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Turn-Key Rentals
Around the Nation
Cash Flow from the
Comfort of Home
Mathew Owens, CPA, owner of
OCG PROPERTIES
Buys & Rehabs
Rentals in Tennessee
from Redondo Beach
Get the Deals DONE
Learn Creative Real
Estate Techniques
from Dave Lindahl, Dolf de Roos,
Bruce Norris, Bill Gatten & more!
Look Inside
New guidelines affect every sector of our industry. In a climate ripe for both miscalculation and
profitable advances, how are our colleagues and partners navigating an industry in continued
transition? Our Who’s Who Round Table Includes:
Last year, I Survived Real Estate 2009 focused on the dramatic shifts in regulation facing our industry. This year, our
panel separates fact from fiction as we delve into the health and sustainability of the current real estate market and the
opportunities that lie ahead for hungry real estate professionals.
To find out how you can participate as an individual or potential sponsor, see the back of this flyer or visit ISurvived2010.
com for more information. Seating to this formal dinner event is limited, so go to the website or call our office today.
Thanks you to all our Platinum and Gold Sponsors and friends for making this unique event a possibility.
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published for Investors by Investors
A
by Dave Lindahl
$5,000…$10,000 or More
Dave Lindahl
Charles Salisbury
ADVERTISING
I
by Carla Fischer
If an investor buys a Triple Net House, they know exactly what their
cash flow is going to be for the next 10 years. They never have to deal
with tenants and never have to deal with or pay for maintenance.
overcast. We’re going to get some rain later age the property so there’s no management. is this: A tenant occupies a three bedroom,
on, which doesn’t mean a thing for our in- Investors will never have to deal with a ten- one bath home, 1,100 square feet, with a
vestors who are from all over the country. ant and never have to deal with or pay for one car garage, for $700 a month. Many
The weather rarely has anything to do with maintenance,” Julian explains. homes are brick with full basements, some
our business, unlike the Wright Brothers.” The company offers a 10-year NNN are ranch houses built in the late ’50s.
Julian shifts to business quickly explain- (triple net) lease. If investors want to ter- Dayton is home to the largest single
ing how he created a NNN (triple net) in- minate early, all they have to do is provide site employer in the state of Ohio: Wright
vesting model, which is traditionally only a 60-day written notice. There is no penalty Patterson Air Force Base with 26,000 em-
found in commercial real estate transac- and the investor still owns the property. ployees. The city also has two universities:
tions. “It’s a turn-key investment. It pays a Wright State University with an enroll-
“I’ve been a real estate broker for a little high yield and we’re able to buy houses at ment of about 18,000, including a medical
over 30 years. I’ve worked with investors low cost and rehab them economically. We school. Next is the University of Dayton,
my entire career. When I talk to them, most then pass that deal on to an investor, as a which enrolls over 10,000 students and
like all the good things about real estate, totally turn-key investment. Their total in- also offers a law school program.
like the cash flow, the tax write-offs, build- volvement after the investment is to collect As far as the financials, a Triple Net in-
ing-up equity, and potential appreciation. a payment from us each month, which is vestor can realize up to 17% return on each
But when potential investors get to talking electronically deposited into their checking house.
about managing, they’ve all heard the hor- account. It’s a perfect storm.” “If the investor pays cash then they
ror stories about tenants, maintenance and When asked how Triple Net Houses can will receive 9.1%.” Julian explains fur-
all those kinds of things.” provide guaranteed returns for investors, ther: “For example, if they have a $60,000
So Julian and his team came up with regardless of what is going on with their house the investor will be receiving $5,460
a unique solution. It’s basic and simple, property, Julian replies: “We’re very care- a year, which is 9.1% of the purchase price.
even though it tackles a complicated con- ful in selecting properties in neighborhoods Continued on pg. 47
cept. The Triple Net Houses program where we know the rents are going to be
L
ast year, while working as a pan- Ginger: What did you do before you
elist at a local real estate invest- became a full-time real estate investor?
ment club in Los Angeles, I had What is your background?
the pleasure of meeting Mathew Mathew: Let’s see, I grew up in the tiny
Owens, a certified public accountant and town of Los Angeles and graduated from
owner of OCG Properties. I was so im- the University of California, Santa Bar-
pressed by his experience and work ethic bara, with a degree in economics and an
that I invited him to partner with me on emphasis in accounting. Afterwards, I was
syndicating real estate projects. able to achieve one of the accomplishments
Having worked closely with him for al- I am most proud of, passing all four parts
most six months now, I can say that he’s the of the CPA exam in one sitting, a feat only
real deal and you’ll be in for a treat if you 10% of candidates have been able to do.
get the chance to work with him. Mathew After passing the exam, I worked as a
has many strengths that make him a great CPA, auditor and business adviser, help-
partner: integrity, organizational skills, ing my corporate and individual clients
and real estate and investment proficiency. increase their bottom line, helping them
Plus, he’s very likable. find fraud risk factors inside their business
I have met a lot of people in this business, systems and auditing their accounting re-
and I expect great things from him in the cords.
coming years. I guess that is why I am so good at do-
I recently sat down with him to ask about ing due diligence on real estate transactions
his real estate investing strategies and the now. The accounting and due diligence
current projects he’s working on out in Ten- skills are a perfect match for a real estate
nessee. Mathew has purchased, renovated, investor, I just had to adjust my personality
and sold or held more than 100 investment to be more outgoing and personable, which
properties in the last three years alone. most CPAs are not known to be. Being in
Below is a partial transcript of the inter- the real estate industry as a full-time inves-
view I had with him. tor, I am finding it is rare to find a CPA who
understands the tax and legal implications
Ginger: Mathew, in your own words, of investing and the real estate investment
what exactly does OCG Properties do? side in detail.
Mathew: In a nutshell, we help people in-
vest in real estate. At OCG, we sit down and Ginger: So tell us, how did you get your
go over our client’s financial situation and start in real estate?
resources to help them find the best ways Mathew: I started investing about five
to invest and meet their individual goals. years before I decided to take some real
With good in-house management in place, estate education courses and quit my cor-
you can hold for long-term growth and re- porate job cold turkey. I found that the skill
ally get a great return on your money. On sets I gained from working at CPA firms
top of that, the price points are low enough were hugely valuable, and I still hold the
that you can buy with cash and not even partners of those firms with the upmost
have to deal with financing. Talk about low respect for what they taught me, the eth-
risk! ics they instilled in me and the guidance
We help our clients achieve great returns they gave me. However, the skills that I
on their money while doing all of the due have developed running my own company
diligence on every investment. We bring a are unparalleled to anything I would have
ton of real estate experience to the table and ever expected. While working for myself,
help our investors every step of the way. I started flipping and holding properties >
T
Never Miss an Issue!
he ten years ahead of us will be cant inflation soon. Experts argue that de-
Realty411
Realty411 Wealth Real Estate
extremely difficult for investors. flation is the bigger risk. While that may
th
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Yield and growth will be scarce, be true, it does not make inflation any less
www.realty411guide.com | Vol. 3 • No. 2 • 2010 A Resource Guide for Investors
Turn-Key Rentals
but much worse will be the four destructive when it starts nibbling at your
Around the Nation
Cash Flow from the
Comfort of Home vampires waiting to suck the life out of investments.
almost every investment you consider. In
Mathew Owens, CPA, owner of
OCG PROPERTIES
Buys & Rehabs
Rentals in Tennessee
from Redondo Beach
Look Inside
Get the Deals DONE
Learn Creative Real
Estate Techniques
from Dave Lindahl, Dolf de Roos,
this article, we will meet each vampire in- Garlic to Protect Your investments from
dividually, understand how they drain your the Inflation Vampire
Bruce Norris, Bill Gatten and more!
FREE
Wealth Celebrating the Largest
Report! Issue with More Pages &
Opportunities than Ever!
Carter: Hello, Dolf. Tell us about what Dolf: I like being on the cutting edge of cloud, you can access your portfolio’s de-
you’ve been doing lately and give inves- what is available. I have always done well tails from any computer connected to the
tors your perspective on the market. with new technology. When fax machines Web. Before long, most services will have
Dolf: Well, Carter, although the media re- came out, it saved us thousands of dollars a that feature, but by then The Property Led-
peatedly states this is the worst real estate year in courier fees. ger will have innovated yet another area.
market we have seen in decades, it is only Now, we don’t fax; scanned attachments Surfing is so much easier one foot ahead of
the wave than one foot behind.
Furthermore, having all the details of
“... with the information stored in the cloud, a property, including title documents,
HUD1s, leases, management agreements,
you can access your portfolio’s details from and the like, stored in one central reposi-
tory is simply a great way to run your prop-
any computer connected to the Web.” erty investment business. Once you have
experienced it, it is difficult to revert back.
