The Evolution of U.S. Credit, Mortgage, and Student Loans

By Rick Tobin

© kraphix/Fotolia

© kraphix/Fotolia

How and why did the cost of education and overall credit in the USA get so incredibly expensive for Americans as time progressed over the past few centuries? Harvard University, back in 1840, was the first university in the USA to establish some type of a school loan program for their early students. Subsequent to the creation of the very first Student Loan Program in America, the Department of Education (DOE) was later established back in 1867. The original purpose of the DOE was supposedly related to collecting information on various national schools and teaching methods or styles in order to try to establish a precedent for a more uniform and efficient national school system.

The financial and economic stresses associated with having endured “The Great Depression” between 1929 and 1939 coupled with the “life or death” struggles with having gone through World War II made more Americans quite fearful that they may not have enough money to meet their family’s day-to-day expenses. This overwhelming fear of not having enough access to money or security drove more Americans to try to improve their education and job options one way or another. For many people, access to new credit was one of the best ways for “peace of mind” as well as a way to invest in a piece of “The American Dream.”

rick_universitysmallMore and more Americans decided to attend colleges or universities after serving in World War II. Later after the Korean and Vietnam Wars, a higher percentage of military Veterans chose to use their GI Bills, and additional affiliated benefits programs, in order to attend colleges or universities prior to hopefully finding higher paying jobs. By 1976, approximately 75% of Vietnam War Veterans may have used their benefits to attend various types of higher levels of education.

Raising a family in newer suburban communities is what more Americans wanted for their families. With the fanciest and most entertaining restaurants, museums, libraries, and community parks also being built in new Suburban regions, the Suburban lifestyle was heavily promoted and endorsed by the local movie theaters and the relatively new gadget called “Television.” Early television shows like Ozzie and Harriet, Father Knows Best, and Leave it to Beaver provided key examples of quality American family lifestyles that many viewers wanted to replicate for their own lives. In order to live the same lifestyle as seen on television back then, one needed better access to credit by way of improved access to both education and the job market.

The origin of the phrase “Keeping up with the Joneses” (or “Keeping up with Ozzie and Harriet”) may have truly began back during this post-World War II era in that young families tried to duplicate what they saw their friends and family members doing in their respective lives, which included finding a decent to high paying job in order to have enough cash to create the ideal American family lifestyle of owning one’s home. Television created an image of the proverbial stereotypical American family’s lifestyle, and viewers tried to duplicate these TV lifestyles by using more credit one way or another.

The Improving Access to Credit

OLYMPUS DIGITAL CAMERAShort of keeping an open “Bar Tab” at the local neighborhood bar, there weren’t too many options for obtaining credit besides FHA, VA, and the local Community Bank’s or Thrift and Loan’s automobile or business loans up until the 1950s. Frank X. McNamara, the owner of a small New York-based loan company, began to improve the access to more credit options back in early 1950 by introducing a new form of credit called “The Charge Plate.” The more common phrase used over the years has been “Credit Cards.”

Initially, Mr. McNamara’s “Charge Plates / Credit Cards” was named “The Diners Club Card” since it was originally used at local restaurants in the card owner’s immediate neighborhood. As the success and demand for “The Diners Club Card” progressed, these early versions of credit cards were later accepted at department stores, hotels, and at more and more restaurants. Since restaurant, department store, and hotel customers who had more access to credit were then more likely to spend more money at these business locations, then it meant much higher revenues for the business owners. As a result, more businesses scrambled to work with customers who held the mystical, magical, and lucrative “Charge Plate” in their wallets.

The early “Diners Club” later drew interest from larger companies such as “American Express” and “Carte Blanche.” Both of these firms soon purchased the “Diners Club” card, and the Consumer Finance industry skyrocketed from there back in the mid-20th Century. With the increased access to credit, then more Americans began to feel the need to increase their income as well as their access to credit partly by seeking higher levels of education in order to later find the best paying jobs out there, which may hopefully one day support their more lavish and expensive Suburban and “Big City” lifestyles.

