Give The Big Business Experience On A Small Business Budget

SONY DSCStarting a business can be a daunting task in any economy, but in the current economy where corporations have become so large they are difficult to compete against, you need to be a little creative in order to keep up.  You will need to leverage your resources accordingly to make the same good impression on a potential client that your competitors will.

The trend in start-ups these days is to minimize risk.  While that has always been true to a degree, it is even more important in this new business age we find ourselves in.  With the advances in technology, business transactions can now be measured in tenths of seconds.  You have the same amount of time it takes to blink an eye to catch a potential client’s attention and keep it.

Do you have the resources to do this?  If not the good news is that there have never been more services available to businesses that are built around helping you make a good impression without breaking the bank.  Here are three suggestions of cost effective strategies for improving your client’s first impression.

coloured-web-adress-1045473-m1.)   Maintain a professional and up to date website.  Customers no longer find businesses by looking in the Yellow Pages. Customers find the services they need in seconds by completing a web search.  Make sure you appear on those search results with a website that represents your company well because customers can click off of your website just as quickly as they clicked on it. It should have a professional appearance filled with relevant and engaging content.  Hire a freelance writer if you need assistance creating content.  About.com has an informative article on how to hire a freelance writer.

biznessman2.)   Dress the part. You don’t need a closet full of designer clothes to be prepared for the big meeting. Invest in a few high quality pieces of professional clothing in a style appropriate to your industry.  Maybe go to an outlet store to find separates that can be paired together in a variety of ways.  You are the living embodiment of your company.  Make sure you represent it well.

3.)   Look into the services of a furnished office.  The spaces are rented as furnished and I don’t just mean with furniture.  They also furnish equipment that would be prohibitively expensive to purchase.  Administrative services, like receptionists and office managers are included.  Your client’s first impression upon entering your office will be a professional staff and stylish waiting room.  They also offer state of the art conference rooms so you will have a comfortable and quiet room to deliver your sales pitch in.  Sites like www.officelist.com are a fantastic place to begin your research on shared offices.

officeThese are the three things that a client will see first.  Each of them will make a lasting first impression on your client.  Make sure that you have a website, office space, and a professional appearance that will knock your clients’ socks off.  It will go a long way toward turning that potential client into a loyal customer.

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS

The Value Of Time: A Slow Cooked Approach To Investing

An Interview with Don Fullman and Charles Sells of PIP Group

By Linda Pliagas and Hannah Ash

Time Save Concept. Red Piggy Bank with StopwatchAs the market continues to rebound, inventory levels are running low. With inventory low, it’s easy for investors to get discouraged about new deals. For partners Don Fullman and Charles Sells, new deals are a matter of knowledge and patience, “there are more investment opportunities than there is cash to put into them”. As director of acquisitions for Platinum Investment Properties West, Sells doesn’t claim to have a magic wand approach to investing. Though PIP offers clients the opportunity to acquire property for “pennies on the dollar” that’s just the result, not the approach. The approach Fullman and Sells take is a refined one. Just as some restaurants, such as McDonald’s, are fast while others require reservations months in advanced and a schooled palate, Sells and Fullman take a slow-cooked approach to investing.

“We offer a conservative, high-yield opportunity that is backed by government regulations,” Sells shares, saying, “we try to take all the hype out of the water.” The partners find opportunities for investing in a segment most find too marked by red tape to even consider. It’s a niche market – and for those that know what they’re doing within it – it’s overwhelmingly a safe one. The market? Property taxes – unpaid ones, that is. What do Fullman and Sells do, exactly? They buy tax liens, not property. They acquire tax liens and deeds when property owners neglect to fulfill their tax obligations.

Investment opportunitiesFullman explains, “we look nationwide for tax sale opportunities that will fill the high-yield investment objectives of our clients. Our target areas can change due to a large number of factors, including but not limited to changes in the economy, the real estate market and the laws of a state. What is opportune today, may not be tomorrow. The market is very dynamic, and thus PIP needs to be dynamic to meet our clients’ needs.” At the moment, Fullman and Sells are focused on two states: Georgia and Illinois. They scout out tax auctions to find deals and get the ball rolling. For example, says Sells, “in Illinois, what we buy is a tax lien to the property. In 2013, we would be buying 2012 delinquent taxes.” Illinois gives delinquent taxpayers a period of redemption of two and a half years during which they can pay back owed taxes (plus interest). “The bid rate starts at 18 percent – and it can be bid down to as low as zero. Whatever your bid rate is, in Illinois, it doubles every six months,” Sells states.

By doubling, Illinois brings a significant ROI to savvy investors. “So if you bought it at 15%, you’re actually gaining a net annualized return on a paid-off certificate of 30%,” said Sells. Once the redemption period ends, if the lien is not paid off, the lien holder (or the investor) can then initiate the foreclosure process on the property. That’s where the red tape comes in.

Where some see red tape, Sells sees opportunity. Acquiring property from tax liens isn’t a get rich quick scheme. The process can be drawn out, taking as long as a year. There are attorney fees. Court fees. Back taxes to be paid. Things to be sorted out. This is the slow-cooking part of their approach. The return on time, and the return on investment, are substantial. At the end of the process, you’ve acquired the clear and quiet title to that property: a meal worth waiting for.

For investors, holding a tax lien is a good place to be. “You’re in line even before the mortgage company,” Sells says. Because taxes are escrowed as a part of most mortgages, clients often find themselves redeemed by the banks themselves. When owners fall behind on their mortgages, the property taxes may not get paid. When they assume a property, the banks are responsible for back taxes. Therefore, Sells explains, “the banks have to redeem us out just like the homeowner would.” He goes on to say, “we have rights to foreclose on the mortgage companies just as we do the homeowner; it’s a pretty safe spot to be in.”

Scissors cut the ribbonSafety. Cutting through red tape. Patience. Sizeable returns. It’s a strategy that works for Platinum Investment Properties West and their satisfied roster of clients. Declining inventory levels are not a problem in this niche market: in the business since 1996, they’re busier than ever right now. The fundamentals, Sells indicates, are strong. “Our company has doubled in size every year for the last six years,” he says. “This year we performed higher than we ever have in past years. There’s still plenty of inventory out there for us, because I think there’s a lot that still hasn’t come to market yet.”

Their clients aren’t looking for quick cash: they want high yields – and they’re willing to wait. 40 percent of their investors are self-directed IRA clients who understand tax liens are not exactly liquid. Investors, like investing strategy, don’t follow one set of principles that apply across the board. Fullman says, “It is also important that investors determine their own investment objectives, preferences and tolerances so they can recognize the investments that are right for them.” For their clients, patience is key to the approach, “we still push on all our clients that this is a long-term hold; you’ll get redemption checks immediately upon investment, but don’t expect that you’re going to flip all this stuff out in a year’s time and do it again.”

There’s a learning curve to deals so intricate – and it’s one reason that so much opportunity within this niche market still exists. It’s not fast food investing – it’s long term, proven, safe investing for investors who want and understand the value of patience.

When it comes to tax lien investing, Sells and Fullman know their industry inside and out. “I think we’re the best in the business that offers this type of opportunity now. And the reason we continue to have our success is because our clients are successful,” Sells says. For investors looking to find out more, Fullman says information is crucial. To keep clients informed and ahead of the curve, the two communicate with their clients through newsletters, educational conferences, webinars and of course, directly over the phone, in person and via email. Before making any move, Fullman believes investors must start by being informed, saying simply, “investors need the information on the investments.”

For more information, visit Sells and Platinum Investment Properties West on the web at http://www.pipwest.com.


Don Fullman - Picture 1 - 2014-DSC_9470Donald Fullman, Jr.

Real estate investor since 1979 and current President of Platinum Investment Properties – West, which is a real estate company focused on acquisition, consultation and management of tax lien and default real estate investment opportunities. Don has been a principal contributing speaker on various outlets for Tax Lien and Tax Deed Investing – what they are, the processes for each, and pertinent investment strategies. Has attained various levels of expertise in a number of real estate areas including tax lien investing, income property strategies and analysis, property management (CAM certification) and default real estate. Early experience and education were in the areas of engineering, computer science and project management.

Website: www.pipgrouptaxliens.com

dfullman@PIPWEST.com

(949) 433-8864    (cell) (877)335-2529 Ext: 103


Kellie McCann PhotographyCharles Sells

Charles has been actively investing in U.S. real estate for the past 14 years (special-izing in default/distressed acquisitions). He has intimate knowledge with most real estate markets throughout the U.S. To date, he has over $60 million managed in principal, or transacted property liquidation for the benefit of nearly 300 investors. Credited on financial news shows as an authority in the laws pertaining to default acquisitions, Charles opened his first business specializing in national tax lien acquisitions in 1999.

Website: www.pipgrouptaxliens.com

ccsells@PIPWEST.com

(843) 298-0009 (cell) (877) 335-2529 Ext:104

pipad

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS

An Investment Banker’s Views on Japan & Asia’s Property Market, Global Economy, Life – and How to Use Money to Make the World a Better Place

An Interview with Roland Thompson,

Formerly Director of North Asia for Credit Suisse

By Ziv Magen

rolandHaving delved deeply not only into equities, mergers & acquisitions, debt and leveraging but also extensively into real estate and related infrastructures, I found Roland’s input and take on current economic and social affairs of great interest. At a recent lunch meeting I wondered if he’d agree to let me “quote him on that”, to which he kindly consented, and so I thought I’d put together a few of his opinions and views on current and potential future events of the next few years, along with tidbits ofhis own life and personality, which are woven into his character and philosophy, just to give you a sense of the man behind the words.

Roland – from Australia to Japan, from harsh and grueling martial arts training with one of Asia’s (and the world’s) most prominent masters to your own boutique dojo, and now from one of the world’s biggest and most profit-oriented investment banks to the almost contradictory field of impact investing. Has this sort of diverse interest arc always characterized you as a person? Tell us a bit about your own personal life journey, and how you came to be where you are today.

Suwari kokyu nage.2Yes it has, as a matter of fact. I grew up as a child in Australia, New Zealand and other Southeast Asian countries. Eventually, I moved to Japan and settled in Tokyo where I have lived for the past 26 years. This diversity of cultures and experiences has provided me with a rich range of interests, from an early age, that today still keeps evolving.

Whether as a business professional or in my personal life, I have been fortunate to have a wide range of experiences and lessons to draw from – which have all helped me throughout my career.

What drew you to Japan in the first place? Are these the same things that keep you here today?

Both business opportunities and the culture drew me to Japan. I arrived in July, 1987 and at that time the economy was rapidly accelerating with asset prices, both real estate and stocks, increasing at 5~10% per month. I was drawn into the confidence and excitement of the now famous Japanese asset price bubble, which ubiquitously engulfed all businesses, and to a culture which was like no other that I had experienced before.

And from my first week I quickly realized that without the ability to communicate in Japanese it would be very difficult to succeed. I dedicated myself to become proficient in the Japanese language and to become effective in doing business with the Japanese. Through this journey I developed many skills and gained even more knowledge from daily experiences. I have also had the joy of building a family with my lovely wife Yuko, whom although has bad taste in men, has blessed me with four lovely children. I have also enjoyed the richness within budo (Japanese martial arts) through my Aikido study (pictured below), and by the volunteering and charity work that I do for challenged children in Japan.

What sort of areas of expertise did your work for Credit Suisse cover? Run us through some of the tasks you were regularly called upon to perform, if you could.

