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AM I TOO YOUNG TO START INVESTING IN REAL ESTATE?

By Glenn Mananeng

Real estate investing is a journey. The earlier you muster up the guts to take that first step, the sooner you’ll reach your financial goals. Beginners in real estate usually start their careers around their 30s or 40s. It may be due to fear, inadequate knowledge about the field, or the lack of capital to start investing. In real estate, there are no age limit nor requirements. Anyone with the right mindset can invest with as little as a few thousand dollars in their pocket. Unique Wealth Education wants to pave the way for young real estate investors who want to start in the business and leave their mark on the real estate world.

How old do you have to be in order to start investing?

If you skip the cartoons and drop your phone down to skip posting your social media drama and think about investing instead, then good for you! That’s one way of being responsible and your first step to being financially independent. Take note that from a legal standpoint, you need to be at least 18 to sign legal documents. There is still hope for ones younger than 18 though cause a guardian who’s over 18 can legally sign for you. However, you won’t technically own the properties you’ve bought until you turn 18.

Perhaps the best time to start investing in real estate would be during your ripe years in the 20s. If you’re serious enough, at this age you must have mustered up enough courage and researched about the basics of real estate. Start early to earn early.

Common excuses of young investors

“I won’t be taken seriously”

This is a pretty legitimate fear but one that can definitely be worked on. Many businesses are constantly on the lookout for youthful individuals since they are generally considered strong assets. There’s a term in the business commonly known as “analysis paralysis”. Feelings of self-doubt can start creeping in right before you even make the leap of faith and causes you to get paralyzed in fear.

One way to combat this is to put in the right time and effort to gain experience and confidence so you can plow through any negative emotions you might have lingering at the back of your head. Don’t stop midway, push forward and it will bring you much-wanted results! Believe it or not, your hard work will serve as your resumé.

“I don’t have the cash”

Another common excuse especially for those currently working or fresh out of college. The reasoning behind this is that most of them are still carrying student debt or loans with no well-established credit history yet. It is true that credit score can be a factor in some real estate investments. However, you don’t even need that good of a score to start investing. Remember, the reason why you thought about investing in the first place is to make yourself financially stable, the better credit score will just be a by-product. Use this as a means to pay off your student loans. Don’t let this excuse rob you of your great potential!

“I’m too young for this”

It can be difficult when you’re young since investing isn’t something that we’ve been taught very deeply at school. You think that most of these young investors were already wealthy to begin with. However, the most recognized investors started from the bottom and they clawed their way up until they finally gained success and became financially stable throughout the years. Just to remind you again, the sooner you do it, the more opportunities you have to make money.

Benefits of starting young in real estate investing

You have more free time

Real estate branches out to a lot of aspects that may be overwhelming for some. It requires a lot of knowledge and experience to know where to invest and learn about different market trends. By starting early, you increase the time frame of you learning more about the important factors in the industry which can benefit you with making the right choices on your hard-earned money.

You get to have tax benefits

A common misconception about earning well in real estate is that the bigger part of your income goes into taxes. This is wrong though as real estate is actually a very wise choice that can help you save taxes. At a young age, you can claim tax deductions in case you have applied for loans. Tax incentives are even offered on repayment for some particular transactions.

You have the marketing advantage

This is where spending most of your younger years on social media pays off. Tech-savvy youngsters have the advantage as they can use a wide variety of online platforms to market their real estate business. No matter what age they are, people are more keen to use online sources in their daily lives – especially when they’re looking to rent, buy, or sell a house.

You can retire early

Investing at a young age allows you to reap its benefits as soon as possible. This gives you the option to tick the boxes off from your bucket list. It normally takes at least a decade (or even less) to achieve what you want when you retire. Imagine starting in your 30s only to retire around the age of 40. You have more time to let yourself grow in the real estate business, and that my friend is a ticket to the comfortable retirement everyone is dreaming of.

Paving the way for young investors

It’s admirable to see you strapped-in and ready to take in your first real estate investment! We might want to back up a bit and think about how we’re going to do this – and we need to do this right. Let’s look at a few pointers before you take off.

Research, research, and more research

Be aggressive with your education. Aside from investing in real estate properties, spend your time and effort in books on real estate investing. For those that aren’t too keen on reading any sort of literature; podcasts, webinars, blogs, and even audiobooks are readily available for a fair price (some are even offered for free!). Make due diligence in your research because if you do, this will take you a long way.

Start small and build yourself up. Although there are a lot of real estate strategies out there, read on what would be the best fit for you. Investing in rental properties can be a good start for young investors. Learn to weigh out the pros and cons of each investment strategy which now brings us to our next point.

Risk management

A good investor knows that with every strategy that they plan to take on, risks come with it. It’s a matter of how you approach the risk and how you manage it. Every individual has their own take in cases of risks or conflict. Luckily for young investors, you will be able to handle it in a different manner compared to your older age bracket. Young ones have a fresh and appealing approach to the business. The enthusiasm and motivation levels are quite high which helps mitigate and manage any risks that come your way.

Remember, no matter how seasoned and experienced an investor is, they definitely encountered risks along the way. Managing these risks are what made these pros hardened and successful in the real estate industry. Understanding what is the worst case scenario in each investment, potential turbulence, and how to handle it if it occurs is key to mitigating risk and achieving success.

Have a mentor

You might be thinking that you don’t know anyone who might have the same interest in the real estate business as you do. People you know are probably out there partying, slaving their time playing video games, or acting out there bachelor/bachelorette fantasies which means you don’t have the helpful and motivating support from your peers.

Use your tools to your advantage. Join local real estate investing groups on Facebook or join similar conversations in twitter and actively participate in them. Your network should include a wide range of real estate investors, contractors, realtors, wholesalers, and property managers. Pick up the phone and don’t be afraid to ask for referrals.

A mentor who deals with “A-Z real deal training” is your best bet. Unique Wealth Education offers such a training program and many more which are facilitated by real estate professionals who work with you from start to finish on locating deals to selling them. Your net worth is directly proportional to your network. Start it right by having the right mentor.

If you feel like throwing in the towel, hold up a bit and let us help you. Try to do a little bit of trial and error and don’t be afraid as we’re here to guide you so you don’t commit irreparable mistakes in the first place. This allows yourself to keep things at your own pace and eventually succeed. If you want to get started but you still have doubts, Unique Wealth Education is here to help you out. Feel free to join our monthly meetup every first Thursday of each month where investors young and old share experiences and make business ventures with one another. Contact us at (734) 224-5454 to learn more.

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What Is A Real Estate Syndication?

By Fuquan Bilal

Real estate syndications are a term that is trending again. What are they?

Among the real estate investment opportunities on the landscape today are real estate syndications. How do they work? What are the advantages of syndicated real estate deals? How are they different from other investment strategies, and who are they for?

Real Estate Syndications 101

Syndications is basically another word for partnerships.

A syndication is an industry or technical term for when investors partner together to acquire, improve, manage and dispose of real estate assets together.

The one main difference between syndications and other types of partnerships is that there is generally one active partner to the deal. Also known as the ‘sponsor’. The sponsor is the one with the experience, connections, teams and systems to handle everything. The other partners bring their capital. Everyone shares in the rewards.

Syndications can be large or small, have few or many partners, and can partner on everything from pools of mortgage notes to value add multifamily apartment deals to ground up new construction projects.

Who Are Real Estate Syndications For?

Real estate syndications are typically reserved for accredited investors. Meaning those with higher levels of income or solid net worth.

This can include highly paid professionals like doctors, lawyers and tech workers. As well as celebrities, athletes, lottery winners and heirs to sizable inheritances. Entrepreneurs, family offices and real estate or private equity funds also often participate.

How Are Syndications Different?

The main differentiator of a syndication is that everything is done for you and you tend to get a split of all the profits, in contrast to investments where you may just receive a yield.

For example, a syndication for mortgage notes or apartment buildings may pay out cash flow dividends as income comes in, and then distribute a share of the gains on exit. So, you may get a percentage of the rents every quarter, and then a slice of the pie when resold. There are many combinations possible. For example a 90/10 split would mean the sponsor gets 10% of the profits and the other partners split the first 90%.

If you are an accredited investor, syndications can be highly attractive in providing a more direct investment and larger share of profits than simple investing in a fund or stock, and yet don’t require the time and headaches and risk of flipping houses or managing your own rentals or note workouts.
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.

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BUILDING WEALTH IN REAL ESTATE: HOW LONG DOES IT TAKE?

By Glenn Mananeng

This is a question on the mind of investors. There is no definite answer for this. This topic is always up to debate no matter how you look at it, as wealth is measured differently by every individual. Here are a few factors you need to know when building wealth – allow us here at Unique Wealth Education to teach you some important pointers to consider:

#1 Wholesaling

This is the easiest point of entry for the majority of the investors, as it requires the least amount of capital. You find a seller who wants to put their property for sale and find a buyer for that property on “as is” condition without the fixing part to try and get the market value higher. After the property has been sold, you’ll get a cut on the sale. Basically you are the intermediary that builds a buyers list to locate undervalued properties using a multi-pronged approach. This relies heavily on how good and how broad your real estate network is.

#2 Fix and flip

You don’t have to be an avid real estate investor to know what fix and flip is. Anyone who has cable and passed by HGTV has a basic idea of what it is. You buy a house below the average market value, renovate it, sell them for a profit! This is one of the most widely used real estate investment strategies used around the county.

Keys to fix and flip investing success:

· Preparing yourself by understanding how to locate undermarket valued properties in the right locations
· Understand values (make sure you are comparing apples to apples and going with the highest comp when doing our due diligence as a conservative approach)
· Aligning yourself with multiple capable and competitively priced renovation contractors to not only give you a bid prior to purchasing the home, but also to deliver as agreed on
· Understanding how far to go with finishes and layout changes to keep within the budget and comps in the area
· Stay away from potential losers such as foundation issues and bad layouts
· Having a sales strategy in place prior to the purchase that accounts for commissions, closing costs, holding costs, etc…
Contrary to “reality” real estate shows, getting rich doesn’t happen overnight. The longer it takes to flip the property, the more expenses you would incur for maintaining it while waiting for a buyer. Working with getting coached by or partnering with a seasoned investor is a huge advantage, as you learn best practices and pitfalls to avoid, which only years of experience can provide.

#3 Rentals

Mortgage Paydown

Let’s use a rental property as an example. In a normal scenario, you have a tenant who is essentially paying the rent in exchange for living privileges. If you bought the rental property with a mortgage, your loan will eventually cancel itself out over time. Why? The rent you receive from your tenant is basically used to pay the loan, which is increasing your equity in the property. The money left over is your cash flow divided by the amount you put down to come up with your CAP rate. This is a GREAT way to build long term wealth.

Cash Flow

We can all agree that this is very important. For those who are new in the game, cash flow is basically the income you get from your investment property (usually rental properties). This is a major factor in generating a high return for your investments and savings. Once you increase cash flow by accumulating properties, this allows you to plan your income and determine the course of future investments.

Taxes

If taken into account optimistically, you’ll see a lot of tax benefits when it comes to real estate investments. Consult your CPA to see how you can depreciate properties that you are holding onto for rental income and also discuss with them acceleration methods used to front load depreciation to give you more capital to buy more and keep building your portfolio.

The answer to how long it’s going to take, as you might’ve guessed already, is up to you. Your real estate skillset, determination, experience, and risk management are major players in this ballgame. it’s all about how smart you invest in the industry. If you make due diligence and play your cards right, you’ll one day realize that you’ve gained a considerable amount of wealth already. Unique Wealth Education can help you in your real estate career in helping you avoid common mistakes & pitfalls, is something that we take to heart very seriously. Contact us at(734) 224-5454 or email us at info@uniquewealtheducation.comto learn more.

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

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

 

 

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How To Get Back Your Passion For Real Estate

By Fuquan Bilal

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Want to feel that real passion for real estate investing again?

Whether you got stuck spinning your wheels before you really got started, have taken an extended break or are just going through the motions now that the money is coming in too easily, it’s important to keep your passion on high.

If you’re not passionate about what you are doing, people will notice, and it won’t be long before things start to slide. You can lose your passion from discouragement or just because you’ve automated everything and it’s become dull.

Whether you crave getting that mojo back or you just want to be sure you are maintaining it, try these strategies…

Remember Your Why

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Why were you investing in real estate or what excited you about it in the first place?

Maybe it was for your lifestyle or for your family, or to help other people. Chances are that you haven’t crossed the finish line yet. You may have run into challenges, or it may have become very transactional. Yet, the odds are that you haven’t made enough money to future proof your family wealth for the next few generations yet. You probably haven’t run out of people to help.

Remember your why. Realize there is still a lot to do. Get moving on that.

Set Bigger Goals

You can make a million dollars a month in real estate and get bored. There is only so much shopping and golf you can do. Set bigger goals.

You might be the biggest investor in your town, in your niche or even Manhattan. There is still more that can be achieved.

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It doesn’t have to be about the money. It’s more about knowing you’ve really pushed the limits as far as they can go.

Billion dollar companies are almost becoming common. If a billion is too small for you, then think globally. Can you build a portfolio of income properties in every state or country or major city? Can you diversify your brand from just flipping houses to new construction or something else?

You don’t have to do it all yourself. Ask who you can connect with, align with or hire to get you there.

Hang Out With Amazing People

It’s important to spend time with your peers and passing on your learnings to help others. Firstly though, be sure to spend a third of your time with inspiring and uplifting people who will challenge you to level up your game. Do that and everything else on this list should fall into place. And if you can’t do so in person for some reason, engage on social media, tune into a great podcast every week, and find ways to do it virtually.

Do Something New

Constantly doing new things is important. It has countless mental and physical benefits. It will also fuel your passion in a variety of ways.

Maybe you’ll travel and have your eyes opened to just how much real estate there is out there. Or you’ll realize how much you really love home.

Find new ways to look at real estate. Take the plunge into new asset classes and strategies. You may find something you are even more passionate about once you taste it.

Go take on new activities and meet new people. Treat yourself to new adventures. Otherwise what’s the point of it all?

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Ask Who You Can Help

We tend to lose our passion when we focus too much on ourselves. Instead, ask who you can help. Get out there and ask everyone how you can help them in regards to real estate.

Who can you help find a home? Sell a home? Generate more income from real estate? Diversify their portfolio? Raise money?

Challenge yourself to deliver. Push your limits. You may find it incredibly rewarding and a new fuel for your passion.

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.

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Allowing a Lender to Cross Collateralize Against Additional Property

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.

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Stop Dissin’ the Housing Market—Set it Free!

By Christopher Thornberg, PhD

Editors Note: This posting was originally published on the Opinion Page of the Los Angeles Daily News.

High housing costs continue to be at the center of policy debates in Los Angeles—and across much of the state. This intensifying focus is warranted now more than ever given how the crisis has moved from simply eating up the disposable income of residents to slowing overall employment growth in coastal economies – something driven by a lack of available workers, which in turn is driven by the housing shortage.

Sadly, the many proffered solutions to the problem remain wildly off base and are not likely to accomplish much of anything.

Take the City of Los Angeles’s proposed linkage fee, a fee to be paid by developers of market-rate properties to fund more affordable housing – and something that has been endorsed by many prominent voices in the community in recent weeks. That support has been motivated in part by the results of a recent homeless count done in Los Angeles County, which suggested that there was a 20% increase in the County’s homeless population over the last year. This is a total red herring when it comes to addressing the lack of new housing supply.

The recent homeless census count indicates that the total number of homeless in Los Angeles County is 53,000—a minuscule fraction of the 10 million plus people who call the County home. Moreover, a clear majority of these folks are homeless not because of the high cost of housing but because of mental and/or substance abuse problems, serious issues that would leave them homeless regardless of the current market price of housing. These people desperately need help—but a different kind of help than the linkage fee would provide.

And the few who are helped represent the proverbial tip of the iceberg—for every family that receives support there are another thousand that continue to struggle as rising rents eat into their incomes. Conservatively, the County would need close to one-quarter of a million new units to catch up with current need.

The linkage fee and similar policy proposals being rolled out at the city and county level reveal a deeper problem: Many localities and policymakers simply believe that the free market is not willing or able to create an adequate supply of housing in the region so they pursue punitive measures to make up for these perceived inadequacies.

Such a claim is akin to chaining a mighty eagle to the ground and then accusing it of not being able to fly. The lack of housing in Los Angeles is not due to the market’s failure but rather to the actions and choices of the City’s citizenry and its policymakers who have systematically intervened over many years to slow new development.

Research conducted at UCLA (UCLA Dissertation, The Homeowner Revolution: Democracy, Land Use and the Los Angeles Slow-Growth Movement, 1965-1992, Morrow, Gregory D.) shows how the City has energetically downzoned over the years, shrinking housing capacity from 10 million people to just slightly over 4 million—roughly the same as the current population. Add to that sky high permitting costs imposed by the City, non-stop California Environmental Quality Act (CEQA) lawsuits, as documented by the lawyers at Holland and Knight (In the Name of the Environment: Litigation Abuse Under CEQA, Jennifer Hernandez, David Friedman, and Stephanie DeHerrera, August 2015), and other rules and taxes including inclusionary housing and prevailing wage requirements, and it becomes obvious why the market is responding so slowly to current price signals.

