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Turning up the Heat in Phoenix MARKETS & TRENDS
STRATEGY
Lies Your Stockbroker Told You: How to Really Diversify Your Portfolio
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thinkrealty . com | 3
CONTENTS
INSIDE THIS ISSUE
THINK REALTY 8 News & Events 10 Contributer Corner Meet W.J. Mencarow
INVESTOR STORIES 11 Success Story: Growing in the Right Direction
FUNDAMENTALS 26 Planning for Growth
Leading through the worst and the what ifs by Jeffrey Tesch
28 3 Ways to Diversify Your Marketing How to build a winning strategy to build your REI business by Shawn Tiberio 30 Farmland: An Under-the-Radar Investment Positives outweigh negatives in this often-overlooked form of REI by W. J. Mencarow
16
32 What’s Your Rating?
How property managers can get four stars on Google ratings by Julie Tollifson 35 Sponsored Content: Investor Review 52 REI Talk American real estate is in a state of opportunity by Grant Cardone
COVER FEATURE
ALL ABOUT ACTION
54 Seller Financing and How to Use It When a mortgage alternative can work for you by Michael Jordan
24
14
INVESTOR STORIES
ENGAGEMENT
59 Where to Invest?
Why investors anywhere should stay with U.S. real estate by Don Wenner
PRESIDENTS’ CIRCLE
EASY ANSWERS
Featured Members: Gary and Susan Harper
Tips to protect yourself — and your investments
4 | think realty magazine :: october 2020
STRATEGY 64 3 Ways to Jumpstart Your REI Strategy Cash, sweat equity, and the right financial partner by Bruce McNeilage
70 Lies Your Stockbroker Told You How to Really Diversify Your Portfolio by Steve Streetman
74 Breaking Down the Myth of Diversification Make sure your diversification does not become di-worse-ification by Tom Olson 79 Tax Liens: The Secret Billion-Dollar Industry How to own properties free and clear by Chantelle Owens
DESIGN POINT 82 Saving a Fort Victorian
Restoring history in a fix-and-flip project by Marla Roberds
MARKETS & TRENDS 86 Market Spotlight: Phoenix
Grant Cardone on living tenfold by Kelli White
Is this housing market turning up the heat, or having the next meltdown? by Fred Heigold III
92 Top Performance Towns
Job markets affect rental markets by Ingo Winzer
68
96
MINDSET 94 The 7 Steps to Financial Freedom
STRATEGY
MINDSET
Step Four (Part 1): Explore and Educate by Gene Powers
WHY WAIT FOR A MARKET DOWNTURN? Reasons not to wait to invest in real estate
MOTIVATION FOR ACTION
Staying the course toward wealth
thinkrealty . com | 5
PUBLISHER & CEO Eddie Wilson
EDITOR-IN-CHIEF Kelli White
SALES MANAGER Rodney Halford RHalford@ThinkRealty.com
FULFILLMENT COORDINATOR Blair Pierce
DESIGNER David Allen Rodriguez
CONTRIBUTERS Grant Cardone Clint Coons Ellis Hammond Fred Heigold III Michael Jordan Bruce McNeilage W.J. Mencarow Tom Olson Chantelle Owens Gene Powers Marla Roberds Steve Streetman
HEY! LET’S BE FRIENDS! GET SOCIAL. STAY CONNECTED.
Jeffrey Tesch Shawn Tiberio Julie Tollifson Eddie Wilson Ingo Winzer Don Wenner
Like, Follow & Share for the Latest Real Estate News, Trends and Insights from Think Realty
COVER PHOTOGRAPHY Ray Kachatorian
Are you following Think Realty on social media? Things move pretty fast in real estate. Don’t miss out on the latest trends, tips, insights and news from your trusted resource for all things real estate investing! Follow. Like. Love. Share. Comment. You can do it all with Think Realty’s social media channels. Join the conversations in Think Realty social communities and connect with like-minded members who range from first-time to seasoned investors. Check out all of our social media channels and connect with us - and other investors - today!
Think Realty 12200 N. Ambassador Dr. Suite 301 (Office A) Kansas City, Missouri 64163 816-398-4130 ThinkRealty.com Copyright ©2020 Think Realty ABOUT THIS MAGAZINE :: Think Realty Magazine is a publication of Affinity Real Estate Media LLC. Reproduction or use of any editorial or graphic, without permission, is prohibited. We are not responsible for the content of any paid advertisements. For reprint rights; to ob- tain a detailed statement of our privacy policy; and for all single-copy requests, address changes and other subscription inquiries: SUBSCRIPTIONS :: The annual subscription for Think Realty Magazine is $36.00 in the U.S. Order online at www.ThinkRealty.com or call 816-398-4130. Provide your full name, address and telephone number. DISCLAIMER :: Think Realty Magazine , its owners, contractors, distributors and their respective representatives do not provide tax, accounting, investment or legal advice and make no guarantee as to the effectiveness or success of any investment or tax strategies discussed herein. Please consult your own independent adviser as to any questions you have or decision you are contemplating.
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6 | think realty magazine :: october 2020
FROM THE EDI TOR- IN-CHI EF
Are You Ready for Something Different?