A typical investment banker’s day would vary greatly, depending on the financial markets, the professional’s position, and the firm’s strategy. During my investment banking career I completed a great many real estate deals, business integrations, compliance and regulatory audits and successfully implemented multi-billion dollar mergers and acquisitions. One area that I always enjoy is the structuring of real estate deals. From my earlier experiences in cross-border investments during the bubble years, to portfolio and assets management, I have dealt with complex challenges such as portfolio re-balancing and restructuring, capital gains and tax maximization, equity and debt issuance and large scale corporate acquisitions.

07_RYA_group_03What are your thoughts in regards to global real estate investments, and in particular the West-to-East shift in wealth and growth that we’re currently experiencing? What do you see happening in Asia over the next few years, and where in particular, as far as real estate opportunities lie?

Financial capital will flow to where it will receive the most efficient returns, and the West-East shift is a part of these dynamics – so I expect this will continue, as markets continue to develop in Asia. Of course, opportunistic growth capital will lead the way, but we now see more and more institutional yield driven capital being deployed, as risks become defined and market-based. Location, location, location is just as relevant in Asia as it is anywhere in the world, as the great human migration into cities continues. Supply and demand cycles will again play an important role in the valuation process – this is why I believe moderately leveraged Asia real estate will perform well in the years to come.

Having said that, European markets have started to recover, so opportunities there will slow the net West-East capital flows – but the long-term trend for Asia is bright.

And in Japan, particularly, there are various market segments that I like. These include high-end retail, hotels, logistic facilities and second tier cities such as Fukuoka (pictured below) and Sapporo, with international airports. I also believe that Japan, like Australia, is a market where investment funds can diversify risk within the region, given their low correlation with other Asian markets.

You sound optimistic, almost buoyant, on Japan’s prospects in face of its mounting debt and coming changes in the regional and global economy. Your belief and faith, which I happen to share, are almost a minority, perhaps because they don’t sell as many headlines as impending doom prophecies. Here are some of those opinions, in a nutshell -

fukuoka“…huge debt load… competitiveness continues to decline… capital flight… …culturally xenophobic, and with an ageing work force that isn’t being revitalized by immigrants as a result…”.

As extreme and pessimistic as these words may sound, they are echoed by many analysts and couch economists these days. How, in your opinion, should foreigners with Japanese assets, or those considering purchasing such assets, play this market through this particular time frame?

Yes, the Japan debt issue can’t be ignored. And while this is owned by the Japanese, there appear to be few options available for the Japanese government to reduce this to a manageable level. They either take the growth option, which requires more debt, or the austerity option, cutting costs, which would eventually shrink tax revenues. No easy choices there! Japan’s demographics are also exasperating the future outlook, so I can see why so many are Japan-passing. The events surrounding Fukushima are also a heavy cloud over broader optimism and the memory of the previous bubble is still also fresh in everyone’s minds. Naturally, I would expect a lot of caution when considering investing in Japan.

judoFortunately, however, Japan doesn’t have to deal with a European Union type organization for its debt problems – and with the LDP (Japan’s ruling party) holding a majority in the Diet, hard decisions can be made quickly, such as the planned increase in consumption tax, the re-vamping in national pension funds management and the agricultural sector, and so forth. So I see that Abenomics (nickname for Japanese PM’s Shinzo Abe’s fiscal policies), the 2020 Olympics, the Casino bill and the TPP (Trans-Pacific-Partnership – a proposed trade agreement under negotiation by Australia, Brunel, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam) are all improving sentiment – and in terms of real estate, global funds are looking again (did they ever stop?) for prime class A and B buildings. According to a recent Cushman and Wakefield report, yield spreads which are around 200 basis points – and with the stable and transparent market (no Bangkok shutdown/riots yet), Japan offers minimal risk with global diversification.

I refer you to the Nikkei’s 52 week performance, to further cement the point. At the start of the year it was around 9,487 points, and as of this December 9th, finished at 15,650 points – pretty impressive if you ask me, and something for the doubters to ponder. Nothing like resolving your debt problem, granted, but increasing your assets by 50%! We will still have to see the full year’s data across industries before we can get too excited, but for now at least, the deflation trend has definitely been stopped.

And like any market, investors need to always remain focused on the dynamics within the market segments they are choosing to invest in. Logistic facilities, for example, have done well for the past three years – but with J-REITS now investing more, cap rate compression will continue into 2014. As more investors compete, the challenge will continue to be finding good quality assets.

Bourses du monde évolutionReal-estate property investments have always played a major part in the portfolios of any significant asset manager or institutional investor. Do you expect this trend to continue in the next decade as well? What new global trends are developing, in your view?

Yes, I do expect this will continue into the next decade and beyond. As a tangible, stable asset, real estate will continue to be attractive to investors

There is, of course, a liquidity cost associated with direct real estate investments, but we all know real estate is a good inflation hedge – and the coming years of Quantitative Easing tapering will push inflation onto everyone’s agenda. There are also a variety of real estate investment products that improve liquidity, so I see this as a lesser concern these days.

And who would have thought that the US would go so close to defaulting on its debt? We are also likely to have another circus early next year, I believe, and I can’t help but wonder how portfolio managers are hedging this risk. The global financial crisis showed that financial innovation, lack of cross checks, poorly policed regulations, and the wrong incentives can exponentially destroy wealth.

Europe is still struggling to recover from the hangover of investment banks achieving 25 to 30% ROEs – now their Tier 1 capital ratios under Basel III at 12 – 18% – investment banks and securities firms target modest 10 to 12% ROEs. Financial capital will still hunt for high returns, so to achieve this less regulated Hedge Funds and the so called unregulated Black Pools are growing, a development that if it continues will undermine the broader stability of the global financial system. I believe in a free market economy, but perhaps the investable hand of John Smith’s now needs the other hand to play a role as well!

Over the coming decade we will see new investment strategies and approaches, some that are not driven by financial returns only, but look to balance these with broad social returns, i.e., the double-bottom-line returns – through Impact Investing. The term Impact Investing appeared around 2008, and is now starting to become more widely used as an investment philosophy/strategy.

Which is where we find you today – tell us a bit about this new initiative of yours, what your immediate and long term goals are, and what kind of players are you looking to network with to make these new ideas manifest.

I recently established my own financial advisory firm, providing consulting services to corporations, family offices, foundations, venture philanthropists and NPOs. We specialize in mission-driven investing through social impact bonds, social development bonds, patient capital, venture philanthropy, social finance initiatives, foundation grants and partnering with overseas development aid organizations.

ziv_solarThe primary areas of focus are renewable energy, environmental sustainability, real estate, health and education. We are currently delivering 100 MW of solar projects throughout Japan.

I am also leading a working group looking into the development of a Social Impact Bond for the Japanese market, as you know, which will hopefully see your company’s (Nippon Tradings International) real estate, portfolio management and project management expertise come into play as well – this SIB will aim to improve upon the current conditions and social standing of Japan’s increasing homeless population, while at the same time also re-vamp and add to the facilities currently utilized (or, in some cases, not optimally utilized) in servicing their needs. There are many more projects that we would like to develop, which we hope will gain support in the coming months.

Last but not least – what motivates you, as an individual and investor yourself, in your personal and professional life? What tips, or general words of wisdom can you share with our readers?

For Japanese real estate – know your market, be focused, and nurture your relationships with adequate local partners. In a broader sense, look to improve equality across the globe, increasing sustainability in all areas and truly try to understand your ecology.

Personally, I want to be disruptive and create positive changes towards creating sustainable communities. The Anthropocene Era (the current geological age, viewed as the period during which human activity has been the dominant influence on climate and the environment) is well defined as our responsibility. We need to fix the damage of the past and to ensure a future for our generations to come.

Thanks for taking the time to speak to me today, Roland. I’d be very interested in continuing our collaborations and reporting on them later in the year. These new times we’re living in are certainly shaping up to be exciting and promising for social and environmental projects such as yours. We wish you the best of luck, and look forward to a long and fruitful cooperation between both our companies, as well as on a personal level.


Picture12Ziv Magen

Ziv Magen is an Australian, and has been deeply immersed in Japan’s culture and business environment for the past decade. In 2003, he forsake his career as an IT corporate project manager, wishing to spend more time with his family and secure their financial future. Having made the transition to real estate investment and successfully building his own portfolio, he subsequently established Nippon Tradings International (NTI) together with his Japanese partner, assisting others in capitalizing on Japan’s vast and lucrative property market.

Picture11

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS

From Cities to Suburbia and Back (Part 2)

This is the second article in a series of three articles from Rick Tobin, where he discusses the evolution of the suburbs in America and how they were shaped and continuously molded by the economic, political, cultural and technological changes in the world.  In the previous issue, Rick discussed the real estate situation 100 years ago to the 1950s.  In this issue, Rick covers the 1960s to the 1980s. In issue 19, he will cover the
1990s up to the present time.

OLYMPUS DIGITAL CAMERA

Suburbia’s Evolution: The 1960s

American suburbia continued to grow and evolve in the 1960s. While Americans in the 1950s decade saw significant prosperity after World War II, the 1960s had both positive growth as well as major heartaches.

The Baby Boom generation (born between 1946 and 1964) increased in size through the early parts of this decade. The increase in the size of American families helped fuel the continued demand for the larger homes that suburbia offered them.

As more Americans moved away from urban population centers, many inner city areas began to decay. The decline of urban cities brought an increase in crime, poverty levels, and a decrease in inner city property values. The urban decline also motivated more people to move to the “safer” and more “family friendly” suburban areas.

rick_grafitiAmericans in the 1960s experienced many conflicts or wars during that time. The threat of World War III reached the pinnacle of potential near actual conflict with the Bay of Pigs conflict in October 1962. An American U-2 spy plane photographed Soviet missile bases installed on the neighboring island country of Cuba. President John Kennedy announced the discovery to America via a televised speech. President Kennedy imposed a naval blockade around Cuba to prevent further missile shipments from the Soviet Union. The world community was stunned and fearful of the first nuclear conflict between the two Superpowers.

The Soviet Premier, Nikita Khrushchev, agreed to remove his troops from Cuba on October 28, 1962 if the U.S. agreed to withdraw their missiles from Turkey. In addition, the Soviets wanted an assurance that America would not later invade Cuba.

The potential of the world’s first nuclear war had a profound effect on the mindset of the average American citizen. For example, a high percentage of school children began practicing air raid drills or “duck and cover” drills to prepare for any missile attacks on America. As a result, many more Americans sought the safety that suburbia offered them away from the crowded cities.

rick_jfk2The assassination of President John Kennedy in Dallas shocked our nation the following year. His successor, President Lyndon B. Johnson, helped pass through Congress the Civil Rights Act of 1964 to lessen discrimination in the sale or financing of housing (later expanded on by the Fair Housing Amendment). The bill also provided equal benefits for all, and partly helped rebuild inner city areas affected by the mass exodus to the new suburban communities. In 1965, the Housing and Development Act created HUD to assist in low income housing and equal lending for all.

President Johnson worked to enact social and welfare programs to promote equality throughout the land with his Great Society concept. In addition to the Civil Rights Act and equal lending programs, Medicare was established in 1965 in order to help those over the age of 65 with their medical treatments.

At about the same time that the Civil Rights Act, HUD, and Medicare were established in the mid-1960s, the conflict in Vietnam caused the U.S. to become involved with the dispute between the communist-backed North Vietnamese and their South Vietnamese counterparts. This conflict was not formally resolved until 1976.