It is true that what does get built in this town tends to be for higher income households. But this is a natural outcome of the barriers to entry that afflict the system. When supply is artificially limited, what does get produced is going to be concentrated in the highest margin portions of the market. If supply were less restricted and fixed costs reduced, there would be a natural movement towards lower income families. Would costs ever go so low as to entice developers to build ‘affordable housing’ using the public regulatory world definition? Probably not. But in Los Angeles the overall lack of supply keeps middle income families in housing that would otherwise be available for lower income families.

The market should not be blamed for problems created by public policies that have constrained them. Addressing these critical policy issues is the place to start. A few small changes have occurred at the state level, but so far, Sacramento has looked more towards punishing local jurisdictions for not allowing housing, rather than attempting to deal with the true root causes. Everyone is treating the symptoms, not the disease.

Take for example inclusionary housing, the new buzz word in many communities. Past studies conducted by neutral researchers have shown that these policies have very little overall impact on housing affordability in a community. This is because the gains enjoyed by the lucky few families who receive inclusionary housing subsidies are offset by the higher cost of housing for the rest of the population. And ultimately such efforts are tiny compared to the scale of the problem. The $90 million raised per year would support less than 1000 new units. This is less than the annual increase in the housing shortage.

A few places with similar problems are starting to look at more realistic options. Oregon has started to move in the right direction with Oregon HB 2007, a proposal that goes to the next level—it seeks to prohibit local efforts and activities that restricted housing development in the first place. As the old ditty goes when you’re in deep the first thing to do is stop digging. But Oregon’s proposal is controversial, there are many loopholes, and even if it passes it will only prevent new restrictions from being put into place. Until California, Oregon and other development-unfriendly places roll back current market restrictions and fill in the hole, the housing crisis will only get worse.


Christopher Thornberg

Christopher Thornberg founded Beacon Economics LLC in 2006. Under his leadership the firm has become one of the most respected research organizations in California serving public and private sector clients across the United States. In 2015, Dr. Thornberg also became Director of the UC Riverside School of Business Center for Economic Forecasting and Development and an Adjunct Professor at the School.

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Are You Destined for Greatness?

By Sam Sadat

The most common nemesis of both new and seasoned real estate investors is inaction! Many use the excuse of no money as their number one reason for procrastination. In fact, the number one reason for failure in life is the FEAR OF ACTION. Many people are simply too afraid to try. Think of this, anyone who has never made a mistake has never tried anything new. STEP UP! Unless you try, you won’t make mistakes, and until make mistakes, you will never grow and prosper. Nothing great has ever been accomplished with contemplation alone.

The greatest source of unhappiness in life is unproductivity. Playing it safe in your comfort zone will bring you nothing but mediocrity. I know it’s scary to step into the unknown, but that’s where all your opportunities are. Make a commitment to explore and embrace the unknown is 2020 and I can guarantee that you will be more successful and a lot happier by 2021.

The mistake most people make is thinking that they can solve their problems with the same mind that created them. The only way to overcome your challenges in life is by changing your mind. You must learn new things and look at your problems from a different perspective. In other words, you need to tackle your difficulties with a new level of consciousness, which is the only way to produce sensible solutions.

To maintain your sanity and joy in life, accept life as it is and not as what you think it should be. Insisting that the world owes you a favor or people must change to accommodate your needs is a hallmark of folly, immaturity, and ignorance. Until you are happy with who you are and what you have, you will not soar to great heights. By acknowledging and taking responsibility for your conditions in life, you will remove a massive burden off your shoulders and pave the way for a bright future.

Learning to accept things as they are requires your trust in the process of life. Let events unfold as they may while you observe them with a sense of awe. Your job is to say yes to whatever life gives you, to celebrate happy times, and to learn from adversity. So, never regret yesterday, live for today, and hope for tomorrow. Here’s a good tip: never stop questioning, exploring, and growing. That’s all you need to enhance the quality of your life. Like a river, life flows……..so stay in the middle of the current to gain proper balance and perspective. All the action is in middle of the stream, not the riverbanks.