Y
influencers like our cover person, Grant Cardone. In our interview, Mr. Cardone shared personal
ou’ve heard the phrase, “variety
is the spice of life.” Overdone? Perhaps. Untrue? Not at all.
stories that led him on the path to attaining his
One thing I enjoy about being the Editor of Think
real estate empire. After all, success doesn’t just happen;
Realty Magazine is the diverse individuals and topics we feature
our actions lead us there. You can read his story on page 16 and find out how you can DO ten times what you might think you can. In every issue of Think Realty Magazine , we aim to include diverse topics under the vast real estate investing umbrella. From farmland to tax liens, this issue offers information to inspire and empower you to do more of what you love: Real Estate Investing! As we enter the last quarter of a year that has brought us events more “diverse” than we have ever experienced, the Think Realty team is hard at work planning for 2021. Stay tuned for some exciting news and what we have in store for YOU. •
each month. The theme of the October issue is Diversification, and although we meant it to pertain to your investment portfolios and business operations, the word “diverse” couldn’t be more apropos to describe the variety of professional backgrounds, interests, educational experiences, and REI stories that belong to each member of the Think Realty audience and to each of our writers— and this variety brings spice to your REI education. Our contributors range from wealth- building entrepreneurs, inspiring educators, and community-enhancing strategists to national speakers, best- selling authors, and social media
Keep Going!
KELLI WHITE, EDITOR-IN-CHIEF
thinkrealty . com | 7
THINK REALTY
NEWS & EVENTS
Think Realty Events or once in the real estate world, it’s not about location! Think Realty hybrid events are conference- and expo-style learning experiences designed for real estate investors of all levels. Knowledgeable speakers at the top of their fields and more than 40 vendors share their expertise and help investors with the education, services, and products necessary to help build their real estate businesses. This year, we are holding on-site events as usual PLUS offering a virtual option to accommodate COVID-19 restrictions and for those not wishing to travel. Whether you stay where you are and learn virtually or experience the event in-person, you will gain knowledge to help you kick off your REI journey or to scale your already-growing business. There’s something for every real estate investor at Think Realty events! • F
KEYNOTE SPEAKER
Fred Lewis The Dominion Group
Think Realty's Core Focus is to be the trusted source in the Real Estate Investment Industry by providing products and services focused on serving the Real Estate Investor.
To learn more about upcoming Think Realty events and to buy tickets, visit ThinkRealty.com/TR-Events.
8 | think realty magazine :: october 2020
Congratulations to the 2020 Think Realty Honors Winners! Nominated and voted by their peers in the industry, these are the best of the best when it comes to real estate. Think Realty wants to honor those in the industry who not only exemplify great success in their own right, but who also demonstrate Think Realty’s mission of being trusted resources within their real estate niche. Congratulations to this year’s winners!
Single-Family Investing Award • Bruce McNeilage, Kinloch Partners
Bruce McNeilage has been a real estate investor for more than 31 years. He is co-founder of Harpeth Development as well as Kinloch Partners & Kinloch Homes, a real estate in- vestment company and single-family home builder in Georgia with assets in the Nashville, Atlanta, Raleigh, Greenville/Spartanburg & Columbia, South Carolina MSA’s. Bruce is a national speaker and guest lecturer on the topic of single-family “Build to Rent” housing.
Multifamily Investing Award • Ellis Hammond, EllisHammond.com & Kingdom REI
Ellis Hammond is a former college pastor turned real estate investor. He sees capital as a means to have tremendous impact for the glory of God and the good of others! He is founder of EllisHammond.com and manages a private network of investors seeking passive invest- ment opportunities in multifamily syndications across the United States. His mastermind, Kingdom REI, is the premiere mastermind community for established Christian real estate entrepreneurs. He also hosts a top-rated investing and business podcast, Kingdom REI.
Real Estate Investment Services • Anne Marie Rogers, Quest IRA
Anne Marie Rogers is a Marketing Director at Quest IRA, a Self-Directed IRA provider that allows Americans to choose their own investments in assets such as real estate, private companies, promissory notes and more. In addition to Anne Marie’s proven experience in marketing and sales, she is also a Certified IRA Services Professional. As one of the lead female public speakers at Quest IRA, Anne Marie travels around the country educating investors on the benefits of self-direction.
Linda’s Legacy: Industry Impact Award • Arianne Lemire, Glast Heim Real Estate
Arianne Lemire is a co-owner of Lighthalzen, LLC and has ownership in 1,050 multifam- ily units. Arianne and her husband Chris also own GH Houses, a residential real estate investment company that buys and sells more than 100 houses a year. In 2020, they launched WealthGym, an education company that focuses on helping others attain financial freedom.
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INVESTOR STORIES
NEWS & EVENTS
The Contributor Corner
A long-time contributor to Think Realty Magazine , W.J. Mencarow is an experienced real estate investor with knowledge in nearly every corner of the REI space. We are fortunate to have him share his insights with you every month. Here, he talks about why he continues to provide valuable information for Think Realty readers: MeetW.J. (Bill) Mencarow
“One reason I like writing for Think Realty Magazine is hearing from readers. There are a lot of sharp people reading it! People ask questions, send me stories of their own investing hits and misses, and sometimes challenge something I wrote. I learn from the readers, and that makes my articles better. And that’s a win-win!”