Mortgage rates in the early 1960s were almost equivalent to today’s low rates. Interest rates in the 1960s sometimes varied wildly from city to city across the nation. Mortgage loans were sometimes difficult to obtain as the qualifying guidelines varied from one lending institution to another. There was not nearly as much uniformity in mortgage loan qualifying as there is today partly due to the lack of a major secondary market for mortgage loans such as Freddie Mac (established in 1970).

rick_womanworkFertility rates began their long gradual decline from the peak of 3.77 children per married household (1957) to an average of closer to 2 children per household at the end of the 1960s. The post Baby Boom era also had a large increase in the number of married women entering the work force. Approximately 30 percent of married women worked at the beginning of the 1960s, and close to 40 percent worked near the end of the 1960s. The suburban population varied from close to 50 million (1960) to over 80 million (1969) as more Americans favored the suburban lifestyle.

America saw a great deal of turmoil in the 1960s. The U.S. also saw the Baby Boom wave grow through 1964 (1946 to 1964 was the “Baby Boom Wave”), the increase in our Gross National Product (GNP), and the expansion of American businesses both nationally and internationally. America experienced potentially the peak of our pride in the 1960s by beating the Soviets to the Moon on July 20, 1969. America’s dominance as a world economic power helped our financial markets, housing markets, and overall economic strength continue through the end of the turbulent 1960s decade.

Suburbia’s Evolution: The 1970s

There are many Americans who are not as nostalgic about the 1970s as they were about previous decades in the 20th Century. When many Americans think of the 1970s, we may think about the Vietnam War, Watergate, the movies: Rocky, Saturday Night Fever, Star Wars, and Jaws, gasoline lines due to the OPEC energy crisis, high inflation levels, rampant real estate appreciation, stagflation, and the hostage crisis in Iran. Real estate investors, on the other hand, may look at the 1970s favorably in that many homes could be purchased near coastal regions for $20,000 to $30,000 at the beginning of that decade.

The Vietnam War continued on until 1976. During the Vietnam War, our country experienced the Watergate scandal. Prior to Watergate, President Nixon helped expand America’s foreign policy with other nations. Nixon thought it was important for our country to have more open policies with countries like China and the Soviet Union. These relationships later laid the groundwork for more business and investment opportunities for our nation.

Unfortunately, President Nixon’s foreign policy accomplishments were later overshadowed by Watergate. America experienced its first major energy crisis in 1973 and 1974. OPEC (the Organization of Petroleum Exporting Countries) began to limit the production of oil for both political and economic reasons.

rick_oilhike smallTheir self-imposed oil embargo caused gasoline prices to jump from almost 38 cents per gallon in 1973 to well over 55 cents (a 150% increase in prices in 1974). While these prices may seem cheap to us today, they were very similar to today’s gasoline prices (in most parts of the U.S.) when adjusted for inflation. It was almost equivalent to almost $3.80 per gallon in recent years’ adjusted Dollars.

As many economists believe that energy prices are the main cause for inflation to increase worldwide, the actions of OPEC and the subsequent gasoline lines helped push the costs of consumer goods and housing costs much higher. The actions of OPEC set in motion the significant appreciation of real estate throughout our nation as inflation took off. Inflation in the 1970s was a “doubled edged sword” for the U.S. economy.

rick_arrowup smallReal estate values increased tremendously in the early to mid-1970s as inflation levels began to soar. The U.S. stock market, on the other hand, was adversely affected by higher energy costs and high inflation in the 1970s. For example, the Dow Jones index hit a low of 577 during the 1973-1974 bear market. Inflation in the mid-1970s later evolved into something known as “stagflation.” Stagflation is a period of time where the economy is in a recession with high unemployment, low demand for goods and services, and high prices (i.e. home prices and consumer goods).

Gerald Ford later succeeded Richard Nixon. Ford later lost his re-election bid to Jimmy Carter. President Carter had the primary economic problem of how to contain the escalating rates of inflation that America experienced in the 1970s. Inflation rates hit a high of 13.3% on an annualized basis in 1979. Carter appointed Paul Volker as the new Federal Reserve Chairman in 1979.

Chairman Volker determined that inflation was “public enemy number #1” so he went on a crusade to increase short-term interest rates to “quash” the high inflation numbers. The Federal Funds Rate had averaged slightly over 11% in 1979 (as compared with 1% – 5% the past several years).

The Federal Funds Rate peaked near 20% in 1981 after the series of rate increases encouraged by Chairman Volker. The Prime Rate reached 21.5% in early 1981, and the long-term Treasury Bond hit above 15%. Chairman Volker’s rate increase actions, though controversial at the time, later did help control the annual rate of inflation as the Consumer Price Index (CPI) levels later averaged less than 4% for all of 1982.

The late ‘70s and early ‘80s were challenging times to work in the mortgage industry partly since mortgage rates hit such insanely high double digit levels. Seller financing options such as “Contracts for Deed” or “AITDs” (All Inclusive Deeds of Trust) became options for motivated sellers who could not find any buyers who could qualify at the time for double digit mortgage rates.

The computer evolution experienced an exponential growth phase in this decade with the introduction of the first UNIX operating system. Intel’s RAM chip, the computer scanner, micro-processors, email programs, the first home video game: Atari’s “Pong” game, the first home computer: The Altair 8800 (powered by Microsoft’s BASIC computer language), the Apple computer, and the expansion of IBM’s operating system, software, and hardware.

Computer technology helped more Americans to move out to suburban areas more than ever before. More people could work from home with the new computer and communications technology at their disposal. The U.S. suburban population exceeded 100 million people by the end of this decade, average U.S. fertility rates per household hovered below two children throughout much of the 1970s, and the percentage of married women in the workforce exceeded 50% by the end of this decade. Americans in the 1970s experienced some pains, but increased prosperity was just around the corner.

Suburbia’s Evolution: The 1980s

rick_pc smallThe decade of the 1980s began during the middle of a major economic recession. The first quarter of 1980 had 30-year Treasury Bonds yielding over 12%, U.S. Treasury Bills were near 15.6%, and inflation was hovering near 14.6% on an annualized basis. The Federal Reserve eventually quashed inflation with the massive increase in short term interest rates, and the inflation and economic numbers later improved dramatically in 1982.

When President Ronald Reagan took office in January 1981, the Dow Jones index was 970, and real estate was sluggish due to the high rates. One of Reagan’s first actions was to enact a series of tax cuts to try to improve the U.S. economy. Reagan helped reduce the top marginal tax rate from a high of 70 percent down to 28 percent in 1981.

In addition, the new Tax Act of 1981 encouraged the creation of new tax shelters (i.e. real estate and equities investments). This later fueled a new investment boom. The flip side of the tax cuts is that the federal budget deficit grew to record levels as the reduced tax revenues did not fully cover the government’s expenses at the time.

TaxesThe 1981 tax cuts were later followed by The Tax Reform Act of 1986. The 1986 Tax Act was pushed by President Reagan, passed by a Democratic controlled Congress, and a Republican controlled Senate. The new Tax Act reduced tax levels even more, the tax base was expanded so more individuals and businesses were taxed, tax laws were simplified, and the investment tax credit was repealed.

Both short term depreciation schedules and the use of accelerated depreciation were eliminated. The government established new cost recovery periods of 27.5 years for residential real estate, and 31.5 years for non-residential properties.

The 1981 Tax Act encouraged the over building of highly leveraged real estate in the early 1980s. The building boom was later followed by a building bust when both the depreciation and the “passive loss” rules were tightened as a result of the 1986 Tax Act. The value of much of what had been built in the early 1980s was adversely impacted by the 1986 Tax Act.

One of the major fallouts of the economic recession of the late 1970s and the early 1980s was the eventual collapse of over 1,000 Savings and Loans (or Thrifts). The Federal Savings and Loan Insurance Corporation (FSLIC) was effectively bankrupted by the collapse of so many major lending institutions in such a short period of time. As a result of the FSLIC collapse, the U.S. government with the help of U.S. taxpayers, stepped in and covered losses of between $175 and $190 billion dollars (see the Savings and Loan vs. Credit Crisis section)

rtcCongress later turned over the management of all of the assets and liabilities to the Resolution Trust Corporation (RTC) in 1989. The RTC’s focus was to liquidate the assets of the failed savings and loans. It was during this time that interest in real estate foreclosures began to increase exponentially.

Savvy real estate investors purchased homes, condominiums, apartment buildings, and commercial properties for a fraction of their recent market value. The American taxpayer helped cover any losses incurred for the heavily discounted property sales. Mortgage professionals, however, lost many of their key funding sources for their clients due to the loss of so many flexible S & L lending options.

The expansion of American suburbia was tremendous in the 1980s as the 1981 Tax Act encouraged builders to build small and large commercial property centers. In addition, residential housing tracts were built right alongside the new commercial property developments in places like Dallas, Houston, and Phoenix.

rick_www smallThe computer and high tech revolution continued in the 1980s with the introduction of the floppy computer disc by Sony in 1980, the improvement in portable computers, the introduction of DOS by Microsoft and their affiliates, Apple’s Macintosh Computer (1984), Microsoft’s Windows software program, the CD-ROM, and the creation of the world wide web (www) in 1989. As with previous decades, the technological advances allowed more Americans to live farther away from major urban areas as they had the technological and communications systems at their disposal either at their home or their suburban offices (or both).

rick_womenwork smallFertility rates for American families remained close to two children per household throughout this decade. Approximately 60% of married women were working full time by the end of the 1980s, and the size of American suburbia reached close to 120 million people by 1989.

The economy started the decade in the midst of a recession, but the economy closed out the decade much stronger as interest rates and inflation dropped, technological advances continued, America won the “Cold War” with the Soviets, tax rates dropped (although the federal deficit increased), the Savings and Loan Crisis situation worsened, and both the stock and real estate markets improved. The economic boom of the 1980s later continued well into the next decade.

Stay tuned for part 3 (Suburbia’s Evolution: The 1990s up to the present) in the issue after next.


Author: Rick Tobin

Rick Tobin Professional Pic sharperRick has an experienced and diversified background in both the Real Estate and Securities fields for the past 25+ years. He has had hundreds of articles published nationally in magazines, newspapers, internet sites, newsletters, and other sources, and has also appeared as a guest on various television shows as well as in seminars about real estate and financial information.

Rick has an extensive background in the financing of residential and commercial properties around the U.S. His funding sources have included banks, life insurance companies, REITs (Real Estate Investment Trusts), Hedge Funds, and foreign money sources.

He has purchased numerous investment properties in multiple states, including government and tax foreclosures, All Inclusive Deeds of Trust (AITDs), Land Contracts, Lease Options, and he has purchased significant amounts of mortgage investments. He has worked in the development of hundreds of residential properties, including single family homes, townhomes, condominiums, and apartments.

Contact Information: Rick Tobin – 12424 Wilshire Blvd., #630 Los Angeles, CA 90025 Email: rtobin22@gmail.com Phone: (310) 571 – 3600 ext. #203 CA DRE #01144023

Ricks’ website: www.thecreditcrisis.net


Flexible Financing for Difficult Economic Times

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS

Interview with Kevin Rollings, Owner of Alcatraz Storage

By Linda Pliagas

warehouse3How did you discover self storage?