The Expansion of Student Loans

As the U.S. population continued to grow and expand, the demand for college applications and quality high paying jobs, which would help to support the expenses associated with living out in Suburbia, caused more people to seek new ways to find credit by way of credit card loans, school loans, business loans, and home loans. In order to be able to cover the rapidly increasing monthly debt expenses, then Americans had to work longer hours at the office to support these higher monthly and annual expenses.

In the same 1950s decade, the very first Federal Student Loans offered to the American public were provided under the National Defense Education Act of 1958. These new direct loans were funded by way of U.S. Treasury Bond funds. In 1965, the Federal Government began to guarantee student loans offered by both banks and non-profit lenders by way of a program called “Federal Family Education Loan” (FFEL).

rick_college copysmallIn 1966, the National Association of Student Financial Aid Administrators (NASFAA) was created in order to act as an oversight committee for the ever evolving “Financial Aid” or “Student Loan” sectors for the USA. As college costs began to increase at a rapid pace, a higher percentage of students had to borrow third (3rd) party funds in order to cover the expenses related to a four (4) year plus education.

Student Loan interest was a tax deductible interest expense just like the credit card and home mortgage interest deduction up until “The Tax Reform Act of 1986” (“TRA 1986”) was passed in Washington D.C. While the top tax rates for the wealthiest Americans were lowered after the passing of this 1986 Tax Reform Act, a section of this act eliminated the deduction of personal interest items such as Student Loan Interest.

For the next decade plus between 1986 and 1997, Student Loans were considered as non-deductible tax expenses for Americans. However, this later changed after “The Taxpayer Relief Act of 1997” was passed, which did allow Student Loans to be tax deductible once again beginning in 1998. These new tax deduction options for Student Loans helped people reduce their Adjusted Gross Income (AGI), which also lowered their overall taxes due in many cases.

“The Omnibus Reconciliation Act of 1993”, as part of the 1993 Congressional budget agreement, passed and was implemented after various studies noted that “Direct Student Loans” would be less costly and potentially easier to manage or administer than “Guaranteed Student Loans.” As part of then President Clinton’s early deficit reduction plans, numerous studies reported that these new “Direct Student Loans” would deliver the same dollar amount of Student Loans to people at much lower costs for U.S. taxpayers. Yet, “Guaranteed Student Loans” remained more widely used and endorsed by politicians than the newer “Direct Student Loan” programs, which seemed to be more cost effective for students and taxpayers.

rick_percentage copysmallWith the “Taxpayer Relief Act of 1997”, deductible interest payments were first capped at just a maximum of $1,000 per year in 1998. Later, the deductible interest payment levels slowly increased in amounts of $500 per year over the next several years. However, taxpayers were initially limited to just the first five (5) years’ worth of interest payments on the loan. In 2001, “The Economic Growth and Tax Relief Reconciliation Act of 2001” (EGTRRA) later eliminated that five (5) year interest rate deduction cap limit.

Student Loans, Mortgage Loans, & The Credit Crisis

rick_gradcapssmallWhen the near financial meltdown of both the U.S. and world’s financial markets began to worsen and accelerate between the Summer of 2007 and the Fall of 2008, the access to various types of credit tightened up considerably. As the widespread credit market disruptions worsened between 2007 and 2010 especially, the credit market turmoil adversely impacted and hindered many private lenders from continuing to offer loans using the federal guaranteed student loan program. As a result, many private lenders changed their lending focus by moving from the “Guaranteed Student Loans” back over to the “Direct Student Loans” once again. Since 2008, the percentages of “Direct Student Loans” offered by various lenders began to rapidly increase once again nationally.

The Federal Family Education Loan (FFEL) program was modified by Congress back in May 2008 due to the ongoing disruptions and reduced access to the credit markets. Both Congress and then President George W. Bush created a temporary program which allowed the Department of Education to purchase “Guaranteed Loans” made by private lenders. The net proceeds from these loans were to be applied towards new student loans by way of “The Ensuring Continued Access to Student Loans Act” (ECASLA). The ECASLA program helped to provide capital from the federal government to private lenders who were making student loans. As a result, this new version of a “Guaranteed Student Loan” program shared many of the same characteristics and benefits as the “Direct Student Loan” program, and it became somewhat of a combination or hybrid between the “Guaranteed” and “Direct” programs.

rick_ffel copysmallIn 2010, “The Federal Family Education Loan” (FFEL) program was completely eliminated by Congress and President Obama in order to attempt to reduce expenses by tens of billions of dollars over the span of the next ten (10) years. Since July of 2010, the vast majority of federal student loans have been offered under the “Direct Student Loan” program. Seemingly every year thereafter as well as before 2010, U.S. politicians and high ranking financial leaders discuss new ways to change the Student Loan Program system with options such as lower or higher interest rates, modified loan term time periods, and other new ideas.

Sadly, college tuition costs continue to rapidly increase with $30,000 to $50,000+ per year annual tuition fees becoming more of the norm across our great nation. How many years will a young person need to work full-time just to be able to hopefully one day pay off his or her undergraduate or graduate college tuition fees? Only time will tell for each person severely burdened with high priced college loans whether or not this debt may ever be paid off in full.

Ironically, one of the main reasons for taking out an expensive Student Loan is to be able to find a high paying job, which may later allow a person to qualify for a home mortgage. However, a potential outstanding Student Loan debt of $100,000 to $200,000 may be higher than the potential mortgage loan for a new “American Dream Home”, and the primary reason why a potential mortgage borrower doesn’t qualify for a new home, tragically ironically. Let’s all hope for an improving job market and overall economy so that more Americans have the opportunity to pay off their debts as well as the opportunity to invest in “The American Dream.”

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: Phone: (310) 571 – 3600 ext. #203 CA DRE #01144023

Ricks’ website:

Flexible Financing for Difficult Economic Times

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From Cities to Suburbia and Back (Part 3)

This is the third post of three posts 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.


Suburbia’s Evolution: The 1990s

The decade of the 1990s began shortly after the end of the Cold War with the Soviets. East and West Germany were also reunited again. The fall of Communism throughout much of the world helped unite the world even more.

On August 2, 1990, Saddam Hussein invaded the neighboring country of Kuwait. The Persian Gulf War began a few months later on January 17th,1991. The U.S. forced the withdrawal of Iraqi troops in Kuwait by the next month. The ground war portion of this war lasted 100 hours until the Iraqis conceded defeat.

Parallel to the numerous conflict victories around the world, investor confidence and sentiment began to increase around our country. America emerged from this time period as the only remaining Superpower with both the strongest military and the strongest economy that the world had ever seen. As a result of the renewed optimism in America, more Americans began to change their mindsets from that of a “saver” to that of an “investor”.

rick_internetThe technological advances in America’s high-tech industries which were associated with the ever expanding internet caused many investors to believe more in American companies’ dominance. With that in mind, the Dow Jones index went from close to 2,500 at the start of 1990 to a peak exceeding 11,000 in 1999.

A much higher percentage of Americans began to take on more of an investor mentality in the 1990s either by investing in stocks or real estate primarily. The Federal Reserve, with encouragement from Alan Greenspan, helped this pro-investor mentality by reducing interest rates to near 30 year lows in 1993. Investors were dissuaded from investing in bank savings accounts as the interest rates paid were significantly less than what they earned in the late 1970s or 1980s.

Many individuals in both the Federal Reserve and the U.S. government believed that inflation was under control in the 1990s, so interest rates continued to drop. The Consumer Price Index, which is a good indicator of the rate of inflation, had averaged 7% throughout the 1970s, 5.5% in the 1980s, and only 3% in the 1990s.