It would be like going back to using slide-
the worst market if you are in the unfortu- are better quality, in full color and don’t rules, or for those readers not old enough to
nate position of being forced to sell. If you require an outdated phone system to get remember what they are, the curly-paged
are in the fortunate position of being able through to a recipient. and faded fax machine — if they even re-
to buy, then by definition, this is the best When I come across people in the real es- member that!
market we have seen in decades. tate industry who do not use email, and in-
With that said, there are still many who sist on using faxes exclusively, I think they Carter: Since you travel often, are the
have trepidation about entering our current must miss out on deals because of their features of Electronic Library useful?
real estate market. This has forced me to go aversion to new technology. I do not want Dolf: Absolutely. In fact, more and more
overseas. There are many countries right to fall into that trap. The Property Ledger companies are trending towards cloud
now experiencing the peak we saw a few is cutting edge, extraordinarily useful and computing. Clearly, it is convenient to
years ago so they see the relative merits of easy to use. Why would you not use it? be able to access all the relevant data on
bringing their money to the United States a property from anywhere and not have
and investing here. Carter: What benefits are provided by to be concerned with taking up space on
The Property Ledger, which other prod- your own computer, keeping data in sync,
Carter: Why did you become interested ucts do not provide? having the data concerned fall into strange
in The Property Ledger? Dolf: With the information stored in the hands in the event of a computer loss, in-
Realty411Guide.com PAGE 16 • 2010 reWEALTHmag.com
stalling upgrades, etc. It is all done for the investments regularly, with real estate, you simply the income divided by the invest-
end user. can buy a property and put the title in a bot- ment. With real estate, since you only need
tom drawer, take a six-month cruise, and to come up with a small portion of the pur-
Carter: Why is it important for investors not worry if you should sell the property chase price in cash, the cash-on-cash return
to monitor the financial performance of again. However, it is comforting to be able becomes very important and, dare I say
their real estate portfolio? to put your finger on the pulse of how your it, interesting. It is an advantage inherent
Dolf: Interestingly, it is important for inves- investments are performing. in real estate investing that is often over-
tors in stocks and commodities to maintain looked by financial advisors.
a vigilant eye on their volatile investments Carter: What is your favorite financial
so that they can jump ship if the ship starts calculation when analyzing your proper- Carter: What type of investment do
to sink. With real estate being a much more ties? And why? Here are the choices: you favor right now and why?
stable investment, much of the interest in •Gross Rent Multiplier Dolf: When it comes to residential property,
monitoring your portfolio is just that: inter- •Cash-on-Cash Return on Investment I prefer the single-family home. However,
est. However, if you want to know when •After Tax Cash-on-Cash Return for the last two decades, I have personally
you can invest in yet another property, •Internal Rate of Return focused on commercial real estate. That
based on cash-reserve build-up, equity po- •Return on Equity doesn’t mean I haven’t invested in other
sition, available collateral, etc.), then you Dolf: I like to analyze based on cash-on- sectors but the benefits of commercial real
want to have the up-to-date information cash return. This calculation shows you estate for the property owner are incred-
available instantly. The Property Ledger how the cash you are putting up is perform- ible. Here are just a few of the benefits:
provides just that when you need it. ing. It is the prime indicator of how you 1. The leases tend to be much longer —
can truly leverage your money. What other anything from three to twenty years. They
Carter: How often should an investor investment allows you to get a $100,000 are generally secured by the business, with
track the financial performance of their asset for only $10,000 or $20,000 in cash? the owners offering a personal guarantee.
real estate portfolio? For most investors, you can’t buy 2. Commercial tenants tend to maintain the
Dolf: As often as they feel comfortable. $100,000 worth of stock or gold or oil property better as the look and condition of
One of the advantages of real estate invest- without coming up with the entire pur- the property is important to their business.
ing that I often tout is that unlike the stock chase price in full. When you put up all the
market, where you have to monitor your money to buy an investment, the return is Continued on next page
Dolf & Carter, pg. 17
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Maverick Investor Group
Scours the Globe for the
Best Investment Properties
Interview by Linda Pliagas
W
ith a name like Maverick, one
immediately expects the unex-
pected. Real estate with a hip
and a bit of a rebellious twist.
Maverick Investor Group delivers all that
and more. It is a real estate brokerage that
caters to a community of sophisticated real
estate investors and agents, all of whom are
committed to using real estate as a vehicle
for designing their lifestyles. The broker-
age is licensed with its primary office in
Las Vegas, but the Maverick principals all
live in different states, work from laptops
on rooftop pool decks, and travel the globe
in search of premium buying opportunities
for their exclusive clientele.
Maverick negotiates directly with devel-
opers and owners for prices and terms that
are not available to the public. The buying
power of the Maverick community enables
developers to move more properties in less
time and save money on advertising, mar-
keting and other normal overhead. This al-
lows them to offer special prices and terms
to buyers in the Maverick community that
they could not offer to the general public.
Indeed, the traditional brick-and-mor-
tar neighborhood brokerage dedicated to
farming a five-mile radius, driving buyers
around and sitting at open houses seems
like an archaic business model next to
Maverick.
Even more avant-garde than their busi-
ness model is their corporate vision: “To Mark Solak Valerie Schrock Matt Bowles
radically improve people’s lives through close as many as 34 transactions and pay the international component, is just a con-
real estate.” out nearly a quarter of a million dollars in tinuation of the global lifestyle enjoyed by
And their radical approach to real estate buyer referral fees to real estate brokers in its principals. The company was founded
is working. Even during 2009, in a single the Maverick Referral Network. by Mark Solak, Valerie Schrock and Mat-
90-day period, the company was able to Maverick’s business model, including thew Bowles — real estate investors >
Seaside Mariana Spa & Golf Resort features the first Jack Nicklaus Signature Golf Course in Nicaragua.
Q: How did the three of you become busi- and announced to the world that Maverick of real estate investors and agents who are
ness partners? Tell us a bit about how Investor Group was born! focused on using real estate as a vehicle
Maverick Investor Group formed? for designing their dream lifestyles. We
MB: Well, Valerie and I met in graduate Q: The Maverick partners live in differ- show our clients how to do what we do.
school in 1999. We both got master’s de- ent states — Matt is in Los Angeles, Valer- You will notice that we have a section on
grees in International Peace and Conflict ie is in Washington D.C., and Mark lives our website that discusses “real estate life-
Resolution and then worked in human between Chicago and Las Vegas. That is style design” in great detail, down to the
rights advocacy in Washington, D.C., for pretty incredible! How did you decide to specific technology products we use. Real
several years. We started investing in real structure your company like that and how estate investing is only a means to an end…
estate on the side, reading books about it does it affect your business? it’s always important to keep your eyes on
and learning by experience. Soon we had VS: We were intentional about structuring the larger prize. Money isn’t very useful
millions of dollars in real estate holdings in the company that way from day one, and if you have lost touch with your dreams.
states all over the country. the primary reason is “freedom of mobili- How can real estate enable you to recapture
I met Mark in 2005 when he sold me over ty” for the Maverick partners. It’s all about your time, design your dream lifestyle and
$2 million worth of investment properties lifestyle. We can live wherever we want make enough money to finance it? That’s
in Las Vegas. I was blown away by his and travel whenever we want for as long the big picture.
customer service; it was the best I had ever as we want, and no business falls through
seen in any industry. These were two of the the cracks because of the systems and pro- Q: Maverick has always encouraged
most talented, ambitious, honest and trust- cesses we have set up and the technology out-of-state investing, why are you now
T
a lot of investors get well-versed in Section 8 you can profit
he housing recovery is in trouble. The lower greatly in the lower-end homes.
limping along slowly priced homes usually The median-priced home becomes the
leaving many real es- have households with blue-chip property. The blue-chip home
tate investors wonder- limited to no savings has lower levels of vacancy and rents that
ing where to invest their dollars. or emergency fund. So have been buoyed by average people be-
Some speculation is even re- when a tenant loses a ing displaced from their primary residence
turning to the market with new job, the property owner via foreclosure. In the market where my
investors looking to purchase, feels that impact pretty company is located, average-priced homes
renovate, and resale distressed quickly. Also lower- are selling for around $115,000. Obviously
properties for short term profits. priced homes tend to with distressed inventory out there, one can
Owning a real estate investment be in older areas giv- purchase properties at lower prices than
Ryan Hinricher
brokerage allows me to see a va- ing the owner a much this, improve them and probably have eq-
riety of transactions, including retail flips higher rate of maintenance. uity that is more tangible than lower-priced
from speculators, investors buying $8,000 homes. How can one possibly model a
homes, renovating and placing tenants in The Numbers $115,000 home the same way as a $30,000
them, and a higher quality purchase and This is where investors usually make mis- home? The $30,000 home (in most cases)
hold homes closer to median home prices. takes. The surface numbers can be very will have significantly higher rates of va-
The latter is a strategy that I believe right deceiving in real estate. When analyzing cancy and maintenance.
