Fund That Flip Raises $20M Series B to Expand Offering for Local Real Estate Entrepreneurs

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Special News Submission

Rapidly-growing fintech company’s award-winning end-to-end investment platform empowers real estate entrepreneurs to create wealth and value in their communities

Fund That Flip, the New York City- and Cleveland, OH-based real estate-focused fintech platform, recently announced the first close of its $20 million Series B funding round. The financing was led by GPO Fund of New York, with participation from MassMutual Ventures and Tribeca Early Stage Partners. More than 50 Fund That Flip clients also participated in the capital raise via an AngelList syndicate led by proptech investor, Jonathan Wasserstrum.

Earlier investors included Edison Partners and SoundBoard Venture Fund. The investment will help further the expansion of the firm’s proprietary technology platform that provides investors access to scalable capital and passive investment opportunities. The raise will also accelerate the company’s national expansion, development of technological innovations for an underserved industry, and exploration of global opportunities.

“Real estate investors play an integral part of the economy in building homes, creating jobs, and growing businesses and communities,” said Matt Rodak, founder and CEO of Fund That Flip.

Matt Rodak, Fund That Flip

“Since our inception, we have been dedicated to solving the problem so many entrepreneurs face: access to capital and technology to grow their businesses. This round of funding accelerates our mission to deliver technology-first solutions that create even more value for the local entrepreneurs who are themselves creating value in their own communities.”

With an aging housing stock and 72 million millennials seeking to transition from apartment living to single-family homes, Fund That Flip is uniquely positioned to expand its technology and track record of enabling local real estate entrepreneurs to scale their businesses with reliable access to financial services and technology. The company plans to continue to broaden its platform into an end-to-end real estate investment operating system designed to support the information and capital needs of the local real estate entrepreneur.

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“With this raise, we plan to create even more innovative solutions for real estate entrepreneurs, bring them additional value through optimizing the real estate investing ecosystem with data and technology, and continue to provide unparalleled customer service to help real estate professionals drive their businesses forward. We’re thrilled to partner with GPO Fund because they have a proven model of helping companies disrupt analog markets through the creation of data-driven solutions and platforms,” Rodak said.

As part of the round, Jeff Stewart, partner and managing director at GPO Fund, will join the Fund That Flip board of directors. “I’m really excited by the way Fund That Flip is leveraging data and technology to empower a huge and underserved market. While they have grown tremendously fast over the past twelve months, we believe the opportunity in front of them is enormous,” said Stewart. “Fintech companies are transforming entire industries through vertically integrated technology solutions, and the team at Fund That Flip has an impressive track record of leading that innovation within the real estate space.”

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Fund That Flip is one of the fastest-growing private companies in the U.S., on pace to grow its revenue by 300% year-over-year and doubling its customer base since 2020. Their technology platform has facilitated over $1 billion in real estate investments, with 99.1% return of principal, and has achieved profitability since the close of their Series A in August 2019.

Raleigh Real Estate Developer Sentenced to Decade in Prison for Real Estate Ponzi Scheme and Firearm Possession Charges

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By Realty411 Editorial Staff

This week, a real estate investor in Raleigh, North Carolina, was sentenced to ten years in prison on charges of wire fraud, in violation of Title 18, United States Code, Section 1343, and Possession of a Firearm by a Felon, in violation of Title 18, United States Code, Section 922(g). 

According to a breaking-news press release from the Department of Justice, Joshua Matthew Houchins, 36, (the defendant) was also ordered to serve three years of supervised release and to pay restitution to victims in the total amount of $1,771,382.25.

Court documents and arguments made in court revealed that Houchins, the owner of various Raleigh real-estate development companies, carried out a Ponzi scheme upon numerous other local investors.  Additional charges were added for Houchins, who also possessed a rifle and several rounds of ammunition, after having been already convicted of a felony.

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Between 2014 and 2018, Houchins owned and operated Rossshire Development LLC, Greenstone Ventures LLC, and Modern South Development LLC, and used these entities to carry out a fraud upon his real estate development investors, according to the superseding indictment.

The court found that Houchins solicited investment monies by telling victims that their money would be “put to work” on a specific property, and further represented that the investments would be secured by deeds of trust filed with the county register of deeds.

Instead, not all of the investor funds were used on the property for which the investor was solicited. According to court documents, Houchins instead regularly used investor funds on other properties, or on personal expenses. 

Without the investors knowing so, the promissory notes were not secured by a deed of trust as they were promised.  To make matters even more convoluted, in some cases, Houchins did not even own the property that was part of the investment, and, as such, could not truthfully grant a deed of trust to the investor. 

The indictment alleges that after Houchins diverted investor money away from the property on which the funds were supposed to be spent, plus he failed to develop and sell the properties, as he represented he would.  Instead, he defaulted on the notes by failing to pay investors their promised returns. 

The investors had no recourse, as they were unable to foreclose upon the investment properties because Houchins failed to secure the promissory notes with a filed deed of trust, which resulting in losses to investors. 

Houchins specifically pled guilty to Count Nine, which alleged one instance of the above-described fraud.  As a part of the plea, Houchins agreed to make restitution to all victims for losses arising from the scheme and related schemes.