After managing rental stores with Nationsrent for 15 years, I was offered the position of Regional Director by the previous owner of the Alcatraz Storage Facilities located in the Indiana. So, my start in self-storage came from someone else already involved in it. I originally came on board as a manager (and investor) looking to learn the business from the ground floor. As I learned the business, I took on the responsibility of district manager over several facilities in Indiana. It wasn’t too many years after that the whole portfolio I was managing became available for sale. I started with the Brownsburg facility before it actually went back to the bank. After finding out how smoothly the purchase with Brownsburg went, I purchased the Ft. Wayne facility. The bank actually contacted me for the sale of the Muncie property. That sale was not a fast sale and took months of negotiations.

Did you do other types of real estate deals before, such as single family or apartments?

I had previously been in the rental equipment and sales business when I started to dabble with residential. After a few residential and a venture into multi family, I found the best commercial real estate to be self-storage, simply because it had tenants but they don’t live there. I did some single family rental homes but honestly, tired of it after a few years because of the tenants’ ridiculous requests and complaints. The same was true of an even shorter venture into multi family. Self storage allows a nice income with a low overhead and none of the crazy phone calls at 2:00 in the morning. A rental home needs maintenance and up keeping during and after a renter leaves.

kevin_2pmHow did self storage compare with other types of deals?

The self storage facilities were actually fairly easy to complete. The shift from residential to commercial was not as hard as I thought it would be. If you are a current investor then you would already know some of the laws and certainly most of the city/county requirements. Commercial has a few different rules and regulations on purchase but nothing that you can’t learn. With self storage, because there are more factors for a successful one than say a single family home, I have a 3 phase due diligence that I apply to any investment opportunity. Once you do the due diligence stages, it makes purchasing a facility much easier and, not only that, it was simple to apply the numbers, negotiate the price and get started.

What type of investor would do well in self storage?

I really think just about any type of investors would do well in self storage. Short term, as well as long term. I personally am a long term personality. I want to build and then add on to what I have built, all the while seeing the investment become a solid, reliable fixture in my portfolio. Many folks see the BIG price tag on a facility and then the fears of steep numbers, along with the insecurities, kick in. They start chanting phrases like, “I don’t have that kind of down payment”, “I don’t know anything about storage”, and “I’d never get my facility paid off if it is one million dollars”. Those are excuses to keep away from success as far as I’m concerned. Compared to any other commercial real estate, self storage is as affordable as any. The return is usually positive quickly. There is a reason this type of property has seen steady growth even when the market for residential and multi-family were hit by the decline in the economy.

What kind of opportunities are there in this niche?

Self StorageThere are opportunities everywhere. Many self storage owners have been in this for a while and many are looking to retire. Others may not have been mismanagement and other investors may have treated the rewards from their investment much like their personal bank. You can find facilities through numerous sources, online, private listing, foreclosures and well, just about anywhere. Anyway, there are a number of facilities for sale throughout the country. They vary in size from small mom and pop facilities to mega storage, and this is very beneficial for anyone looking to get into this business. You can choose a facility that is the right size for you and your comfort level. An 80 unit facility can add a nice residual income and allow you to position yourself to add more facilities. So yes, in self-storage, size is important but it needs to be the size that makes you comfortable.

Do you find that once investors enter the self storage arena they are hooked for life?

Yes, most self-storage operators I know feel very similar to how I feel; “Wow, why did it take me so long to find this niche?” or “If I’d have only known more about this industry I would’ve never done the residential headache”. I believe most people that start off on the path down to self storage usually stay there, happily. Self-storage is generally not considered your get rich quick with a flip property, although, there are some that do flip them and do that successfully. But, for me, it was the long term investments I was looking for, to retire nicely and live the dream.

What is the best way to get started in Self Storage?

Getting into the business is easy, just listen to me! No seriously, there are many avenues you could choose from to get your start in the self-storage business. As you, and most anyone, in the real estate investment world knows, you can find a lot of “experts” out there teaching one thing or another. Everyone has their own way of doing things and I think it’s extremely important that the future investor in self-storage do their own due diligence on the avenue they seek to learn the business. We all have different learning styles, but one of the most important things to look at is “Are they doing what they preach?”. I can’t vouch for anyone else in the industry, but my style of teaching is much different, because I am literally in the trenches, so to speak, daily in my facilities. There are also, a ton of resources and classes available on the internet but the number one thing they need is the desire to learn!

Do you have anything else you’d like to add.

The last thing I would add, other than check out our website at http://selfstoragefacilitymanagement.com/ and read about our online class: Self Storage Masters Workshop: The Extreme, is remember when you buy your facility, buy the facility realistically. Do not put yourself into any over leveraged situation. Learn the value of profit centers and the revenue streams they can bring to the facility and learn how to market, not just your facility but yourself. Invest with passion, do what you love and remember to live your dream!

Self_Storage_Full_Page_Ad

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS

Interview With Marko Rubel

By Linda Pliagas

marko_main pic1Marko, you have a true rags-to-riches story, can you tell us a bit about your journey from being a poor immigrant to living the American dream and how real estate made it happen?

When I came to America, I didn’t speak English and didn’t have much money, but I was so excited! I knew that in America it’s possible to make money if you work hard, which wasn’t the case where I came from. Over there in Croatia, you had to have connections and in fact you had to be born in the “right” family to have any chance. So Yes, I was very excited.

After a few years of learning the language, and going to a school, I finally got a decent job, but seven months later I lost my job due to downsizing.

Then, after working for Sony in San Diego for 11 months, I lost my job again due to downsizing.

This was the time I realized that no matter how great the company you work for may be, there’s no job security. I was disappointed, and very stressed out looking for another job… and during that time, out of desperation I purchased a real estate course called “No Money Down” while watching a late night infomercial. It was hard to comprehend the techniques, but as you know, that started the change and the rest is history. That was back in 1997, and a few years later I went full time in Real Estate and been having a blast ever since.

What type of real estate do you like best? Flipping, Buy and Hold, Wholesaling??

I consider my “Unlimited Funding” model to be the ultimate model. Sure I’m biased, but it is the only model that gives you the profit now, the cash flow, the benefit from loan paydown and appreciation, plus the tax savings… without dealing with tenants. I only flip properties that come my way and don’t fit that criteria.

Tell us about your Unlimited Funding Program, what is it?

MARKO-FUNDINGI had no money when I started, and my credit was non-existent, so I had to come up with a method to profit without it. I was smart enough to quickly realize that flipping houses would never give me the passive income I was after. There was no leverage, no cash flow, no appreciation benefit, plus the small profits realized by flipping are highly taxed. I knew I had to own properties to create real wealth. That’s how I perfected the strategies that today I call “Unlimited Funding”. It made me a millionaire, so I consider it the BEST way to invest in real estate.

Why do you say that most real estate “gurus” only talk BS?

marko_pillThere’s no business on this planet that brings you easy success, but “gurus” make it seem like all you have to do is buy their “magic pill secret” and success will be really easy. That is B.S. Most gurus are just information sellers and are not doing the business. They hate me for saying this, but it’s the truth.

Can you explain the 2 X 2 of real estate investing?

There are 2 ways to approach real estate investing – the “conventional (1)” way, where you buy rentals using your own credit and hassle with it for years; and then there’s the “creative (2)” way where you use creative techniques like “subject to”, options and lease options, seller financing, etc. to create wealth a lot faster. The “creative” investing has 2 different approaches as well. One is “fixing houses” and the other one is “fixing paper” by creating favorable financing for buyers who can’t qualify. The latter is easier and a lot more profitable!

Marko, what is the greatest real estate lesson you have learned so far?

The one I always tell the new real estate investors – the best strategy to invest in real estate is not the one that “a guru” told you about… but rather the one that has potential to give you all five leverage benefits of real estate. That is the strategy and business model that provides not only the profit based on difference in buy vs. sell price; but also the cash flow; the equity build-up due to loan paydown; the equity build-up due to appreciation; and the tax shelter due to depreciation (IRS 167).

Do you have any investment regrets? If so what are they?

I think I wasted a few first years trying to wholesale and then later trying to fix & flip houses. That’s the least profitable way.

What advice would you give to new investors?

MARKO_HARDWORKFor new investors – success doesn’t come over night, so be ready to put in some work. You will not regret it!

What advice would you give to more advanced investors?

For more advanced investors I suggest asking yourself this “Is your income going to continue if you stop doing what you’re doing? If not, then change your strategy!”

Are there any areas you are having your eye on right now?

I don’t believe in investing out of state. It’s too many hassles and hard to control the overhead. I believe that with the proper strategy, everyone has a diamond in their back yard. So, my focus is my back yard…San Diego, Phoenix and a few other areas through my partners.

What is the best and worst part of being an investor?

I think the worst is the start…it takes accepting the fact that you will get a lot of “No’s” before you get a “Yes”.

The best part of being an investor is that once you get it going, it’s the BEST business there is…it does not take too many hours to create huge income.

Give us your Famous Last Words….

The Time to Invest is NOW! Get in and start hard! Sure, the better time was two years ago, but this is still a good time, so don’t look for excuses!


markoMarko Rubel

After making millions for himself, Marko Rubel has dedicated his life to helping ordinary people achieve wealth through Real Estate investing. Through his active business, he has identified the simple strategies to create massive profit that can be immediately applied to improve your business and the quality of your life. You are invited to take the first step right now.

http://markorubel.com/

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS

Interview with Dmitriy Fomichenko, Founder & President of Sense Financial Services LLC

By Linda Pliagas

Sense Financial 30 - background

How long has Sense Financial been in business?

I started Sense Financial 3 years ago in October 2010.

Why did you start Sense Financial?

In short, because I saw a need and was able to provide the solution. My background includes conventional financial and retirement planning. I started my career in financial planning in 2000. I met with families one on one to help them create a budget, plan to get out of debt, save for their children’s college education and to plan for their retirement. At about the same time, I was introduced to real estate investing. In 2001, I purchased my first investment property.

dmitriy_dollarOver the next several years, I realized that conventional investments such as the stock market and mutual funds were very unpredictable. At the same time, my real estate investment portfolio was growing rapidly. I made a number of mistakes and lost money on some of my real estate deals, but overall, my returns were significantly better than that of the stock market. I wasn’t comfortable recommending conventional investments to my clients and started devoting more of my focus to real estate.

In 2004 I went to work full time for a real estate investment firm and started teaching my clients how to invest in real estate. I soon received offers to teach classes in real estate investing at several local community colleges. Over the years, I mentored hundreds of investors and instructed over one hundred classes/seminars.

One thing I heard from my clients was that while their real estate portfolio was growing, their retirement account was losing its value in the stock market. I had heard that it was possible to invest in real estate using an IRA or 401k, so over the next year, I researched how to invest in self-directed IRAs and 401ks, and consulted with the top experts in the field. That is how Sense Financial was born.

How has the Solo 401k revolutionized self-direction?

A Solo 401k (also known as Individual 401k or Owner-Only 401k) is a simplified version of the 401k Plan, and is designed for sole-proprietors or small business owners who don’t employ full time workers. Most investors qualify for it, even if they have a full time W2 job working for a company. All that is needed is the presence of self-employment activity, which could include consulting, network marketing, a referral business, etc. Many real estate investors that manage their own properties use this activity to qualify.

The reason a Solo 401k is so attractive is because of its unique features and benefits, not found in a self- directed IRA. Here are few:

dmitriy_chartLoan Provision: The Solo 401k Plan also contains a provision which allows the participant to borrow from the account at any time and for any purpose. A Solo 401k loan can be made for up to 50% of the account or $50,000, whichever is less. These loans can be used for any purpose.