W.J. MENCAROW
10 | think realty magazine :: october 2020
INVESTOR STORIES
SUCCESS STORY
Growing in the Right Direction HOW AN ENTREPRENEURIAL SYSTEM CAN AID IN OPERATIONS
Here are some takeaways from Think Realty Resident Expert Gary Harper and his EOS method that could help your company’s track to healthy growth:
1. Goals must be measurable. Break down your desired result into processes that will allow you to measure achievement. Make smart goals and implement procedures behind them then report these measurables on a consistent basis to stay on track and focused. 2. Put the right people in the right seats. Define your leadership team to ensure they are operating effectively and efficiently. This will not only change what you can achieve and introduce rapid growth, but it will have a tremendous effect on your company culture. 3. Let the leader lead. When owners and/or presidents are taken out of the daily business minutia, they can be the visionaries they are, which allows them to become better leaders to produce new ideas and perspective. Then, make sure each department within the company has its own leader to integrate those ideas. 4. Meet regularly for health check-ups. These might be quarterly sessions in which you report the measurables and statistics of your goals as well as progress toward setting new goals for the next quarter. 5. Prioritize and maintain accountability. Structured, short weekly meetings allow the team to define tasks and speak about the health of the company and feedback from employees and clients. As your company grows, these tips become even more es- sential. Business solutions such as these can help you reach new levels and enjoy the opportunity for success. •
Story provided by Sharper Business Solutions
he decision to stay at a small business level or grow, gain market dominance, and
T
become a large organization can be daunting. Sometimes even successful companies struggle to grow in the right direction and often need some help. That was the case for the owner of Integrity First Home Buyers, Eric Brewer, who found himself—and his business—at a crossroad. Gary and Susan Harper, owners of Sharper Business Solutions brought Brewer and his team the EOS— Entrepreneurial Operating System— and it didn’t just change Brewer’s company, “it changed our lives,” he said. “Starting with defining our vision and our core purpose we were able to lay out specific goals. Not just immediate goals, but a well thought out plan for the company’s future. Defining a vision that was shared by everyone immediately brought us together as a team,” Brewer said.
thinkrealty . com | 11
12 | think realty magazine :: october 2020
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INVESTOR STORIES
PRESIDENTS’ CIRCLE
FeaturedMembers: Gary and Susan Harper FOR THIS HUSBAND-WIFE TEAM, SEEING OTHERS SUCCEED IS THEIR REWARD
by Kelli White
T
he Harpers, a husband-wife team, have decades of
ness Solutions, a business consult- ing firm that has worked with over 400 real estate investors. “Gary started out in real estate by working for his brother-in-law as a laborer around the age of 18,” Susan recalled. “By 24, he started buying rental properties while also working as an executive full time. In 2011, Gary got sick with Lyme disease and redirected his focus to full-time real estate until 2016. It was at this time he was asked to help other business owners in REI. This all happened organically, and the coaching business grew.” After years of teaching, coaching, and mentoring others, the Harpers have reaped their own rewards from educating others.
“The biggest reward we get is seeing business owners get their time back. We feel what we do al- lows a business owner the ability to choose how they spend their time,” Susan said. For Gary and Susan, seeing others succeed is their reward—a selfless price to pay for their own success. Their preferred niche of real estate investing is passive investing, which also comes with the reward of get- ting time back. “We always say there is active investing, which requires time for money and there is passive investing that exchanges money for money giving us more time. This can be done with storage units, apartment complexes, or single-family rental
experience in not only real estate investing, but in educating others. And, the duo is well-versed in tran- sitioning. From a full-time executive to single-family rental owner, Gary also transitioned from investor to property manager, growing his com- pany to 300 doors. Susan, a former schoolteacher, started in real estate by helping Gary during her sum- mers off, but she eventually retired from education, segueing into REI full time. The team transitioned yet again in 2016 when they focused on another thing they do well—helping other business owners in the real estate investing industry. Together, they own and operate Sharper Busi-
14 | think realty magazine :: october 2020
He Said, She Said.
The cost of education is much more expensive when learned through mistakes.” –Susan Harper
GARY HARPER
SUSAN HARPER
Hawaii Hawaii FAVORITE PLACE YOU HAVE TRAVELED: “ Hawaii” “ Hawaii”
FAVORITE MOVIE:
“The Greatest Showman”
“The Notebook”
properties,” Susan said. Over the course of their working lives, the Harpers have learned what hard work means and what gaining autonomy can bring. “My first job was steaming crabs at a restaurant in Virginia Beach,” Gary said. “That job taught me the ability to work hard, and oddly enough, I learned how not to get trapped doing something I would hate my whole life.” Susan’s first job was de-tasseling corn where she learned the ability to work hard independently and with- out the need to be supervised. Although most real estate inves- tors are entrepreneurs at heart who thrive on working for themselves, for novice real estate investors, some supervision might be welcomed at the beginning. The number-one piece of advice the Harpers give beginning investors is to get a mentor—”even if you have to pay to work or have to work for free. The risk people take without properly educating them- selves is very concerning.” •
FAVORITE FOOD:
“Crawfish”
“Pizza”
BEST PODCAST:
“Tuesday Talks by our son Jacob Harper”
“Tuesday Talks by our son Jacob Harper”
FAVORITE MUSIC:
“Christian Music”
“Christian Music”
HOBBY:
“Toy Collectables and Golf”
“Crafts and Coloring”
thinkrealty . com | 15
COVER STORY
GRANT CARDONE
Grant Cardone on living tenfold ACTION ALLABOUT
BY KELLI WHITE PHOTO BY JOHNNY THE CAMERA GUY
16 | think realty magazine :: october 2020
I WANT TO MAKE A DIFFERENCE. FOR ME, IT’S NOTABOUT MAKING SOMEONE
FEEL GOOD, IT’S ABOUTMAKING
THEIR LIFE BETTER. IT’S NOTWHAT I SAY, IT’SWHAT I DO THAT MATTERS.