G. Norman Acker, III, Acting U.S. Attorney for the Eastern District of North Carolina made the sentencing announcement this week. The Federal Bureau of Investigation and the North Carolina Secretary of State investigated the case.  The Wake County Sheriff’s Office, Apex Police Department, and Sanford Police Department also provided assistance.  Assistant U.S. Attorney William M. Gilmore served as the prosecutor.

Related court documents and information can be found on the website of the U.S. District Court for the Eastern District of North Carolina or on PACER by searching for Case No. 5:20-CR-245-1D(2).

THE SAFETY LESSONS IN THIS STORY:

Always perform extensive background checks on all individuals who solicit funds from you for real estate investments. A simple background search would have raised flags immediately due to the defendant’s previous criminal record. Secondly, always confirm with county records that your investments are indeed secured by a deed of trust (aka “trust deed”) to enable recourse in case of a default or fraud.

International Real Estate Investors Renew their Interest in U.S. Properties

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By Stephanie Mojica

One of the unfortunate consequences of the COVID-19 pandemic has been significant restrictions on foreign travelers entering the United States, which has caused the number of foreign real estate investors to decline. However, this trend is slowly changing as the U.S. government lifts travel restrictions.

According to CNBC, the main sources of foreign real estate transactions within the United States are Europe, Brazil, India, and China. Because the U.S. government relaxed travel restrictions for vaccinated travelers from 33 countries, people can now enter the country to buy real estate for the first time in almost two years.

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Wealthy people overseas have booked numerous appointments with American realtors, especially in cities such as Los Angeles, New York, and Miami, according to CNBC.

In 2018, foreign nationals purchased $267 billion in U.S. real estate; in 2019, they spent $183 billion, according to the National Association of Realtors. Stymied by the unavailability of in-person showings, foreigners bought only $107 billion of U.S. real estate in 2021.

During the pandemic, American housing prices have skyrocketed while the supply has dwindled — especially in common investment hubs such as Miami and Palm Beach, according to CNBC. Areas such as the Manhattan borough of New York City saw a decline in prices and an increase in supply, but this is changing as the pandemic seems to be drawing to a close.

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However, this may not pose a major problem to foreign investors. According to brokers interviewed by CNBC, buyers from countries such as China tend to prefer new construction. On the other hand, the United States real estate market might not see as much money from the hands of Chinese nationals. The government of China has created major blockages in its efforts to stop the flight of capital from its country.

The good news is that plenty of other countries and regions of the world do not have such restrictions, which will likely aid the U.S. real estate market as people continue to recover from the pandemic. Buyers from the Middle East, Canada, and Mexico are showing increased interest in investing in properties in the United States.

The most recent data available, from before the pandemic, shows that foreign real estate investors tend to prefer the following areas:

1. Florida
2. California
3. Texas
4. Arizona
5. New Jersey
6. New York

This trend is expected to continue, especially in coastal cities, according to CNBC.

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Are You a Candidate for a NO-DOC Loan?

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By Stratton Equities

You might be a candidate for a NO-DOC loan, or No documentation mortgage loan, if you do not meet the strict Consumer Financial Protection Bureau’s (CFPB) mortgage loan conditions. This type of loan is a NON-QM loan and is designed for some rental property investors, borrowers that are self-employed, and those who do not meet conventional loan standards. private lenders can also fit self-employed borrowers into the QM space.

It is also an option for borrowers who have had challenges qualifying for a NO-DOC loan due to credit issues (such as bankruptcy, foreclosures, late payments, or other isolated credit issues) in the past or have an unconventional source of income.

Unlike the traditional income verification mandated for most loans, this type of mortgage loan allows you to be eligible based on alternative methods. NO-DOC loans create real estate investment opportunities for a wider array of people due to their more versatile qualification criteria.

A qualified mortgage loan is an “agency” mortgage-backed security. On the other hand, a No documentation mortgage loan is considered “non-agency” or “private-label”–is suitable for borrowers with exceptional circumstances or those whose incomes differ from month to month.

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Many individuals, including hospitality employees, self-employed business owners, and retirees have fluctuating earnings. This is where NO-DOC loans fill the void by offering dynamic underwriting measures for prudent borrowers with special income conditions.

A prevalent belief is that NO-DOC loans are “bad loans” in disguise, and therefore not recommended. The reality is that these kinds of loans have their own set of rules related to QM loans to ensure that private money lenders and borrowers are protected from a high-risk loan. The process of lending NO-DOC and NON-QM loans are very similar to that of QM loans, only with a different collection of documents during application.

What is the Difference between a QM and NON-QM Mortgage?

The biggest difference between a QM (Qualified mortgage) and NON-QM Mortgage, is that a QM Mortgage loan tends to be traditional government-backed loans and conventional loans.

Because a conventional loan (QM) is usually processed through a bank or traditional financial institution on an owner occupied property, a NON-QM with a private lender is the best solution for a real estate entrepreneur looking to purchase an investment property.

A NON-QM or NON-Qualified mortgage loan is typically portfolio loans for real estate investors that do not conform to the strict government or conventional mortgage guidelines.

