to be wide open a renowned German quantum physicist,
regardless of what the past looked like or called the Uncertainty Principal. My point
what the stats tell us. My approach to is that you can very possibly shape your Hundreds of members visit monthly.
Life’s events is this: “Maybe and who future based on your decisions today. ity is in your surrendering and not fight-
knows.” It reminds me of an old story of Likewise, I know our country is in a lot of ing with Life, the quicker you’ll succeed
a peasant whose only horse ran away and trouble now and many feel that our sys- in all areas of your life. So, play the game
left him without any means to make a liv- tem might eventually collapse because of like a child and you will enter the King-
ing. His neighbors called this event very corruption in the government and our mon- dom of God, Universe, Nature, Life, or
unfortunate. The wise old peasant’s re- etary system, but we could very possibly whatever else you wish to call it.
sponse was a simple, “Maybe and who change the course of future events by our
knows.” A few days later, the horse re- thoughts and deeds today. Best regards,
turned with another ten wild horses in tow. Life has a mission of its own. Life is Sam Sadat
His neighbors flocked to his place and non-linear. Life is mysterious and unpre- Founder and president of the National
called him the luckiest man on earth. His dictable. Life doesn’t follow our limited Club of Real Estate Investors and the Los
usual response was, “Maybe and who human perspective. Need I say more? Angeles Real Estate Investors Club, visit:
knows.” A few days later, the peasant’s So, I highly encourage you to come to www.ncrei.com and www.lareic.org
son broke his leg while riding one of the grips with this facet of our human exist- Email directly: sam@samsadat.com

Bank on Land by Bonnie MacKinnon

A
s a long-time reader of MONEY FOR LIFE
Realty411, it is a thrill Invest in stocks, and you’re
to contribute some- investing in the principals of
thing to this publication. Just the company and their finan-
like most readers, I am an cial savvy and common sense.
investor. I have several parcels If they make the wrong
in Palmdale and Lancaster, decision, your money gets hit.
which are growing areas Invest in a rental property,
outside of Los Angeles, Calif. and you’re relying that a set of
I’ve seen my parcels grow people from property
tremendously in value in the managers to cleaners to rental
boom years and hold steady in personnel are all communi-
more recessive times. I have cating and coordinating
tried other investment ve- effectively among themselves
hicles, like the stock market to make sure the renters are
and rentals, but I always come taken care of.
back to land as being the best Nope, give me something I
and most hassle-free way to can understand and control,
make my money grow. There’s and I’m a happy camper. Give
a common saying: “Sometimes me Los Angeles County with
it’s easier to make money than a population of 18 million
it is to keep it.” people. Give me an economy
Boy, have we all learned this that’s the 11th strongest in the
lesson over the last six months! world. Let me stand back and
As the stock market dropped watch people migrate to Los
to levels not seen since 1990, Angeles because of its
I stood by comfortable in the financial opportunities and
fact that my money — both then migrate to Antelope
cash and IRA funds — were Valley for its space and
safely secured in land. affordability. Give me land.
My stock market invest- Lastly, I was talking to a
ments have taught me a lesson: long-time resident of Palm-
It’s one thing to make money, dale. He’s seen the effects of
but you have to hold on to it the growth and popularity of
and, even smarter, to make it the area with retailers and
grow. businesses over the past 40
Another thing that I appre- years. I mentioned to him that
ciate about investing in land is I had a nice 10 acre parcel on
the fact that it earns its value the east side of Lancaster at
based on truly organic 35th St. East and Avenue F.
elements: population expan- “Just wait,” he said, “In 10
sion and time passing. years, you’ll be downtown.
How many times have we You’ll be sitting on a gold-
made an investment in which mine.”
the results were dependant on That type of care-free
some person or set of persons investing sounds good to me.
making the right decision?

