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Marketing Offline Helps Build Personal Relationships

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By Gene Guarino

What is Offline Marketing?

Offline Marketing is having a brochure, flyers and business cards. They should look professional and be accurate and clear. You only get one chance to make a first impression. The brochures should match your website and your online presence. In addition to that, one of your biggest and probably the most important way to market your business is referrals. Getting the word out to other people who can bring business to you.

How do you get referrals?

When somebody is thinking about Assisted Living, they’re going to ask someone they trust. who do you know? Where do you think I should go? If they have a friend that’s in a care home right now, they can invite them over for a visit to see for themselves. We need to create and maintain those relationships.

There are professional referral sources.

There are placement agents that refer seniors to homes. They went out and created the relationships. They typically get paid one month’s fee for those referrals. That’s expensive however if the bed was vacant last night you would have earned zero and you’ll never get that revenue back.

There are attorneys that specialize in working with seniors. Insurance agents that work with long-term care insurance. Financial planners that specialize in working with people’s estates as they get older. They’re the ones who are getting ask for a referral and they can direct those people to you.

Hospitals and doctors offices are your two other primary sources for referrals. People don’t go into a hospital for fun. They go there in an emergency or because they’re sick and they need to, not because they want to. The hospital has doctors, nurses, and orderlies that are potential referral sources for you. It could be something as simple as having your brochure in the waiting room or building a relationship with the nurses and staff.

You can build offline marketing relationships yourself!

Imagine if you just showed up once a week for a month where you just bring in a flat of coffee, a small box of chocolates and a handful of brochures. Everything I just described costs about $25 or $30. I suggest that you go there once a week at about 10 AM, when they need a little pick me up. Nobody’s ever going to turn down coffee and chocolate. You just say, “Hey, just wanted to stop by and say a quick hello.” Get to find out what their favorite coffee is. That’s about $100 per month. You’re going to get one, or two, or maybe many more referrals from that. Every one of them is worth thousands of dollars to you,

It doesn’t have to be you building those relationships either. It could be your manager or somebody that’s got the personality and is willing to get the word out and build those relationships. Set a budget, give them a business credit card or debit card for these types of expenses to help build those relationships.

Referral marketing is the best way to get new business in Assisted Living and Residential Assisted Living.

You can also subscribe to our iTunes for on the go listening:
https://itunes.apple.com/us/podcast/assisted-living-networks-podcast/id1360517721?mt=2

Gene Guarino
Founder/CEO
Residential Assisted Living Academy™

Gene is the President, CEO & Founder of RALAcademy.com. Gene has over 30 years experience in real estate investing and business. Today, Gene is focused on just one thing… investing in the mega-trend of senior assisted housing. He has trained thousands of investors/entrepreneurs throughout the United States how to invest in and operate residential assisted living homes. For over 25 years he has been educating people on the strategies of successful investing, business and self-employment. He now specializes in helping others take advantage of this mega-trend opportunity.

Besides the Purchase Price, There Are Other Costs You Must Consider

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By Lloyd Segal

When flipping properties, you also need to consider repair costs, holding costs, real estate commissions, closing costs, estimated profit, and lost opportunity costs.   Let’s analyze each of these costs separately.                             

Repair costs.  The repair costs will likely be your largest cost, so you need to calculate them carefully.  If you’re able to inspect the interior, you’ll be able to estimate the repairs and renovations needed to make the house salable.  However, if you aren’t able to inspect the interior, use 10% of the purchase price as your estimate of repair costs.  In the alternative, multiply the square footage of the house by $7.00.  For example, if the property has 1,500 square feet, the estimated repair cost would be $10,500.