Why Should Borrowers Choose NON-QM Loans on their Real Estate Investment?

Unlike conventional investment property loans that max out at 70% LTV, a NON-QM Mortgage Program maxes at 85% LTV and with no PMI with rates starting at 4.375%. This allows the borrower to put less money down on their purchase, typically loan amounts range between $100,000 and $5,000,000.

How can a Real Estate Investor Qualify for a NON-QM Loan?

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If you are a real estate investor that has an investment property and are looking for a quick turnaround without stringent guidelines, NON-QM loans may be better for you — NON-QM loans do not need to abide by these strict guidelines! Bottom line = This means that NON-QM lenders can provide faster service and approval to more types of real estate investment opportunities.

Private lenders who utilize QM loans must first qualify a mortgage borrower’s income, liabilities, and monthly debt payments to determine whether the borrower can successfully pay back the loan in the future. To successfully qualify for a QM loan, real estate investors must fit the strict requirements set by the Consumer Financial Protection Bureau. This approval process requires borrowers to submit extensive documentation concerning their credit history, income, assets, and monthly debt payments, which usually takes well over a month to complete.

NON-QM and Private Money lenders understand that everyone’s situation is different and that to a traditional financial institution (like a bank) some borrowers may not present like a qualified candidate for a loan. This restriction could be due to the borrower’s employment status, income, credit history, and liquid asset requirements – however with a non-qualified mortgage, private lenders focus on; high credit score, investing experience, and liquid assets.

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As a result, NON-QM loans’ lax restrictions make them ideal for these types of real estate investors:

Self-Employed Investors: Especially in light of the unprecedented year, with COVID-19, we completely understand how difficult it is to find steady income. These type of loan programs are based on the value of the property itself or the borrower’s credit score and liquid assets.

Foreign Nationals: Government backed loans typically require proof of a US Social Security number or a W2 (which is a US tax form). Because NON-QM loans don’t have such requirements, they are ideal for foreign nationals who are in the States on a visa and are looking to invest.

NON-QM Loans: The Benefits For Borrowers

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The key benefit of NON-QM loans is that they offer opportunities to borrowers who would not otherwise meet the mortgage requirement. Non-Qualified Mortgage Loans provide much-needed loan financing for millions of hard-working Americans, including self-employed people and small-business owners who have worked hard to achieve success but are not eligible for QM loans.

Below are some of the benefits NON-QM loans for borrowers:

  • Looser, more versatile underwriting and guidelines
  • Ability to close faster than a QM loan
  • Ideal for 1-4 family investment properties
  • NO-DOC Mortgage Loan: Does not require income verification or tax returns
  • Self-employed people are top candidates for NON-QM loans

For specific borrowers with unique income sources or a high DTI, a NON-QM loan will enable them to obtain the money they need. NON-QM lenders also set standards for Non-Qualified Mortgage Loan borrowers and need to determine their potential to repay.

This type of mortgage loan is ideal for a wide variety of potential borrowers and can be used to buy commercial and investment assets. It is advisable to contact a certified loan officer to determine your qualification for a NON-QM loan, so they can review your profile to ascertain if this product is perfect for you.

Leaving Nothing to Chance with Your Property

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Experts share tips for drafting effective real estate succession plan

By Brad Nelson, Senior Real Estate Asset Manager, BOK Financial & Dan Bartell, president of Bartell and Company Real Estate Wealth Management

Ensuring those who inherit your real estate property don’t inherit a headache means having a plan in place.  A real estate succession plan is one piece of a bigger estate planning strategy, as it helps protect assets, maintains or increases cash-flow for future generations, and yields more effective and flexible tax strategies. A real estate succession plan plays an important part in helping you achieve your goals and investment objectives.

If someone passes away without a succession blueprint in place, things like what to do with inherited real estate are left to chance.

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Many times, family members who inherit real estate want to sell it before they even know what they have.  They typically don’t have the expertise to take on the role of a real estate professional who can help them evaluate the assets. Without the real estate expertise, the beneficiaries default into selling the assets without knowing the potential value of what they have inherited.  In many cases real estate property may be re-developed into something bigger or more valuable than the original zoning, all of which would/could make it a more favorable investment.  Having a plan in place can also help eliminate unnecessary and unexpected family conflict that arises from an under-qualified individual being left to manage the asset.

When it comes to the creation of a real estate succession plan, we suggest keeping a few things in mind.

Analyze family conditions

This analysis involves taking a thorough look at family dynamics and the individual relationships. It also takes into account stages of life of stakeholders, which can have an impact on the members’ needs and how the plan moves forward.  This step involves determining to whom, and how, the asset will be transferred, and who will be managing the real estate assets, and establishing goals and objectives.

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In each case it’s important to consider if those being named as inheritors or managers are qualified to manage this type of asset.  Do they have the appropriate licenses, maturity and experiences?  Could this cause additional contention or division amongst other family members? These are important questions to ask at this phase.

The ages of everyone involved also matters. Their season of life will affect the lens they use to view things like assets and income, so these are important considerations to keep in mind.  As an analogy, an aging parent who has a long history of successful real estate experience may want to keep their feet in the investment world without too much personal involvement, and without subjecting his/her children to undue risk.  However, the children who view growing market conditions in their area might want to push the envelope and do more within an established strategy.