now is being overlooked by many inves- a real estate transaction If you go up a step to
tors. many investors aren’t the higher-than-average
using vacancy and main- priced homes, you’ll no-
The Product tenance, or applying the tice those homes might
There are many markets where you can same vacancy and mainte- offer stable tenants, usu-
purchase and hold homes at the median nance numbers to homes ally high-end profession-
or even average home price and receive a that vary widely in price, als who will reliably pay
positive cash flow with a traditional 20% age, neighborhood, size the rents. The cash flows
down strategy. These homes, are out-per- and city. This can cause a may look lower on the
forming many lower-priced homes from pretty big disappointment surface than other types of
rental prices and home values perspective. when the cheap property you purchase is homes but these blue-chip homes perform
Median-priced homes in most markets are affected by socio-economic issues leading more reliably on maintenance, vacancy,
three bedrooms, two bathroom homes, to high tenant turnover, criminal element, and valuations.
which offer good car storage. Usually this slow-paying tenants and maintenance is-
is the type of home most Americans desire sues. Financing
to live in ensuring you always have both an I’ve seen many people advertise profor- Financing on blue-chip homes tends to be
available rental pool and an available buyer mas with high cash flow on smaller, older much easier than most any other price point
pool. This product offers real estate inves- homes in areas with high crime, poverty, for a number of reasons. First because the
tors multiple exit strategies with the ability poor schools, and with low rates of home prices are low enough you don’t worry
to sell it retail versus lower-end properties, ownership. One can argue that these can be about jumbo loan pricing, rates, and re-
which usually need to be sold to other in- good investments structured correctly and strictions. On the lower end not all lenders
vestors. by applying the right metrics to ensure a are lending on homes priced under $50,000
In addition, median-priced homes are more accurate projection of cash flows is and at times have a different rate table. In
usually in areas low in crime, close to achieved. These lower-end properties have and around the median price nearly every
schools, shopping, houses of worship, and become the penny stocks of the real estate lender offers investor loan products. I’ve
with easy access to employment. The in- investment business. If you get the perfect also found the appraisal issues are fewer
verse of this is, of course, also true. I per- tenant who doesn’t feel the pains of the because normal sales activity exists at this
sonally own properties at much lower price recession, maintains the home themselves Continued on page 24
points as well. They took the hardest hit and stays in the property for a long time,
on rents and value. This is where I’ve seen you could hit pay dirt. Similarly if you’re
Realty411Guide.com PAGE 22 • 2010 reWEALTHmag.com
Blue Chip Real Estate Strategy, pg. 22
price point. When you have a ida, which were impacted very
lot of normal sales, valuation little by the housing boom and
tends to be (somewhat) stabi- bust. Many of these cities have
lized. a good economic future, afford-
able tax rates, net population
Exit Strategy growth, and high enough rents
Having an exit strategy is an es- to achieve positive cash flow at
sential part of your real estate the median home price.
plan. Some investors plan on
never selling and while that In Summary
can make sense to receive all With distressed properties mak-
the benefits of real estate, lives ing up a large percentage of
change. If you think back five total sales, then it only makes
years ago and how different sense to focus on buying blue-
things in your life were at the chip homes at a discount today.
time, you might agree that hav- In doing so, one can realize
ing an exit strategy is impor- equity through quality reno-
tant. vation, placing a tenant and
With these blue-chip invest- holding. These homes should
ment homes, you’ll find mul- provide you relative peace of
I
just had a great call with one narrow down your search
of my coaching students on to REOs, probates, fixers
how to get a deal signed up by or other criteria. You don’t
the end of today. Times are tough, even need access to the favorite ways to find deals is to ask other
and although sending direct mail MLS, just find an investor- wholesalers what they currently have un-
pieces is a great way to get leads, friendly agent and let them der contract and to market that property
sometimes it’s just not possible know your criteria. They to my buyers’ list. Or, if you’re a rehab-
to send them out — especially if will set you up to receive ber or landlord, you can pick up amazing
you’re just starting out. So over the years, free emails. deals without having to do all the leg work.
I’ve learned some “cheapskate” ways of It’s important to work with an agent who Where do you find these wholesalers? If
finding leads. knows you want a smokin’ deal, and who you see a “We Buy Houses” sign, call them.
will make lots of lowball offers on your be- You’ll likely be dealing with a wholesaler.
1. Online RSS: If you’ve been in real es- half without flinching. Also visit your local REI meetings, Google
tate any amount of time, you probably al- For most listings, other than REOs, you “wholesalers” in your area, ask rehabbers
ready know that online sites such as Craig- can also try and make seller-financing who they recommend, and ... don’t forget,
slist, Redfin, Backpage, Oodle, etc., can deals. The point is to get your foot in the ME! I’m an active wholesaler in Southern
have some pretty amazing leads on For door and start negotiating with the seller. California who loves working with other
Sale By Owner (FSBO) properties. The Another lead system you can set up on investors. (Shameless plug? Of course.) If
only problem is that it takes tons of time to the MLS is expired listings. These list- you get a deal done and need to sell your
sort through all those sites to find a decent ings have expired without anyone buying property really quickly, let me know.
deal. the property. This can mean you’d be deal- Well, now there is no excuse for you not
Rhett Halsey, one of my good friends and ing with very motivated people! to find a deal today! Good luck and send
an internet marketing guru for real estate Set up a win-win situation with your me a brief email letting me know if you
investors, told me of a free feature offered agent where they can present your offer, found this helpful.
by most websites: RSS or Real Simple and if the sellers don’t like it, the agent may
Syndication. Instead of multiple searches be able to pick up a new listing. To contact Ginger Macias or learn about
for leads, the leads come to you in one her speaking engagements and wholesale
spot. You can set up a Google Reader ac- 3. Other Wholesalers: One of my absolute deals, visit: www.OCWholesalers.com
count and have all these leads sent directly
to you, the minute they are posted on one of
these sites. It’s simply amazing how much
time this saves.
We have just implemented this in my of-
fice and within a few days got three proper-
ties under contract and sold them within a
few hours. My new assistant was floored
at how quickly an investor can get a deal
under contract and sold!
To set up your own RSS feed, go to your
favorite FSBO site, Craigslist (www.Craig-
slist.com) for example. Do a search using
motivated seller keywords like “fixer,”
“investor,” etc., one word at a time. Once
the search is complete, you can scroll to the
bottom of the page and click on RSS or the
little orange RSS icon. Set it up to point to
your Google Reader, and you’re done!
L
et’s face it … money for a day
World in
the country, or two at a high
the econ- interest rate (but at
omy and the real a reasonable cost),
Compromise
estate market is with which to pur-
just terrible. There chase a foreclosed-
are no more good upon property by
deals. Let’s all get means of an all-
out of the business. cash offer prior to
People are not building, buying or selling its scheduled pub-
homes any more. There are so many over- lic sale date. And then selling it on the day for, or in advance of, services to be ren-
encumbered and foreclosed-upon cheap of closing, or soon thereafter, in a separate dered, whether such services are actually
properties available for pennies on the escrow settlement to an end-buyer who ob- performed or not. Another common viola-
dollar that nobody wants them anymore. tains his own loan and lives in and loves tion has to do with “sand bagging” by attor-
After all, who can make a living in this ri- the property forever. neys, and many non-attorneys, who bill on
diculous business these days? This process is known as the “A to B/B a monthly basis for services (mostly loan
Oh yeah? to C transaction.” In other words, you, the modification schemes) while a short sale
And Michael Jackson faked his death, investor are the “B” component; the cur- or loan modification process is presumably
Elvis eats at Burger King, and the world rent owner is “A,” and the end-buyer is taking place. Instead, either there never was
ends in three years! “C”. In other words, “B” buys from “A” any such attempt or the attempt failed, and
Not that they’re needed anymore, but
here are a couple solutions to these hor-
rible problems facing real estate investors “...two REALTORS® in Massachusetts were recently
in this disastrous economy: sentenced to five years in prison each for
1. Stay in bed with a tinfoil hat on your
head. having used this scheme several times.”
2. Go live with your parents and let them
feed you until you win the lottery. in one escrow closing process (taking full the client wasn’t informed and was told,
3. Go back to school on the government, ownership of the property), and then sells “We’re working on it…be patient,” while
and get a law degree so you can force peo- the property to “C” at a reasonable profit in the monthly payments continue.
ple to pay you to stop suing them. a wholly separate escrow process. Another big one, and one that is proba-
OR... It all sounds simple and it is! However, bly most tempting but also most deadly for
4. You can capitalize on singularly the a thorough knowledge of all the rules and REALTORS®, is the situation wherein the
greatest money-making opportunity ever! regulations concerning short sales, equity- investor/REALTOR® has already lined-
And you don’t even need a dollar or a dime purchasing, equity-stripping, foreclosure up a retail buyer who is ready to take the
to do it. consulting, credit repair and mortgage property at its true market value following
lending is absolutely mandatory before the short sale acquisition by the investor.