Roth Sub-Account: The Solo 401k Plan comes with the Roth sub-account, allowing plan participants to make after-tax (Roth) contributions into the Roth bucket of the Solo 401k Plan. All investments made using a Roth Solo 401k are completely tax-free. That means that no income tax on the rental income received from the property and no capital gains taxes on the sale of the property. The potential return on investment using a Roth Solo 401k could be infinite, especially if leverage is used!

dmitriy_egg401kHigh Contribution Limits: Plan participants are allowed to contribute up to $51,000 per year into the plan. Those over 50 years of age can take advantage of the additional $5,500 catch-up contribution. If the spouse of the business owner is participating in the business, he or she could also participate, which would make the total contribution to the plan up to $113,000 per family. This makes the Solo 401k Plan a great tax-sheltering vehicle.

Checkbook Control: Because a Solo 401k Plan is set up under different IRS rules than an IRA, it does not require a custodian to hold the plan assets. With a Solo 401k, clients are designated trustee of the plan, which allows them to control their retirement account directly. A checking account is opened in the name of the Solo 401k Trust and funded with contributions, or a Transfer/Rollover from other qualified plans such as IRA, 401k, 403b, etc. Investments and transactions are as simple as writing a check. This eliminates the unnecessary delays and fees that are associated with custodial accounts.dmitriy_checkbook

Exempt from UBIT: When an IRA uses mortgage financing to buy leveraged real estate, this triggers Unrelated Debt Financed Income (UDFI) – a type of Unrelated Business Taxable Income (UBTI) in which taxes of about 35 percent must be paid. But, with a Solo 401k plan, you can use leverage without being subject to the UDFI rules and UBTI tax. This exception offers major tax benefits to buy leveraged real estate.

Are your clients mostly local or do you service clients around the country?

Our headquarters are in Orange County, Southern California. Initially all of our clients were local. We sponsor several real estate investment clubs and work with investments providers who help us spread the word. Over the last couple years, I’ve been asked to contribute to several blogs and have been writing for them ever since. Now people from all over the US that are looking for retirement solutions, are able to finds us online. We get about 50% of our business from the web, and most of these clients are from out of state.

Tell us about important developments in the IRA industry and how are they affecting investors?

dimitriy_soloWith our national debt level growing un-proportionally high compared to the median household income, more people are concerned that the US government may follow the example of other countries, where governments used private pension funds to meet deficit targets. It happened in Portugal, Poland and Cyprus. Private pension funds were seized to cover the debt gap. Many ask the question: Is my retirement account safe from our government? Unfortunately, if your retirement account is being controlled by major financial institutions, it becomes very vulnerable. More and more people are now switching to Solo 401k Plans, where the client acts as a trustee of the Qualified Plan and the need for the custodian is eliminated. This is the only structure that makes the retirement account impervious. After the shocking events around the globe and after our own government shutdown, we noticed a significant increase in our business where clients are switching from IRAs to Individual, trustee-managed Solo 401k Plans.

What advice would you give to someone that wants to start planning for retirement?

Plan for the future. Save money and invest wisely. Don’t get into Get Rich Quick schemes – they don’t work. Educate yourself and learn how to invest for the long term. Real estate for example, offers the ability to build significant wealth over time if you do it right. With a Solo 401k, real estate is one of the types of investments available to you. Taxes are one of the biggest obstacles to the growth of your wealth. Learn how to shelter your investment income and gains from taxes. You will significantly increase the chances for reaching your financial goals by doing so.

What are the biggest misconceptions about IRAs?

Many people been conditioned by major financial institutions to believe that traditional investments (stocks and mutual funds) are the only investment choice in the retirement account. But the fact is, this is the limitation put in place by financial institutions and they dictate to you these investment options. The IRS allows a whole spectrum of investments, including real estate, precious metals, trust deeds, private lending and many more!

What is the best and worst part of running Sense Financial?

dmitriy_piggysI love helping people! It fills me with joy when my clients are satisfied. I would say that this is probably the best part. When my clients call or email me to express their gratitude and satisfaction – I feel fulfilled. I am an engineer by education and I like creating systems. I have several ideas for improving things, expanding in other markets, etc. However, I can’t do it all myself and have to delegate things. Finding the right team members can be challenging. I select people very carefully. I have also experienced companies that grow too rapidly, which was detrimental. That is one of the reasons why I want to have controlled growth. So the worst part of running Sense Financial is probably the fact that I can’t implement all my ideas immediately.

Where do you see Sense Financial in five years?

That my company has achieved controlled growth and that the people added to my team have been carefully selected and share the same values of integrity and customer service that I have.

dmitriy_retireIs there anything you would like to add?

We understand that many people are concerned about retirement. And we know that the self-directed retirement accounts we offer, such as the Solo 401k, enable our clients to take control over their future. Our goal is to provide our clients with IRS-compliant retirement accounts and to ensure 100% satisfaction. I am happy to report that we are able to achieve this!


Dmitriy Fomichenko

dmitry2Dmitriy Fomichenko is Founder & President of Sense Financial Services LLC, a company specializing in helping clients obtain checkbook control over their retirement accounts. He owns multiple investment properties and is a licensed CA Real Estate Broker. Over the years, he has instructed at many investment & financial planning seminars and mentored hundreds of investors.

Since 2000, he has been helping his clients maximize returns on their investments, while protecting their hard earned money. He is very passionate about helping families and individuals achieve financial freedom by following proven Biblical principles of prudent planning and investing.

Facebook: https://www.facebook.com/SenseFinancial

Twitter: https://twitter.com/dfomichenko

LinkedIn: http://www.linkedin.com/in/dfomichenko

Youtube: https://www.youtube.com/user/sensefinancial

Google+: https://plus.google.com/u/0/+Sensefinancial/posts

dmitry ad

 

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS

Interview with Karen Rittenhouse

karen_rowhouses

Today we are interviewing Karen Rittenhouse. Karen has been investing in real estate full-time since January 2005. She has purchased hundreds of homes, opened a full-service real estate company, a property management company, a coaching/training business, and has written several books on real estate.

Welcome Karen and thank you for taking the time to speak with me today. Can you please tell us about yourself, what you do now, your companies, the books you’ve written, etc.?

Hello! And thank you for the opportunity to talk about real estate. This is such a great time to be investing and I absolutely believe every person needs at least 5 single family rental properties to secure their retirement.

Right now in our business, I handle a lot of our marketing. I blog, write articles for real estate publications and, as you mentioned, I’ve written three books, The Essential Handbook for Buying a Home, The Essential Handbook for Selling a Home, and The Essential Handbook for Landlords.

The first book, the one on buying, I wrote when our youngest and his wife were buying their first home out of state. He would email a question, I would respond with a long answer. About the third email I thought, “He’s asking the very same questions all of our buyers ask. I need to write out the process in an easy to follow format, so we can hand these out to our buyers at the beginning of the process.” And so I did. The last one, the one for landlords, I wrote with our coaching students in mind. You only need to purchase your very first investment property to become a landlord and most investors fall into the landlording business quite unprepared!

As far as our companies, as you mentioned, we started investing full time in January 2005. We still have that company and today it focuses primarily on renovating and selling properties with a goal to pay off our portfolio. We also have a wholesale division, a full service real estate brokerage, a property management company, and a coaching/training business.

We did not start out with all of this in mind! Our only original goal was to secure our retirement. As the business progressed over time, however, all of the other divisions/focuses grew out of what we were doing quite naturally.

Now, let’s go back to before 2005, what initially inspired you to become a real estate investor?

mr. lampMy children had left home and my new focus became retirement – how would I ever be able to afford it and would I ever be able to quit working.

Since I would be working for years to come anyway, I really wanted to make every hour count. So, I started reading about and studying the wealthy – how did they create their wealth and how did they become generationally wealthy? Over and over, I ran into real estate. Having purchased two houses in my lifetime, I knew I could do it and decided that maybe owning rental houses would be the way to go.

I discussed with my husband that we should probably own five rental properties for retirement. In my mind, they would each be generating anywhere from $1000 – $2000 per month in rent by the time we retired, meaning we’d have $5000 – $10,000 per month passive income by the time we stopped working. How great would that be?

He agreed and we started looking at for-sale-by-owner properties and trying to learn neighborhood property values in our spare time. It took about three years to buy our first five rental properties and I really felt that we had accomplished something important.

At that time, Jim and I both worked in commission sales. Because commission means that if you don’t work, you don’t get paid, we rarely took time off. One year, we went all out and took an entire week off to visit family in Seattle. When we got back from our wonderful time away, our commission for the month was at zero. However… our rent checks were in the mail. Light bulb moment for both of us – What if we were focusing on the wrong end of our income? After all, these rent checks came in no matter where we were. We could be in the Bahamas, in the hospital, sitting on the couch watching soap operas! These little oil wells just keep pumping.

We decided right then that we were young enough and healthy enough to try one more venture. And so, after some discussion, we agreed that I would quit my W-2 job and try this real estate thing full time. Jim made enough to pay all of our bills and we figured that, if buying real estate didn’t work out, I could always go back to another W-2 job.

We had no idea what “the real estate thing” we were jumping into was, how we would know if it was working, or really even what we were looking for. In my mind, I wanted to get to retirement faster and perhaps create an even better retirement for the two of us. How? I had no idea. Income for today? I never even considered that this new venture would create income now. Perhaps, that’s one of the reasons we’ve been successful – we had no high expectations and certainly never considered real estate investing as a way to get rich quick.

Can you tell us about your first real estate deal?

ConceptI was terrified. And, because I didn’t know what I was doing and didn’t really want a seller to say “yes”, in the beginning I made very low ball offers. Ignorance is not always a bad thing.

We had begun a little bit of marketing to get the phone to ring – walked neighborhoods putting out flyers, had magnets on our cars, and put an ad in the local Nickel Paper – a three line ad was only $265 for a year! I had questionnaires printed out and stacked by the phone so, if a seller did call, I’d know what questions to ask.

Almost the very first call was a woman calling from out of state. Turns out, her son lived near us and had taken down our phone number from the magnets on my car doors while parked at a grocery store. As it turned out, the condo she was selling was in our neighborhood!

It was vacant and had been on the market with a real estate agent for a year. I asked for the property details and promised to call her back. After doing my due diligence, I called and offered her 65 cents on the dollar. She said, “Honey, I’ve owned this condo for six years and I still owe more on it than that!” I told her that I totally understood, that I was not going to be her best offer but that I was one solution, and she was welcome to call back anytime if she had more questions during her selling process.

I was so relieved that she didn’t take my offer. That night, she called back. She asked if we did the deal, how it would take place. I explained it to her, told her we would close with our attorney, and that she would have to write me a check for the difference between what I was offering and what she still owed. She thanked me and hung up.

The next day, she called back and accepted my offer. I had never even seen the property and was scared to death. Later that day, I met her son at the property to check it out. It was immaculate – all new carpets and paint, all appliances including washer and dryer, a 2 story living area with a 2 story stone fireplace, an upstairs office area that overlooked the living area below. It was amazing. Because it was my very first deal and the seller actually paid me to take it off her hands, I took this as a sign that I was heading down the right investment path!

Do you focus on any particular real estate investing strategy?

Strategy Concept Red MarkerSingle family homes is our primary focus. Naturally, you can’t learn or become skilled in all the strategies at once. As an investor picks a strategy that is of interest to them, they should study and learn that specific strategy until they are comfortable with it, and add more as they go.