The parent and the children are seeing the situation from different walks of life, with different goals and experiences. There are ways to help the two generations find common ground and share in appropriate risk and potential reward, rather than investing and developing simply because they can.

Have frank discussions

Having frank discussions is where people tend to struggle the most.  Sometimes people are reluctant, but it is important to have honest and open conversations with your estate attorney and wealth management advisor regarding the future of the family.  It’s best to be open about goals and obstacles that could arise down the road.

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Knee-jerk responses to dramatic life events can yield irrational investment behavior.  Making assumptions about an individual’s intrinsic motivation and perception of the situation can yield drastically negative results.  Asking the parties not only what they need out of the real estate, but also why having the real estate itself is meaningful, is sometimes difficult—but often cathartic. Asking this type of question smooths the course, maintains positive relationships, and often has a positive impact on the health of the investment.

Evaluate the asset’s performance

People don’t always take the time to look closely at a real estate asset and evaluate if it’s performing as well as it can and how it reacts to different circumstances.  Partnerwith a real estate professional to have an analytics report completed on the asset to understand past, present and future forecasting performance.

The performance analysis should include the following:

  • Investment objectives
  • Historical performance as compared to the market/submarket
  • Debt service coverage analysis
  • Asset basis
  • Cash on cash returns
  • Current condition of property
  • Internal rate of return
  • Cash flow
  • Cash reserve analysis

The analysis should focus on the strategies that can be implemented to maximize cash flow while adding value, as well determining if the asset is underutilized or underperforming.

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Understand the risk

It’s important to get a full understanding of the different elements that make up your real estate and how they might perform in the context of today’s world, while considering future uncertainties and risks.

In working to understand the risk, there are some additional key questions to consider:

  • Are there any environmental issues?
  • How is the asset currently titled?
  • Has an insurance valuation been performed to ensure adequate coverage?
  • Are the returns acceptable as it relates to the overall risk?

When it comes to a real estate succession plan, or an estate plan, it isn’t one and done.  Family dynamics, situations and values change, and will need to be re-visited along with those ongoing conversations.

Brandon Cobb Leads Investors To High Performing Recession Resistant Assets

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By Tim Houghten

Founder of The House Buyin’ Guys and HBG Capital, Brandon Cobb is leading investors to new forms of high performing and recession resistant assets this year.

We recently caught up with him to find out what he is investing in now, why, his take on the markets, and how to make great investment choices among uncertainty.

Expanding & Diversifying

We last caught up with Brandon in the midst of the pandemic in 2020. His company was thriving through COVID, with double digit growth, great spreads on deals and lots of volume in the single family space. It was their best year up until that point.

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Their building, rehabbing, flipping and wholesaling ventures in the Middle TN market were exploding, especially as many investors had chosen to sit on the sidelines afraid of the market. Single family inventory was plentiful, deeper discounts were widely available, competition was low, and on the flip side deals ended up selling for incredible profits as house prices boomed.

Of course, as others watched this success and wanted a piece of it, everyone wanted to jump back into the market at the same time and mimic it. Inventory disappeared and green investors have bid up home prices to wild highs in many parts of the country.

Brandon and his Middle Tennessee business are still doing very well there. Yet, he has also evolved his strategies and opened up new opportunities for investors.

Although deeply tragic on a personal level, the pandemic has been very good to many financially as well. Brandon has found many investors with plentiful capital looking to deploy it in the right assets, and especially in the real estate space.

The truth is that no one knows what the medium term holds for the economy, country and real estate. There are many wildcard factors that could be played. For now, it seems like the outlook remains incredibly strong through the end of the year. In the long run we all know that real estate has proven to be invaluable.

While it looks like the worst may be over, many analysts still see the potential for a recession in the near future as the impacts of recent policies add up and become evident.

After a long and insane run, analysts, including the Chief Investment Strategist of Bank Of America are predicting the global economy and public stock market are headed for at least a ‘flash recession’ in the second half of 2021. In fact, with the exception of a few categories like real estate, healthcare, and utilities which have covered up losses elsewhere, behind the scenes many commodities have fallen by over 20%. Even Peter Theil’s big tech company has reportedly been making big moves into tangible assets. Jeff Bezos has hit the news headlines for a few times for selling off his Amazon stock and bolstering his personal real estate portfolio instead.

All this together prompted Brandon to start giving investors access to more high quality and bigger deals in new places.

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He’s been flying around the country, and even the world to source and vet the best opportunities. Including a 384 unit, $42M apartment building with 97% occupancy that they helped close on in Daytona Beach, FL.

There Are Great Performing, Solid Deals Out There

Despite some misinformation and over exaggeration in the media, and the real competition and compressed returns in the single family market there are high performing assets to buy into. There are acquisition opportunities which have not only proven to thrive through COVID (and hence should through any other crises), but are ideally situated to survive and even see improved performance in a potential recession.

Brandon sees opportunities lying in the multifamily and commercial real estate space.