—GRANT CARDONE
thinkrealty . com | 17
I f you’re not one of Grant Car- done’s three million Instagram followers, you’re missing out on business tips, sales strate- gies, real estate advice, and so much more. Known for his dynamic personality, this real estate mogul and multi-business owner has a way with words that might just leave you feeling inspired to close your next deal and take your business to the next level— or even multiply its growth by 10. Cardone is founder of the 10X Move-
ment—a platform launched by his book The 10X Rule in 2011 and the 10X Growth Conference in 2017—in which he teaches and trains entrepreneurs to grow their business, their income, and their life—tenfold. His passion to help others permeates off the stage— and the page—as he shares insights, tips, and thought-provoking strategies for success, which according to Car- done’s definition, is ultimately each person’s individual duty. For Cardone, success is not an
option, it’s an obligation. “Learning from failures is not an op- tion. I measure success by what I can DO, how I can contribute, and how I can be an example for others,” he said. Talking with Grant Cardone is like reading a book of daily affirmations and deep thoughts, while at a boot- camp to becoming your best self. But he puts more priority on his actions than his quotable quips. Through- out Cardone’s seven companies, he employees nearly 500 people. And it’s
18 | think realty magazine :: october 2020
“I’MNEVER GOING TO GET OFF THE SELF-IMPROVEMENT TRAIN. IT’S NOT SOMETHING YOU GRADUATE FROM. IT DOESN’TMATTER IFYOU’RE 62 OR 26. MANY PEOPLE MY AGE ARE SATISFIED WITH THEIR THINGS, BUT BEING SATISFIED AND GETTING
COMFORTABLE IS THE PROBLEM IN AMERICA.”
—GRANT CARDONE
Cardone with Kevin Hart at the 10X Conference Photo credit: Johnny the Camera Guy
what he does day after day that proves to be the key quality of a leader. “DOING is the number one, two, three, four, and five reasons of being a leader,” he said. “And, have an opinion on everything!” So, just what has Grant Cardone done? Well, a lot—of everything.
renowned sales trainer and speaker specializing in leadership, real estate investing, entrepreneurship, social media, and finance. He has been in - vesting in multifamily real estate since the mid-1990s. With over 8,000 apart- ment units and a short-term goal of attaining 20,000 units, Cardone has demonstrated decades of discipline in work, life, and leading others. His professional portfolio is beyond diverse; his titles include sales ex- pert, entrepreneur, trainer, speaker,
educator, author, real estate inves- tor, commentator, philanthropist, and social media influencer. Regard - less of which hat he’s wearing, he knows what he’s good at. He said, “If I don’t excel at something, I dump it.” For example, he might not be good with details and organization, but it’s no secret he has excelled at real estate investing, and his focus has been on affordable, income-produc- ing multifamily housing. “The trend in America is rent-
GETTINGTHEJOBSDONE Cardone is a New York Times bestselling author and internationally
thinkrealty . com | 19
to Easy Street, but the best stories never are.
als. We are a renter nation. Mostly because people don’t have enough money for down payments but also because of choice. Young people don’t want to commit to 30-year mortgages even if they’re qualified, and Boomers don’t want to commit to one place,” Cardone said. “Real estate is so good to my fam- ily, knowing I’m taking care of them with indestructible investments is rewarding.” But multifamily is not the only asset class he pursues. He said he is look- ing hard at retail and office because he believes there is opportunity.
“Where there is so much bad news, there has to be opportunity. Plus, people will still need to go to doctors’ offices! And, you can’t buy everything on Amazon!” he said. Before becoming successful in sales and investing in real estate, Cardone tried his hand at many entry-level gigs, all of which ended with the door closing behind him. Not unlike many young people trying to find their way, Cardone was lost and unhappy with himself. That mindset became a mirror, reflecting negatively on every aspect of his life. Cardone’s story is not a straight line
GROWINGTOWARD 10X Cardone was fired from his first five jobs. From fast food and retail to a refinery, he not only struggled to keep employment, he struggled to keep clean. Cardone had a drug problem and a reputation for being trouble. As a twenty-something, he had turned himself into a terrible example. One of five children, Cardone lost his father when he was ten. Hav-
DOWHAT GRANT CARDONE SAYS AND WHAT HE DOES. HERE ARE THREE TIPS CARDONE REPEATEDLY TELLS HIS STUDENTS AND HIS AUDIENCE:
1
Learn how to sell—how to sell yourself and your products.
2 3
Don’t spend earned income. Only spend passive income.
Go big or go bigger. Don’t go home! There’s nothing there.
Photo credit: Johnny the Camera Guy
20 | think realty magazine :: october 2020
“I INVEST IN REAL ESTATE FOR ONE REASON: TO MAKE MONEY. AND TO PROTECT CAPITAL. AND FOR LONG-TERM APPRECIATION. AND THE TAX BENEFITS.”
Photo credit: Ray Kachatorian
ing only one parent, no matter how great she was, was not enough. Going through that extreme loss as a child eventually ignited a fire toward greatness, but it took ten years to turn it around. “I stood in the unemployment line at 23 years old. My uncle asked what I was doing there. I said I was there to get a check. He said you didn’t go to college to be in that line. I got out of that line and went and got a job. Life is hard with money. It’s almost impossible without it,” Cardone said. So, he started selling cars at 23 and stuck with it for more than six years. “I hated it,” he said. “But I com- mitted to doing something I hated and decided to become great at it. I couldn’t get another job. Part of why I hated my job was because I hated myself. No one was more disappoint- ed in me than me.” When he was 25, Cardone went to rehab. “What turned it around for me
was looking in the mirror for 10 years (from the time I was 15 to 25) and just being disgusted. I became more disgusted with my choices, my drug addiction, my results from my actions. I got sick and tired of being sick and tired. One day, after 1,000 attempts, I started changing. I flipped my obsessive quality and addiction to productivity and mak- ing a difference. I am proof of the American dream; you can turn it around. You can be a good example even if you were a terrible example,” he said. In hopes of becoming the men- tor he needed during his formative years, Cardone started The Grant Cardone Foundation, a nonprofit or - ganization devoted to helping under- served and at-risk kids by providing mentorship and financial literacy. According to the foundation’s web- site, “the statistics of fatherless kids are undeniable. Kids without dads are more likely to be poor, involved in drugs and alcohol abuse, drop out
—GRANT CARDONE
of school and suffer from mental and emotional problems.” Cardone is an example of a “good kid raised in a good family that turned bad” because there was no father figure for guidance and disci - pline. He credits the men in his life, like his uncle who guided him out of that unemployment line, for stepping in and showing him direction and purpose. Now, his direction is nothing but upward. Cardone’s annual 10X Growth Conference (prior to the pandemic) attracted thousands of attendees wanting to learn about entrepreneurship, leadership,
thinkrealty . com | 21
“THIS PLANET HAS SEVEN BILLION PEOPLE ON IT. THAT’S ABIG FAMILY. WE’RE ALL CONNECTED, ANDWE CANALL HELP EACH OTHER.”
—GRANT CARDONE
marketing, motivation, and more. It is a conference for those who want to improve their businesses and every aspect of their lives. With A-list entertainment and elite presenta- tions from hand-picked experts and educators, the event itself has been a showstopper. And, the show is set to go on next year as planned. The 10X conference is just another way Cardone can reach people and make a difference in their lives. For him, touching more lives is the one to-do on his list that will never be crossed off. “Reaching more people and mak- ing a difference is my want and my why. I can’t help everyone because not everyone wants help, but I want to influence enough people to consider my life significant. I have to be noisy to get heard. People either like me or they hate me. I only worry about the ones that don’t hear me,” he said. LEAVINGALEGACY In the world of real estate, the phrase exit strategy is often spouted as a means to get out of a deal when the time is right. But when is it time to exit a career that is so far-reach- ing and so fulfilling? For Cardone,
Photo credit: Johnny the Camera Guy
there might never come a time to exit; rather, he hopes to leave a leg- acy that will live on to affect future generations. “My legacy is what people will say about me when I’m not around any- more,” he said. “My body can’t live forever, but my contributions can. My dad was a good man who influenced the small town we lived in, but I want to influence more people. I want to share educational tools that last. Businesspeople can make impacts forever—like Rockefeller and Carn- egie. Their names are still used and
what they did is still talked about.” The biggest thrill for Cardone is giving back and helping people, especially those he doesn’t know. For example, he tells investors, “Invest in yourself first, your busi - ness second. Then, if there’s money leftover, invest in something that can’t be destroyed. I’m not a risk taker. I make big bets on diversified assets. Multifamily is an indestruc- tible wealth vehicle that has proven itself for hundreds of years.” Time will tell if Cardone will be the same. •
22 | think realty magazine :: october 2020
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thinkrealty . com | 23
ENGAGEMENT
BUSINESS TIPS
EasyAnswers
TIPS FROM AN ATTORNEY TO PROTECT YOURSELF — AND YOUR INVESTMENT.
When it comes to your real estate investing business, asking questions is part of the job. Think Realty Resident Expert, real estate financial advisor, and attorney Clint Coons offers his advice and answers to questions he hears from clients every day.
Q: I amreal estate investor andmy company is an LLCw/ an S-corp. I invest in tax liens and deeds and I amplanning to open a Roth solo 401(k) and domyRE investing there. I am looking forways tominimizemy taxes by rolling over money frommyRoth solo 401(k) to a self- directed Roth IRAandwait five years before Iwithdrawthe amount.Will I be subjected to taxes and penalties?
A: Depends on whether you have maintained a Roth IRA for five years. To satisfy the penalty-free distribution, you must have maintained a Roth IRA for five years preceding the rollover and subsequent distribution. If you have not, then you must wait the requisite five years. Here is the great news: the portion of a non-qualified distribution from your Roth 401(k) account to your Roth IRA (contributions, not gain) is treated as basis in the Roth IRA. If a qualified distribution, i.e., you are over 59 1/2, from a designated Roth account is rolled over into a Roth IRA, the entire amount of the distribution will be treated as basis in the Roth IRA.
Have a legal, finance, or tax question that might affect your REI? Send questions to Think Realty’s editor at kwhite@thinkrealty.com.
24 | think realty magazine :: october 2020
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thinkrealty . com | 25
FUNDAMENTALS
LEADERSHIP
Planning for Growth
LEADING THROUGH THE WORST AND THE WHAT IFS
by Jeffrey Tesch
the Coronavirus has taught businesses within the mort-
I f
quarters in the company’s history. Coronavirus was just making its first rumblings in the United States, and RCN was in growth mode as far as the team was concerned. The very next day, I called an emergency meeting with all of RCN’s managers to discuss remote proto- cols and discuss with each of them what their departments would need to successfully transition to working remotely should the situation arise. Less than a week later, RCN’s first round of employees went remote and the following week, the entire company was working remotely. I don’t relay these experiences to brag about the foresight I had, be- cause I did not think the worst would happen. But as the CEO of a compa- ny with over 100 employees that are counting on me to make sure they continue to receive a paycheck, even when unprecedented times occur, it would have been foolish of me not to prepare and know what a “worst case scenario” would look like. I share these two stories as a warning to other business leaders. If you do not have a plan in place to shore up your business so that it can survive even the most incomprehen- sible situations, you are not doing your job. That’s not to say you have to do this all on your own, in fact, I strongly encourage you to enlist the help of other members of your
gage industry anything, RCN Capital included, it is that they need to be prepared for the worst, and more importantly, the “what ifs.” What if something happens to a member of the Executive Management team? Is there a succession plan in place? If the market faces a significant chal - lenge, is your business equipped to ride out a downturn? If a once-in-a lifetime pandemic hits the United States, what is your plan? It is so easy to become focused on growth initiatives, especially when things are going well and opportunities abound, that those “what ifs” fade into the background. But any good business leader knows, having a plan in place to deal with all of the “what ifs” is how you ensure that your business can not only survive, but thrive when it matters most, during the worst of times. BE PROACTIVE I’ll never forget the looks on the faces of RCN Capital’s Head of Trea- sury and RCN’s Comptroller when I met with them at the beginning of March to request they run a P&L that showed zero closings. I’m pretty sure they thought I had lost my mind. Why was this request so unusual? Because RCN was having one of the busiest, most profitable first
26 | think realty magazine :: october 2020
Executive Team to help you identify any and all blind spots. Create clearly defined plans that can be implemented in times of emergency. Run your financials to see what would happen if business dried up for several months and figure out what the company would need to do to stay afloat. Develop a succession plan for yourself and other members of your Executive Management team. Whatever you develop, make sure the items within your plan are not only clearly defined but actionable.
continuing, instead of getting lost in the weeds. And during the worst times, remember that your employees continue to be your greatest allies. As the head of your company, this is your time to lead. It is up to no one else but you to make sure they are informed, their concerns are being addressed, and they know what happens next to move the company forward. The best thing you can do to take your company out of crisis is eliminate uncertainty and provide the leadership your team needs. •
to be available and transparent with my employees as opposed to shying away from tough conversations. This level of communication allowed the RCN team not only to get on the same page but it allowed us to move forward and plan what we could do during our down time to improve our processes, and be better, so that when we could lend again, we could come back stronger than ever. Even when we couldn’t lend, my mind was still in growth mode. The one thing I continued to tell my team during all of this was be patient, because your patience will pay off, and did it ever. This planning allowed us to hit the ground running and ramp up like never before once we were originating again. LOOKING TO THE FUTURE You can still look towards the fu- ture and work to grow your business even while dealing with issues in the present, but that is only possible if you have laid the proper ground- work. Having your plans in place for the worst-case scenarios is what allows you to continue to execute your company’s growth strategy, or only be forced to take a detour before
COMMUNICATION IS KEY When COVID hit the U.S., it
seemed like every company sent out an email to customers letting them know how their business was going to handle the impending crisis. Com- municating with customers when crises arise is crucial to the future success of the company, but that’s only one half of the coin. When I talk about communication being key when a situation arises, I am refer- ring to internal as well as external. Many business owners become so focused on external communication with customers that they completely neglect relaying information to their employees. When RCN had to temporarily sus- pend origination, we were not only increasing the number of updates being sent to our clients, but I was making sure to increase internal communication as well to ensure our employees knew what was going on. High-level strategy meetings with our executive team went from happening once every two weeks to twice a week; I worked with our Head of Treasury and Marketing to update employees on what was going on in the industry at least once a week, and most importantly, I made sure
Jeffrey Tesch, Chief Executive Officer, is responsible for overseeing the
operations of RCN Capital, including sales growth initiatives, underwriting review with compliance oversight and leadership of senior level strategic planning. Joining the Company in 2010 as Managing Director, Tesch led efforts to develop a national brand in private lending with the best practices and transparent products for a diverse customer base. Since RCN’s inception, Jeff has personally overseen over $1 Billion in originations. Jeff’s previous real estate experience was as an investor in both commercial and residential properties, ranging from single family homes to commercial retail centers. Jeff currently serves as a member of the American Association of Private Lenders’ (AAPL) Ethics Advisory Committee and a member of the Advisory Council for the National Private Lenders Association (NPLA).