Knowledge may be power, but its application will bring you joy and prosperity. If you want to know whether you know a subject well, try to explain it to a child. If you can’t do that, then you don’t understand it well enough. Until you learn and assimilate a subject well, you’ll never be able to apply it successfully and until you can apply your knowledge, you will not achieve greatness.

Never fear to act, as life rewards the brave.

Best regards,
Sam Sadat


Sam Sadat

Over the past 28 years, Sam Sadat has been involved in more than 2,000 real estate transactions as a principal, partner, lender or broker. During this time, he’s helped thousands of aspiring investors learn the real estate business the right way and apply their knowledge confidently to prosper greatly. He started his own company, Aim Financial, which in a few short years, became a top producing brokerage firm in Los Angeles. He also started Global Financial Network, LLC which is an NMLS licensed private lending firm specializing in financing of “fix and flip” or “buy and hold” investment properties in Southern California. Also, he hosts his own radio show, The Free and Clear Hour, on KHOW in Denver, CO and created the VIP Mentorship Programs that are affordable, practical and powerful.

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Wife’s Life of a Real Estate Investor

By Rachell Reed

So, your husband wants to be a real estate investor?…. well, I understand.

True Story…

My husband Jimmy Reed decided he needed a change. We were not yet married but had been together a long time…a long time! I knew him well enough that when he needed a change, he would get one. If one didn’t come his way He would make his own way.  He’s a go-getter and he does not settle.  Low and behold an infomercial… a Real estate infomercial… “Looks easy enough”. The most famous words ever spoken by anyone whoever thought about real estate investing.

It did look easy I thought “sure why not” we can do this! Well, I soon learned that I didn’t have the temperament to talk to people.  Sometimes they can be quite nasty.  If they yelled at me over an offer I would yell back. That’s just not good business no matter how ya look at it…

Jimmy jumped all in.  Right up his alley so to speak. So his new part time career began. He went to a seminar. He was hooked!

It took a year for him to do his first deal.  A whole year.  Lesser men would’ve quit but not him. It took off from there. He started “buying” properties and flipping them. Back in the day flipping had nothing to do with rehabbing. It was contracting a property and selling it before you had to go to closing (buying it).  So where does my life come into play in all of this??…

The busier he got the busier I got. He couldn’t do all of it on his own. I was working in retail clothing. Remember, those days shopping actually meant going out and trying clothes on not just ordering online and having your clothes delivered by FedEx…

I needed a change too at this time.  I was tired of working that hard and seeing others benefit from all my hard work. So, Him needing help came at a good time for me.

So where did he need my help? Organization!  I’m a bit obsessive about being organized. It makes life so much easier. It definitely makes business a lot easier, especially if you are self-employed. I didn’t like the interaction with the sellers but I am very good with paperwork and getting organized.  Seeing what needs to be done and doing it.

These days I handle all of the paperwork.  The computer work. The accounting. Dealing with all the monies. From rent to invoices to mortgages… and everything in between.  What I do not handle are tenants because quite frankly tenants can be big babies and I gave up my babysitting job when I was a teenager!

Our business relationship works very well. We try not to step on each other toes but sometimes that does happen. We are very clear on whom does what and we try not to cross each other boundaries but it does happen ever so often. We gently remind the other that’s a no-no.  Ok that’s not always true…sometimes there’s a lot of very loud talking and then we calm down and act like adults and work it out. Things are much easier that way.  It’s been a lot of fun these 30 plus years. It’s a lot of hard work. It can be a lot of fun too. Real estate enabled us to do things we never would’ve been able to do.  We’ve traveled and traveled and traveled some more… we’ve been able to help others and give back which is a whole lotta fun. 

Real estate has been good to us. It will be good to you too as long as you understand it’s a part time job or even a full time career. It is not a get rich quick program but a real life hard working job that you need to work at to be successful. If you get to work with someone you love…even better.


 

Rachell Reed

Rachell Reed has been involved in many aspects of business, church ministry, design and motherhood.

She is a wife, mother of two, and is Self-employed with her husband Jimmy in their Real Estate companies which cover areas such as a Rental business, a Buy & Sell company, Real Estate Club, Real Estate Training Company, International real estate projects, and much more.

After 30 years of rehabbing Flips & Rentals, a lot of her creativity became more about taking old things and giving them new life, which birthed her refurbish & design company.

She has a love of all things outdoors… from hiking to scuba diving.