We focus on neighborhoods, areas where we want to own, rather than on a specific type of investment strategy, like foreclosures or probate. Because we focus on geographic areas rather than on a specific strategy, we have become skilled in just about every buying strategy possible.

With marketing, you never know what deal you’re going to run across or who is going to call, so our goal is to present an offer, a solution, to anyone who comes to us.

Our belief is to focus on the customer and what they need or want, then to create a solution to their situation. If you can solve your client’s problem, they are happy to work with you. If you focus on just one strategy, like foreclosures or probates, too many deals come to you that you have to pass on because they just don’t fit those narrow models.

We are part of a group of investors so, when new investors join, they are able to learn with the deals they can handle and pass on the ones they can’t. As they grow in experience and knowledge, the deals they are able to complete on their own expands.

How do you find motivated sellers?

mail boxOur preferred method for finding sellers is direct mail marketing. With direct mail, we target only the houses we want to buy in the neighborhoods where we want to own. It’s probably the most costly form of marketing, but, when the phone rings, we know we’re interested in the property because the caller received our mailing. It’s expensive, but it produces the highest quality leads.

With so much competition, what makes a motivated seller want to deal with you and not someone else?

Communication. It’s vitally important to be a good communicator. To be a good communicator, you must be a good listener. Starting out, I really knew nothing about this business other than I wanted to be in it. I quickly discovered that I wasn’t selling anything so, without a “pitch” to present, I didn’t know how to talk to the sellers. What I learned quickly was that most of my time was spent listening to them. The great thing was, they all had a different need and they were only too willing to tell me what that need was. All I needed to do was craft a solution for them, and they were thrilled to work with me. It’s that simple: listen to what they need, figure a way to make it happen.

What key things do you look for in an investment and what criteria do you use to determine how much to offer for a property?

Well, it has to make us money. If there’s no profit in the deal, we walk. How do we determine how much to offer? It depends, which I know is a terrible answer, but it’s true. Location, quality, condition, appreciation potential, and how we’re going to buy and sell all play a part in our offer. If we have to pay for funding to buy a property, we are forced to offer less. If the seller is willing to finance, we can offer more.

One thing we have done from the beginning is to demand profit the day we buy. Because we never speculate on the future, we made it through the recent economic downturn basically unscathed. We never count on appreciation, for example, because we have no idea what the future real estate market will do. Like anyone who’s been in this business over the past 10 years, we feel like we have a pretty decent understanding of real estate cycles, but who knows when another Katrina or 911 might hit.

So, we buy conservatively. All purchases must have equity and cash flow from the day we close. For flips, we must have a large ARV profit potential and know that, if for some reason it doesn’t sell, we can put in a tenant. With every purchase, we prefer to have several viable exit strategies.

Be conservative.

What were your goals when you first got started and how did they change as you became more successful?

business concept, accuracyMy first goal was five rental properties. That happened over three years and we both still had full-time W-2 jobs. My next goal was to secure our retirement so I quit my W-2 job to focus more time and energy on securing a better (or sooner) retirement. Two years later, we had 25 properties and I was convinced that was enough. I wanted to stop and work toward paying those off. My husband was convinced that this business had amazing potential and decided to quit his W-2 job at that time to put his full effort into real estate.

When he quit, we hired our first assistant, purchased an office space to get the business out of our home, and the business made its first huge leap. We had trouble keeping up and quickly brought in another full-time person to help out. Over the next year, we realized that we needed help owning and operating a company, which this had become. And so we found a business coach.

The first time we sat down to create goals and actually write them out on paper, we weren’t good at it, at all. In fact, the first time we wrote out goals, we accomplished our one, three, and five year goals all within the first six months! If you don’t have a plan and written goals, you’ll never know how much you can accomplish, or whether or not you’re getting anywhere.

By year three, we were far better at estimating what we would do over a given 12 month time frame. Our goals, our vision, and our conversation are on a completely different plane than when we started out. It takes time to morph from a W-2 mentality to that of an entrepreneur and business owner. If your thinking doesn’t progress, your business will not succeed.

So it sounds like establishing goals really helped you to focus and to take your business to another level. Can please expand a little bit more on this?

Naturally, when we started out, we had no idea how limited our understanding was. We absolutely understood that we had no real estate experience or training, but I cannot over emphasize the statement “you don’t know what you don’t know.”

When I quit my job, our only plan was to secure retirement. We didn’t even know what that meant or how we’d know if we’d done it. About six months into it, we purchased an extensive online business plan. We worked on it diligently for three months. It asked for a lot of numbers that we totally guessed on just to have something to fill in. The plan asked a ton of questions that we would never have thought to consider on our own.

The great thing about completing this exercise was that it made us think. It made us ask ourselves important questions about going forward. It made us think through scenarios and possibilities in our minds. And, significantly, it gave us a graph that we could refer to over and over as a guide. We could learn, for example, from the guessed numbers we had plugged in, how accurate or how far off they were. And because we had it spelled out in the beginning, we learned to accurately gage going forward. Having so much written down really made us pay attention which caused us to be aware of much we would have missed without the business plan.

Our only exit strategy starting out was, if this doesn’t work, we’ll each get another W-2 job. We had nothing at the time, so we had nothing to lose.

We have since shifted our focus from acquiring properties to paying off what we own. I work a totally flexible schedule already. I don’t know if Jim will ever stop. He completely loves what we do.

What big mistakes have you made or seen others make?

バツ印のボードHmmmmm. The biggest mistake I’ve seen in others over the years (over and over again) is getting impatient and getting distracted. Too many have unrealistic hopes about real estate investing being a fast or easy means to wealth. It is neither. Yes, you can create long term, generational wealth as well as a huge income, but it takes time and a lot of effort. Starting out, neither one of us took a day off for over two and a half years and we were working at least 12 hours a day. Plus, we were spending nothing except on the business – no movies, no dinners out, no new clothes, nothing. We had a goal and we stuck to it.

I have seen many, many over the years drop out when they follow the next “shiny object” that comes along. Before you know it, they’re caught up in some multi-level marketing business that takes all their time and effort and they confidently state that real estate investing didn’t work, blaming it on the economy, their local market, lenders, anything but their own lack of focus.

Stay focused. In the past, it was not unusual for a job to last 25 years or more. Why do we now think we can amass tremendous wealth in two to three years?

What was your most challenging deal and what did you learn from it?

Isn’t every deal a challenge? Now, there’s a valuable lesson! If you don’t want to be surprised when you’re in the middle of a deal, then expect to be surprised. Because surprises happen – with pretty much every single one. And, they’re all different so, no matter how prepared you think you are – surprise! Something unexpected pops up once again.

Just know that you won’t be able to see everything going in. Repair costs will be higher than you budget for. Closing will take longer than promised. You’ll have to make unexpected concessions to get the property closed. Contractors will disappoint. Don’t even get me started on what can trip you up on the funding side.

But, if you buy right, it’s all worth it. Just determine not to get stopped. Keep jumping over the hurdles one at a time. Eventually, you’ll find yourself crossing the finish line with a big smile on your face.

What advice would you give to a new investor?

Find a coach/mentor in your area to whom you can turn for guidance. Make sure they are successfully doing what you want to do and, if possible, talk with others they’ve helped.

This is not a solo business. You need attorneys, CPAs (knowledgeable in real estate investing), sub-contractors, real estate agents, title companies, inspectors, appraisers, on and on. Find someone who’s walked through the mine field before you, who can give you a hand to save you both time and money. Should you pay them for their time? Absolutely. If they’re willing to share with you what they’ve learned over the years, they’ve paid for their skills one way or another and what you will gain from them is worth paying for. If they’re not worth paying, they’re not worth following.

Is there anything else you’d like to share with our readers before we go?

Buy real estate. If you haven’t started yet, start. If you’re buying, buy more. If you don’t, 10 years will have passed and you’ll be kicking yourself for not buying all you could today.

It’s a worn out cliché that “there’s never been a better time to buy real estate”, but it’s true. And I believe it’s always true. Sure, you have to adjust your methods and your exit strategies depending upon the market, but they’re not making any more real estate and everyone works, shops, and lives somewhere. If you don’t own it, someone will.

Get an education, hook up with a mentor, and buy real estate.

Here’s wishing you tremendous real estate investing success!


Karen Rittenhouse

karen_upcloseKaren Rittenhouse has been investing in real estate full time since January 2005. In that time, she has purchased hundreds of single family properties, opened a full-service real estate company, a property management company, a coaching/training business, and written three books on real estate, The Essential Handbook for Buying a Home, The Essential Handbook for Selling a Home, and The Essential Handbook for Landlords.

Facebook: http://www.facebook.com/karen.rittenhouse

Google+: https://plus.google.com/100526347560227717288/posts

 

 

 

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS

Interview with Nav Athwal

?????????????Today we are interviewing Nav Athwal, the Co-Founder of RealtyShares.  RealtyShares is a Crowdfunding investment platform for Real Estate.  Hello Nav and thank you for taking the time to speak with us.  Can you please tell us a little bit about yourself – your background, experience and type of real estate investing you have been involved with?

I started my career as an electrical engineer and then I transitioned into working as a Commercial Real Estate Broker.  Prior to Founding RealtyShares, I worked as a Real Estate and Land Use Attorney at a law firm in San Francisco where I advised a broad range of real estate clients including real estate developers, property owners, investors, non-profit housing providers, REIT’s, governmental agencies and renewable energy companies on some of the largest mixed-use residential, commercial and alternative energy Projects in California.  I have also been an active real estate investor for the last 5 years and have invested in single family, multi-family, retail and ag properties.

I’ve heard of crowdfunding sites for fundraising, such as Kickstarter and Indiegogo, but not for real estate.  Can you please explain to us how RealtyShares works?

Yes, crowdfunding has actually been around for about half a decade mostly in the donation and rewards based realm.  Sites like Kickstarter, Indiegogo and Kiva.org were the pioneers of that form of crowdfunding.  However, over the last year and on the heels of the enactment of the JOBS Act, investment or equity based crowdfunding has begun to emerge as a new way for investors to access things like startups, alternative energy projects and now with RealtyShares, Real Estate.  Unlike donation or rewards based crowdfunding, investment or equity based crowdfunding actually allows investors to participate in the growth of a company or asset.

For example, at RealtyShares we provide our investors with access to pre-vetted real estate investment properties or loans secured by real estate and the ability to invest as little as $5,000 directly into these investments.  We focus on investments that offer immediate cash flow to our investors.  With our loan investments, investor distributions are made monthly and with our equity investments, distributions are made quarterly.  The investment process is completely paperless and streamlined.  Investors can browse investments directly from their laptop or tablet, choose the investments that most suit their needs and execute all investment documents and transfer all funds via ACH directly from the platform.

Haus kaufenAll investments are passive so that investors don’t have to worry about the usual headaches that go into managing and operating real estate.  Another advantage is that an investor can diversify among a wider range of investments than they could with a direct real estate purchase offline.

You mention that all investments are passive.  Does this mean that your investments are mostly buy and hold opportunities?

When we say passive, what we really mean is that the Investor does not have to worry about any of the usual headaches that come with owning, operating and managing real estate (i.e. tenants, taxes, insurance, repairs, etc.).  Rather, the investor is investing passively just like they would in a stock or bond and the Investment Manager handles managing and operating the investment.  However, the type of investment can be anything from a stabilized apartment building in San Francisco, to a short term fix and flip investment in Florida.  But, regardless of the type of investment, to the investor it is still a passive headache free real estate investment.