Holding costs.  It’s going to take you approximately 2-4 months to repair, market, and sell the property.  During those months, you’ll incur holding costs (i.e. mortgage payments, taxes, insurance, and utilities).  Neophyte flippers frequently forget to include these costs in their budgets.  If you’re worried about these costs, you can significantly reduce them by living in the house during this period, which is exactly what many flippers do when they are just starting out.  Instead of chalking up your monthly expenses as holding costs, simply consider it rent.  Another way to trim your holding costs is to price the house correctly the first time.  By offering the best home in its class at the best price, you’ll sell the home faster and lower your holding costs to more than cover the cost of selling the home for a little less.  

Real estate commissions. You can assume you’ll pay a 6% commission to your real estate agent for selling the house when you flip it.  For that money, the agent will market your property for sale, list it in the Multiple Listing Service and related websites, advertise in local newspapers, receive and submit offers, negotiate with the buyer, and assist you with the timely close of escrow.   

Closing costs.  You will incur closing costs when it comes time to sell the property.  These costs include escrow fees, title insurance, transfer tax, recording fees, and other miscellaneous charges.  For a rough estimate of closing costs, figure 2% of the anticipated selling price.

Estimated profit:  While we’re at it, let’s factor in profit.  You want to make at least a 20-25% profit on each of your flips.  In that way, if unexpected expenses do pop-up, you’ll have some margin before you lose money on the deal.  (And if you sell the house for more than you expected, or your expenses are lower, you’ll make an even better profit.)

Lost opportunity costs:  Opportunity cost is the cost of pursuing one investment choice instead of another.  Every investment you make has an opportunity cost.  With respect to flipping, lost opportunity cost boils down to making choices between various deals.  For example, if you are considering two potential deals and can only make one, which one is likely to generate the greatest return?  Which fits best into your workload, your skill set, and the time you have available?  If you can spend the same amount of time and money on a property that will generate a 20% return instead of another property that will yield only a 10% return, which would you choose?

Time:  Another cost that you may not have considered is your time.  Successful flipping takes time.  If you buy a property and plan to do some repairs yourself, you will save money on repair costs but you’ll also spending your time.  How much is your time worth?  If you’ll spend 300 hours repairing and renovating a property and will make $3,000 in profit, your time was worth $10 per hour.  If that sounds good to you, great!  If it doesn’t, you’ll need to adjust your cost estimates accordingly.  For example, if your time is worth $50 per hour, you should factor $15,000 into your budget for those same 300 hours.

Lloyd Segal

Chief Cook and Bottle Washer
Los Angeles Real Estate Investors Club, LLC
310-409-8310

www.LAREIC.com

 

 

How Much Of A Threat Are Zillow & The New iBuyers?

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By Fuquan Bilal

A new breed of iBuyers have their sites on transforming and taking over the real estate industry. How much of a threat are they really?

Hundreds of millions of dollars are being thrown into this new real estate strategy, and some of the most powerful companies are behind it. Should smaller real estate investors be worried?

The Rise of the iBuyer

‘iBuyers’ are the new name given to online home buyers who promise owners and sellers a quick transaction. The pitch is generally a cash offer and fast closing. While there are many small wholesalers across the country which may fall into this category, most notable are the big giants.

Zillow has moved into this space with its Zillow Offers program. Opendoor has attracted hundreds of millions of dollars in investment capital from funds like Softbank. Opendoor has also partnered with brokerage Redfin to buy up homes. Offerpad has partnered up with Keller Williams. Opendoor has also partnered up with home builder Lennar to promise a seamless transaction to cash in your old home and upgrade to one of Lennar’s newly built homes.

Buying the Business & Manipulating the Market

Zillow is notorious for losing billions of dollars in attempts to buy up different segments of the market. Their plans call for very slim margins and fast house flips. Opendoor smells a lot like other Silicon Valley startups which may be happy to lose a lot of money to push their competition out of the market.

Zillow is particularly worrisome due to how much influence they have over perceptions of home values. It’s easy for them to manipulate prices down when they want to buy, and up when they want to sell.

When you have a billion dollars to blow, it is pretty easy to artificially influence market prices in a given area and drown out the competition.

