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INVESTOR NETWORK GROWING BY DESIGN
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TABLE OF CONTENTS
INSIDE THIS ISSUE
THE BIG PICTURE 12 The Most Important Lesson
How to separate the ‘real deal’ educators from real estate investing gurus and scammers. by Eddie Wilson 26 Comings & Goings Choosing the right entry and exit strategies will help ensure a positive outcome for your fix-and- flip deals. by Tarek El Moussa 28 The Beauty of Buy & Hold Did you know you have five profit centers in each of your rental properties when you keep them for the long-term? by Matt Bowles 34 Finding the Bull's-Eye There’s a method to determining where to buy single-family houses for investment. by Rob Caldwell Hilda Lunderstedt, Wealth Migrate CEO for Global Operations, has a passion for real estate and for educating investors, particularly women. by Linda Wienandt 94 The Weekend Investor With so many challenges and opportunities, where does the beginning or part-time real estate investor start? by Kevin Guz 100 Best of Two Worlds How one investor enjoyed five years of water- front living as the owner-occupant in a mis- marketed duplex, updated and converted it to single-family and then made a tidy profit. by Larry Arth UP CLOSE & PERSONAL 92 Crowdfunding Crusader
ON THE COVER EXPANDING NETWORK
THE BIG PICTURE
MORE FOREIGNERS INVESTING IN U.S. Chinese investors pass Canadians in real estate buys.
THINGS ARE OK IN OKC Despite clouds on the horizon, investors are still rolling.
4 | think realty magazine | may :: june 2016
NUTS & BOLTS 120 What's it Going to Cost?
It’s important to understand the numbers involved in maintaining a rental property when evaluating whether to make that deal. by Carter Froelich, CPA 122 For the Record Using a scope of work—especially a detailed one— can prevent misinterpretation and save big money. by John and Corinne Tesh 124 Shifting into Reverse A Reverse 1031 Exchange requires financial strength, no matter which route you choose. by Steven Hickox 128 Networking for Success Take care to ensure there are no weak links in your chain of connections. by Jessica Conflitti BYTHE NUMBERS 130 A Flip of the Numbers After a four-year slide, home flipping was up in 2015, RealtyTrac year-end report shows. by RealtyTrac 134 Local Market Monitor Today’s best rental investment markets may not be sexy, but they’re profitable. by Ingo Winzer
Founders BRANDON THOMPSON and WILL HARDY have found a formula for successful growth of their company, Investor Network, and they freely share it.
by Susan Thomas Springer :: photos by Tim Glover
NUTS & BOLTS
BY THE NUMBERS
INSIDE 51 Investor Review A Guide to Real Estate Investing With Your Self-Directed IRA, with commentary by experts in the industry.
IS THERE A TREND AFOOT Boomers seeking rentals in walkable areas.
Weigh the pros and cons involved in crowdfunding.
thinkrealty . com / mag | 5
PUBLISHER R. Michael Wrenn
PRESIDENT, AFFINITY ENTERPRISE GROUP Eddie Wilson | EWilson@AffinityEG.com
EDITOR-IN-CHIEF Linda Wienandt LWienandt@ThinkRealty.com
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PRODUCTION & TRAFFIC MANAGER Carolyn Addington
CONTRIBUTING WRITERS Larry Arth, Teresa Bitler, Matt Bowles, Rob Caldwell, Tyler Carter, Jessica Conflitti, Mike D’Arrigo, Chris Edwards, Kelly Edwards, Carole J. Ellis, Tarek El Moussa, Dawn Erling, Lawrence Fassler, Carter Froelich, Zach Fuller, Abhi Golhar, John Gutman, Kevin Guz, Steven Hickox, Jeff Kottmeier, Leon McKenzie, Kevin Ortner, RJ Palano, Scott Sklare, Robert Springer, Susan Thomas Springer, BreAnn Stephenson, Corinne Tesh, John Tesh, Paul Wassgren, Brice Willis, Ingo Winzer FOUNDING PUBLISHER, PERSONAL REAL ESTATE INVESTOR MAGAZINE Andrew Waite FOR ARTICLE REPRINTS :: Contact Jeremy Ellis at Reprint Pros, 949-702-5390. www.reprintpros.com. SUBSCRIPTIONS :: The annual subscription for Think Realty Magazine is $28.95 for six issues 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. ABOUT THIS MAGAZINE :: ThinkRealtyMagazine isapublicationof AffinityRealEstateMediaLLC.Reproductionoruseofanyeditorial orgraphic,withoutpermission, isprohibited.Wearenotresponsible for thecontentofanypaidadvertisements.Forreprintrights; toob- tainadetailedstatementofourprivacypolicy;and forallsingle-copy requests,addresschangesandothersubscription inquiries: COVER PHOTOGRAPHY Tim Glover
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6 | think realty magazine | may :: june 2016
FROM THE EDI TOR- IN-CHI EF
Inaugural Awards of Distinction Will Honor Visionaries Among Us
s I write this, we are contacting and congratulating winners of the
the City by the Bay is a great place to spend your late-summer evenings.) You can find more information about the conference and registration details at our website, www.thinkrealty.com.