How does an investor monitor the performance of their investment?

They can monitor the performance through an easy to use “Investor Dashboard”.  Through this dashboard, investors have the ability to monitor their real estate investments, cash distributions and returns.  The dashboard also serves as a repository for all of their investment and tax documents, including K-1’s.   Investors can also manage their investments in the dashboard, including their cash distributions, returns and all paperwork.  We’re like a Scottrade or E-Trade but for real estate.

How did you come up with the idea for RealtyShares?

My co-founder and I met while in grad school at UC Berkeley – I was at the law school and he was at the Haas MBA School.  Upon graduation in 2009, we immediately started looking for real estate investment opportunities in the Bay Area.  However, we found that raising capital for these investments was extremely inefficient.  In fact high quality Investment Managers spend more than 40% of their time trying to raise capital for great deals rather than focusing on what really matters – the real estate itself.  At the same time, investors lack access to quality real estate deal flow and have very few ways to invest in real estate outside the publicly traded REIT market.  With the rise of online investment platforms like E-Trade and Scottrade, we knew there had to be an easier way to connect investors interested in diversifying into real estate with Investment Managers looking to raise capital for great deals.  That is why we created RealtyShares.

Who locates the investment opportunities? 

The investment opportunity is brought to us by a third party that we call the “Investment Manager”.  The process starts with the Investment Manager submitting a short application through the RealtyShares Platform that can be found here: http://realtyshares.com/raise-capital.  We then review the application to determine whether the investment opportunity presented by the Manager makes sense for our Investor Community.

We’re looking for strong management teams, with a good investment strategy and an investment opportunity that makes sense for our investors.  We pre-vet each Investment Manager through background and credit checks, personal reference checks and a review of their financials.  We also carefully curate and underwrite the investment property.  This underwriting process includes reviewing a BPO or Appraisal, reviewing sales and market data for the specific geography, reviewing historical trends, vacancy rates, cap rates, and the like.  As a result of this vetting process, on average only 2% of Investment Managers that apply to raise capital through RealtyShares are actually given an opportunity to do so.

What is the background of individuals evaluating the real estate opportunities? 

Our In-House Underwriting Team utilizes proprietary due diligence methods and handles all of the investment vetting and curating.  We also have our Investment Committee review some of the investment opportunities and give the thumbs up or thumbs down.  Our investment committee consists of experienced real estate professionals with decades of experience underwriting and investing in real estate.

Where in the United States are the investments located? concept of real estate

We aren’t limited to any one geography but rather have a national focus.  We want to be the premiere real estate investment platform and to do so we need to have a variety of investment opportunities all over the country.  The first two investments we funded were actually located in Jackson, Mississippi.  They were first position trust deed investments secured by single family homes offering a 9% secured return and a 50% equity participation upon sale of the home.  The latest investment we funded was located in Sacramento, CA and now we are focusing on bay area investments.  When possible, we are also looking for socially impactful real estate investments.  If we can earn market returns for our investors while simultaneously benefiting the community by providing much needed affordable housing, then it is a win-win situation.

Your website states that accredited investors can passively invest in commercial real estate alongside high quality Investment Managers.  What is an accredited investor?

The definition of an “Accredited Investor” is set forth in the Securities Act of 1933 and is any individual earning at least $200,000 a year or more, or $300,000 or more jointly with that individual’s spouse, or having a net worth of $1 Million or more excluding their personal residence.  Currently, our investment offerings are limited to accredited investors because securities laws make it difficult, if not impossible for non-accredited investors to participate.  However, this could soon change.  The JOBS Act for the first time will allow non-accredited investors to participate in these investments.  However, the SEC has yet to publish rules implementing this Act.  I think we’ll see proposed rules towards the end of Q2 or the beginning of Q3, 2013.

Another thing that the JOBS Act did was lift the ban on general solicitation and advertising for Regulation D, Rule 506 private placement offerings.  However, that too was dependent on the SEC approving implementing rules.   Two days ago the SEC finally voted to publish final rules to effectuate this change.  What this means is that investment offerings on platforms like RealtyShares can finally be marketed publicly to accredited investors via social media, print materials, email and other means.  It is a very exciting time and we’re excited to be a part of such a monumental change.

You mentioned earlier that the current minimum investment amount is $5,000 per property.  What is the maximum investment amount? 

Real Estate ConceptWe currently do not have a cap on the maximum investment amount.  An investor could potentially invest the entire Fundraising Goal if they chose to do so.  The fundraising goal is the total amount of capital that the Investment Manager has indicated they would like to raise through RealtyShares.  An investment is only finalized if the funding goal is met.  If the funding goal is not met, 100% of the investors’ money is returned to them.

What type of person would be interested in investing through RealtyShares? 

Any intelligent investor that wants to diversify their investment portfolio by passively participating in direct real estate investments. In the current financial landscape with the volatility of the stock market and money market accounts yielding a paltry .5% and the 10 year treasury bond yielding only about 2.6% per year, real estate is one of the only ways investors can earn healthy returns.  Even REIT’s, as of June of this year, are yielding only about a 3.5% annually.

Thus, Real Estate should be a part of every investor’s investment portfolio.  However, most investors still struggle to access a reliable source of quality deal flow and to invest passively like they would in a stock or bond.  That is why RealtyShares makes sense for so many investors.  We only launched a few weeks ago and have already funded more than $250,000 worth of investments through our platform.  This is really exciting because it shows there is a real demand among investors for a platform like RealtyShares.

If my circumstances change and I would like to sell my investment, how does this work?

Each RealtyShares investment opportunity has a specified hold period that is clearly listed on the Investment Page.  For an equity investment this could be anywhere from 3-5 years and for a loan investment, the hold period is typically 6-12 months.  During this hold period, Investors will not be able to sell or exit the investment.  Eventually, we do envision partnering with or creating a secondary market platform where our investors could potentially sell or trade their real estate shares and thus could exit the investment prior to the expiration of the hold period in case their circumstances change.   However, currently that is not available.

Is there anything else you’d like to share with us about RealtyShares before we go?

Our goal and focus is to continue to build RealtyShares as a disruptive marketplace for individual investors to invest in exclusive and pre-vetted real estate properties.  We want to continue to expand the type of real estate investment properties on our platform as well as the ease with which individual investors can access and invest in these properties.


Nav Athwal - Bio PhotoNav Athwal is a Founder of RealtyShares.  RealtyShares is Crowdfunding for Real Estate, a marketplace for accredited investors to access exclusive real estate properties or loans secured by real estate and invest as little as $5,000 into any specific investment. Prior to founding RealtyShares, Nav worked as a Real Estate Attorney where he led some of the largest mixed-use residential, commercial and renewable energy projects in California on behalf of national and international clients. Nav was named a 2013 Rising Star Lawyer, is a lecturer on real estate investing at UC Berkeley and graduated from UC Berkeley Law School in 2010 as the Class Valedictorian.  Nav is also a California Licensed Real Estate Broker and active real estate investor.

Trey Clark -Bio PhotoPrior to Co-Founding RealtyShares, Trey Clark led Acquisitions for a real estate startup focused on acquiring and foreclosing upon debt collateralized by commercial real estate, and subsequently worked in the Investments group of a large real estate Private Equity management firm with over $4.0 billion in assets under management. In these capacities he has evaluated hundreds of real estate investments across a wide breadth of asset classes and markets.  Trey earned an MBA from UC Berkeley’s Haas school of business, and is an active California real estate Broker and real estate investor. 

Contact Info for RealtyShares:

Email:  contact@realtyshares.com

Phone No.:  1-866-202-2023

Address:  505 Montgomery Street, 11th Floor, San Francisco, CA 94111

Primary Website:  www.realtyshares.com

Facebook link:  www.facebook.com/realtyshares

Twitter Link:  www.twitter.com/realtyshares

LinkedIn Link:  http://www.linkedin.com/company/realtyshares

 realtysharesad

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS

Interview with Ziv Magen

OLYMPUS DIGITAL CAMERAGood morning  Ziv.  Thank you for taking the time to speak with us.

Can you please tell us a little bit about yourself? What did you do before getting into real estate investing?

I suppose you could call me an IT geek turned property geek. I was in corporate IT project management for many years, mostly working for large organizations. Not the startup types, but the big and heavy beasts that expected detailed ROI reports, efficient use of resources, specific budget restraints and with a whole bunch of stakeholders to please every step of the way.  In short, this was excellent training for the turnkey operator or portfolio manager that I’ve become these days, though I never would have thought so while doing it at the time.

Why did get into real estate investing?

This may sound cliché, and you’ve probably heard this quoted a lot, but I got into real estate investing to secure a financial future for my family and to maximize our savings. I wasn’t particularly considering real estate as opposed to anything else, but was more weighing the pros and cons of different investing strategies. In the end, it was the regular and potentially high monthly returns that investment properties provide, in addition to the more speculative potential for growth. My dad, who’d been investing in properties for his retirement for most of his life, always said “If it doesn’t work, your family will at least always have a roof over their heads”.  It’s really that type of reliability that cemented the choice for me.

When did you begin investing in real estate?  Also, why Japan, why not invest closer to home in Australia, or maybe in the United States?

jpanI got my first property in 2009.  Not that long ago really, but the time was perfect from my perspective.  The market was offering great deals all over the world right after all hell broke loose in 2007-2008. There was this big slump, though it wasn’t felt as strongly in Asia and Oceania as it was in the United States and Europe.  People who’d been sitting on their funds were suddenly “pouncing” on real estate all over the place. Japan was a natural environment for me considering my location in the world – Australia.  I “married into the country” in 2003, and have been going back and forth ever since, staying up to a year at a time when my son was born. I also knew about other places in the region such as Singapore, Hong-Kong and Thailand, having visited and following their economies with interest for many years.  So, investing overseas wasn’t an alien concept for me, and Asia seemed to be where things were happening.

As I’ve repeatedly stated in my first few articles in REI Wealth Magazine, choosing your market is, first and foremost, a personality thing. If you feel out of water, you probably are.  I recommend that anyone, particularly those getting their feet wet for the first time, go to where they feel most comfortable. In my case, the US was out of the question.  The tenant profiles, property managers, bank personnel, insurance companies etc., seemed quite difficult to juggle at a distance, especially for a “wet behind the ears” investor like I was at the time.  Plus, the distance meant a serious long-haul if things needed a personal touch, which I felt they often might in the US (no offense to our US-based readers). Australia, Japan, Hong-Kong and Singapore are all more highly regulated and manageable in that regard, and were also more accessible physically for me. Now, almost five years down the track, I’m more comfortable with my deal evaluation and remote management skills and I do invest in the US now. Though, I confine my investing to note structures and similar deals, which are more contractual financial arrangements than actual property investments and require very little maintenance post-setup.

For geeky scaredy-cats like me that prefer everything as reliable, quiet and by-the-book as possible, Japan wins hands-down!  Japanese are among the most honest, reliable and downright honorable folks on the planet, and are well aware of being a rarity in that regard.  Traditionally, they are very wary of conducting business with foreigners. Once you break through that barrier, though, it’s the most relaxed and enjoyable business environment a geek like me could hope for.

In previous REI Wealth Magazine articles, you discuss building a team.   Could you quickly cover the types of team members needed?