Many people believed that the efficiency of American business and the high tech revolution helped reduce costs and the overall rate of inflation. As a result of lower interest rates, more money than ever before flooded into the stock market as well as into real estate.

Near the end of the 1990s decade, the stock market portfolio represented almost 25% of the average American’s assets as compared with only 8% back in 1984. In 1997, 43% of adult Americans invested in the stock market as compared with only 21% in 1990. Many Americans purchased their stocks in the forms of mutual funds, which totaled as much as $5.4 trillion by the end of the 1990s.

Business news channels like CNBC originated in the early 1990s. These cable business channels helped explain and simplify the complicated stock, bond, and real estate investment processes. As investors better understood the financial markets, more wealth was created. The newly created capital helped to encourage investors to invest more money into real estate either for larger primary homes or investment properties.

rick_lasvegasThe Baby Boom wave began to age into their peak earning years or near their early retirement years so areas in the Sun Belt regions like Las Vegas, Palm Springs, Phoenix, Austin, and parts of Florida began to flourish.

The computer and high tech evolution grew tremendously in this decade with the increase in the sophistication of cell phones and the internet. The world wide web (created in 1989) was released to the general public in 1990. This is followed by the first commercially available internet company to come on line called “The World.” They offered dial up service to the internet.

rick_usbportMicrosoft continued to upgrade their DOS and Windows technology. Linux offered a free and open operating system. Intel offered the Pentium processing chip to the world, the USB port is created, and the first major search engine from Yahoo is offered to the world. The increase in the efficiency of technology, cellular communications, the internet, and financial markets allowed more Americans the choice to live in more suburban and more remote areas than ever before.

In addition to the growth in Sun Belt regions, ski resort and college towns in Oregon, Colorado, Utah, and other states increased in size dramatically. More Americans were able to move from the large urban centers like New York, Chicago, and Los Angeles to more peaceful areas where they once vacationed or attended college.

The U.S. fertility rate increased slightly in the 1990s to an average of just over two children per household. The percent of married women in the workforce surpassed 60% by the end of this decade, and approximately 50% of America lived in some form of a suburban area (almost 150 million Americans).

The suburban lifestyle in the 1990s was becoming the normal way of life for many Americans. Suburbia would continue to increase in size well into the 21st Century, and other countries would begin to model their housing communities after America’s suburban lifestyle.

Suburbia’s Evolution: The 21st Century

We are now in the middle of the second decade of the 21st Century. The evolution of the American way of life in suburbia has grown in popularity around the world. In addition to the growth of suburban communities here and abroad, the “franchization” of predominantly American-owned businesses has increased worldwide.

There are many communities in Japan, China, Western Europe, and other regions around the world which are being modeled after successful suburban areas like Irvine and Laguna Niguel in California, Phoenix, Las Vegas, Dallas, Atlanta, and Florida. In addition to these suburban neighborhoods, the same franchised fast food restaurants, fancy coffee shops, grocery stores, discount warehouse centers, and other franchised businesses are being built right next to these new suburban neighborhoods.

rick_housesbuildThe American lifestyle is admired by many people around the world for many reasons. First, the freedom that we have here is not readily available to many people abroad. The food, beverage, clothing, and automobiles are desired by many who eagerly watch American films and want to live the same American lifestyle by purchasing our products.

The demand for American products is staggering. There are several fast food businesses that generate more income from foreign based restaurants than from local American locations. Following the trend of foreigners wishing to live the American lifestyle, suburban communities are developing abroad as well.

The flip side of the expansion of our popular American lifestyle is that the demand for oil and other natural resources has increased substantially the past decade. Countries like India and China, with their respective 1 billion plus population bases, have increased their demand for energy and natural resources. This is partly why oil has increased to the $90 to $100 + per barrel price range in recent years.