thinkrealty . com | 27
FUNDAMENTALS
MARKETING
3Ways to Diversify Your Marketing
HOW TO BUILD A WINNING STRATEGY TO BUILD YOUR REI BUSINESS
by Shawn Tiberio
t’s common for real estate investment businesses to start
algorithm to say it was spam. This kicked off a three-week effort to prove otherwise to Facebook. In the meantime, anything that had our website link, calendar link, or even mentioned anything about our com- pany would not be posted. It simply was deleted by Facebook as soon as we hit that post button. Thankfully, Facebook was not our only means of marketing. We have a diversified marketing approach that allowed us to move forward without worry. Not to mention, when you diversify your marketing efforts, you will be less prone to panic if Insta- gram changes its algorithm or Face- book decides to change its policy.
I
So how can we as real estate inves- tors diversify our marketing strategy?
out using only one or two marketing channels, particularly social media (namely, Facebook). While it is free to post there, and the ability to share outside informa- tion to say “Hey, we are here to help” is easy, relying on one or two chan- nels of marketing can be dangerous. Not diversifying your strategy can leave your business in an uncomfort- able spot if anything goes wrong. For instance, Facebook deleted one of our accounts shortly after we start- ed gaining traction on the platform. Why? Simply put, one of our posts had something that triggered their
NO. 1 FOCUS ONYOUR EMAIL LIST Email marketing is the best way to build relationships and turn those lukewarm leads into loyal raving fans of your business. According to the Harvard Business Review, working professionals check their email an average of 15 times per day, or every 37 minutes. Since anyone who joins your email list must have had some interest in your business when they signed up, we know this is a warm lead. Periodically popping up as a
28 | think realty magazine :: october 2020
name in their inbox guarantees that they will remember that you exist, even when they don’t open the email. Use emails to share engaging content and special deals with your leads. Email marketing is a great me- dium to connect your highly engaged audience with first access to exciting new services you offer and even gift- ing ideas for every holiday. Providing tips for how they can sell their home quickly, or the major updates new home buyers are looking for, is a great way to showcase your knowl- edge and continue to position your company as the expert in the area. When it comes to growing your email list, you need to be strategic. Gone are the days of asking people outright to sign up for your newslet- ter. Instead, offer individuals some- thing of value in exchange for their email, such as a useful checklist or workbook, or a special report that will help in their decision- making process. Once you get them on board, engage them with relevant, valuable content. It can be tempting to send out “WE BUY HOUSES - GET A CASH OFFER TODAY” but keep those emails to a minimum. Instead, put yourself in the customer’s shoes: Why will they want to open your email, and what about it will make them want to open the next one? Your goal is to get subscribers who do want to hear from you, and then delight them with content that gets them excited. NO. 2 OWNYOUR CONTENTON YOURWEBSITE If you have been focused on Face- book marketing for a while, you have probably produced a number of posts there. That content is yours. You did the work to make it, and now it is time to repurpose it to bulk up your website.
Consider taking posts that you have shared on social media and reconfig - uring them as articles on a blog on your website. This way, regardless of what happens to external plat- forms like Facebook, your own site will continue to be the main hub for everything that your business wants to share. The long-term benefit of creating original content on your site is that it will improve your Google search ranking, making it easier for potential buyers and sellers to find you when they start hunting for what they’re looking for online. Since real estate investment companies will have a hard time ranking highly for broad search terms like “we buy houses,” your best strategy is to create content based on specific ideas and tailored for a specific audience. Think about your company’s specialties, whether pre-foreclosure or short sale, maybe you focus on vacant landlord rentals. When your content is specific, not only will you show up higher in search results, but anyone who finds you when searching that topic will likely be motivated to stick around on your site since it’s highly relevant to them. NO. 3 BUILDALONG-TERM STRATEGYFORORGANIC TRAFFIC Referral traffic (both from social media and Google ads) is great, but you are limiting yourself if you aren’t going after organic search traffic. Building a robust content strategy is a longer-term plan that typically won’t deliver immediate sales. But, as the amount of relevant, quality content on your site increases, so will your organic search rankings. This will, over time, provide you with a steady stream of incoming traffic from potential sellers and buyers who
are searching for answers to their questions when it comes to their real estate needs. Begin creating content that answers the common questions and assists your ideal client in their research. As you add more marketing chan- nels to your strategy, think about how they can feed one another, working together to convert leads into deals. Having a central point for collect- ing and reporting will make all the difference. Many seasoned real estate investors layer on numerous market- ing channels but fail to connect all the data. As you create valuable pieces of content and your organic traf- fic increases, you can serve more people. The more content you create, the more assets you have to share on social media, boosting referral traffic and potentially earning you more backlinks as people share your content. By having a diversified and stra - tegic marketing approach, you are giving your potential leads the oppor- tunity to get to know you, understand how you can help them, and ultimate- ly build trust that you know what you are doing. With the changing economic climate, real estate investors have a great opportunity. The question is, will your prospects know that you are an option for them? •
Shawn Tiberio is a Marine Corps veteran, serving 10 years of honorable service in the United States Marine Corps. With multiple deployments over
the years and extensive training as an Ironman distance triathlete, entrepreneurship and mindset has become a must for Shawn. He is co-owner of Top Results Consulting, where he helps businesses and entrepreneurs grow and succeed. Check out his free master class and learn exactly how to target the correct prospects for your business at topresultsconsulting.com.