It’s something to watch.

Threat to the Economy

Perhaps the biggest threat these giant iBuyers present is to the housing and financial markets and the economy in general. While they may not yet be buying more than a few thousand properties each year, if they fail, they could leave many properties in foreclosure, cause huge losses for their investors, Wall Street and stockholders, and help vaporize billions of dollars from the economy.

These companies do not yet seem to have the experience to do this well. Their margins are slim. They could get stuck with a lot of inventory. Of course, this could be a great thing for those looking to buy up real estate in bulk.

Are iBuyers a Threat to Smaller Investors?

These giants may be of more help to smaller investment firms and individual investors than most realize.

It is true that they have a lot of advertising power and they may be happy to overpay for properties and can afford to outbid you. Yet, there is still a lot of room for everyone else.

To start, they are normalizing this form of buying and selling houses, which is great for everyone else.

So far the data shows that around 50% of offers they make are turned down by sellers. Plus, they charge hefty fees for the privilege of selling to them. Often 7% of the sales price or more. They still haven’t fully automated, meaning the process is much more traditional, involving inspections and Realtors, than they let on. Many sellers are going to be resistant to the fact that companies like Zillow are going to low ball them, and then put the listing on their own site for a profit the next day.

More significantly, these giants are moving slow. They are only in certain cities. Their buying criteria is pretty narrow. That leaves a lot of units for others to buy up. They may be generating a massive amount of Realtor leads in this way, but smart investors can leverage this noise to their own benefit.

Lastly, these iBuyers could become major buyers of your own real estate product too. Find the deals at the right prices and instantly flip them to Zillow and Opendoor.

It’s all about knowing who is in your market, what they are buying and for how much, and how you can use that to your own advantage.

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

 

Fuquan Bilal

Fuquan Bilal founded NNG in 2012 with the principal mission of capitalizing on the growing supply of mortgage notes in the interbank marketplace. Mr .Bilal utilizes his 17 years of residential and commercial real estate success to identify real estate opportunities and capitalize on them. To date, he has successfully managed three private mortgage note funds that primarily invest in singlefamily performing and non­performing mortgage notes. His financial acumen and proprietary set of investment criteria enable him to purchase underperforming real estate assets at a deep discount of face and market values, thereby increasing the value of the assets. This, coupled with his ability to maximize the use of leverage, enables him to build strong, secured portfolios with solid passive income flows.

Allowing a Lender to Cross Collateralize Against Additional Property

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By Edward Brown

There are times when a lender is going to ask for additional [real estate] collateral in order to make a borrower a loan. The most likely scenario for this is when there is not enough equity in the target property. Other scenarios include a borrower with less than stellar credit, or the type or quality of the target property may not be enough to satisfy the lender to make the loan, as most lenders are more interested in making loans that will pay them back instead of facing foreclosures. For this reason, the lender may ask the borrower to put up additional collateral satisfactory to the lender so as to give the borrower an incentive to avoid defaulting on the loan.

In many cases, this cross collateralization may not be something the borrower worries about, as the borrower intends to pay the lender in full. The general plan is for the borrower to refinance the target property at a point where a new lender does not require cross collateralization, pay off the existing lender, and the existing lender releases both properties; however, what happens when the borrower sells the crossed property, or has the opportunity to refinance the target property, and there is not enough to pay off the current lender who crossed?

The danger here is that the lender may hold up the sale because it does not want to release their lien until they are paid in full. For example, let’s say the borrower owns a rental house that is worth $500,000 and there is a first mortgage in place for $200,000. The borrower wants to buy another rental for $800,000 and has $250,000 to put as a down payment. The borrower asks a lender to loan the remaining needed $550,000, but the lender is not comfortable with the LTV [68.75%], so the lender asks what other real estate the borrower owns, so it can cross collateralize its $550,000 loan. The borrower mentions the other rental, and the lender decides to ask for crossing on the first rental. Thus, the lender has lowered its risk because of the equity in the first rental.

Now, let’s say that the borrower receives an unsolicited offer for the first rental of $525,000, and he wishes to accept it. If there was no cross collateral against this property, the borrower could accept the offer, pay off the existing first of $200,000, and pocket the $325,000 remainder. However, because the rental has been crossed, the lender has $550,000 against the property in second position. That means that there is technically $750,000 of liens showing up against the property. The borrower cannot accept the $525,000 offer without having the second [the crossed loan] release its lien.

For this reason, it is imperative for there to be an agreed upon release price in which the lender agrees ahead of time to release its interest in either properties for a specific sum. It does not necessarily have to be just the remaining equity in the first sale [$325,000 in our example]. The release price could be a smaller amount. It could also be a larger amount [up to what the lender is owed]. If the lender desires more than the $325,000, the borrower would have to come up with additional cash in order to transact the sale. This may not be all bad, as the crossed lender’s loan has then been reduced.

For example, if the crossed rental was sold at a 5 CAP rate, and the crossed lender’s interest rate was 7%, the borrower may choose to sell the rental and come up with money to satisfy the lender should the lender want more than the $325,000 net proceeds from the sale. In other words, there are times when it makes economic sense to come up with money in order to sell property. Another similar scenario like this occurs when there is a blanket loan covering multiple properties, as is the case when an apartment building has been converted to condos and the owner of the building desires to sell off one condo at a time. A typical lender on the building will usually have release prices [agreed ahead of time] under which the lender will allow each unit to be sold and the lender takes a specific amount [or percentage of each sale] as a pay-down of its loan.

The release price can be negotiated between borrower and lender. Because the lender did not take the new property alone due to the high LTV, many times the lender will reduce its pay-down to where it feels comfortable with a specific amount of its loan on the remaining property. To make this point clear, let’s say that the lender usually makes loans for rental properties at an LTV of no more than 55%. Since the new rental was purchased for $800,000, the lender would be fine with a loan balance of $440,000. Thus, in order for the lender’s exposure to be reduced from its original loan of $550,000, it may be willing to accept $110,000 from the sale of the first rental in order for the lender to release its crossed lien. In this case, the borrower would sell the first rental for $525,000, pay off the first mortgage of $200,000, and pay the lender in second position $110,000 [to release its crossed lien of $550,000], and pocket the rest of the proceeds from the sale [$215,000]. The borrower would keep $215,000 from the sale, and the only debt on the second rental would be the lender [who crossed] of $440,000.

Borrowers who overlook release prices [a specific clause in the loan documents] risk having to ask the crossed lender after the fact under what circumstances the lender would be willing to release the first property. If there is no agreement ahead of time, the borrower runs the risk of being at the mercy of the lender, as the lender does not have an obligation to release its lien for less than what it is owed.

Many lenders may be willing to work out a reasonable amount for releasing either property, as it is in the lenders best interest to reduce the borrower’s default risk. Having more than one property as collateral sounds good in principle, but the added exposure of having a loan spread out amongst more than one property may not be worth the risk. Each situation will be different, but, as a general rule, it is more conservative from the lender’s viewpoint to have a low LTV on one property compared to having crossed on one or more additional properties that have a higher LTV. Additional costs of foreclosure, if needed on more than one property, as well as having to deal with an existing first mortgage [keeping them current, so that lender does not foreclose] may not be a desirable solution to protecting the lender’s interest.

This is the primary reason why typical banks do not usually cross collateralize their loans. Most banks do not like a lot of moving parts. They want to focus on one property and the risk associated with it.

Borrowers should make sure that the lender does not hold any of the borrower’s properties hostage and that release prices are set at a point where the borrower feel comfortable.