The exporting of the American lifestyle around the world has both positive and negative effects potentially for all of us. Increased demand for American products may generate more jobs here, and the market value of American companies may increase as well.

rick_netThe evolution of the telecommunications and computer industries has connected the world more than ever before. The internet has allowed more free speech and the voicing of different opinions from countries that had rarely experienced this type of free speech. The evolution of the internet will topple even more dictatorships and Communist regimes around the world as citizens will be empowered with more knowledge than ever before.

Ironically, many Americans have spent more time in their homes than in years past. The efficiency of phones (home and cellular), email, and the internet have allowed more Americans to avoid spending minutes or hours on the freeways when they were commuting to and from work. Additionally, a higher percentage of mortgage and real estate professionals are able to work out of their homes as opposed to a central place of business with their various high tech gadgets such as computers, iPhones, iPads, cell phones, and other products.

The futurist, Faith Popcorn, once coined the term “cocooning” to describe the increased time that people spend in their homes. Our homes are becoming the center of our universe in a way. With numerous phone, fax, and internet lines, we can reach out across the world either through our respective business or investment ventures.

As a result of the importance of our homes, the demand for the perfect home may bode well for future home values. There may be a number of very remote regions which may be the next popular place to live in the near or long term. Rural parts of Montana, Idaho, and other regions may be the next real estate “hot spot” as the desire for an improved quality of life replaces the need to commute to work every day in a busy city.

rick_migrantsThere will probably be a number of foreign countries that more Americans move to as well (i.e. Baja California in Mexico, Western Canada, Costa Rica, New Zealand, Australia, etc.). Americans may find that they can live a similar lifestyle, have many of the same comforts of home, and the same information access in other locations around the world at a much lower price.

There are many economists who used the term “globalization” when describing what is happening around the world. I think the term more closely represents the “Americanization” of the world. We are exporting our lifestyle abroad much more than we are importing other regions’ lifestyles. We are also experiencing an enormous growth of immigrants looking to become American citizens. The growth of America originated with immigrants who rode the ships into Ellis Island, New York (and other locations). Our country will continue to grow with the net increase of new immigrants.

America’s population now is over 300 million people. There is a lot of undeveloped land around our country. We may eventually have a population base of between 500 million and 1 billion plus like in India and China. Hopefully for all of us, there may be enough real estate and flexible and affordable financing to go around down the road. As long as the demand for American products and the hope for our American lifestyles remain steady, then our economy may continue to grow and prosper in the future.

With the recent developments of 3D Printer systems which supposedly may soon be able to build homes within just one day, what sort of an impact with their really high tech gadgets have on home prices, future development locations, and to individuals who derive their income from the construction and development industries. How will mortgage professionals also be impacted if loans may be processed in seconds or minutes online as underwriting systems continue to get more automated?

With more new development occurring in and around larger U.S. cities in recent years, then how will the mass migration back to the cities impact housing values out in “Suburbia”? Will a higher percentage of immigrants to the USA offset any potential suburban and / or metropolitan city population losses? Only time will tell.

Or, will cities get so crowded that the migration trends revert back to Suburbia? We shall see how the migration and investment trends work themselves out as we progress more into the 21st Century.

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: Phone: (310) 571 – 3600 ext. #203 CA DRE #01144023

Ricks’ website:

Flexible Financing for Difficult Economic Times

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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. 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 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.

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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

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.


(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.


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


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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.


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From Cities to Suburbia and Back (Part 2)

This is the second post in a series of three posts 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 his previous post, Rick discussed the real estate situation 100 years ago to the 1950s.  In this post, Rick covers the 1960s to the 1980s. In the next post he will cover the 1990s up to the present time.


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: Phone: (310) 571 – 3600 ext. #203 CA DRE #01144023

Ricks’ website:

Flexible Financing for Difficult Economic Times

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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 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!


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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.

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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.






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Interview with Karen Rittenhouse


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.






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