SHORT SALES becoming too far vested in the business When the scheme comes to light, the con-
The short sale industry is burgeoning of short sales. To date, hundreds of other- tention by the lender in these cases is that
now and will probably continue to do so wise nice-guy and gal would-be investors if the property were worth more than they
for three more years. New short sale mil- have been severally sanctioned, shut down, were told in the transaction, there would
lionaires are being made every day. There heavily fined and/or sent to prison for vio- have been no need for a short sale and their
are billions upon billions of dollars (Re- lating the very stringent laws regulating resultant loss. They see such schemes as
member when a billion dollars was a lot short sales and foreclosure consulting in blatant bank fraud and have no sense of
of money?) to be made in the “transac- various states. humor in such cases. As a matter of fact,
tional funding” of compromised mortgage In my own case, I’ve spent my busi- two REALTORS® in Massachusetts were
defaults — loans that would otherwise be ness as a fearless bull rider: but in this last recently sentenced to five years in prison
forced into expensive and time-consuming Rodeo, I’m sticking to riding milk cows. each for having used this scheme several
foreclosures, and sold by lenders at public I won’t set any records or win any prizes; times.
auction. but I’m a lot less likely to get thrown of and So the long and short of it is…kind’a
Def: Short Sale: The acquisition of real have a horn poked up my rear end (… this, like Henny Youngman was one to say: “If
estate at a compromised (wholesale) pay- is, by the way, an analogy … not a good one, it’s gonna hurt when you go like that … for
off amount that is less than the balance of I agree, but an analogy none-the-less). cryin’ out loud, don’t go like that!”
the mortgage obligation. One of the most often violated of the Today’s short sale market is burgeoning.
Def: Transactional Funding: The two- many regulations being put on the books
stage practice of using another person’s as of late has been that of taking money Continued on pg. 29
10 CA$H Weeks to
����� ��������� ��� �������� ��������� ���������������������������������������� ���������������������������������������
OW
���������������������������������������� ����������� ������������ ���������� ��� ���������������
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����� ���������� ����� ������ ���� �������� ��� ������� ���� ������������� ���� ���� ���� ������ ���� ������ ���� ����� ��� ��� �� ����
����������������������������������������� ��������� ���� ��������� ���� ������������ with Matt Malouf
����������������������������������������
��������������� ��� ���� ��� ����� ��� ����������������������������������������� �����������������������������������������
���������� ����� �������� ���� �������� � ��������� �������� ���� ������ �������� ����������������������������������������������
T
�������� ������by��� Ginger
���� Macias
����� ������� ����� ��������� ��������� ��� ����� ��� ���� ���� � ������������������������������������������
���������������������������������������� tors, courses and
������������ systems to �������
������������ help them� since 2001. Over the years, he has special-
���������
����������� ��� ���oday’s
�����real estate environ-
���� ��������� ���� achieve their
����������������� success? Those of you who ized in wholesaling, owner financing and
��������������������������������������
ment can seem a little
��������������������������������������� are living the real estate dream,
����������� ����� ���� ����� ��� ��������you know foreclosures. Malouf has developed a busi-
������������������������������������
tricky to navigate. So many
������������������������������������������� that luck had little to do with where
�������������������������������������� you are ness
���� ������ ���he����������
model that describes as ���T.E.R.M.
���� �����
possible
��� ��������� �������� ways
��� ���� to make
����������� today. It takes concrete
������������������������� actions, goals and “It is a model designed
����������������������������������� to efficiently
money exist in
�������������������������������������� this indus- guidance to get to your dreams.
�������������������������������������� minimize the investor’s time, energy, re-
��������������������
try,
������������������������ it can be overwhelm- Well, for those of you starting out in real
�������������������������������������������� sources and money –��������
������ ���� ������� in that order,” he ex-
���� ���������
ing, especially
�������� for those
��������� who are just���
����������� get- estate who are anxious to get going, there
����������������������������������������� plains.
����������������������������������������
ting started in real estate investing.
���������� ����� ��� ��� ��� ����������� ��� There are wonderful ways to get into all this ac-
������������������������������������������ To that end, his program is a 10-week
���������������������������������������������
are many late-night television shows that
�������������������������������������� tion.
����������������������������������������� course
��� ����that walks������
������� investors through
���� the ex-
���������
claim to teach you how to be a multi-gazil-
���������������������������������������� Recently, I spoke with Matt Malouf
���������������������������������������� act steps needed to find, analyze and
������������������������������������������� buy an
lionaire by next week, but is there any truth
������������������������� about his new program, which helps inves-
������������������������������������������ investment property that cash
��������������������������������������� flows from
to what they’re saying?
������������������������������������� tors bridge the gap from real estate dream
��������������������������������������� day one. Some topics include learning
���������������������������������������� how
Take a look around. You’ll notice that
���������������������������������������� to reality. And by reality, I’m talking about
����������������������������������������� to set up your property management
�������������������������������������� team,
there are a lot of successful real estate en-
����������������� actually owning
����������� ��������� your very��������
own investment
�� ����� screen tenants, how to hold title and financ-
������������
trepreneurs,
������ ���������people������
who are
����making
����� a�����
kill- property
�������������at the end of the course! (More on ing options.
��������� ���� �������� �������� �����
ing today, in this down market. The
���������� ��� �������� ���� ������� �������� ques- that later.) ��� ���� ������ ��� ���� ���
����������� The motivation
������ ���� �������� to create
��� �����this����
course
���
tion is ����������
������ did they just���start
�����making lots���
�������� of Malouf is���
���������� an����
investor-friendly
�������� ��� real estate
������ came from Malouf’s desire to meet the
money by pure luck, or did they have men- agent in California and has been investing �������������������
needs of investors who want to get educat-
����������� �������� ��� ����� ����� ������ ������ �������� ���� ���� ������ �������
������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
ed and match them with the people on the team. Malouf and
best available product in the his team then go out and find a
real estate marketplace. property that meets the stu-
This “hybridization” will en- dent’s needs. They send per-
able beginning investors to buy sonalized updates, letting them
a property that meets their cri- know what’s being done to find
teria, after learning all the basic them a property.
steps needed to acquire and This program lays the foun-
manage that property. dation to successful real estate
“This is not just a course,” investing. Malouf gives this
Malouf explains. “At the end of analogy: “It’s like building a
10 weeks, they’re going to have skyscraper. You have to spend
a cash-flowing house, an asset the time to set up a foundation
to put in their portfolio. It is and set it nice and deep, nice
all- inclusive in the program.” and strong. That way, it will
S
elf-reliance, balance, integrity: ness cards in hand. Dressed in casual cloth- and building wealth through cash-flowing
these are just some important ing, they chatted while munching on choc- rentals, all using Sensei’s Remote Rehab-
mantras in the martial arts world. olate chip cookies. They discussed their bing program. “The Phoenix market is pro-
Step into a monthly meeting at latest deals, needs and goals. viding incredible wholesale deals on newer
Black Belt Investors and you’ll soon dis- When the master approached the front, homes starting at $48,000,” he says. “Flip-
cover these disciplines are in full force. the students took their seats and settled pers are turning their properties and cashing
With two locations in Southern California down quickly, ready to start their lesson. out about every 90 days. The buy and hold
(Downey and Norco), Black Belt Inves- Sensei’s cash and wealth system is pure strategists are capitalizing on great cash
tors provide a social network for both flow averaging $900 per month.”
the novice and seasoned. It is a club Although he started his career as a
where education is emphasized, deals
are analyzed, and action is taken to
Sensei Spills His Top 5 remote rehabber (his first deal was in
Florida), he now prefers to wholesale
reach goals. Secrets to Land a Deal and calls it: “The Ultimate Real Es-
Ricardo Valencia, a national investor tate Cash Machine.” His investing
with holdings in four states (CA, TX, formula, “Find it, Bind it and As-
IN and MO), stressed the importance Can’t seem to locate sign It™,” is used in California, but
of attending monthly club meetings, a distressed home- the strategy can be duplicated in any
as we were walking into a community owner or unwanted area, in any market.
property? Believe it
center in Downey. Wholesaling “does not require cash,
or not, many people
“We have a responsibility to teach credit or a license, which equals NO
have real estate that
those who are newcomers,” he says they no longer need
RISK.” He further explains, “The
with a smile, “And, at the same time, or want. (Yes, we intention is to sell the contract to in-
you learn from those who are more first found this con- vestors who can’t find a deeply dis-
advanced.” cept hard to believe counted deal on their own.”
Valencia, who travels throughout Sensei Gilliland While many people, including Bro-
too!) Follow these
Los Angeles County to attend numer- five secrets from a master wholesaler, kers and REALTORS® who do not
ous real estate events, admits that and you’ll soon have more deals than understand creative real estate, frown
the members of Black Belt Investors time to work them. upon any deal that is not a traditional
“keep bringing me back ... it’s always transaction, wholesaling retains an
nice to mix and mingle with them.” #5: Code Enforcement: Many local gov-
important role in the community.
ernment websites, such as Los Angeles
What began as a casual meeting at As a matter of fact, wholesalers are
County, offer online lists of distressed
a coffee house in 2000, by investor, often the first to spot and service a
properties. This is an often overlooked
martial arts expert and entrepreneur, treasure filled with potential gems. homeowner or property in distress.
“Sensei” Sean Gilliland has become In wholesaling, success depends on
an organized official club boasting Continued on pg. 59 recognizing circumstances and offer-
two locations and filling the room ing solutions.
with a strong following each month. Sensei recalls one recent transac-
Sensei chose to stake his claim in Downey, and simple. He trains his students on how tion in which he assisted a family made
the city where he was raised. Next, he chose to create cash quickly through flipping real up of siblings scattered around the country
Norco, the city where he now lives with his estate so that resources can be funneled to who were feuding over an inherited home
wife, Annamaria, a licensed REALTOR®, purchase income-producing property. in need of many repairs. Because of the
and their three children. And what areas are being focused on? stress it was bringing upon the family, they
The club meeting room, located inside a Right now, he has two major target zones. wanted to dispose of the property quickly.
community center, was full and bustling in Phoenix, Ariz., is his target zone for rehab- Sensei packaged the deal and sold it to a lo-
May. The sweet aroma of freshly brewed bing flips and rentals; Southern California cal rehabber willing to put in a lot of sweat
coffee and abundant smiles were inviting. is his bulls-eye for wholesaling properties. equity and cash. The investor was willing
The group, mostly in their 40s and 50s, He and his members target Phoenix as to take a risk for a chance to profit.
was diverse in experience and background. their area of operation for fixing and flip-
They were master networkers, with busi- ping properties for immediate paydays Continued on pg. 59
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Investors & Industry Leaders Share
an Evening of Glamour & Giving
The 3rd Annual “I Survived Real Estate 2010” will Raise Money for
Breast Cancer Research & Unite the Nation’s VIPs to Discuss Investing
by Lori Peebles for investor rights. For the past two years, event honors her courageous effort to fight
D
he has united real estate giants to discuss this disease and hopefully adds to the like-
oes “Shadow Inventory” really ex- the issues that matter, and most important- lihood of someday finding a cure.”
ist? What is the state of the REO ly, to exchange ideas that can help investors In addition to raising breast cancer
market? These are just some of do what they do best: rebuild communities awareness and funds for research, as well
the crucial questions to be and rejuvenate econo- as providing investors of all levels access
Bruce Norris with his wife & son.
tackled by real estate in- mies. to information, “I Survived Real Estate”
dustry experts on the eve- “The panel we’re has been instrumental in spotlighting the
ning of September 17. putting together can crucial role investors have in our nation’s
The Norris Group, speak about these issues economic infrastructure.
headed by Bruce Norris, from several differ- Norris explains: “This event gives a
a 30-year veteran known ent point of views and chance for investors to be seen in a different
among investors as the hopefully provide us light. We all know investors are often seen
“Nostradamus” of Cali- with some new as the “sharks”
fornia real estate, is once insights mov- Tommy Williams of the real estate
again organizing their an- i n g f o r w a r d , ” i n d u s t r y. We
nual philanthropic event in Norris explains. take this night
Orange County. Some returning to show other
This black-tie affair guests, include: sectors that we,
is one of the most fash- Joseph Magdz- as investors,
ionable tickets in town, iarz, 2011 presi- play a signifi-
mixing charity, important dent for the Ap- cant role in the
trend updates, education, praisal Institute; solution side of
entertainment and industry networking. It Tommy Williams, 2008 president of the market.”
is always a sold-out gala, one that attracts the National Auctioneers Association; and Norris knows firsthand that real estate
the Who’s Who of real estate. Christopher Thornberg, principal of Bea- investors take great risks in a volatile mar-
When we attended last year, it was fasci- con Economics. ketplace. “With greater acceptance, their
nating to note that besides all the tuxedos, New guests are also being added. “We ideas have a better chance at being heard
satin dresses and crème brulées on fine chi- are very excited to have Sean O’Toole and being implemented,” he says.
na, some serious industry trends and alter- from Foreclosure Radar joining the panel The charity event was designed to give
native solutions were pre- this year to add his everyone, regardless of personal income,
Guests at the last year’s event.
sented in just a few hours. data-driven and in- an opportunity to participate.
It was an evening of edu- vestor-minded per- “By joining our walk team and raising
cation with a sophisticated, spective.” the money in their networks, attendees
entertaining twist, much like For Norris, the “I and sponsors can technically come free of
the man behind the event. Survived Real Es- charge,” Norris explains.
“The theme for ‘I Sur- tate” series is per- Sponsorship opportunities are also
vived Real Estate 2010’ sonal. This night is a available. Benefits for advertisers include
will again focus on trends, way of honoring his inclusion in all mailers to local, state and
solutions and have an added wife, his family, his national government officials, SEO op-
focus on the state of REOs,” Norris says. community and profession. timized website advertising, inclusion in
“With constantly changing government In the last two years, the fundraiser has mailers and flyers, plus event program
regulations, it’s been difficult for anyone in raised over $100,000 for the Susan G. and screen exposure. Each sponsor is also
the real estate business to build a sustain- Komen Foundation; these funds are used mentioned in video and radio segments that
able business model.” for breast cancer research. air before and after the event.
Norris, a 30-year veteran investor (from “My wife, Marsha, was diagnosed with For more information, please visit online:
rehabber to private lender) is a champion breast cancer more than 15 years ago. This www.ISurvived2010.com
M
ainstream reporters who
present real estate as
doom and gloom surely
haven’t been to Mem-
phis. The city, known as
the birthplace of rock ’n’ roll and the blues,
is bustling with industry activity — and
visitors aren’t just touring Graceland and
Beale Street, they’re leaving as bona fide
landlords. MemphisInvest.com & FortuneBuilders
Our editorial team was invited to attend
The Ultimate Cash Flowing Buying Tour Unite Investors from 18 States & 2 Countries
by MemphisInvest.com, a boutique, Mem-
phis-based brokerage catering to out-of- and Sell 29 Rental Homes in 2 Days!
state investors. by Linda Pliagas
The company, which serves more than
200 clients and manages more than 650 in- outstanding views and plump pillows. In- where we have our own personal invest-
vestment properties for them, joined forces vestors traveled from 18 states to attend, ments,” Chris says. The Clothiers person-
with the San Diego-based FortuneBuild- one couple arrived from Canada. ally own more than 100 rental homes in a
ers, Inc., (owned by Than Merrill and the Most of the attendees were investors handful of quality, long-term buy-and-hold
“Flip This House” team) and wanting to learn how to be- areas of Memphis.
together they organize one of come MemphisInvest.com Typical home prices range from $34,000
the largest property buying clients. Many were referrals to $85,000, rents average out be $850 per
events in the nation. from their existing client month. The city boasts high rents and low
“You’ll never see anything base, and some were repeat prices. But surprisingly, 48% of Memphis
quite like this,” promised customers. residents rent.
Kent Clothier Sr. during our “Our average client buys The Clothier family, who were formerly
telephone conversation a few four homes and refers us to in the grocery business, moved to Tennes-
months ago. Kent Sr. is found- all of their friends and fam- see because they saw such an opportunity
er of MemphisInvest.com. He ily,” says Chris Clothier, for long-term real estate investing and
takes the helm of the 18-team- director of sales and market- monthly cash flow.
member operation, which is ing. At the time, Kent Sr., Kent and Chris
managed by his three sons, MemphisInvest.com pro- were scattered about, working in different
Kent, Chris and Brett. vides clients with an option of either buy- real estate markets (Texas, Colorado and
In my six years as an out-of-state inves- ing a turn-key rental home or one that needs Florida). Memphis real estate brought the
tor, I had never attended a property buy- rehab. The company oversees the work for family together. It’s an additional perk for
ing tour. Plus, I repeatedly heard about the investors. Each property has a separate proud papa Clothier. “I’m the luckiest man
the benefits of the Memphis market from quote for the renovation included in its pro- in the world to have my sons working next
many sources. I thought, ‘What a perfect forma profile. If the rehab goes over bud- to me,” Kent Sr. told the crowd that day.
time to put on my reporter’s cap and go get get, it comes out of the company’s pocket. On the first day of the tour, the investors
the scoop.’ MemphisInvest.com caters to investors gathered to get educated on the local mar-
The Ultimate Cash Flow Buying Tour def- who are looking to buy in typical middle- ket, meet the Clothier family, and mingle
initely stood up to its name. Just being in a class areas. The company says they stay with JD Esajian from FortuneBuilders.
room filled with investors from around the away from crime-ridden pockets of the (The “Flip This House” team owns numer-
nation was electrifying. On the first day, the city, regardless of how the numbers may ous rentals in the area.)
event was held at a ballroom in the Hilton appear on paper.
Hotel, a circular 27-story glass beauty with “We only offer houses in the same areas Continued on pg. 58
Realty411Guide.com PAGE 37 • 2010 reWEALTHmag.com
Seeking Financing Interview and article
by Lori Peebles
M
lender. However, we do have
clients who are rehabbers
MG Capital, LLC, compared to a bank. who own other free-and-clear
an asset-based lend- With MMG Capital, property, they then secure a
ing company, be- no income verifica- line of credit with us for the
lieves successful in- tion is needed nor is purpose of purchase and re-
vestors need to have credit score or sea- habbing more property.
Chris Gleason
skin in the game. soning taken much
For that reason, they still invest company into consideration. The allure of their program
funds alongside those of their investors Recently, our editorial team spent time is that underwriting guidelines are not
who supply the private money used in their reviewing some of the company’s pro- based on the borrower’s credit, income or
operation. grams, which include private lending, trust seasoning, which truly opens up the play-
Both company and client assets have deed investing and unique investing vehi- ing field for many more investors. In real
grown significantly since their formation in cles, which offer short-term liquidity and estate transactions, time is truly of the es-
2007. In fact, the compa-
ny’s principals have been
responsible for the man-
agement of assets valued MMG Capital Funds Creative
at more than $6 billion.
Although MMG Capi-
tal is only three years old,
Investors Across the Country
the principals have over
50 years of combined industry experience; safety backed by real estate. sence, and Gleason explains how their pro-
their expertise includes banking, private We then asked Gleason to give us and gram can help investors move confidently
equity transactions, development, secured our readers a better understanding of how on offers and close quickly on deals.
lending, land acquisitions and sales. their services can help leverage the as-
From an investor’s point of view, one of sets of their clients so they can grow their We take a very common sense approach
the most impressive features of the com- wealth more quickly. to lending. Asset-based lending has been
pany is that they lend on a national scale First, Gleason gives us a glimpse as to around for decades, but it was largely
— most “hard money” firms keep close to who their typical “hard money” lending abandoned by most firms during the boom
home and rarely venture off into faraway client might be and shares some of the cri- years because anybody who could fog a
markets. teria they look for when funding deals. mirror could get credit. Now we’ve ar-
“We’ll go to all 50 states,” says Chris rived back to an old school standard where
Gleason, managing director of MMG Capi- We see a very wide range of real prop- we’re lending realistic amounts against
tal, LLC. He explains further, “There are erty investors who are looking for capital, realistic values and realistically taking
a number of markets across the country all the way from the most sophisticated into account the kind of trouble that our
where we’ve found the types of deals that investor down to the beginner. The inves- marketplace is in. It’s really a plus and a
we look for, and they tend to be in higher tor who makes the best candidate for an minus for investors – only those who have
value areas with greater demand.” MMG Capital Loan is the investor with solid assets are able to obtain financing
Currently, the states where MMG is the at least moderate real estate investing ex- and “nothing down” scenarios don’t ex-
most active are California, Florida, New perience and a substantial balance sheet. ist anymore. But, for those who have the
York and Tennessee. MMG Capital is an asset-based lender, so net worth to support an asset-based loan,
The firm’s success stems from their rig- we’re really looking for two things: hard there’s very little competition for them and
orous lending practices, Gleason admits equity and net worth. We can be a great they can align themselves with a private
that only one deal out of 75 makes sense for financing partner for a real estate inves- lender like us who will provide them quick
them to lend on. However, since they are tor who is doing significant business and capital based on their current equity.
an asset-based lender most investors have already has some substance to their bal-
an easier time qualifying for an MMG loan ance sheet. Continued on pg. 61
W
oodson “Chip” Philbin be- come about in everyday affairs. Routine His angel investor continued to be in-
gan his career as a securi- business connections can turn into friend- volved in projects with Philbin and togeth-
ties broker, but he soon ships, which can then evolve into joint ven- er they built a solid portfolio.
left Wall Street tures. That was exactly the “With him as my partner, I developed
to sell “tangible” investments. case for Philbin. His career three single-tenant NNN leased commer-
Fast forward 23 years later, as a commercial mortgage cial buildings, all leased with terms of 15
the Sacramento-based lender broker opened the way for to 20 years, in which I placed fixed-rate
and mortgage broker now has joint ventures with his as- permanent financing right after completion
a successful career as a real es- sociates and clients. and occupancy by the tenants.”
tate syndicator. “I was referred to a well- Long-term buys may be his strategy of
Many professionals are lured heeled investor by Comer- choice, but make no mistake, cash flow to-
into the real estate industry ica Bank, who owned day is the goal when Philbin and his inves-
with a hope of one day purchas- a high tech company in tors acquire a property.
ing the very object they sell. At Santa Clara and needed His success record is impressive. “The
first, Philbin, CEO of Philbin to refinance his plant. I ar- cash flow from this small portfolio is
Chip Philbin
Capital, wasn’t focused on his ranged the loan and didn’t nearly $400,000 annually, plus I was able
own portfolio as much as those hear from him for about to finance out almost all of our entire cash
of his clients. He was initially attracted to four years,” he recalls. But then one day, investment, so we have very little cash left
the business as a commercial real estate opportunity knocked. in these deals.”
lender and mortgage broker because it “He called me in to discuss another refi- The massive passive cash flow has been
made financial sense in contrast to the high nance, this time a cash-out refinance. We a blessing, but Philbin admits it made him
volatility of the securities market. did some analysis on how much he should a bit complacent. For the past several years
“At one of my previous employers, the borrow and I arranged another loan for he’s been working primarily on his handi-
management started a real estate investment him. At that point we decided to become cap at the Northridge Golf Club in Fair
trust, got it listed on the American Stock partners and to purchase cash-flowing Oaks instead of pounding the pavement to
Exchange, and raised about $100,000,000 commercial and multifamily property.” procure new investors.
to do mortgage loans. They went through The new partners joined forces and But now that his primary angel investor
the hundred million in about five years,“ he funds, which led to the purchase of a 72- is retiring, Philbin is actively recruiting
recalls. “Here I learned that one of the main unit apartment complex in Chico, Calif., a new investor partners who are interested
objectives of those that manage REITS is property they still own today. in commercial investment opportunities in
to generate management fees and not nec- When questioned about his transition the Northern and Central California mar-
essarily safeguard their investors’ money.” from adviser to partner in his dealings with ketplace.
That experience, along with his experi- clients, Philbin replies: “People have a real The company prides itself in investing
ence as a stock broker and other stories need for trusted advisers who are experts funds into every deal alongside the partner.
similar to ENRON, made Philbin wary of in their given industry. If you have a high He believes in full disclosure, low manage-
paper assets. He explains: “Stocks have degree of integrity and put your clients and ment overhead, and welcomes partners who
limited true inherent asset value contrary to investors ahead of your own interests, then are relationship-oriented and are seeking
real estate, which is tangible.” opportunities will present themselves.” long-term, tax-sheltered passive income.
Philbin, who was busy arranging funding Although rehabbing tends to attract the While profits and returns are what inves-
for multimillion dollar deals his investors spotlight in real estate, Philbin shuns those tors strive for, Philbin stresses that build-
were securing, did not stay on the sidelines quick-turn deals and prefers to invest with ing long-term business relationships is the
for long. “I formed a partnership with ten a five to seven year minimum holding pe- most gratifying aspect of the real estate
people I knew, and we made a hard money riod. Because of his mortgage background, business.
loan to a small grocery store north of Sac- when possible, Philbin prefers to refinance “I really enjoy people and enjoy the real
ramento,” Chip says. He adds, “We loaned the asset after an initial holding period so estate business,” says the 29-year industry
the owner/operator about $1,000,000 at that investors can retrieve their initial down veteran.