 

Edward Brown

Edward Brown currently hosts two radio shows, The Best of Investing and Sports Econ 101. He is also in the Investor Relations department for Pacific Private Money, a private real estate lending company. Edward has published many articles in various financial magazines as well as been an expert on CNN, in addition to appearing as an expert witness and consultant in cases involving investments and analysis of financial statements and tax returns.

5 Ways of Getting $10M to Invest in Real Estate

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By Fuquan Bilal

Need more money to invest in real estate? Where can you get another $10M in capital from?

The ironic thing about money for real estate is that you rarely have too much of it. You can for a little while, especially if you’ve raised a lot and have your latest deal oversubscribed to. It’s happened to many funds recently. Though sooner or later, the reason for not doing more always comes back to “If only I had a little more money I could…”

Maybe you want to take down a big commercial building, or need to have millions to earn a seat at the table and ability to bid on the note pools and bulk REO deals with the most profit. Or perhaps $10M is just the next milestone you’ve set for yourself. Where do you get it?

Commercial Real Estate Loans

$10M is a very small number in commercial real estate. In fact, there are many, many lenders who don’t want to touch small balance deals for less than that. It’s their minimum loan amount.

You may have to find a great deal with lots of equity, or raise $1M for down payment, but this kind of money is out there to borrow.

Real Estate Crowdfunding

This can be done publicly or privately, and for debt or equity or even donations. If a prototype for an off brand smart watch (not even Apple) can raise $10M in a few hours on a crowdfunding platform like Kickstarter, shouldn’t you be able to raise a lot more than that for some prime real estate with great yield or value add potential?

Here’s the thing. Most crowdfunding campaigns fail. Either because there was no strategic roll out, or the organizers didn’t have the marketing budget designated to invest in it. It might cost you $100k or $1M to raise $10M, but that may still be worth it.

Partnerships & Syndicates

Partnerships are probably the most obvious way to raise capital to invest in real estate. At least after loans. Depending on who your contacts are, that may come in $50k or $1M or $5M increments.

If just being involved in a deal of this size is what you want, then maybe you don’t even need the $10M. Maybe you can put your $1M into an existing syndication with the right connections, management and systems in place – and benefit from big deals like this, without having to raise money at all. You might even be the one getting the preferred return, without any of the work.

Launch a Startup

As crazy as it may seem, there are still billions of dollars being plowed into startups. It may make little sense given the risk of volatility and how poor and low value you think the ideas that are being funded are. So, why not do better than them? If you can make contacts that want to invest in startups instead of just real estate, give them a startup to put their money into. You can call it a tech company in the real estate space, or a real estate or finance or fintech startup. Put a nice appealing twist on it, get help with a great pitch deck and float the opportunity.

Make $100M for Someone Else

If you make $100M for someone else, they shouldn’t have a problem cutting you a check for 10% of that, right?

Maybe you don’t want to do all the work involved in acquiring, managing and disposing of $100M worth of real estate. Yet, it may be far easier to help someone else raise that kind of money, sell that much real estate or buy that much property. Then get some reasonable compensation for that. Or you can leverage arbitrage and invest that money into another fund and keep your slice. Then you can invest your $10M in whatever you like.

It’s not that much when you really start looking at the numbers. That much property can change hands in a day in Manhattan alone. These days $1B seems to be the new minimum property price tag for Google and Apple. $100M is loose change for them.

How will you raise your next $10M?

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

 

Fuquan Bilal

Fuquan Bilal founded NNG in 2012 with the principal mission of capitalizing on the growing supply of mortgage notes in the interbank marketplace. Mr .Bilal utilizes his 17 years of residential and commercial real estate success to identify real estate opportunities and capitalize on them. To date, he has successfully managed three private mortgage note funds that primarily invest in singlefamily performing and non­performing mortgage notes. His financial acumen and proprietary set of investment criteria enable him to purchase underperforming real estate assets at a deep discount of face and market values, thereby increasing the value of the assets. This, coupled with his ability to maximize the use of leverage, enables him to build strong, secured portfolios with solid passive income flows.