Sure – Many people think it’s all about “getting those deals” and that getting as many realtors, financiers and potential buyers on their “lists” as possible, is the way to go.  Those who come from a self-employed background, like a small business or shop, believe that this is what works best.  I suppose if you’re a wholesaler, flipper or “serial” investor who works a certain market hands-on, it does.

Picture3I’m a firm believer in “setting up the infrastructure” first and foremost, in any new market.  That infrastructure is always the legal and financial representation.  My perspective comes from being mostly a remote investor, more diversified and hedged geographically, and also from my project management background.  You’ll rely on legal and financial representation heavily when you’re new to any market, and may need to refer to them time and time again, regardless of which deals you’re considering. So, get them right the first time, even if it means it’ll take longer and cost a bit more to start off.

The rest of your team members are secondary and, although they’re significant to your success as well, can be far more numerous, and allow for more flexibility and changeover. Switching property managers or stopping to work with a realtor, or even a renovation or repair contractor, while occasionally painful, is relatively easy to do. Changing accountants or lawyers mid-project, is far less so.

Since Japan is half way around the world for some of our readers, how do you recommend that someone get started investing in real estate there?  

Picture4Not just in Japan, but for any country that’s not your country of residence or origin, local partnerships are key. The world’s our oyster these days in a very practical way, with technological, legal and financial advances paving the way to REI “global domination” in every sense of the word.  But, that doesn’t mean you should jump head-first into the waters of any country in the world, Japan included. Cultural differences, legal and practical terminology, as well as the language in some cases, are vastly different.  Partnering up with a verifiable and reliable local entity, whether as an equal business partner or as a turnkey operator, will save you from numerous mistakes that local know how could easily sidestep.  Partnerships also help you bridge the cultural gap that should be carefully understood and never underestimated. Misunderstanding a country’s mentality, values and practices can cost a lot.

I’ve been fortunate enough to find this partner, in my wife, who’s a bright and hard-working mover and shaker (in a very polite, honorable, Japanese kind of way). Believe it or not, I’m considered a rude oaf in Japan.  If it wasn’t for my wife, I very much doubt any of the professionals we normally work with would even entertain my presence for longer that one first meeting.

What would be a typical type of property to invest in (condo, houses, etc.)?

Japan’s most active markets are residential condos and commercial properties. Houses do exist, but are not built to last as long as the concrete monsters Japanese cities are “blessed with”.  As such, they carry far more “hidden” maintenance costs, due to the nature of the building materials used.

Do you invest in certain cities or neighborhoods in Japan?

We drift with the flow of the economy. Since the big earthquake and tsunami disaster of 2011, we’ve been seeing a lot of business and family traffic migrating south-west, to the Kyushu landmass (equaling about half of Japan’s mainland). This is the gateway to China, South Korea and Taiwan, to the west.  Core family numbers (couples plus young children) are on the rise and increased tourism and other business is coming in from Central Asia.  All of this is evidenced by recent property price hikes. But, we also follow the deal trail to other areas of the country.  We stick to medium or big cities of not much less than a million people, whenever possible. But, we also do “requests” for clients seeking holiday homes on the ski slopes of Hokkaido and other similar profiles.

Can these properties be financed, or do you need to purchase them with all cash?

Picture5

Financing is not available to foreigners who aren’t Japanese residents at the moment, unfortunately. Some of the international banks like HSBC and Citi occasionally lend against Japanese securities, but these cases are very rare and have fairly strict criteria for these arrangements. The vast majority of our clients are cash buyers, or are those who have secured their finance in the form of non-secured personal loans, lines of credit, etc.  But, with affordability as low as $20,000 and yields as high as 16% pretax, it’s really a no-brainer for cash buyers, big or small to invest in Japan.

What types of real estate investing strategies (e.g. wholesaling, flipping, lease options) work or don’t work in Japan?

Japan is mostly a buy and hold market, with tenants staying 4-5 years on average, and with 15 and 20 year leases quite common.  You really want to keep that reliable cash flow going as long as you can. With larger portfolios, where you can start claiming depreciation, purchase expenses, etc., it may make sense to “cycle” properties every few years, to reset those claiming cycles. Wholesaling and flipping does exist, but only if you’re a Japanese company or local resident. Our clients sometimes buy from a local dealer of this sort. Owner financing schemes and other creative lease options are very rare, as home ownership is also rare. Most Japanese rent for their entire lifetimes.

 Can you walk us through a typical deal?

Not that different from any other country, except for the almost complete absence of the need for background checks on realtors and wholesalers, double-checks on titles, debt etc.  You’re all but guaranteed not to have to resort to those tactics in Japan, due to the nature of the practitioners involved. This doesn’t mean there’s nothing that needs to be checked, but simply that you can get right down to the actual deal analysis, which consists of the following:

1.  All relevant data regarding monthly income and payments normally appear in the body of the MLS listing itself. After entering these numbers into your spreadsheets and receiving the “green light” on your selection criteria, you would then submit an offer. Bear in mind that in Japan, negotiations to more than 10%, or thereabouts, are fairly rare and are sometimes considered an insult. We’ve had some sellers in the past, who wouldn’t take a further offer from us, after having been “deeply offended” by our “rude” first offering.Picture6

2.  Once the offer is accepted (or refused and re-submitted, then accepted), the realtor will provide the complete information package. This should include the tenant history, renovation history on the block itself (internal renovations are quite affordable in Japan, and tenants would never let things deteriorate in a state of non-repair, so there normally isn’t much to discover in that regard), and of course the status of the holding company’s “accumulated funds pool”. This is known in other countries as the “sink pool”, “repairs fund pool” or various other names. It is essentially money collected from all owners of all units over the years. The building’s renovation history and accumulated funds put together should make sense. If that pool is depleted and there aren’t any major renovations to speak of in the last decade, you know something’s wrong – most likely financial mismanagement or troubles of related sorts.

3.  Assuming nothing untoward has been uncovered in the course of due diligence, you would proceed to a contract signing meeting, where a government licensed “official document reviewer” will read aloud and elaborate on all official documents (a good chance to re-confirm all of the above before signing anything), at the end of which all documents are signed, and the deposit (normally 10%) is the paid.

4.  On settlement day, the realtor or judicial scrivener that is handling the sale, receives the remaining funds and settlement adjustments.  He then proceeds to transfer true ownership of the property to the buyers, after confirming that any outstanding debts have been settled prior to the new registration taking place.

That’s it, in a nutshell.  Of course, investors who have never been to Japan and do not speak Japanese, find this hard to achieve without hands-on translation services, preferably from an experienced real-estate professional or investor. Additionally, locals are still largely unaware of the nuances involved in working with Westerners – which, for the Japanese, are vast and intimidating – so Japanese partnerships become even more significant, in order to find the good deals.

Picture7The last hurdle, which companies like ours help alleviate for foreign investors, is the difficulty of opening a local Japanese bank account. While the law doesn’t prohibit this, almost none of the Japanese banks allow non-residents to do so, as part of their anti-money-laundering policies. While local registration, normally achieved with an investors or business visa and a temporary lease contract for a small apartment, may solve this issue, this isn’t a particularly cost effective solution.  Plus, not all investors visit their country of investment, particularly for smaller deals. So it becomes essential, again, to have a Japanese partner, like ours, in place.  Someone who can evaluate and facilitate the property purchase, arrange for insurance, collect the rent from local, “old-school” property managers (who will most likely never be able to wrap their heads around the concept of transferring funds overseas), hold it in local bank accounts until they accumulate to an amount worth transferring, or until exchange rates are profitable, then send it overseas.

Picture8This partnership can take the form of a split-all-profits-and-expenses-down-the-middle kind of arrangement, or can simply be a services package purchased from a firm like ours, for a small percentage of the incoming rent (normally less than a property manager). That partner can then also handle all correspondence with local entities, which is the last main barrier between foreign investors and the Japanese property market.  Receiving maintenance requests, approving quotes, finding new tenants etc., can become quite challenging when one doesn’t speak the language.  Even a “shark-less” business pool like Japan can cause many frustrations until they’re resolved, through no fault of either side involved – which is exactly why Japanese professionals also prefer to avoid dealing with non-Japanese entities.

What are some of the biggest real estate investing mistakes that you’ve made?

I remember my very first deal – a package of three units, all sold be the same owner, in Kitakyushu, one of western Japan’s bigger Industrial and blue-collar hubs. Although the yield was phenomenal, the tidy IT geek in me couldn’t handle the fact that one of the three was slightly lower in the rental income than the other two, and for no reason that I could see.

Picture9And so, without consulting with the property manager, and without verifying market conditions at the time, I proceeded to an “all-guns-blazing” approach, and notified the tenant, whose lease was just ending (“What perfect timing!”, the greedy westerner in me rubbed his hands together) of a rent rise – to the tune of something like $20 a month. This was less than 10% of the rent price. Even the property manager’s complaint that they had just notified the tenant they may continue their lease as it is, didn’t deter me.

My tenant promptly moved out.

He most likely rented one of the four available units in the block – the ones advertised by the same property manager for over four months at the time, and all asking for a rent lower than the one my tenant was paying at the time. All facts that I would have found out in a heartbeat had I listened to my very own property manager, who happened to be placed in care of most units in the block and knew everything there was to know about what rents can be expected at any given time and for any unit of similar profile.

I’ve since had to put up with a series of short-term government supported tenants that came and went. Not as big a deal as in Western countries. The worst these guys might do is to abscond, disappear altogether, or stink the place up a bit.  They normally come with a guarantee or insurance policy in place, which covers the cost of removing their belongings and cleaning the place up.  But, still far more hassle than the tenant I lost. One who was already in place for four years, and might have stayed at least another four. But, that’s the price you pay for waltzing into a foreign land and trying to do things “your way”. I was greedy and arrogant, and paid the price accordingly.

Fortunately for me, the rest of my portfolio has been doing far better. I’ve since learned to listen to those who have been living, breathing and working in the market for far longer than I have.  In short, to trust my team and follow their advice, since that’s what they’re there for.

What would be your dream deal?

Picture10A well-diversified package of small, affordable residential properties, spread out over several cities and socio-economic profiles.  All in developing cities, unknown to foreigners, and yielding 12-16% pre-tax in p/a in net cash flow, with tenants in place 4-5 years, with no financial issues on either the tenant side or the holding companies. “Sweeeeet”, as we say in Australia – and quite achievable if the right kind of due diligence is performed in advance.

What advice would you give to a beginning investor?

Follow your dreams, not dollar signs. Find a business environment and strategy that works for you as a person. One that will make you wake up every day with a hungry glint in your eye and not because you’re dreaming of the money.  Money is just a form of energy that you can direct and utilize for your goals. Instead, get that kind of glint that comes from enjoying what you do every minute of every day. The rest will follow naturally enough, no matter what the naysayers tell you. But, if you follow the lure of fast and easy money to a place that doesn’t “turn you on” as a person, you’re bound to suffer long-term, and so will your business. It needs the best of you to succeed, like any relationship really – and you can only give your best when you’re living your dreams.

Best of luck! :)


Picture12Ziv Magen

Ziv Magen is an Australian, and has been deeply immersed in Japan’s culture and business environment for the past decade. In 2003, he forsake his career as an IT corporate project manager, wishing to spend more time with his family and secure their financial future. Having made the transition to real estate investment and successfully building his own portfolio, he subsequently established Nippon Tradings International (NTI) together with his Japanese partner, assisting others in capitalizing on Japan’s vast and lucrative property market.

 

Picture11

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS