re investment news march 2016

8/20/2019 RE Investment News March 2016

1/16

N E W S

ReCapitalize

from Dave Van Horn

N E W S L E T T E R F O RM I D - A M E R I C A A S S O C I A T I O N O F

R E A L E S T A T E I N V E S T O R S

March 2016

Elite StartReal EstateInvestorTraining 2016

On a Note Invesment

P I L L A R S O FB U I L D I N G W E A L T H

5

PLUS

REINVESTMENT

TimelinesWhen rehabbing houses to flip.

Important Rental Protection!


2/16

SUCCES

THE FIVE PILLARS OF

BUILDING WEALTHby Dave Van Horn

Photos from Canva.com

“more isn't

always the best

path to building

wealth ”As an investor, like many of you readingthis, I always have plenty of irons in the

fire. Sure I do notes and invest in hard

Real Estate, but I also utilize things like

insurance contracts as well as own and

run several businesses. The one thing I

recommend for all investors or

potential investors is not to simply

invest in any one of these avenues I

listed above but to invest in one’s self.

One of my recent projects has been the

formation of an accredited investor

group called Strategic Investor Alliance

(SIA). Now like my note business that

originated with a focus on 2nd liens (a

marketplace that was barely in existence when

we began), I helped to start SIA because a group

that my fellow board members and I envisioned

didn’t exist. By that I mean a group of like-

minded individuals interested in one thing – the

pursuit of building and preserving wealth.

Now, although that’s a broad topic, we try to

tackle it with focus towards different aspects

and strategies at each bi-monthly meeting and

at our annual one-day event. For example, last

month we dedicated our entire meeting to The

Seven Stages of Retirement. The idea behind

the group is to not only to enrich others with

what you know but to also build credible

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relationships with those who know investmtax, and estate planning strategies that you

not even be aware.

To really preserve wealth, one needs to hav

wealth so part of our group’s focus and my m

goal as an educator is to teach how to build

wealth. As an active investor and business

owner, I spent much of my career in

accumulation mode – finding the next prop


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once purchased a house for $40,000 in m

Roth IRA and flipped it for $80,000. So i

that instance I made a $40,000 profit th

was entirely tax-free. I’ve also purchase

many notes in my IRA account, and besi

the tax-free passive income, there’s not

like the high yield when cashed out with

early payoff.

#5 Business Equity

Business Equity can be a fifth pillar for

some, but for business owners it may no

always be all that passive. Many busines

owners, including myself in the past, are

guilty of working in the business instead

on the business. Businesses can also the

toughest asset class to own, develop, an

maintain depending on the type of indus

your business is in. But it’s also importanremember that they are also the asset c

that has the potential to offer the highes

all returns on investments, in fact it is th

investment of choice for nearly all of the

world’s wealthiest people. So creating a

saleable business or one that can contin

on by employees or family generating

passive income is usually the end goal by

retirement age. And in the meantime, on

the best wealth building strategies is to

sweep some of the money out of your ev

day business and into the other pillars

above.

Utilizing many of these pillars, especially

synergistically, can really ramp up any o

investment’s revenue stream and be the

key to building true wealth. So whether

have a day job or a business generating

income that can be put towards investin

you can use that money to capitalize on

mixture of any or all of the 5 pillars abov

Ideally, you could purchase real estate f

the tax breaks (on your earned income),

notes for the little to no hassle revenue

stream that is earned passively, place somoney in some insurance contracts so a

keep some of your capital in a safe buck

that can pass favorably to heirs, and if an

of these strategies are done in your IRA

account, all of this builds tax free! So as

can see, any one of these pillars is fine by

themselves, but when put together you

really can learn how to harness their

greatest attributes to build wealth.

SUCCESS MARCH 2016

Although there are many different types of

insurance, as well as varying strategies

depending on how you’re trying to protect

loss of income or utilize contracts for

retirement income or legacy planning. It

rarely can ever lose money, since it has a

guaranteed yield regardless of the market,

and it throws off tax-free retirement

income, as you are able to access the cash

value through loans. Keep in mind, these

are long-term investment vehicles, but they

are very safe and predictable.

Can you beat the yield elsewhere?

Absolutely, which is why it is only one of the

pillars.

Two other nice features of insurance

contracts are that they have built-in asset

protection, and money borrowed outdoesn’t count as income when you’re filing

out a tax-return, applying for social

security, etc.

#3. Notes

Now I’m certainly partial to notes because

they are my business but I can you tell you

why, it’s really because there are very few

investments like it. Notes are usually

purchased at a discount, and they tend to

offer a similar net yield to Real Estate and

are backed by collateral (actual properties).With notes, your money can start to work

as hard as or harder than you do.

For example, sometimes a note bought at a

discount, due to partial equity in the

property backing it, could suddenly become

more valuable if equity were to come back

into the market place. Many times, a note

purchased at a discount can be sold a few

years later for almost the same asking price

that it’s currently at today, either due to the

bulk of the monthly payment being mostly

interest, or due to the improved trackrecord of a longer pay history.

#4. IRA Accounts

Self-directed IRA accounts are a great

vehicle to build tax-free or tax deferred

income by retirement age. For example, I

R E I N V E S T M E N T N E W S 3

the next note deal, always moving and

accumulating more and more investments.

Now as I’ve become more passive and started

planning my future as I get closer to

retirement age, I’ve come to realize that

more isn’t always the best path toward

building wealth. I’ve found there are really

five ways to create wealth using synergies

between two or more of the following ways is

what I think is the key to exponentially do so.

#1. Real Estate

Obviously, real estate is the cornerstone for

passive income and wealth building. Between

the tax advantages and write-offs, as well as

the depreciation and appreciation, it has

some investing characteristics that are

second to none. Now, how we build this pillar

in our portfolio of passive income may varybased on our strategy.

For example, some types of real estate are

easier to manage than others (e.g. Garages

may be easier to manage than houses,

commercial real estate may be easier than

residential, etc). Real estate is also the easiest

of asset classes to leverage. It’s easier to

borrow money for real estate than it is for a

business or paper assets.

Now there are many out there who are

understandably conservative with theirproperties, paying off their real estate so as

to have little to no debt, especially by

retirement. Personally, as long as my real

estate has positive cash flow and I have

earned income, the debt doesn’t really

bother me especially if I’m re-leveraging my

properties to purchase other types of

investments with equally favorable returns.

Is owning fewer properties that are all paid

off better than owning a lot more homes that

are carrying debt in retirement? The answer

is, it depends. Risk tolerance, comfort level,and the amount of passivity you want in your

investment career really are the things that

dictate that answer.

#2. Insurance Contracts

Now, insurance contracts are often

overlooked, but they’re a valuable tool when

trying to build and protect your wealth.


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5/16

Please log into MAREIMember.com to download

your Member Benefits Magazine that includes

our special code you need to get the 2% Rebate

plus a phone number to call on this Benefit.

Note in the Kansas City Metro stores, The Home

Depot is testing out an additional Rebate of up

to 5% to all registered shoppers based on their

annual amount spent at the Home Depot.


6/16

Photograph by GrapicStock.com

Recently, a fellow investor askedme how they could make moneyby investing in notes. This is avery broad question, and thetruth is that there are an infinitenumber of ways to make moneyby investing in notes, just as thereare by investing real estate.So, the real question then

becomes, “how quickly can Imake money?”

Oftentimes, if you buy realestate notes that are in default,the money is made either byexiting through the borrower(like by using a modifiedpayment plan or short sale for

3 Ways to QuicklyRecapitalize on a

Note Investment1. example) or through the property(foreclosure, deed in lieu, etc.).

If you decide that you want torecapitalize sooner rather than lateryou can implement more of a velocimodel, either by selling the note,selling a partial note, or creating acollateral assignment of note andmortgage.

1. Selling or Flipping the Note

An asset can always be sold, whethere-performing or non-performing.

Note buyers can be found almostanywhere. Some of the best places tstart are local REIA meetings or realestate and note meetup groups. Youcan even try websites like FCIExchange, Loan MLS, Bigger Pocketsand a variety of LinkedIn groups.

Of course, the best buyer is the onewho is already a customer, so someof the best ways to proactivelycontinue sales could be to provide

reps and warrants with notes to givebuyers more security, as well asoffering them quality collateral andfollow-up service.

Another option is to flip the note,essentially buying it for one price anselling it for another. For example, ifyou went through the work of purchasing a note wholesale, you casell it at retail value either ‘as is’ or

From the Dave Van Horn

6 M A R E I

. O R G


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8/16

ONE YEAR OF LOCALREAL ESTATEINVESTOR COACHING

SUMMARY OFTRAINING

Weekly TrainingTraining will occur oncea week via webinarthrough your owndevice. Each training willbe recorded and madeavailable for replay.

Each training will have a structured topic tobe discussed and have time after that topicis discussed to answer questions emailed inby the students.

Answers toQuestions

Because real life rarelymatches a trainingschedule we will haveroom each week at theend of the call for studentquestions, however thereis a catch.

Local Real Estate Investor Kim Tucker and her team at KCInvest havecommitted to a weekly Elite Investor Training to get the local newinvestor off to the right start. Training will be held via internet eachThursday night from 7:30 pm to approximately 9:00. You don't haveto worry about missing a webinar as each one will be recorded andmade available for replay.

Section 1: Starting with the Basics: Mistakes New Investors Make,Types of Strategies, What is a Deal, Creative Financing, Where to FindDeals, Buy and Hold Strategies, Wholesaling and Retailing.

Section 2: What is a Deal: Where to find comparables, how toinspect properties and estimate repairs, what to offer and a specialsession on values of multi family properties.

Section 3: Finding Great Deals: MLS vs buying Directly from theSeller, REOS and Short Sales, Marketing for Motivated Sellers andAdvanced Marketing Techniques.

Section 4: Funding all those Deals: Using Mortgages vs Private

Partners, Using Creative Financing plus IRA and 401K Investing.

Section 5: Putting those Deals Together: Talking with the Seller,Managing Leads and Follow Up, Negotiation and Due Diligence,Closing and the role of the Title Company.

Section 6: Exit Strategies: Building a Buyer's List, Rental: Tenants,Management, & Budgets, Rehabbing Houses, Creative Selling,Wholesaling and Retailing.

Section 7: Business Management: Asset Protection, TimeManagement, Systems, Outsourcing, and Simple Bookkeeping.

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10/16

A strong lease and a thoroughinvestigative background check,performed and verified by a liveperson, are your first and bestlines of defense against losses asan investment property owner.But even with those safeguardsin place, there may be animportant layer of protectionthat you’re missing… ”

To understand why, imagine fora moment that you’re sitting atyour desk. The phone rings, andwhen you answer the voice onthe other end of the line isintroduced as a lawyer. You canalready assume this isn’t goingto be a pleasant conversation,so you simply close your eyesand wonder, “What the heck ishappening now…”

ImportantRentalProtection

What you learn goes something likethis: your tenant has two dogs, asmall one a large one. Yesterday, thesmaller dog found his way to thehome of Rose, the elderly woman

who lives next door to your propertyShe loves dogs, and wants to be agood neighbor, so she decides toreturn the dog to its home. Afterscooping up the animal and knockinon the door, she is surprised whenthe tenant’s daughter opens the dooand the larger dog comes barrelingout – knocking Rose to the groundand breaking a leg in the process.

While you process all of this, the

question coming from the attorney isimple: “Who are you insured with,and how much is your liability limit?”

If you had the foresight to demandevery tenant obtain a renter’s liabilitpolicy before they’ve moved in, andshow you proof that they’ve done sothe answer is simple: “Call the tenanand ask him!”

Having your tenants buy their liabilit

policies grants you protection frommany incidents that can occur on orin your property. In fact, this may beyour only way to protect yourself,your assets, and your investmentsagainst the unforeseen. It’s humannature to think “these kinds of thingwon’t happen to me,” but why takethe chance? Incidents like the one I’vdescribed in this article take placeevery day. The one thing they all havin common is that no one saw them

coming.

Additionally, the policy your renterstake out can also help protect youagainst tenant-caused damage. Thelosses from candles, smoking,unattended cooking fires, and othercalamities can be bigger than youthink. If your tenant has a rentersinsurance policy, and are liable fordamage to your property, then you

B U Y A N D H O L D

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From Investigative Screening & ConsultingPhotos from Canva.com

Add a little bit of body text


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as the landlord have the ability torecover those damages (and out-of-pocket expenses, includingdeductibles) from their insurancecompany.

There are many, many goodreasons to insist that your renterstake out insurance policies, and nogood reasons why they shouldn’t.That’s especially true when youconsider that such a requirementcosts you nothing, and is incrediblyinexpensive for your tenants.

Through our partners at RealProtect, ISC is able to offer tenantliability policies for under five

dollars per month. If your tenantswant to add protection for theirown personal property, they cansign up for that coverage for smalladditional charge. Best of all,having tenants register through ourportal takes less than a minute, andrequires nothing from you so longas you already have your propertyset up in our system. You will evenbe notified in the event that yourtenant tries to cancel their policyfor any reason.

You can’t ever predict what kinds of crazy things might happen in thefuture, but you can take the stepsto be protected against theunforeseen. Insist that everyonewho rents from you take out aliability policy at a minimum. Then,when the phone rings and it’s alawyer you weren’t expecting tohear from, you’ll know you’reprotected.

For specific questions on rentersinsurance offered by ISC, call ustoday at 480-305-1350.



12/16

by Kim Tucker

When you set out to buy a property, renovate that property and then sellit there are quite a few things you need to be aware as you plan yourtimelines.

Of course you are going to set down and write out your checklist of 1) Secure the Property, Order Dumpsters and Switch Utilities2) Order all items that take time to arrive3) Clean out the house and Start Demo3) Replace Roof and Make Sure there are no leaks.4) Replace windows and or Siding

5) All Exterior Repairs Completed & Looking Good on the Outside6) Replace HVAC and any system repairs7) Interior Painting8) Install cabinets9) Tile Work Complete10) Refinish Hardwood Floors11) Install Light Fixtures & Hardware & Blinds12) Good Construction Clean13) Install Carpets14) Final Clean & Punchlist

TimelinesYes your order might be a bitdifferent and you might rearrangea bit due to weather.

Next is list it for sale, right and thenyou have a whole new set of

timelines.

1) Stage the House2) Take Lots of Photos3) List on MLS4) Blitz the Internet with marketing5) Hold an Open House6) Get an Offer7) Negotiate a Contract8) Buyer Inspections9) Buyer Appraisal10) Go to Closing

11) Get a Check

Or at least something like the above,however we are missing some verykey dates that you need to knowabout.

First, in the State of Missouri there isthis little rule called a notice of intentto sell. Designed to protectcontractors from not getting paid, itrequires the filing of a form stating

you are going to sell the property. Sowhen you sell a property that has hadmajor and in some cases minorrenovations, you need to have filedthis form 45 days prior to closing.

We advise that you file this form theday you buy it and put everyone onnotice that in 45 days or more youwill be offering this home for sale.

When you are rehabbing houses to flip, you needto be aware of several time lines.

R E H A B B I N G

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Is there a way around this rule?

The answer of course is "ItDepends." In some cases a fewtitle companies may still close the

transaction for you, but requirelien waivers from every contractorthat you have in fact paid them.

It's much easier to just file the formwhen you buy the property, or if it's a property you have owned fora while then file the form as soonas you decide to start renovatingthe property to sell.

The second major time lineinvolves the sale of your newly

renovated property to a buyer whois getting FHA financing. This rulehas changed almost annually forthe past 10 years or more.

This rule was created by someperson or persons who think thatReal Estate Investors arescamming everyone and that if webuy a house today and then sell itfor more money, then we have tobe taking advantage of someone.

So while this rule was waivedduring the downturn and no oneseemed to be able to getfinancing, today if you have anFHA buyer, you as the seller must

have owned this home for aminimum of 90 days.

Period . . . but that is NOT the endof the story.

Further if you have owned for lessthan 6 months, you can sell theproperty to your FHA financedbuyer, however as we assume youare buying a house to renovateand sell for more, you willprobably be required to pony up

for a 2nd appraisal.

This second appraisal is usuallyrequired if you are selling thehouse for 100% higher than whatyou paid. For example, you buy ahouse for $40,000 and you invest$20,000 in repairs and are nowselling it for $80,000. You havetoo much of profit to bebelievable, so you will need to payfor a 2nd appraisal.


Your buyer will pay for the firstappraisal, and at closing the secondappraisal will be a closing cost foryou. So figure this into your rehabcosts from the start.

You may also be required to providereceipts showing all the repairs youmade to increase the value of thehome, so be sure to get those andsave them for a report to showeither the lender or the appraiser.

Also be prepared for more repairs asusually once the buyer has aninspection, the lender is not going toapprove the loan until you as theseller can prove that all of those

items called out in the inspectionhave been repaired. For this reasonalone, just plan on fixing everythingfrom the start so you don't havedelays on down the road at the finalclosing.

You have several options when youare dealing with your resale. The firsis to make note on your listing andmarketing that in the first 90 days,you will not be able to finance anybuyer using FHA financing.

Specifically note the buyer will needconventional financing and thenonce you hit day 91, you can thenopen it up to buyers using FHA.

Next, once you have a buyer, be itFHA, VA or conventional a nicephone call to the loan officer and thebuyer's agent, plus probably acouple of follow up emails to makesure everyone knows how long youhave owned the property and theneed to having 2 appraisals. Somelenders wait till the 1st one comesback to order the 2nd, and otherlenders totally space it off until theday before closing and theirunderwriter stops the closing askingfor the 2nd appraisal. You make thebig bucks, so make sure your lenderknows what's going on so you haveno delays in closing.


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DIRECTORY

BUSINESS

ASSOCIATES

A C C U R A T E T I T L E

A Full Service Title CompanyDavid Greenwww.AccurateTitleCo.com913-338-0100

A L P H A T I T L E

Full Service Title CompanyPatsy Archerwww.AlphaTitleLLC.net913-498-8999

A P I A

Asset Protection Insurance AgencyLindsay Griffinwww.APIAProtects.com877-752-2742

A Z U R E W A T E R F R O N T

Luxury Waterfront Property InvestmentBrad Reddickwww.AzureWaterfront.com800-240-3606

Find out more about each of these associates by visiting

their website.

Or go to MAREI.org and click on Business Directory.

CROSSROADS INVESTMENT LENDIN

C O N T I N E N T A L T I T L E

Investor LendingBritton Asbell and BarakTschirhartwww.KCLend.com913-766-2900

A Full Service TitleCompanySharon Bowerwww.CTitle.com913-338-3232

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B R I D G E M A N A G E M E N T

A Turn Key Real Estate ExperienceNathan Brookswww.BridgeEquity.com913-695-8213

A Z U R E C A R P E T C L E A N I N G

Carpet, Hardwoods & MoreJerry Myers & Tiffany Kroutwww.AzureCarpetCleaning.com

816-668-0258

B O U L E V A R D C O N S U L T I N G

A Foreclosure Solutions GroupDanny Hammondwww.Fighting-Foreclosure.com816-985-4950


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re investment news march 2016

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