In her down time she likes to read and write. She also has a blog. Rachell has been involved in ministry for 20+ years, as a Speaker/Teacher and Leader of women’s ministries. She has written bible studies and encouragements.

Today you will find her working on her latest project, a book of daily devotionals. Her absolute passion is creating something beautiful from something ugly and that is why she loves sharing…    “My Beautifully Messy Life”.

 

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BRAG!…Be Rich And Generous with HUD Homes

By Larry Goins

BRAG is all about investing in real estate to Be Rich And Generous! In his new book author and BRAG radio show host Larry Goins breaks down how you do that by buying HUD homes at 50% discounts.

He has shared the stage with experts including; Suze Orman, Donald Trump, Robert Kiyosaki, and Tony Robbins. In the forward that New York Times bestselling author Michael Gerber wrote for Larry Goins’ book he likened his entrepreneurial genius to that of Michael Dell, Ray Kroc, and Bill Gates. Now, following the great success of ‘Getting Started in Real Estate Day Trading’ Larry has launched a new book – ‘HUD Homes Half Off’. Keep reading and we’ll tell you how Realty411 readers can get their hands on a FREE copy.

Who is Larry?

Larry Goins in a visionary, educator, and an active real estate investor. He has been in the industry for over 30 years. He has hands on experience on the frontlines of just about every facet of real estate; from commercial properties, to development, financing, and residential investment.

More importantly, Larry’s organization is one of the few which isn’t afraid to lead by its values, and to put principles and people before profits. The firm is active in giving, volunteering, launching new nonprofits, and empowering a new generation of social entrepreneurs. If this resonates with you, then you won’t want to miss the weekly BRAG radio show on WBT or iHeart Radio where you’ll hear more about using real estate to become rich and generous.

Today you’ll find Larry is perhaps best known as one of the biggest buyers of HUD homes in the Carolinas. Over the last three years his team has been active in at least 12 states, with students and apprentices flying in from as far away as Australia and Sweden.

‘Filthy Riches’

Goins coined the term “filthy riches” to apply to making great money from distressed properties In fact, he says his system can enable investors to make more money from dirt cheap homes than others make flipping higher end properties.

HUD homes are a big focus of this. Larry says “you can still make great money on HUD homes today,” and that “there are plenty of HUD homes for investors, at discounts.”

In his new book he shows how to make as many as 7 offers per minute, and reveals both the best time of day, and best days to make winning bids on HUD auctions. Yet, Larry says there are two things he doesn’t like in real estate; “renters and rehabs.” So how does he turn these deals into cash?

In an exclusive interview the author told Realty411 that there are options for both active and passive real estate investors. Those strategies may include ‘day trading’ real estate, acquiring notes, or private lending. You’ll want to check out more about this and the specific examples given at PrivateInvestorsOnly.com.

What’s Unique?

Larry was the first to admit “anyone can teach you how to invest in real estate, or to flip houses.” However, there are clearly some differences in this method and firm than others.

In his own words Goins describes where he sees the uniqueness as:

  1. Being approachable and accessible, always
  2. Doing what we teach
  3. A commitment to helping you achieve your definition of success

This company has an open invite to its offices near Charlotte, NC, which is certainly unique. Larry’s team is still investing daily and offers a variety of ways to participate in those deals. Though what is really cool is the attention to aiding investors in honing in on their why, and getting them setup to achieve it. For most investors the first why that comes to mind may be the money. Larry says it’s highly unlikely you’ll be laying on your death bed wishing you had done just one more flip. He says your only job security may be your ability to make money, but he is passionate about getting you on the fast track to get the money challenges out of the way, so then you can work on your passions and purpose. After all; what are you going to work on after you are at the level where you are making $10,000 a month or are wholesaling 10 deals a month. “What are you going to do with your blessings?” For some of his protégés it has been a mission to giveaway a million bibles, or to go build houses in Kenya.

 

Larry Goins certainly continues to be generous with his gifts. Some might prefer to keep these types of wealth building secrets to themselves. Not Larry. He publishes and broadcasts them. When it comes to his model for investing you’ll also find him investing in neighborhoods and offering seller financing in small town USA. Places where people have community values, where families are born and raised and want to raise their own families.

Get the Book

Whether you are looking for cash now, or cash flow for the long term you’ll enjoy checking out LarryGoins.com where you can grab a free copy of the book HUD Homes Half Off for yourself, or for someone you care about.