11% for two years. I had $100,000 in this payment, leaving little or no cash in the deal
deal and my investors provided the rest.” and magnifying returns. Philbin is partial to For questions regarding commercial real
One of the benefits of working in real owning retail centers, single tenant NNNs, estate, contact Chip at (916) 961-6832 or
estate is the networking opportunities that multifamily and industrial properties. visit: www.PhilbinCapital.com
applications. Remem-
later when he worked for the
Atari Corporation. Thanks
to his modern dance classes,
he was able to calculate how
much resolution of movement
cause creativity is the stuff of life. That is a ber how our lives have was needed in their video
big reason, but there are other more reasons changed since the 9/11? games.
to consider. Another reason is change. We Well, the business rules The real estate entrepreneur
all know the only constant in life is change, of engagement have Frank Morrow explains that
albeit we tend to resist change. (In fact, the also changed drasti- he got his entrepreneurial
only person I know who likes “change” is cally. Real estate has education while attending the
a wet baby.) taken the biggest blow, graduate school of business at
When things change, new information and as usual, our gov- Stanford. Although he took
emerges, which leads to a brand new set of ernment’s answer to every problem is more all the required courses in marketing, fi-
problems. It’s proven time and time again regulation. In contrast, I advocate educa- nance and accounting, he said. “I learned
that it’s no longer possible to solve today’s tion over regulation. But you can’t find more about business from a drawing course
problems with yesterday’s answers. So you that kind of knowledge in any accessible than anything else. My teacher taught us:
have a decision to make: You can either or even comprehensible fashion in our bu- ‘All art is a series of recoveries from the
complain about how difficult things have reaucratic system. first line. The hardest thing to do is to put
become or employ your creative juices to To obtain this kind of knowledge required down the first line. But you must.’ The
come up with new ideas, new solutions, for prosperity, you need to attend and net- same is true in business. You must act. A
work in real estate meetings lot of business school-types analyze things
and seminars. Venues such as to death and never get around to acting.
Socrates once said: our real estate club, Los Ange-
les Real Estate Investors Club
Perhaps more of them should take drawing
lessons.”
“An unexamined life (LAREIC), will provide you
with the new knowledge on
I believe your mindset is more important
than nuts and bolts. We have plenty of real
is not worth living.” how the game is being played
now. Once you know what’s
estate knowledge at our monthly meetings
and seminars to arm you with helpful tools
working in today’s market, to succeed in this market. But I challenge
and new paradigms. you’d be able to further develop your cre- your beliefs relative to success. Remem-
This economic turndown has vastly influ- ativity and capitalize on it more effectively. ber that unless you break with the old,
enced our lives in recent years. It has forced Without this new information, you’re lim- you won’t let in the new. In other words,
us to stop and examine our lives. Socrates ited to old solutions, which are ineffectual Light (education, abundance and love)
once said “an unexamined life is not worth in our fast-changing world. won’t come into your life until you show
living.” So, I think this recession may ulti- I believe there are ways to enhance your the courage to literally kick out Darkness
mately prove to be a good thing because we creative powers. Here are a couple of sug- (ignorance, scarcity and fear.)
are learning valuable lessons. What would gestions from two highly successful peo- So expand your horizons, step outside
make it even better is if we further examine ple. of what’s considered normal, break the
our spending habits and reasons why we Steven Jobs was asked why some people boundaries of what seems reasonable, and
tend to live beyond our means. This kind are more creative than others. He replied, act upon your knowledge. There’s never
of introspection is needed if we are to attain “Innovation is usually the result of con- been a more important time in our coun-
financial freedom ourselves and to save our nections of past experience, but if you try’s history (or the world for that matter),
great country from becoming another great have the same experiences as everybody than the present. What we do today will af-
civilization that was. else, you’re unlikely to look in a different fect humanity and shape our future destiny.
To affect positive change we needed an direction.” For example, in college, Jobs So, let’s make it a good one.
impetus and we got one, the Subprime took modern dance classes to meet women.
Meltdown, the biggest economic downturn What he didn’t realize was how much he Kindest regards,
since the Great Depression (or as I call it, learned about movement and perception Sam Sadat — sam@samsadat.com
the 9/11 of the business world). It is here in those classes, which came handy years Be sure to visit online: www.LAREIC.org
?
How to Get the
Bigger Better
by Kathy Fettke Deal
T rying to get
a good deal
in today’s market
individual investor
because the price tags
are much higher, but
can be frustrat- the deals are sweeter.
ing. It might mean For example, we just
making a hundred wrote down a $12.9
offers before you million FDIC loan to
get the one that $3 million on 27 al-
makes sense. And even if you most-finished water-front con-
have cash and will close “as dos in Portland. Investors will
is,” you still might lose out. make over 40% in one year.
Or you might end up with the This is truly the greatest
property and find out later you wealth transfer in history. Op-
paid too much or got stuck with portunities abound, and to-
a lemon. gether we can make it happen.
So how are the experienced Mistakes happen when inexpe-
investors getting deals with rienced people jump into some-
less effort? At Real Wealth Net- thing they don’t understand.
work, we have found the power That’s why so much wealth has
of numbers. Our teams buy in been lost over the past decade.
bulk directly from the bank. You don’t have to go it alone,
The banks love this because learn from the experts.
they can move more property Real Wealth Network brings
at once, even if it means slash- new and experienced investors
ing prices. In most cases, the together to share information
properties never make it to and learn from each other.
the open market before we’ve Our site has articles, videos,
hand-picked our favorites. It’s blogs, podcasts and downloads
tough for an individual to com- to help educate our members to
pete with a bulk purchase. make smart investing decisions
We also pool funds to pick during this once-in-a-lifetime
up almost-complete subdivi- opportunity.
sions or multi-family proper- For information, visit:
ties. Again, this is tough for the www.RealWealthNetwork.com
CashFlowCows.com Alternative Economics™
Sales and Referrals since 2006
- S
CA nwide
Natio
in
Basedrvice
e Club Launches in CA
C
by Linda Pliagas
alifornia is that owns a 112-unit apartment
Our Personal Team Can Help You one of the complex in Florida.
Start or Grow Your RE Portfolio most active Ritchie wholeheartedly
Sign Up Online for e-Mail Alerts! states for believes in the importance of
investors. Even during
Over $7 Million in Sales! this current economic
diversification and says others
feel the same way. “This breadth
We help clients every step of the way...
downturn, the state is of investment strategies attracts a
still a powerful economy much larger segment of my com-
We Even
Hel
You Manag p
in the global market. To munity,” he says. “Being built
e
After the
Sale! meet the demand for in- around Alternative Economics™,
vestor education, a new I am providing applicable eco-
investment club system nomic alternatives to help mem-
Owned by Linda Pliagas was recently launched bers develop their own personal
Her credentials include: in California by Roger system of financial growth.”
Landlord since 1994
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,
,
M
any Investors gamble to invest, Woo says he bases his compa- the CEO of ER Real Estate Investments.
their financial future ny’s approach on solid, factual data. “Our Reynolds purchased her first rental at age
and retirement dreams team constantly seeks out markets that 24 for $10,000 cash. Since then, she has
on capital appreciation. can weather the storm based on strong job been involved in numerous transactions
Michael Woo, chairman growth and economic or population expan- and she is also currently an out-of-state in-
of Longfin Investment Solutions, thinks sion.” vestor. Reynolds enjoys assisting others in
that is unwise. “It’s time to get paid month- Woo began his career as a real estate also maximizing their potential through the
ly instead of gambling on a 20-year pay investor in 1995. Before eBay was ever in purchase of passive income real estate.
out,” he says. the picture, Woo sold and marketed collect- “My core belief is that real estate creates
As chairman of Longfin Investment Solu- ible toys as a way to raise capital for his wealth, and wealth is effectively amassed
tions (LFI), Woo created a turn-key invest- first investment. In two years, Woo raised through real estate acquisitions,” she says.
ment system for investors who seek cash $50,000, a down payment for his very first Both Woo and Reynolds have great na-
flow in emerging markets. “Our properties property. Since then, Woo has been in- tional resources accumulated from years of
are totally rehabbed, with existing property volved in hundreds of transactions. personal relationships, which they pass on
management, and often His skills in to their clients. They also have established
already have renters in Mike Woo with “Rich Dad, Poor Dad” the industry did relationships with private equity lenders
place,” Woo says. “Our founders, Robert and Kim Kiyosaki not go unnoticed. for financing. “Lending is not a problem
average NOI (Net Op- In February, Woo for LFI and we do not want financing to be
erating Income) rate of was honored as the reason you do not take action toward
return is between 25% the recipient of investing,” says Woo.
to 36% ROI (Return Rich Dad edu- LFI also created an affiliate marketing
on Investment) with cation’s Hall of partner program, which offers profit shar-
10% to 12% cap rates. F a m e Aw a r d , ing.