Live Where You Want,
Invest Where it Makes Sense
by Kathy Fettke thing.” While that’s a tall order, most people are finding that
cash flow today is better than the hope of appreciation in the
The old adage, "Invest in future. The economic crisis we face today is different than
your own back yard" is still other downturns. An asset bubble collapse can last much longer.
true. But in today’s informa- The Great Depression in the U.S. and the asset collapse in
tion age, our back yards have Japan in 1989 are examples of this. It has been 20 years, and
become much larger. Japan has still not recovered. Ask investors there if they would
Through Google
maps, we can
visit any location in the world at the click of a but-
ton. We can research MLS listings nationwide. And
with direct flights, we can be in another state in
just a few hours.
I live near San Francisco, where the median
home price is $656,700. Median rents are $2,234
for a typical 3/2 home. Median income is $63,393.
In a city like this, it clearly makes a lot more sense
to rent than to own. And the only reason an inves-
tor would buy in this city would be for the poten-
tial appreciation — not for cash flow.
Let’s compare rentals in San Francisco to Dal-
las. In Dallas, you can expect to get at least 1.2
percent of the purchase price in rents: a $100,000
property would bring in $1,200 in rent. You could
buy six and a half of these for one home in San
Francisco. The rental income in Dallas would be over $7,300 have taken cash flow over appreciation. The appreciation never
per month, compared to the $2,234 you’d get in San Fran- happened.
cisco. That’s a $60,792 difference in annual income! After 10 The biggest hurdle investors need to overcome when in-
years, the difference is $607,920. Many people will hold out vesting in cash-flow markets is the worry that their property is
for the possibility of the San Francisco property doubling in so far away, and “out there on it’s own.” While this would be
value over 10 years and worry that Texas properties never tragic, it does not have to be the case. Good property manag-
appreciate. What they fail to see is that income can be just as ers are the key. Real estate is a business and must be treated as
lucrative as appreciation, but it’s less speculative. such. All good businesses rely on delegation. Real estate in-
In today’s economy, investors are looking for the “sure vestors are no different. They hire teams to help them suc-
ceed, and a good property manager is one of the team mem-
bers.
Therefore, live where you want (even if it means renting)
and invest where it makes sense, in areas with affordable mar-
kets with high job and population growth as well as landlord-
friendly laws.
For more information about Kathy Fettke, please log on to:
www.RealWealthNetwork.com.
Real Wealth Network helps investors build their teams. As
the network grows with investors sharing information, our
list of tried and true real estate professionals also grows. Mem-
bership is free and access to this list is available to those who
ask and includes CPAs, 1031 exchange companies, asset pro-
tection specialists, property managers,wholesale property sell-
ers, and turn-key property networks.

Birmingham
Market411
Affordablity and High Returns
Make this Southern City Shine
Thinking about heading South to expand your portfolio? Regionally speaking,
the South is leading the nation in economic stability and growth. This booming
and stable region provides investors with a low entry point (Investors can buy
with as little as $1,500 down.) and outstanding returns. How does a cash on
cash return of 400 percent sound? Here are some other reasons why Birming-
ham, Alabama, is attacting investors from across the nation. —Realty411 Staff
Inside Scoop on Birmingham
* An Old City Embraces a New Economy * This vibrant city is gaining attention
as being a key market for investors.
* Birmingham's economy 40 banks in deposits and • CNN/MONEY named Birming-
was transformed by invest- assets.
ham, Ala., the 10th best overall real
ments in bio-technology * Telecommunications pro-
estate market in the nation.
and medical research at the vider AT&T, formerly
• Birmingham is the third best cash
University of Alabama at BellSouth, has a major pres-
ence with several large
flow market in the United States,
Birmingham (UAB) and
offices in the metropolitan area. according to Nuwire Investor.
its adjacent hospital. UAB is now the
area's largest employer and the largest * Major insurance providers (Protec- • Relative to all metro areas exceed-
in Alabama with a workforce of about tive Life, Infinity Property & Casu- ing one million persons, Birmingham
20,000. alty and ProAssurance, among others) has the lowest unemployment rate.
* After Charlotte, NC, Birmingham is are headquartered in Birmingham and • Birmingham is the third fastest
the South’s leading financial center with employ a large number of people in growing real estate market in the na-
headquarters to three of the nation’s top greater Birmingham. tion, according to CNN/MONEY.


LAND BANKING
A Real Asset
Predictable - Profitable
Smart - Simple - Safe
• A stronger alternative to traditional markets
• Excellent placement for cash, self-directed
IRAs, old 401(K)s
• Customer receives a grant deed, fee simple
ownership and title insurance

“A Proven Formula for Building Wealth Since the 10th Century.”

Numerous Advantages to
Land Banking exist, such as:
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• Risk is minimal, not relative to
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• No management or maintenance
• 1031 exchange
Add Land to Your Investment Portfolio!

ACE CAPITAL GROUP
Lou Meza
Affiliate Land Consultant
9454 Wilshire Blvd., Ste. 600, Beverly Hills, CA 90212
Cell: 562-945-3510 • lmeza@ace4wealth.com
www.ace4wealth.com

Those Insurance Villains!
by R. Michael Wrenn, President and CEO of Renovator’s Insurance

L
et’s talk about those Insur- a good friend too in your agent. If you
ance Villains. You know, don’t, you’ll probably always be talkin’
those agents and companies about those Insurance Villains. So, here
that take your money and we go, and pay attention...OK?
then never pay a claim due 1) Find an agent (preferably one with at
to the fine print! I just don’t know how least three years experience) who you like and take as much risk as you can afford to
they get away with it, and if I didn’t need and trust and knows about the issue of take; choose those higher deductibles. But,
that darn stuff, I wouldn’t even buy it! vacancy in the various property insurance do not fail to buy all the liability insur-
Those fast talkin’ no good…scoundrels. policies…and the Insurance 101 issue of ance you can afford as this is where some-
I guess after 35 years in this business, I replacement cost and actual cash value one takes you out if you have none and
have heard it all…even a thank you or two. coverages. Tell him or her exactly what someone is hurt or receives damage to
I developed a program that today insures you do and then tell them exactly what you their property where you might be negli-
over 4,000 locations for investment prop- know about insurance. Next, rely on that gent. (You know, negligent…it’s where
erty owners and rehabbers. We started this agent to educate you on just the basics over you didn’t take out that dead tree and it
with about 32 HomeVestor franchisees in the next say six months. Go to lunch or fell on your neighbor’s car or house…or
1999, and now we have over 600 clients breakfast a few times during this period that hole you failed to fill in, but the
nationwide. I know you investors very well and just talk about YOUR business. They neighbor’s kid found, fell into and broke
after 10 years. Busy, busy, busy, you are will usually buy too! his neck.)
for sure! You’re running around doing 2) If after six months you don’t sense they This is really simple enough, don’t you
deals and taking for granted the insurance know anything or they don’t care about think? And, oh, if you buy based on price
you’ve placed on your prized developing you, then fire them and start the process only, you might want to take all the whin-
assets. I know you almost better than you all over. You have no time to invest on an ing about those Insurance Villains and
know yourself as it relates to your con- agent who doesn’t “get you” or seem to make it into a song! Remember the old
sumption of time and energy and atten- care enough to “get your business” and its adage: You get what you pay for.
tion or focus on insurance policies, and unique needs. The biggest issue of all is finding that
their appropriate coverage on your rental, 3) Explain your risk preference and abil- agent who really cares. If he or she really
renovation or vacant properties. I’ll go ity financially to handle higher deductibles cares then everything else will generally
even further: You don’t know much about in the event of a loss. Then tailor the pro- work out just fine.
your risks. But, one thing you need to gram you buy to your personal risk level,
know is: If you make a
mistake on this, it could
take you out of the game.
So, you’ve had a
claim and it wasn’t cov-
ered, surprise, surprise.
But, you know, maybe I
can help you with that.
Maybe I can give you
some good, sound ad-
vice that can save you
money and may even
lead to a claim being
covered and paid…it
just might even save
your little bottom (line)
sometime!
If you’ll take my ad-
vice you can exit this
business at retirement
with a valued relation-
ship and probably even

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Realty411 Magazine Real Estate Investing Guide

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