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Q-an-A with Dani Lynn Robison with Freedom Real Estate Group

A Question and Article Interview with Dani Lynn Robison, Co-Founder of Freedom Real Estate Group

 


 

Dani Lynn Robison is no stranger to real estate.

In fact, she is a member of the esteemed Forbes Real Estate Council and is Co-Founder of her own turnkey investment business – Freedom Real Estate Group in Dayton, Ohio. With her rapid success in real estate over the past 10 plus years, we sat down with her to find out a bit more about her success, what she’s doing now, and the advice she has for real estate investors.

INVEST IN READING THIS ARTICLE, REALTY411 GOLDEN NUGGETS , INCLUDE:

  • Discover how a life transition can result into a lucrative passion with real estate.

  • Find out what it takes to be a turnkey provider in this competitive environment.

  • Get an advantage on how a professional buys and sells real estate investments.

  • What does the future have in store for rentals in the Midwest?

  • How does real estate compare to the stock market, get a perspective.

Q: How did you get started in real estate?

A: Flip (her husband) and I spent about 10 years of our life after college traveling on cruise ships as musicians and art auctioneers. Once we were back on land, we both wanted something that required less travel and put us in one place. I decided to pursue and learn three different interests of mine and choose one. First, I tried finance. Didn’t like it. I moved on to mortgages and lending. Didn’t like it either. Finally, I landed on real estate sales. I became a REALTOR® and guess what? Didn’t like it either. Flip and I both became REALTORS® in 2008 at the height of the recession.

It was tough. So we decided to attend an educational seminar put on by Phil Grove. Soon we became part of his expert panel as we were his most successful students. After a few years investing in real estate in Texas, Florida, Arizona and other states, we were turned on to the concept of turnkey investments.

I loved the idea because it is all about helping others create cash flow and financial freedom for themselves, which was exactly what we were passionate about doing for ourselves. Now we could help others do the same and they could benefit from our experience and knowledge. We started doing it and haven’t looked back.

Q: Tell us a bit more about your current business and what you’re doing.

A: My main focus is turnkey investing. Basically, we buy properties, rehab them to our standards, rent them to a tenant, put property management in place, and in turn sell it to a real estate investor who wants monthly cash flow without the hassle. It’s an all in one, done for you real estate investing system.Most of our clients are busy professionals who understand the power of building wealth with real estate and they want to get involved, but don’t have the time, resources, knowledge or even interest to learn more about it.

An added bonus of investing this way is your investment doesn’t have to be local to you. With turnkey, you’re able to select markets with high returns that may be across the country. As long as you’re partnered with a trustworthy turnkey company, your asset should be well taken care of.

Q: Your business is located in Dayton, Ohio. Why Dayton?

A: Dayton is great for generating cash-flowing assets. A few things play into that. One, you can buy property much cheaper here than in a lot of other metro areas like Los Angeles, Miami, and Chicago. Here, a single-family property that has 3 bedrooms, 2 bathrooms will cost you as little as $75,000. Try getting that in one of those cities I just mentioned. With that $75,000 investment, you’re cash flowing about $730 per month after taxes, insurance, and management fees. That’s a 12% return on your investment. Once you get into properties with two units and higher, the returns can get even better.

We offer some properties with 15% returns. Two, the greater Dayton area has a history of a greater owner to renter ratio. Right now, it’s about 60% home owners and 40% renters. That means there is a solid number of renters in the area needing housing. Three, it’s a stable economy. There is definitely growth happening in the greater Dayton and Cincinnati area. The urban core of both cities is booming. Dayton has some staple businesses that have long been here and will continue to be. For example, Wright Patterson Air Force Base, one of the largest research bases in the military and the largest single-site employer in all of Ohio is based in Dayton.

Q: So why not just do real estate investing and rentals myself?

A: I’ve been a real estate coach since 2010. Over 90% of students fail. Either they don’t have the time, passion, or money. It’s always one of those. Seasoned investors have all experienced failure. It’s part of learning. Failures that have cost us hundreds of thousands of dollars.

We’ve done it. If you want to do it, more power to you. Real estate has a huge learning curve. Plus it’s full-time. If you do it right, if you do it well, it’s more than full-time. With no experience in real estate, you’ll likely find yourself with a money pit of a property, get frustrated, and give up.

Q: How does turnkey investing compare to investing in the stock market?

A: I love the cash flow and asset protection aspect of turnkey investing. Renters will always exist. There will always be demand. Plus, if you decide to sell off your properties, you will always have a tangible asset that has worth. Also, real estate isn’t as volatile as the stock market.

Even if the real estate market crashes, there will always be a recovery. Plus, if it crashes, you fall back on cash flow. It’s rare that rents go down – even in a recession. They may not increase but you will still be getting consistent cash flow every month. It’s just not the same with the stock market.

Q: Speaking of a market crash, how do these assets weather that?

A: When you’re buying turnkey properties, you should be buying for cash flow. Yes there are a few markets that boast appreciation as a selling point. I never advise that. Appreciation is speculative and never guaranteed. If you have a 10-year plan, what happens when the market crashes at 9 years and 9 months into your plan? Not good, right? Buy turnkey properties for cash flow. Appreciation is an added bonus when you decide to exit.

Your goal shouldn’t be to have $1 million dollars in your bank account. It should be to have $10,000 in cash flow coming to your mailbox every month. That’s how you achieve true financial freedom.

Q: What does the future look like for Freedom Real Estate Group and you?

A: I plan on continuing to work on and expand our turnkey business. We’ve been able to meet some great people across the globe. I love it. Especially the wonderful success stories. We plan to expand into some other markets. By the end of 2018, we will be expanding into Cincinnati. We’re hoping within the next 12 months to have a presence in two other markets as well but that is still in the works.

Q: Finally, what advice do you have for someone new to real estate investing who wants to begin?

A: If your passion is real estate, find someone local and learn from them. Always have the mindset of there is something new to learn. I’m still learning. If your passion is different from real estate, as in you’re a doctor, teacher, or dentist, align yourself with a real estate investment professional to define and set your goals. That’s how I approach all client conversations. I want to know your goals so I can put you on the right path to get there. Real estate is a great asset for passive income.

If you’re a busy professional who doesn’t want to quit their job and get into real estate full-time, turnkey investing may be a good option. Eventually, once you’ve built a healthy portfolio, you’re working because you want to – not because you have to. That’s true financial freedom.


For more information on turnkey real estate investments, or to schedule a call with a Freedom Real Estate Group investment counselor, please go to their dedicated turnkey website at: www.TurnkeyOhio.com.


LEARN MORE ABOUT THE LEADERS OF FREEDOM REAL ESTATE GROUP

Dani Lynn Robison, Co-Founder, Managing Partner

Dani has been a Licensed REALTOR®, Distressed Property Specialist and Note Consultant since 2009. She has participated in countless real estate transactions and evaluated thousands of houses. Dani’s joy comes from creating win-win situations that help sellers, buyers, and the community.

Dani grew up in Phoenix, AZ and earned an Music Performance degree from Southeastern University. She’s lived in Florida, Texas and Ohio and traveled on cruise ships for 10+ years where she met her husband, Flip. She and her husband are the proud furry parents to one golden retriever, Tucker and two feisty bulldogs named Spartacus and Rosie.

Eric Jones, Director of Sales & Marketing

Eric is a licensed Realtor and has been an integral part of a marketing team for a large, multifamily property management company for over 10 years. While he was there, he marketed and advertised their properties to achieve maximum occupancy and improve their customer experience to be one of the top-rated communities. He was also responsible for doing company-wide presentations to improve sales numbers and motivate the team.

He holds a Bachelor’s degree in Public Relations and Marketing from Northern Kentucky University. With in-depth experience in the real estate and rental market, he constantly strives to improve the customer experience with every transaction and any organization he is involved with. Eric lives by the quote – “Go the extra mile. It’s never crowded.”

Eric grew up in a small town in southern Kentucky before relocating to the Cincinnati and Dayton, Ohio, area for college. Eric currently hangs his hat in Springboro, Ohio, with his partner Matt and his darling step-daughter Lilly. In his free time, you can find Eric working with youth performing arts organizations across the country or jet setting to a warm location with a beach.

 

Key Do’s and Don’ts of Probate Leads: How to Find Motivated Sellers

By Kristine Gentry, VP of Innovation, US Probate Leads

As the real estate market continues to tighten, successful investors are diversifying their lead streams and trying new sources. One of the most underutilized sources of leads are probate leads. Why are they underutilized?

Primarily because people do not understand the opportunities that are available or how to quickly and easily obtain probate leads. In addition, some investors do not know what to do with probate leads once they have them. If you are considering using probate leads to increase your opportunities, or if you already have probate leads, below are some tips for helping you make the most of your leads.

What Are Probate Leads?

Probates leads include information on property that is part of a legal filing after the death of a loved one. These cases include many types of property owned by someone who has passed away including homes, vacation homes, cars, RVs, businesses, commercial property, rental property, artwork, and other personal property. These cases are listed in each county after the death of a loved one where a probate needs to be filed and are controlled by the local court.

Oftentimes, this property has to be sold in order to pay for medical, tax, legal, and funeral expenses. The court will assign an Executor to handle the sale of the property so that these obligations can be met and the heirs can receive any remaining funds.

As part of an overall investment strategy, probate leads are valuable because they come with very motivated sellers. Executors need to deal with the property that is in the probate filing in order to meet the court requirements. Many times, they need cash in order to pay bills that have been left after the passing of their loved one.

Often, they do not live near the inherited property and simply want to sell it as quickly and easily as possible. If they know the property needs updates, they may not want to have to deal with that hassle and would rather sell the property at a discount. In addition, since they inherited the property, anything they make on the property is extra for them so they are less worried about getting maximum value for the property.

Probate properties may be available for thirty to fifty percent off of the market price and are generally available for a quick closing. So, probate leads are a great way to diversity and increase your lead source. But once you have probate leads, what do you do?

Probate leads are not like all other leads and should be treated differently. Do offer to help the executor/heir. Remember they have recently suffered a loss and are grieving. Since probate leads are generated when probates are filed in a local courthouse after a death, it is necessary to be especially warm and considerate when speaking with executors and heirs. They have recently gone through a very tough time and are probably overwhelmed with the loss of their loved one as well as all the legal and financial issues they are faced with as the executor of the estate.

For some executors/heirs, the last thing they have the time or energy to deal with is a recently inherited piece of property. They may not live near the property and may not have the time to take care of basic issues with the house. For instance, suddenly having another yard to maintain can seem daunting.

You can help by offering to mow the lawn, trim shrubs, or water plants. Sometimes the heir or executor simply need someone to talk to. You can be that friendly person they can speak with. Offer condolences and let the executor or heir take the lead in how much they want to talk about their loved one. Simply asking what they need help with can go a long way. Do continue to reach out to the executor/heir. One mailing or phone call will not be enough.

Unlike other leads sources, it is hard to know when will be the right time to reach out to an executor or heir. In some cases, heirs want to sell property as fast as possible. They may be ready to sell quickly so they can move on. In other cases, heirs are reluctant to sell their loved one’s property.

They may hold onto it for months before feeling pressured to do something with the property. We have learned that it is important to regularly reach out to executors and heirs and recommend doing so for at least a year. Sending a mailer or making a phone call every other month is a good timeline. The important thing is for the executor or heir to have your contact information available when they decide they are ready to sell.

Do be honest about how you can help and why it is beneficial to you both. Executors and heirs have a lot going on. They will know that you are interested in making money and not just a stranger who showed up to help out of the blue. It is best to be honest and explain that you make money by purchasing properties below market value, fixing them up, and reselling them. And that it might be helpful for them to sell you their property below market value so that they do not have to deal with the hassle of fixing up a house to sell and then listing it.

Remind them that you can help them get cash quick, but there are no guarantees of how long it would take for the house to sell at full value.

This is a win/win situation for you and the executor or heir, and you should be up front about that. Don’t forget about historical leads. Heirs often don’t sell right away. New users of probate leads often think that the leads have a short time on the market. However, that is not the case. Generally it takes some time for Executors to get all of the paperwork filed and to go through their loved one’s things before they are ready to sell.

There is also the process of grieving, which can cause Executors to hold onto a property for a time before they are willing to sell it. With these parameters in mind, real estate investors who are looking at probate leads will find that Executors who are selling property may not be ready to sell for twelve months after the filing. In many cases, the leads are still viable eighteen months after the passing of a loved one. This allows for plenty of time for real estate investors to make contact with the Executor. Therefore, a successful probate investing practice should include the usage of historical leads. Don’t try to get leads on your own. Purchase them from a reputable source.

Many investors have attempted to gather leads themselves from courthouse records and quickly grew tired of the painstaking and time consuming process of doing so. Now, there is no need to gather these records on your own. Several companies provide probate leads for you. Most specialize in only a handful of counties – often counties where probates are available online. However, some companies have researchers trained to go to courthouses where these records are not available online, which is the case for the vast majority of counties.

U.S. Probate Leads is a family-owned company that has been in the probate business for over 15 years. We have more experience and offer high-quality ads that include skip tracing for executors and addresses.

Don’t waste your time gathering probate leads. Instead, contact us to learn about why our leads are the best on the market. Get Access to Probate Leads Today. Using probate leads is a great way to find more leads in your area as a real estate investor. With long-term viability and Executors that are motivated to sell, you will see that probates are a way to quickly find discounted properties.

If you are looking for diversity in your lead package, then you can get access to probate leads easily and quickly by vising US Probate Leads. We offer county by county listings of the probate leads listed in your area delivered directly to your inbox. Each county in the United States is covered by our trained team of lead specialists. Our team makes sure that you have the leads that you need in order to make your business grow.


Want more information?

You can visit us at www.usprobateleads.com today and get more information on our lead services or sign up. In addition to our lead service, we also offer seminars, webinars, eBooks, software and individualized mentoring for dedicated investors. Contact us today for more information and learn how we can help you to meet your real estate goals.

Probate Leads Available Now – In Your Area US Probate Leads has access to virtually any county in the United States, meaning regardless of where you live, you can start receiving leads monthly.

Go to the US Probate leads site: www.usprobateleads.com, click on your state and get started. To get a 10% discount, place an order before September 30th. Use discount code “Realty411.” Or you can contact them directly at: (877) 470-9751.

Now is the time to make your mark in this little-known niche – never before have more properties become available than will in the coming years. Becoming a US Probate Leads subscriber could really be the start of a whole new future, a more lucrative career, and an exciting investment opportunity.

- Article By Kristine Gentry, VP of Innovation, US Probate Leads

DOWNLOAD THIS ARTICLE AS A PDF NOW


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Listen to LIFE-CHANGING REI Tips with Larry Goins

Don’t Waste Your Commute Time – LEARN WHILE YOU DRIVE

University on Wheels in the way to expedite growth + explode your income.


What is University on Wheels?

It’s simply making your car a university on wheels by listening to personal and professional development podcasts during your commute.

Some implement this technique further by listening to programs while their doing chores around the house, and at the beginning or end of their day.

As real estate entrepreneurs it’s important to use our TIME WISELY.

REMEMBER: Time is the most important asset we have, don’t wait a second of it.

We want to help your mission of Growing, Learning and Transforming your life to a new level of success and abundance.

Listen in to this week’s Invest Wisely podcast with our guest, Larry Goins, and learn transformational tips to take you higher.

Larry is one of the most active investors in the country and he’s ready to help you grow your real estate portfolio too.

JUST CLICK HERE to connect to our Invest Wisely podcast — Happy Investing!

 

10 Rules of Successful Real Estate Investing

By Marco Santerrelli, CEO of Norada Real Estate Investments

I came up with the following rules of successful real estate investing over my many years of successes and failures. These are the same rules I follow today and share with our clients at Norada Real Estate Investment.

1. EDUCATE YOURSELF Knowledge is the new currency. Without it you are doomed to follow other people’s advice without knowing if it’s good or bad. Knowledge will also help take you from being a “good” investor to becoming a great investor, and that knowledge will help provide a passive stream of income for you or your family.

2. SET INVESTMENT GOALS A goal is different from a wish; you may wish to be rich, but that doesn’t mean you’ve ever taken steps to make your wish come true. Setting clear and specific investment goals becomes your road map and action plan to becoming financially independent. You are statistically far more likely to achieve financial independence by writing down specific and detailed goals than not doing anything at all. Your goals can include the number of properties you need to acquire each year, the annual cash-flow they generate, the type of property, and the location of each. You may also want to set parameters on the rates of return required.

3. NEVER SPECULATE Always invest with a long-term perspective in mind. Never speculate on quick short-term gains in appreciation, even in a heated market experiencing double-digit gains. You never know when a market will peak and it’s usually 6 to 9 months after the fact when you find out. Don’t chase after appreciation. Only invest in prudent value plays where the numbers make sense from the beginning.

4. INVEST FOR CASH-FLOW With few rare exceptions, always buy investment property with a positive cash-flow. The higher,  the better. Your cash-on- cash return is directly related to the before-tax cash-flow from your property.

Cash-flow is the “glue” that keeps your investment together. Your equity will grow over time (through appreciation and loan amortization), while the cash-flow covers the operating expenses and debt service on your property.

5. BE MARKET AGNOSTIC The United States is a very large country made up of hundreds of local real estate markets. Each market moves up and down independently of one another due to many local factors. As such, you should recognize that there are times when it makes sense to invest in a particular market, and times when it does not.

Only invest in markets when it makes sense to do so, not because you live there or you bought property there before. There’s an element of timing and you don’t want to buck the trend.

6. TAKE A TOP-DOWN APPROACH Always start by selecting the best markets that align with your investment goals. Most investors start by analyzing properties with little to no regard of its location. This can be a big mistake if you don’t consider the investment in light of the market and neighborhood it’s in. The best approach is to first choose your city or town based on the health of its housing market and local economy (unemployment, job growth, population growth, etc.). From there you would narrow things down to the best neighborhoods (amenities, schools, crime, renter demand, etc.). Finally, you would look for the best deals within those neighborhoods.

7. DIVERSIFY ACROSS MARKETS Focus on one market at a time, accumulating from 3 to 5 income properties per market. Once you’ve added those 3 to 5 properties to your portfolio, you would diversify into another prudent market that is geographically different than the previous one. Typically that means focusing on another state.

One of the underlying reasons for diversification within the same asset class (real estate), is to have your assets spread across different economic centers. Every real estate market is “local” and each housing market moves independently from one another. Diversifying across multiple states helps reduce your “risk” should one market decline for any reason (increased unemployment, increased taxes, etc.).

8. USE PROFESSIONAL PROPERTY MANAGEMENT Never manage your own properties unless you run your own management company. Property management is a thankless job that requires a solid understanding of tenant-landlord laws, good marketing skills, and strong people skills to deal with tenant complaints and excuses. Your time is valuable and should be spent on your family, your career, and looking for more property.

9. MAINTAIN CONTROL Be a direct investor in real estate. Never own real estate through funds, partnerships, or other paper-based investments where you own shares or other securities of an entity you don’t control. You always want to be in control of your real estate investments. Don’t leave it up to corporations or fund managers.

10. LEVERAGE YOUR INVESTMENT CAPITAL  Real estate is the only investment where you can borrow other people’s money (OPM) to purchase and control income-producing property. This allows you to leverage your investment capital into more property than purchasing using “all cash”. Leverage magnifies your overall rate-of-return and accelerates your wealth creation. As long as you have positive cash-flow and your tenants are paying off your mortgage for you, it would be foolish not to borrow as much as possible to buy more income property.

For more information, visit: http://www.noradarealestate.com/

 

Land Trusts vs. Limited Liability Companies

By Randy Hughes aka Mr. Land Trust

Recently I read an article by an attorney telling his readers not to use a Land Trust. He recommended titling your investment property in a Limited Liability Company. His reasoning was that Land Trusts are only a “deterrent” to a lawsuit and they do not provide “true” asset protection. The attorney went on explaining how any lawyer “worth his salt” would find out you are the beneficiary of a Land Trust as the result of a judgment debtor’s exam (which is a hearing in a court room…sometimes called a Citation to Discover Assets). The attorney writing this article concluded that you have “zero” privacy with a Land Trust and if you want privacy you should “save the expense” of a Land Trust and title your investment real estate directly into an LLC (Nevada or Delaware).

After over 40 years in the real estate investment business, I can spot an attorney who understands the law but does not have practical real world experience. I agree that LLC’s have better asset protection than a Land Trust, but Land Trusts have far better privacy elements than LLC’s. I use LLC’s in my business but NOT to hold title to investment property. Let’s review the benefits of using a Land Trust.

LAND TRUSTS:

  • Are NOT registered anywhere on the planet
  • Do not require a registered agent
  • Pay no franchise taxes
  • Cost nothing to form (you can form them yourself)
  • File no tax returns
  • Require no tax ID number
  • Can be formed in a state other than where the property is located (for terrific privacy and asset protection)
  • Can easily hold each property separately from other properties to keep all investments insulated
  • Can have an LLC, Corporation or Personal Property Trust as its beneficiary

Experienced real estate investors understand that putting all of your properties into any one entity (be it an LLC, Corporation or a Land Trust) is a nexus for a lawsuit. Remember grandma’s advice to not put all your eggs in one basket? It makes logical sense to put each property into its own separate Land Trust and then make the beneficiary of the trust your LLC or Corporation.

This yields the best of both worlds from a privacy and asset protection standpoint. Since the Land Trust Agreement is not recorded anywhere no one can find out who the true owner of the trust is without a full blown lawsuit…which is expensive for your adversary. Furthermore, if the property is in one state, the Land Trust is formed in another state, and the LL C beneficiary is registered in a third state you get a dy-no-mite structure that is not only difficult to unravel but legally expensive to pursue. Most contingency fee lawyers would give up and start looking for another sucker to pursue.

Real estate investors are more susceptible to a lawsuit than most other Americans. The general public’s perception of a real estate investor is that they do not have any debt on their property, have lots of cash in the bank and tons of positive cash flow. So, even if the investor is upside down on their property debt and suffers monthly negative cash flow they are still at the mercy of the contingency fee lawyer and his/her dead-beat client. Keeping property isolated in separate Land Trusts makes logical practical sense to those of us in the trenches every day. A huge benefit to holding title to each property in a separate trust is the ability to finance without affecting the other properties.

You can also sell property on an installment contract basis without affecting other properties. If you title multiple properties in one LLC the lender will want to tie up all the assets of the LLC as collateral for the loan on just one property. Take your advice from a streetwise investor with decades of real-life experience. Use a Land Trust to hold title to your investment real estate…you will be glad you did!

To receive a FREE copy of my booklet “50 Reasons to Use a Land Trust” send me an email at: mailto:randy@mrlandtrust.net

 

MULTIFAMILY PROPERTIES: Should It Be in Your Future?

By Tom K. Wilson

One of the most common questions I get is: Which are better investments, multifamily properties (apartments) or single-family homes? My answer is, both, but not multifamily without experienced or qualified and experienced partners.

A multifamily property is defined as 5 units or greater, and single-family homes, duplexes, triplexes, and four-plexes are referred to as “1-4s”. For someone with a goal of building a medium to large real estate portfolio, I generally recommend considering the inclusion of a commercial or multifamily property with one caveat: Don’t start by yourself and don’t put all of your real estate working capital into one large investment.

After purchasing and selling over 2,000 units and 12 multifamily properties over 37 years, my experience is that the best investment property I ever owned was a multifamily property and the worst investment property I ever owned was a multifamily property. These properties have ranged from 10 units for $400K to 176 units for $10M.

Multifamily properties offer higher potential reward along with higher risks. On the surface, an apartment building seems to be nothing more than many units, like single-family detached homes, but in one address, however, their proper management is a specialty. There are many more variables and expenses than in 1-4s including utilities, landscaping, contract maintenance, on-site maintenance, office management, tenant profile, advertising, lender and government inspections, requirements, and more.

So why are the largest investors attracted to them? For one factor, the rent ratios are usually higher and, therefore, the potential Net Operating Income (NOI) and the cash-on-cash return can be higher. In the multifamily world, rent ratios are represented as the GRM (gross rent multiplier): The property price divided by the annual gross income, the lower the better.

There is also generally an efficiency of scale for maintenance and other expenses, and with good management, expenses are easier and more efficient to control. The advantage of scale best manifests itself when the monthly income is great enough to afford full-time, on-site management and maintenance. For non-high end metro areas this is usually about a $2.5M property or higher. With a typical 60-70% loan this is a stiff barrier to entry that may best be solved by partnering with other experienced investors.

And then there is the issue of the loan. In these post crash years, getting a government- backed loan such as from Fannie Mae is virtually impossible in today’s tight money market without current or significant past multifamily ownership experience. Regional banks and private lenders may sometimes provide loans at the cost of higher rates, shorter terms and amortization, and lower LTVs. For investors who are “tapped out” at 10 loans for 1-4 residential properties and can’t get more loans because of Fannie Mae loan quantity restrictions, a multifamily purchase has the advantage of not being forbidden just because you have 10 or more loans on 1-4s.

For an investor who would like to own a multifamily product, but who does not have the experience or local residency that the lender wants, one can work with a syndicator who can connect you with an investor or investors who can qualify for the loan, reduce your risk and exposure, provide the expertise needed to evaluate a deal, and to manage the property for maximum return on investment.

Many investors are drawn to small multifamily “Tweeners” (5-50 units) because it is a lower entry price. However, the problems include:

  • Loans are generally more difficult to obtain
  • Loan terms are not as good
  • Price per unit is higher
  • Banks prefer local borrowers
  • Properties are generally older
  • The economics cannot justify full-time, on site management and maintenance

And, it is usually difficult to manage effectively. Stories of offsite management showing up after a week or two at small multifams only to discover that drug dealers have run off decent tenants are common stories. Also, a single vacancy in a small mulitfam has a greater percentage impact on cash flow than in a larger investment. Again, one valuable way to mitigate these factors is to purchase a larger product with partners through syndication.

Due diligence is much more critical than with single-family rentals but there are also more resources available to get a lot of the general information because there are a lot of marketing firms that support the REIT and institutional investors who mostly purchase large multifamily and commercial properties.

A multifamily seller’s proforma (projections of the potential income and expenses in a perfect world) should for the most part be disregarded. True expenses are seldom less than 50-60% of gross income, otherwise be suspect. And study local demographics carefully. Visit the prospective property unannounced, walk it, and then sit in your vehicle to observe who is living on and visiting the property. Take note of the time of day and night. Yes, evening observations are the most enlightening. Go to the local schools, parks, and retail stores and see whom your prospective tenants and demographics are.

Do you feel at risk parked so near your potential property, or would you feel comfortable joining the tenants for a barbeque? Please do not rely on website data about the neighborhood. There are a lot of variances in a one-mile radius. Lastly, my post data analysis is always punctuated with the satellite view question: Would I be comfortable with my daughter living here?

In addition to syndications an alternate way to have many of the benefits of a multifam with less money down, an achievable loan, and much less risk is with a portfolio of single-family properties. Throughout my investment career, I have always also owned many 1-4s.

 This approach spreads your risks by building a “mutual fund” of properties in various locations. In addition to having a variation of rent, price appreciations, and occupancies that tend to converge on the averages for a region, single-family homes are more liquid, have less expenses, are less complex to manage, and tend to appreciate more because they are based on owner occupant demand rather than on income. In the next decade, most economists project a higher upward trend in occupancies and rent for single-family homes and for multifams.

The most important ingredient is to select that right team of professional resources. How much experience and knowledge do they have in the region and product of interest? Are they invested in the products themselves? If you are considering partnering to own multifamily properties, do they have experience with syndications and access to experienced and qualified investors, lenders and property management?

When you invest in real estate, don’t start with the “deal.” An honest assessment of the amount you have available to invest, your risk tolerance, your experience, and your long-term goals, along with the right professional team, will lead you to the right deal or deals: A multifamily investment or a portfolio of cash-flowing single-family properties? I choose both.

Tom Wilson is a 37-year real estate veteran who has executed over $100M and 2000 units of real estate investments. Wilson is also a weekly host of the Real Estate 360 Radio program on KDOW 1220 am every Wednesday at 2 pm. Listen to his podcasts on iTunes or his website: www.tomwilsonproperties.com

 

Five Steps to Raising Private Capital

By Jillian Ivey Sidoti, Esq.

Many people assume that in order to raise capital all they have to do is go out and find potential investors to whom they may pitch their idea. However, the laws regulating the sale of any security are such that operating in such a matter would be illegal.

Too often, people learn fact and decide that their aspirations are out of their reach… or worse, raise the capital illegally, putting themselves at risk to suffer very serious consequences should the SEC catch on to what they are up to. Truth is, with the appropriate planning and effort, anyone can raise the capital necessary to execute their business plan.

At a very abstract level, there are five steps to raising private capital, and they are as follows:

1. Develop Your Business Plan: One cannot very well start a company without a plan! At the very least, you want to put together bullet points of the “who,” “what,” when,” “where,” “why,” and “how” you will put your company to work and start generating income. From there, you can flesh out the details.

2. Set Up Your Company: Your next step is to decide what type of entity is appropriate for your business plan, and in which state. A corporation, limited liability company, and limited partnership each have their respective positives and negatives. The particulars of your situation will dictate what best fits your company.

3. Decide What To Offer Investors: If people are going to invest money in your company, one of the most important questions they will have is “what do I get out of this?” First and foremost, you have to analyze your business plan to determine your baseline of what you can afford to offer investors in addition to what the market dictates in your particular industry. You must then determine what you are comfortable offering investors and land somewhere between those points. This could be a percentage return on their capital investment, simply just a share of profits the company earns, or a combination thereof.

4. Put Your Offering Documents Together: Not only may you be required by law to present offering documents (called a “Private Placement Memorandum”) to your prospective investors before taking their money in order to ensure you have made all the appropriate disclosures, but such documents will provide all the information they need to decide to make the investment. The private placement memorandum encompasses the three “D’s” – disclaimers, disclosures, and details.

5. Find Investors: For many entrepreneurs, finding investors is the most intimidating step in the process. However, if you organize and execute your capital raising efforts in the correct manner, then you will be well on your way to meeting your capital goals.

Yes, this is a very boiled down step-by-step. Yes, you will need the advice of a professional to help you along the way. However, you need to realize that if you do give all the above steps the appropriate amount of attention, there is no reason that you cannot raise the capital you need.

Jillian Ivey Sidoti is a partner in Trowbridge, Taylor & Sidoti, a boutique securities law firm with locations in California and Florida. Jillian may be reached for consultation at 323-799-1342 or at: jillian@jilliansidoti.com

 

Meet the Future of Private Money

By Tim Houghten

In the words of the great Bob Dylan: the times “they are a-changin,” for Sean Morsi and Ajay Mehra — CEO and CFO of MOR Financial, respectively — the notion of shaking things up has been woven into their company’s genetic code. It may come as a surprise to hear that an asset- based lender, known for utilizing cutting-edge marketing and high-tech analytics, assert for a traditional approach in customer service and building lifelong client partnerships.

With an average yield returning 10.5% for their lenders, Morsi and Mehra have compiled more than $70 million in committed capital from their investors, with roughly $35 million in their active in-house servicing portfolio. Built in a relatively short period of time with a focus in Southern California, where both were raised, the two have also set their sites on penetrating the Florida, Nevada and Arizona markets.

Ajay came on board as a partner in MOR Financial in 2009, with both partners coming from established lending backgrounds before re-shifting focus after the market crash. “Since then, we’ve grown into a premier private lender here in Southern California, specifically around Los Angeles County,” notes Morsi.

As the new kids on the block, the business moguls captured a very large percentage of the market in a very short span of time. A large percentage of their competition has been in the private money lending sector for 20 years or more. Mehra added that the industry had always been something of an “intuitive-based” one, which both men felt kept it from growing like it could. “We wanted to deliver structure,” said Mehra. “We wanted to shift the industry from the whimsicality it had.”

The demographic for private money investors today, according to the executives includes much of the younger mindset than was seen 10 or 15 years ago. The change in development is spawned mainly from disappointed and lack of confidence with the stock market and the desire for more tangible investments.

“Thanks to the stock market crash, several savvy financiers have a sour taste in their mouths, yet are still hungry for yield,” said Mehra. “We are seeing people, who would otherwise have investment portfolios centered around Wall Street now, deviating into real estate.” Today, instead of owning Microsoft as a growth stock, youthful investors would rather invest in assets they can hedge. The emerging generation with access to capital doesn’t have faith in the stock’s paper and would rather place funds into something concrete. At the end of the day, a hard asset like real property is never worth zero. They can hang their hat on that!

Another way the industry looks different today is the high-creditworthiness of the borrowers. For the most part, the “flippers” and other borrowers MOR Financial scopes have great credit. In the past, hard money lending was often seen as the realm of the hard-luck borrower. Mehra suspects, “Maybe 20 years ago, that was the case, but a lot has changed. Banking guidelines being as stringent as they are have really opened things up for private money lending. Where else are people supposed to go to get the access to leverage?”

Morsi adds, “Today’s investors are strong and hungry.” Since MOR comes from the customary lending side, the company strives to maintain and deliver on customer service. And deliver they did. MOR Financial has set themselves apart by taking the insight of due diligence and recalibrating it in a way to center on becoming trusted advocates for their borrowers.

“We always try to play the devil’s advocate for their benefit,” said Mehra. “Not to kill the deal, but to make sure our affiliates aren’t walking into a black hole.

As the company’s directors, Sean and Ajay look at every deal as though it was their own so they can provide bona fide feedback to their clientele.

With repeat borrowers, MOR has rapport in the industry. The company aims to educate everyone from their able borrowers to individuals just breaking in — and they work with a lot of beginners.”

“We’ve always felt that the most durable relationships are built through education,” mentioned Mehra. Since MOR has considerable professional relationships with their borrowers, it brings perhaps an unexpected benefit: fewer defaults.

Mehra and Morsi both feel strongly on not being viewed as a corporation, but as a part of a business network working conjunctively to meet each other’s needs. Out of 360 plus transactions that they’ve written, only two notices of default have occurred.

One of MOR Financial’s core principals centers on the belief of education and the conventional techniques of equity partnership arrangement, mainly structured for borrowers who are just starting out.

“You can literally walk into a deal with no cash out of your pocket,” said Morsi. “We’ll provide the investors willing to bring capital to close and supply the rehab funds. All you need to have is a great asset and an ability to manage a property. The financing side we’ll take care of.”

The program has allowed many of MOR Financial’s clients to evolve. With their eminent skill and market presence, they’ve won over the masses. Clients effortlessly transform from wholesaling a deal to doing their first flip. MOR Financial is giving beginners an opportunity that cannot be captured elsewhere.

For information about MOR Financial visit wwwMORFinancial.com

 

Vacant Properties = Motivated Sellers!

By Linda Pliagas

Every profession has tools of the trade, products which help us get ahead in our industry. Thanks to innovative technologies, investors now also have a fantastic tool to zero in on neglected properties. Find Motivated Sellers is a new product that can help investors locate vacant homes around the country or right in their own backyard. 

Created by entrepreneurial investor Chris Richter, who partnered with veteran industry leader Kent Clothier, the software is helping many sophisticated buyers find their deals. In fact a loyal reader in San Francisco, Jimmy Tu, a master wholesaler and rehabber, was able to land three vacant property deals in less than three months utilizing the Find Motivated Sellers system.

I recently had the pleasure of interviewing Chris and Kent so they could explain this exciting new technology and how it can benefit more of our readers.

Linda: Tell us a bit about the Find Motivated Sellers Now system. How did it come about?

Kent: Find Motivated Sellers Now is the product of necessity and data insight. In 2008, co–founder and creator Chris Richter embarked on a three month research mission to uncover insights in the property data that would act as an early indicator that a property had a high likelihood of being sold at discount. One glaring indicator associated with many of the deeply discounted sales, as well as those that sold quickly, was that they were vacant.

Linda: What are some of the benefits to using Find Motivated Sellers Now?

Chris: The benefits are time and money. The platform is designed to allow any user, regardless of experience, to log in and, quickly and easily, create and distribute marketing to a highly targeted list. It’s quick and easy, with just a few clicks of a button. Due to the list being targeted to an audience with a far higher likelihood of turning into a seller, the ROI is increased dramatically.

Linda: Tell us about the partnership you formed for this new marketing tool.

Chris: I reached out to Kent Clothier in November of last year and demonstrated how I was using this method to find highly motivated sellers, off market. Despite being in a market with one of the tightest inventories in the country, I was able to effortlessly locate phenomenal deals.

Linda: I like that a mailing campaign can be executed directly from the system, which makes marketing easy to do. Can you please discuss that further?

Kent: The system is designed to be dropdead simple to use, even for folks who are not tech savvy. Users can simply log in, click their state, county, or city, then run a search based on their criteria. Investors can zero in on vacant homes, vacant commercial, high-equity properties, etc.

From there, users can export to excel or simply mail directly from within the system to their list. It is the built in simplicity and functionality that really makes it such a powerful tool.

Linda: Why are vacant property owners a great audience to zero in on?

Chris: Vacancy is what we call a leading indicator of distress. What the numbers tell us is that although not all vacant properties have distressed owners, most distressed home sales are vacant. What makes it the most profitable among lists for direct mail is the fact that the property is generally vacant before it is an REO, before it is probate, before it is listed, before you see a lien, etc. The vacancy is typically the first warning sign that someone may need to sell soon. Previously, this list wasn’t publicly available.

Linda: Why do good homes end up being neglected and abandoned?

Kent: Homes become vacant for many reasons, not all of these reasons would make someone want to sell. Some common themes we see in vacant homes where people do want to sell include: pre–probate, family member moved to nursing home, eviction, seller moved out of area, rental vacancy, death with no probate, and even an occasional jail sentence.

Linda: What other insight can you add that investors can learn from?

Kent: Don’t be afraid to mail more and do extra marketing, it will make your phone ring.

Linda: Does your system have sample letters that can be used? Does it also provide phone numbers?

Chris: Yes, the system includes letters for both investors and brokers that have been tested repeatedly and proven to work well. Again, this is a push-button system, we have done all the heavy lifting for you. Once a user has set up their account, they are literally a couple minutes, and a few clicks away, from having proven copy in the mail and out the door. We do not provide phone numbers, we want them to call us.

Linda: How can we learn more?

Chris: Readers can see our demonstration on www.FreeVideoFromKent.com Thanks and let us know how it goes.

 

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NEWSFLASH: The Record Has Been Broken…

In 2017, CIX.com broke records for connecting investors with funding. We’re talking nearly $3 BILLION in loans facilitated monthly!

What does that mean for you? In 2018, we want to help fund twice as many deals! We’ve already added more lenders to service your needs and even more are coming on board in the weeks ahead. That means more lenders compete to fund your investment properties – residential and commercial for your short or longer term capital needs.

In the last two months alone, our lending partners brought hundreds of millions more capital to the table; they’ve loosened guidelines and are eager to become your funding partner in 2018.

Simply put, this means more options and better terms for your next investment property. January’s numbers are going to be epic. Why not get your share?

Get connected in less than two minutes – and the lenders that will immediately contact you are vetted, verified, and 100% secure!

Submit your application and start 2018 with a locked and loaded funding option for your next investment!

Putting the REAL in real estate,
Connected Investors and Realty411