Erica Reynolds
Why wait for tomor- presented by Reynolds ex-
row when you can cash “Rich Dad Poor plains, “Being a
flow today?” Dad” author marketing partner is
An avid fisherman, Robert Kiyosaki. a great way to join
Woo, who is a native Woo was hon- the team and partici-
of Southern California ored for his role pate on many great
and graduated from Torrance High School in increasing financial intelligence. In ad- deals. As a market-
and San Diego State University, named the dition, he was acknowledged for dedicat- ing partner, we offer
company Longfin to commemorate a fish- ing his time to helping others improve their great referral fees,
erman’s special name for the albacore. own lives. equity partnerships
“Albacores are renowned by sportsmen all “We teach real estate investing funda- and other benefits.”
over. They are a much sought-after game mentals, including having the right mind- Lately, Woo and Reynolds have been
fish with attributes of being fast-moving set and goals,” Woo explains. “We want to busier than ever attending many network-
hunters that operate together to achieve make each investor a better person and ex- ing events and also hosting their “Stop
goals,” he explains. tend their investment dreams further than the Gambling” seminars for the public in
Woo’s individualism also positively im- they could have ever imagined.” Southern and Northern California. LFI is
pacts his investment philosophy. In addition, Woo says they teach inves- also organizing investment road trips to In-
For example, while many investment bro- tors to understand demographics, locations, dianapolis, one of their target markets.
kerages only deal with one specific type cash flow and ROI.
of property, such as single-family homes, Recently, Woo expanded LFI and added To learn about the “Stop the Gambling”
Woo’s investment strategy is to find deals a dynamic partner: Erica Reynolds. She educational seminars, contact Longfin
across the entire market spectrum. has been appointed as vice president and Investment Solutions at: (949) 388-0678.
Instead of letting headlines predict where marketing partner. Additionally, she is also Visit LFI at: www.longfininvestments.com
H
Shahid Ketan
omeowners all
across the U.S. are
feeling stressed
out due to a decline in the
value of their homes and
the fact that they now owe
the bank more than their
property is worth. However, up-front fees to homeowners. It
there is hope through an option offers a solution for both banks
known as short pay refinance, as well as for the homeowners.
which is a great solution for The homeowners get to keep
them, if they qualify. their home with a lower princi-
According to a report pub- pal balance and lower monthly
lished in May 2010 by First mortgage payments more in
American CoreLogic, a real es- line with the current value of
tate information company based their home, and the banks get a
in Santa Ana, Calif., “more than chance to “clean-up” their bal-
11.2 million, or 24% of all resi- ance sheet by getting a property
dential properties with mort- completely off their books.
gages were in negative equity Banks are becoming more
at the end of the first quarter willing to accept a short pay
of 2010.” Out of that number, refinance especially if the bor-
in California alone, more than rower is current on their mort-
2.4 million homes, or one third gage but is experiencing some
of all mortgages, have negative type of short-term financial
equity. difficulty or the interest rate on
The underwater mortgages the borrower’s current loan is
and negative equity pose a about to increase.
roadblock to a housing recov- A short pay refinance also
ery because the underwater provides the bank with an infu-
mortgages are more likely to sion of “cash,” which increases
fall into default leading to a po- their ability to invest in other
tential foreclosure by the bank. opportunities or to lend out.
Most banks have already been Banks are in the “lending”
taking big losses on foreclosure business and not the real estate
and short sale properties and business.
are considering other options Unlike a loan modification or
as well. a short sale, which sometimes
Short Pay Access, a company requires a borrower to be delin-
based in San Ramon, Calif., quent on their mortgage pay-
is able to help homeowners ments, the short pay refinance
anywhere in the U.S. through program follows standard lend-
the best short pay refinance ing guidelines and only works if
program available today. The the borrower has a clean recent
company does not charge any mortgage payment history.
1. The mortgage needs to be their home with a new lender at
more than the current market
value of the home.
the current market value.
The Short Pay Access team
Do You Feel
2. Borrowers need to be current
on their mortgage – no late pay-
consists of experienced nego-
tiators who have carefully built Trapped by Your
ments.
3. The borrower’s credit score
working relationships with
lenders. The negotiating team Current Mortgage
must be 620 or better.
4. They must have verifiable
is well versed in the lender’s
requirements and preferences and the Loss of
Your Home's Value?
income. and uses this experience to help
5. The prop-
erty must be
the borrower’s Let us help you
primary resi-
dence. 'Short Pay Refinance'
Short Pay a new option with
Access works
with the lender NO Upfront Fees!
in order to complete the short the homeowner without wast- (This is not a loan modification or a short sale)
pay refinance and gets the lend- ing any time dealing with un-
er to write off a portion of the knowns.
loan amount. A short pay refi-
nance gives homeowners the
ability to refinance their homes For more information, contact
at the fair market value. The Short Pay Access online at
process involves paying off the www.ShortPayAccess.com or
current lenders loan at fair mar- call (925) 309-6109 for a no
ket value and then refinancing obligation free consultation.
The Clothiers discussed their own per- about $350 monthly. very first day of the tour.
sonal story of their quest for passive income The elegant banquet room where the Kent Sr.’s luring promise that I would
and presented their research on the market. education took place was filled with many never see anything quite like this proved to
Then they introduced the members of their Californians like me, including a young be true. The action that was taken on that
team. After a brief networking break, they couple from Burbank who rented a rec- day was mind-blowing. A total of 29 homes
passed out a large, white sealed envelope reational vehicle and drove nearly 2,000 were sold, all sight unseen. I was captivated
with the information everyone was waiting miles to buy a property in Memphis. by the volume of deals done as well as the
for: The Deals. “We left on the Fourth of strategies they spoke about, such as their
Guests were more than July and plan on touring dif- guerilla-marketing leasing system.
eager and ready to buy a ferent cities for two weeks Here is the creative way they fill vacan-
cash flow property based after this,” Declan and Shaun cies: MemphisInvest.com hires multiple
on an address, a photo- Hoare said. The new investors leasing agents on commission to show and
graph and numbers. Most purchased a three-bedroom, rent out their client’s property. A total of
rental homes cash flowed two-bath brick home on the four signs are placed on the lawn, each with
Guests listen to Kent Sr. a different number, each reaching a distinct
agent. Competition is created. Each leasing
agent is on high alert: If they want to get
paid, they have to be the first to answer the
phone and show the property.
Another management technique that re-
ally stood out is the system they have of
calling their clients just to touch base. Once
a month, investors receive a status report,
even if there is nothing wrong with the
property.
“If a client has to call us to check on their
property, then we are not doing our job,”
Chris explained to the audience.
Our group saw their four-sign leasing
AUGUST SCHEDULE system on the second day of the tour. On
that day, we hit the road on two buses and
August 4, 2010 August 24, 2010 saw numerous sample properties.
6:30 to 8:30 pm 6:00 to 8:00 pm We saw houses in all states of renovation,
Pasadena Library Valencia Library from the stinky and messy to the shiny and
285 E. Walnut St. 23743 West
Pasadena, CA 91101
fresh. The rehabbed homes featured hard-
Valencia Blvd.
Valencia, CA 91355 wood floors, soothing earth-tone colors,
August 5, 2010 new tile and new countertops. The quality
6:00 to 8:00 pm August 25, 2010 of their remodel is a testament to Kent Sr.’s
Torrance Library 6:30 to 9:00 pm perfectionism and attention to detail.
3301 Torrance Blvd. LA Real Estate After attending the tour, it became clear
Torrance, CA 90503 Investors Club that I was in the middle of one of the best
Beverly Hills
August 10, 2010
investing markets in the country, and in the
Country Club
5:30 to 7:30 pm 3084 Motor Ave. presence of industry leaders. If your goal is
Angela Iacobini Los Angeles, to purchase a quality rental in a burgeoning
Library CA 90064 market and have it managed by a proactive
4900 Clark Ave. and creative team, then be sure to pencil in
Lakewood, the next The Ultimate Cash Flow Buying
CA 90712 Tour on your calendar.
license, which
6601 Owens Drive, Suite 245
est. Remember: Your reputation is
Pleasanton, CA 94588
more important than money. Once
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MMG CAPITAL, pg. 39 properties at once for quick best-buy decisions
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maturity. writing decisions of real people •Provides solid repair cost estimates
MMG Capital prides itself not computers, MMG Capital for renovation projects
on doing business differently. is weathering the storm that has •Supports up to 20 financial options
However, Gleason says the cost slammed America’s real estate
for comparison purposes
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parable to that of most other bad debt. In fact, the California •Has charts, graphs, and tables for cash flow
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expect a total cost for a loan For more information about
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anywhere from 15% to 20% two websites: For borrowers:
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www.mmgcap.com; Investors:
www.mmginvestors.com
Invest in the Rental Property Analyzer
Realty411Guide.com PAGE 61 • 2010 reWEALTHmag.com
Short Term Retirement, pg. 55
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