You have to look a little further for them, dig a little deeper, have better connections and a stronger network and do more investigation, but they are out there.

What Brandon Is Investing In Now

With the launch of HBG Capital, Brandon has created a new platform enabling other investors to participate in the deals he is engaging in, and to learn how he is doing it.

While he makes no guarantees of performance, and past performance isn’t always an indicator of future performance, he has produced stable double digit returns for investors throughout the years and at least up until now.

Today he is helping those with capital to invest, those who want to smooth out their returns and avoid the extreme volatility of the public stock market, and desire hard asset backed investments. As well as busy high income earners who simply know that they need to diversify their asset allocation into real estate, but don’t have the time to do it all themselves.

In the multifamily space HBG Capital is mainly focused on 100 unit plus acquisitions to benefit from all of the economies of scale that they offer.

On the commercial real estate front he says they are again looking at recession resistant properties like self-storage and assisted living complexes.

It’s All About The Due Diligence: Integrity & Equity

Success in real estate investing, and especially in times like these all comes down to the due diligence. Doing your homework and screening opportunities.

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In fact he says his firm only pursues 2% to 3% of deals they are presented with, after they’ve gone through their rigorous vetting process.

He says the two most important factors in this are:

1. The integrity of the person you are dealing with, and their capabilities
2. The amount of equity in the deal and current existing performance

Most deals fail to pass these factors.

Brandon has also just published a new book on the subject, which you can download for free on their website www.HBGcapital.net

‘Due Diligence: 100 Questions Passive Investors Should be Asking Before Investing’ is the book that outlines everything you should ask and know before making an investment, and how he and his firm are qualifying opportunities.

More Ways To Outperform

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Other ways Brandon and his teams have continued to outperform the market no matter what comes along include the following:

  • Keeping the construction in-house to combat asset management, inflation, and other external threats
  • Keeping the map open to invest where the best deals are
  • Adjusting your buying criteria with the market changes and outlook
  • Regularly review your past deals to see what’s working best and where you are leaving money on the table
  • Partner with world class operators with proven track records

Conclusion

Even despite pandemic lockdowns and restrictions real estate investors like Brandon Cobb have proven to survive and thrive. As the market continues to grow, those leading the way are continuously expanding and diversifying into new assets.

To make the best investments in this sector now, be sure you are doing your due diligence, and are aligning with great partners.

Equip yourself for this with Brandon’s new book for free, and check out HBG Capital’s process at HBGCapital.net.

Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.

Is Austin The Wrong Place to Invest In 2021?