thinkrealty . com | 29
FUNDAMENTALS
LAND
POSITIVES OUTWEIGH NEGATIVES IN THIS OFTEN-OVERLOOKED FORM OF REI Farmland: An Under-the-Radar Investment
by W. J. Mencarow
early as I can remember, every weekend my Dad took me and our German Shorthaired Pointer to visit
with the Consumer Price Index (CPI) and a 79.84 percent correlation with the Producer Price Index (PPI), the two main measures of inflation according to the TIAA Center for Farmland Research at the University of Illinois. That is the best correlation of any investment as far as I know. Agriculture is our most important industry, and when inflation increases the price of food, farmland becomes even more valuable. People always need to eat. According to fool.com, “Over the last 50 years, the value
As
our farm, about 25 miles east of our home in Moline, Illi- nois, and then he let our dog go crazy chasing, but never catching, all the critters. I listened and learned as he talk- ed to the farmer about the crops, seed varieties and such, and the one topic all farmers talk about: the weather. Thanks to my Dad, as an adult I have bought and sold farms in the Midwest and in Texas (crop farms, never livestock; I do not invest in anything that eats, flies, floats, or has wheels). One reason for that, among many, is to hedge against inflation. Few people know that in 2020 the Fed has created more dollars than ever before, and it is Economics 101 that too much money in circulation is the direct cause of inflation. Here is a chart of the growth in the money supply from 1984 to mid-2020. It screams “inflation ahead!” What this chart tells you is that if you keep your savings in dollars you will
of American farmland has risen by about 6.1 percent per year, with only five down years during that pe- riod. Add in the cash rent yields, and the return to investors has been even more impres-
get your head handed to you on a platter. You must in- vest in inflation hedges, and no other invest- ment offers the long-term pro-
sive. Since 1991, farmland has produced a positive return every year, generating an average annual return of 11.5 percent, according to the USDA. To put that return into perspective, it has outperformed all other asset classes except the Dow Jones REIT Index during that time frame.” Farmland will diversify your portfolio because it has little-to-no correlation to the performance of other asset classes. Gold is a popular inflation hedge, and its single advantage over farmland is its liquidity. But gold is ex- tremely volatile, and it does not produce income. Farm-
AdenForecast.com August, 2020
tection against inflation with so many other advantages as does farmland. No investment has a perfect correlation with inflation, but farmland has a 70 percent correlation
30 | think realty magazine :: october 2020
land is an inflation hedge that combines low volatility, income, and proven long-term appreciation. It has been called “gold with yield.” • Unique among real estate investments, farmland never has a vacancy. It produces reliable income year after year. • Unlike other real estate, there are several methods of increasing income. • Professionally managed farmland is a passive investment. • Farmland never needs maintenance (except for irrigated farms, also known as money pits). • Farmland cannot be trashed, burned down, vandalized, or stolen. • Property taxes are lower due to agricultural exemptions. • Landlords never get calls from their farmer tenants to fix or replace anything. Be aware that because they have so many advantag- es, a farm may not produce the annual cash return (not counting appreciation) that other investments offer. Own- ing a farm is not a way to get rich quick. My farm manag- er Ed Kiefer, who was voted by his peers as the National Farm Manager Of The Year with Hertz Farm Management, cautions, “The agriculture economy has always been cy- clical. Farmland is a long-term investment; in my opinion, 10 years at the minimum.”
A farm is a large investment. However, it is relatively easy to get favorable financing through the Farm Credit system. An alternative is to do a sale-leaseback with the farmer/seller. Two less capital-intensive options are to buy fractional ownership through a farmland fund or a REIT (Real Estate Investment Trust). The two publicly traded farmland REITs are Farmland Partners (NYSE: FPI) and Gladstone Land Corporation (NASDAQ: LAND). Be aware that when you invest in a fund or a REIT you trade invest- ing less money with giving up control of your investment. If you buy a farm it is critical that you work with a pro- fessional who knows the market and has the agricultural background to evaluate farms for sale. Unless you are experienced in managing farmland, hire a professional. Aside from the farm itself, a good manager may be the best investment you have ever made. Farmland gives you an asset you can walk on and enjoy owning, knowing that you have consistent passive income, the ability to maximize that income to take advantage of market conditions, appreciation that historically beats inflation better than other investments, low volatility, property tax exemptions, no vacancies, no maintenance, and no tenant problems. You have a renewable crop growing each year and the satisfaction of doing your part to feed the world. Plus, you always have a place to live far away from urban areas! •
W. J. Mencarow is a real estate investor (including farmland) with over 35 years of experience. He offers a free e-course on real estate note investing at www.PaperSourceOnline.com
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