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By Adiel Gorel

I get many calls from people interested in buying in various cities and want my opinion.
One of the popular markets right now is the Austin metro area (people get excited about the overall thriving of the local high-tech scene, Elon Musk publicly decamping to Austin, and others moving there from California). It is tempting to think of Austin as a good destination to buy in 2021. However, in my opinion, it is not! Austin, in fact, is a good city to be a SELLER in 2021. Austin prices have climbed rapidly in the past six years, while rents went up much more slowly. As a result, the rents are too low to cover all expenses. One expense in Austin (and in the state of Texas overall) is the very high property taxes. The property taxes in the Austin metro can get to almost 3% of the home value per year (depending on county and town). That is over 2.5 TIMES the property tax rate in Oklahoma (or California). Together, the high prices, relatively low rents (relative to the prices, that is), and the high property taxes, as well as high insurance costs, create an untenable cash flow.
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Here is a partial headline of a Business Insider article “Elon Musk and other tech powerhouses are flocking to Texas, pushing an already bonkers real-estate market to new heights”. Just logically, do you want to be a buyer in a market that is “already bonkers” and now is being pushed up even more? They have a name for such a market in the real estate world: “A strong Seller’s’ Market”.
Do you want to be the BUYER in that strong Sellers’ market? You will be the one paying “bonkers” price to the savvy sellers, fending off multiple offers higher than list price.
It is very tempting for a California resident to say, “What? I can buy a new home in Austin for “only” $320,000? That is so cheap! Yes, it is. “Cheap” relative to San Francisco prices. However, it is not cheap to buy as a sound rental home, and has bad cash flow. Austin is a place where many of our savvy investors are now SELLING, as the selling market is strong. It is not uncommon to see an investor selling one Austin home and buying 3 brand new homes in a 1031 tax-deferred exchange in Oklahoma City, or Tulsa, or Baton Rouge, or Central Florida. This move creates much more quality real estate owned, more 30-year fixed loans at todays’ super low rates, and brand-new properties with brand new roofs, ACs and all other parts of the homes.
Similar logic applies to the Dallas Ft Worth metro area (DFW), Houston, Phoenix, Las Vegas, Nashville, Denver, Salt Lake City, Boise, and others. I even get some investor talking about Seattle and Portland, which make no sense at all. Some misguided reporters (who in many cases have no actual experience in real estate investing themselves) confuse high prices and growth with an attractive place to invest in. The two are not necessarily linked. An example of another very popular destination for Silicon Valley people leaving to other states, is Miami. Miami is popular, large (much larger than Austin, for example), has an international airport, great weather, beautiful beaches, and proximity to great vacation spots. Miami also has a thriving tech sector. Sounds perfect, right? We should invest in Miami, right? No! Miami prices are way too high to make sense at this time. While the property tax is “only” about 160% of that in Oklahoma or California, the price/rent ratio makes it an unattractive place to invest. Miami has been a magnet for the wealthier set of tech and finance people as of late. The prices reflect it. There is an interesting article in Business Insider written by a tech person who had moved from San Diego to Austin and regrets it. It’s titled: “I moved my family from California to Austin, Texas, and regretted it. Here are 10 key points every person should consider before relocating.” The author mentions the harsh Texas heat, coupled with humidity, which, in the summer keeps you indoors and runs your AC 24/7, while also bringing scorpions and the like, and being hard on the houses. Of course, he mentions the super-high property taxes and high insurance costs. He talks about the very high cost of power and water, much higher than he had in California. Overall, he was surprised by the cost of living being much higher than he had anticipated. He mentions the travel difficulty, as Austin doesn’t have a large airport, requiring an extra “hop”. He laments the relative lack of public parks and spaces, to which he was used in California. While this is only the account of one high tech family who moved to Austin, and may not reflect everyone’s experience, some of the points are absolute.
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We have investors who actually LIVE in Austin. They are absolutely not interested in investing in Austin. They live there. They know how little sense it makes to buy in Austin in 2021. They seek investments in saner markets where the prices, rents, and property taxes, are in much better balance. We also have investor who live in Miami, Phoenix, AND Las Vegas, as well as Portland and Seattle, among many other places. All these investors wouldn’t dream of buying rental homes in the market they live in at this time. They know the insane sellers’ market that exists there, and the way-too-high prices.
This phenomenon is not new. Investors declare they want to “Buy Low, Sell High”. However, in reality, many investors end up “Buying High and Selling Low”. Right now, Austin is the darling market touted for its growth and Elon Musk. The people who are buying super-high in a “bonkers” market, pumped by the media hype, will be the first ones to sell frantically when a recession hits, or even lose those homes to foreclosure. We have seen these scenarios throughout history, time and time again. You see the same phenomena in the stock market. People secretly love to “Buy High”.
The reason is usually “But this market will appreciate a lot!” Really? You mean you know the future? No one else does. Just because a market behaves a certain way, and even booms, it is not necessarily a guarantee of everlasting constant appreciation. We have seen it in many areas of the country.
One other factor that is important to discuss is, again, the heart and soul of single-family home investing in the United States. The reason single family rental homes change futures so effectively and powerfully: The 30-year fixed-rate loan. I talk a lot about the wonder of this loan. A very quick recap for new readers: The monthly PI payment never changes, while everything else in the US economy constantly changes with the cost of living. Same is true for the mortgage balance, which goes down due to amortization, but also never keeps up with the cost of living. This creates incredible futures for people, as inflation constantly erodes the real value of the loan balance and monthly PI payment. No need to wait for 30 years. Typically, after 12, 14, 16 years, the loan balances are very small relative to the home price. The monthly payment is very small relative to the rent. It is not uncommon for a person to find, after 14 years, that the loan balance (even though the loan still has 16 years to go), is merely 20%-25% or so of the home price. Many sell a couple of homes at this point, and use the after-tax proceeds to pay off several other small loans, and leaving several free and clear homes, enabling them to retire. People also see how this can send kids to college (even costly colleges), and achieve many other long-term financial life goals.
The reason I hark back to this point in this article, is to remind you that the most important point is to buy a good new single family rental home, put a down payment, and then get the constant power of inflation and the payments by the tenant, to pay off and erode the loan balance, building equity for your future wealth. With today’s astoundingly low rates, strong results may be seen even sooner, perhaps 10, 11 years.
The single-family home is the VEHICLE to let inflation work its magic on the 30-year fixed-rate loan. The location of where you buy the home (as long as it’s large metro areas in the Sun Belt states, where the numbers make sense), is of secondary importance. It would behoove the smart investor to buy in a market where the prices are not “bonkers” and where the rents measure up to the price well, preferably in an environment where property tax and insurance costs are low. This enables the owner to enjoy cash flow (especially with today’s low rates), which building their wealth for the future with the help of inflation.
ICG (International Capital Group) Real Estate Investments was established in the 1980’s. Adiel Gorel, founder and CEO, has been helping people achieve financial security for over three decades, and in that time worked with investors to purchase over 10,000 homes. Gorel is a real estate broker in several states in the U.S., an international keynote speaker, and notable author of three books: Remote Controlled Retirement Riches – The Busy Person’s Guild to Real Estate Investing, Invest Then Rest – How to Buy Single­Family Rental Properties and Remote Control Retirement Riches – How to Change Your Future with Rental Homes. He has been featured on major television and radio networks across the country and in Fortune Magazine. He has also been featured on Public Television with his show, “Remote Control Retirement Riches with Adiel Gorel.” To invite Adiel Gorel to speak for your group, email [email protected] and visit AdielSpeaks.com. For more information on ICG Real Estate Investments visit icgre.com.

The Great Exodus Of Our Time

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By Sensei Gilliland

Investors Are Leaving The Golden State & Big Apple In A Stampede. Here’s What’s Driving Them And Where They Are Going…

We’re seeing a macro shift in migration, capital flows and investor relocation at incredible new levels. Keep reading to learn how wise investors are adapting to this incredible event.

The One Thing You Can Count On Is Change

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Image from Pixabay

As much as you might like it to sometimes, nothing ever stays the same forever. Change is the one thing we can bank on. There are mini cycles and economic rotations which go around every 7 to 15 years. Then there are macro shifts. There are evolving eras, which we’ve seen go from hunter gatherer to agricultural societies, to the industrial era, and now the internet. We are currently experiencing one of those mega shifts which only comes around every 100 years or longer. The dinosaurs couldn’t adapt to it. All that is left of the great Egyption civilization is crumbling pyramids. Ancient civilizations that once thrived in Machu Picchu and Tulum have left only ruins. Detroit has literally become an urban waste land since the end of the industrial era too. If you haven’t been lately, there are real ruins, weeds and vines taking over once vibrant neighborhoods, and a few urban farmers trying to stick it out among the remnants of a once economic powerhouse.
According to a new report from the Pacific Research Institute and many others, not only is San Francisco, but also Los Angeles, California is checking off all of the boxes on the way to becoming the next Detroit.
This includes increasing taxes, regulation, harassment of businesses, rising crime and riots, and distrust of leaders are some of these signals that lead up to these massive shifts, and the downfall of once great cities. Perhaps some of these things sound familiar to you?

This Exodus Is Far More Significant Than You Think

This isn’t just a few low wage workers who are teachers or restaurant workers leaving high cost states for somewhere they can afford to live.
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Image from Pixabay

Almost 700,000 people moved out of California in 2019, before COVID hit. A Berkley study reports that half of registered voters in California have been considering moving out of state. 44% of New Yorkers making $100k a year or more (not even a living wage there) say they plan to move out of their state. We are talking about millions and tens of millions of people leaving these states. If you thought it was bad before they left, wait until the remaining few realize they have to pick up the tax bills to cover the void by the other half who left. If many are leaving for safety, then crime rates will also be expected to dramatically rise, with the per capita risk of you being a victim of a crime at least doubling. It’s not just the amount of people leaving either. It is who is leaving that is also making a huge difference. We are talking about the wealthiest and smartest individuals and their companies that employ millions of people. It is a massive wealth and brain drain.
We’re talking about people like Elon Musk and Peter Thiel. Even the New York Stock Exchange has said it will leave NY if newly proposed taxes are implemented.
Those who are left are at least sending their money out of state for safety and better returns.

What’s Driving Them?

There are now many factors driving people and their cash out of coastal states and other major cities, and pulling them to other destinations. These are just some of them.

Affordability

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Image from Pixabay

Sheer lack of affordability is one of the top factors driving out residents and capital. Even in Florida, which seemed cheap in comparison to NY and LA at the beginning of 2020, the massive surge in migration has driven up property prices by at least 1,000% in some areas. In Miami some builders are finding excuses to kick out pre-construction investors to be able to resell those same units at top of the market prices. Even in the most rural and cheap areas it has become so expensive that investors are buying distressed homes, and are renting them out at top of the market rents, while leaving tenants to make the homes livable. It’s not just housing prices either, it is overall cost and quality of living.
When it comes to investing, affordability is the number one factor that analysts look at to gauge where a market is in the cycle, real value, and future potential growth or decline.

Profits & Returns

In addition to these coastal cities, even international investors are looking for smarter places to invest with more value and better returns. Even in Denver investors have been resorting to negative cash flow properties due to such high prices.
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Image from Pixabay

It is true rents and house prices may float down in California and New York as millions leave. Yet, they have long been too high to make sense for investors. You should never invest for negative cash flow. If you are just going to gamble, it is probably a lot more fun to go to Vegas and play the games, than go through all of the work to invest, and in something which may have less odds of going up in the short term. Real estate has taken off in a big way over the last year, not only due to the huge amount of moving activity, but also as people see the stock market and things like Bitcoin just go crazy with no real fundamentals to support them. They are running on vapors and speculation. They offer no downside protection, and rarely reliable passive income.

Anti-Investor & Anti-Business Climate Change

An extremely litigious climate, lack of physical protections for businesses, and a regulatory pattern of trying to crush businesses, entrepreneurship and investors is forcing capital flight and the movement of talent.
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Image from Pixabay

These are beautiful places, dear to our hearts, but just make no sense to live and invest in anymore. At best they just want to bleed us and our children dry financially. Why not go somewhere you are wanted, and that wants you and your family to prosper? You can always go back home on vacation if you can stomach it.

Safety

Personal safety, property protection, and wealth preservation are all compounding this trend.

Freedom

While many have been working from home and running fully remote businesses, even in real estate for at least 16 years, many are just walking up to the fact that they can live in the Midwest, and get a three bedroom house with a yard for a quarter of the cost in California, while still making NYC and San Fran level wages. They also no longer have to put up with lockdowns and restrictions if they choose not to.

Where Are They Going?

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Image from Pixabay

Cleveland, Ohio stands out as one of the top places for people to move and invest in 2021. Here are just some of the reasons it stands out and it drawing savvy investors:
  • Ranked one of the top 2 most affordable cities in America for 2021
  • Ranked one of top 10 markets to watch this year by Forbes
  • $1B in stimulus being invested in infrastructure and attracting new residents
  • Low volatility
  • Rental property investors can still achieve the 1% rule
It just makes sense. There is positive cash flow to be had, with plenty of room for assets to appreciate over the long term, and low downside risk.

How To Do It

One of the best ways to invest in Cleveland, OH today is in turnkey rental properties. Handsfree investments, producing passive income, with professional management and boots on the ground to support your assets.
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Image from Pixabay

In addition to market rate, cash tenants, there are also strong local Section 8 and other housing programs through which the government pays your rent and profits. No worrying about another pandemic.
With prices so cheap, many real estate investors will find they can sell a single unit in California, and buy 7 houses with yards in Cleveland’s suburbs for the same price. Only with a whole lot more cash flow and much better returns and growth prospects. Within an IRA or through a 1031 exchange this can even be done without any tax hit on your capital gains. It’s the chance to exit mature investments, and diversify for consistent returns. Or more importantly, the ability to sleep well at night, knowing you are set financially. You can buy a second home to Airbnb while not there, and start spending some vacation time exploring the city, and acquiring more deals. Or go turnkey and handsfree and spend your time in Mexico, traveling the country in your RV, on your own private ranch, while your rentals put money in the bank.
Black Belt Investors is a real estate firm offering education, coaching and turnkey rentals. Get started now by visiting www.BlackBeltInvestors.com or call us at (951) 280-1900.

Eviction Moratorium

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Image from Pexels

By Stephanie Mojica

Property owners can now take steps to evict delinquent renters, according to a U.S. Supreme Court decision that blocked President Joe Biden’s recent moratorium on evictions.

Over objections from three sitting Justices, the Supreme Court ruled on August 26th that the Centers for Diseases Control (CDC) did not have the authorization to enact a moratorium on evictions, according to USA Today.
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The court’s majority wrote the following in an eight-page, unsigned opinion:
“It would be one thing if Congress had specifically authorized the action that the CDC has taken. But that has not happened. Instead, the CDC has imposed a nationwide moratorium on evictions in reliance on a decades-old statute that authorizes it to implement measures like fumigation and pest extermination. It strains credulity to believe that this statute grants the CDC the sweeping authority that it asserts.”
The majority further added:
“Congress was on notice that a further extension would almost surely require new legislation, yet it failed to act in the several weeks leading up to the moratorium’s expiration.”
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The CDC’s original moratorium had lasted from September 2020 to the end of July 2021 and was designed to quell the spread of COVID-19, according to CNN Business. On August 3rd, 2021, the CDC issued a new moratorium on evictions that protected about 90% of the country’s renters and drew the ire of many landlords and real estate companies. The new moratorium applied to areas of the country where COVID-19 infection rates are once again spiking due to the Delta variant. Critics of the eviction moratoriums state that these allow unscrupulous renters to spend money on other things while shafting their rent obligations and causing undue financial distress to landlords. Supporters of the moratoriums claim that dissenting landlords are acting on greed and do not care that innocent people will be left homeless.
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Image from Pexels

According to a recent U.S. Census Bureau survey, more than 3 million renters will become homeless in the next two months if alternative solutions are not offered. Fortunately, there is $46 billion of federal rental relief aid funding available, according to CNN Business. Only about $5 billion had been distributed through the Treasury Department as of July. Another blow to renters with financial struggles is that three unemployment programs — Pandemic Unemployment Assistance (PUA), Federal Pandemic Unemployment Compensation (FPUC), and Pandemic Emergency Unemployment Compensation (PEUC) — end on September 4th, according to 13 WREX.

Last Call for Vendors (Annual Los Angeles Real Estate Grand Expo)

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Annual Los Angeles Real Estate Grand Expo

LAST CALL for VENDORS! In 2019, we had over 800 people attending our Annual Los Angeles Real Estate Grand Expo. And this year promises to be even BIGGER! Can you handle over 800 new clients to your vendor table in one day?

If you have a product or service for real estate investors, realtors, and related real estate professionals, you need to reserve a vendor table at our “Annual Los Angeles Real Estate Grand Expo.” The Grand Expo is scheduled for Sunday, October 31 (9:00 am to 6:00 pm), at the beautiful Skirball Cultural Center. An entire day celebrating real estate investing and you can participate. There will be twelve national speakers (in three breakout rooms) and a vendor exhibition area the size of a football field. (We have taken over the entire Skirball – it’s all ours for the entire day!)
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We already have over 70 vendors, but there’s always room for MORE. So don’t miss this opportunity to network with investors and real estate professionals, the best and brightest, all levels (neophyte to experienced), all in one location, and all in one day. These are your future clients. They need your product or services. And the best way to display your stuff is at our Grand Expo. This year you need to be a vendor! The cost is $697.00 for the entire day. But please register as soon as possible so that we can include your name and logo in our extensive marketing. Please call (310-994-1962) or email: [email protected] for more details.
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Vendor Reservation Form 2021