Think Realty Awards of Distinction. In this inaugural year, our Awards of Distinction are being presented to compa- nies and individuals that have proven them- selves to be stellar role models and leaders based
LET’S GET REACQUAINTED Inside this issue of the magazine, we’re proud to rein- troduce our “Investor Review” series with a focus on using self-directed IRAs in your real estate investing. These publications bring you valuable information and insight on each spotlighted topic by those who know it best: the companies and people who work in that space, day in and day out. We’d like to thank these companies for their advertis- ing support and content contributions: American IRA, the Entrust Group, Equity Trust, Inverse Investments, Kingdom Trust, Lasaii, MidAtlantic IRA, Next Gen- eration Trust Services, North American Savings Bank, Self-Directed IRA Services, Sunwest Trust and uDirect IRA Services. Thanks also to RJ Palano of BuyCash- FlowProperties.com, Clay Malcolm of New Direction IRA, Tyler Carter of NuView IRA and Alisa Mirabal of Preferred Trust for their articles. All are committed to providing you with accurate, helpful information to get you started down this path to building wealth. I stress the “getting started” part, as this is no one- size-fits-all strategy. Each person has a unique situation, objectives and timeline. Be sure to do your due diligence in selecting the right team to help you reach your goal. •
on their long-range vision, sound business practices, high ethical standards and dedication to moving residential real estate investing forward as a respected industry niche and avenue for wealth building. These award winners are the innovators and change-makers who are taking individual real estate investing from a once easily dismissed interloper to respected industry player. They believe in collaboration for the long-term benefit of this industry niche and all who share those standards and ethics. We will give well-deserved recognition to this esteemed group in August at theThink Realty Global Conference in San Francisco, and a major section of our magazine’s next issue will be devoted to sharing their stories. Through those stories, we hope to inspire others toward similar success and commitment to excellence. It’s fitting that we shine the spotlight on these organiza- tions and individuals while in the company of their peers from around the world, as so many global partnerships are being forged in real estate investing. We hope you’ll be among those in San Francisco for the celebration as well as for the many educational and networking opportunities that the Aug. 11-13 conference presents. (Not to mention,
LINDA WIENANDT, EDITOR-IN-CHIEF
thinkrealty . com / mag | 7
KRAUSE PROMOTED TO CEO OF RPM FRANCHISE SYSTEM
TEN-X RANKS TOPMARKETS FOR MULTIFAMILY GROWTH
LUKAS KRAUSE has been promoted to CEO of Property Management Business Solutions, the franchisor of REAL PROPERTY MANAGEMENT . Kirk McGary, who founded RPM with business partner Doug Oler in 2005, becomes chair- man of the board. McGary said his role has
TEN-X ’s recently released Multifamily Market Outlook report, based on Q3 2015 current and expected fundamen- tals, lists Orlando, Fla.; Raleigh-Durham, N.C.; Fort Lauder- dale, Fla.; Phoenix and Sacramento, Calif. as the sector’s top buy markets, based on local economic gains and population inflows. On the other side, it identifies northern New Jersey, Philadelphia, Miami, Pittsburgh and Boston as areas where investors should reevaluate their holdings, due to slowing economic outlooks and diminishing employment. “The overall multifamily sector remains healthy, and the trend of renting instead of owning continues across the U.S.,” Ten-X (formerly Auction.com) chief economist Peter Muoio said in a news release. “Despite being six years into its expansion, the demand drivers for multifamily are still in place with no signal of waning in the coming years.” The report reveals markets investors need to focus on, as well as outlining howmultifamily construction is heating up as demand drivers are holding strong. Effective rents are up by 4.3 percent nationwide from one year ago, which accounts for an all-time peak, Ten-X said. Other multifamily findings in the report include deal volume inching up to $34 billion in Q3 2015 and Q3 cap rates dropping by 20 bps from the prior quarter to 5.8 percent. • JUWAI.COM PREPARES FOR CONTINUING SURGE OF CHINESE INTEREST IN U.S. Chinese international property portal JUWAI.COM recently named its first president of the Americas as it intensifies its focus on North America and the U.S. real estate market. MATTHEW MOORE , who has been involved in Internet market- ing and other projects for more than 20 years, will be based in Los Angeles and will oversee the North American team responsible for sales, marketing and industry relations. “China is the No. 1 investor in U.S. property markets today, and its level of investment will continue to increase over the next decade,” Juwai.com CEO Charles Pittar said in a news release. “Matthew’s role is to help real estate professionals in the U.S. make the most of this growing opportunity.” Los Angeles is the most-searched city in North America by Chinese property buyers, California is the most-searched state, and the United States is the most-searched country in the world. • WEB :: www.ten-x.com
evolved to focus more on long- term growth strategies and acqui- sitions, and Krause was the obvious choice to become CEO, overseeing day-to-day operations. Krause joined Property Manage- ment Business Solutions (PMBS) in 2012 as vice president of oper- ations and was promoted to COO in 2013. During his time at PMBS, he has
implemented several new software systems, built a franchisee business consulting group and was vital in the creation of a corporate-owned office in Salt Lake City. Previously, Krause led the Tax Advantaged Investment Practice for Ryan Inc., and was senior director of global expansion for Quiznos. In 2015, HousingWire Magazine named Krause one of the industry’s rising stars under 40. The Real Property Man- agement brand was also recently recognized as the No. 1 property management company by Entrepreneur Magazine, and one of the top franchise opportunities
for veterans by Military Times, Fran- chise Times and Franchise Business Review. In 2014, it was named one of America’s 10 Best Franchises by Forbes magazine for an investment under $150,000. Franchise industry veteran JOHN GOHDE has been named to fill the COO position. Gohde has more than 30 years of experience in franchising, most recently
serving as Senior Vice President of Franchise Operations at BrightStar Care. Prior to that, he held executive level positions at Cosi Inc., Sears Holdings Corporation and KnowledgePoints, Inc. •
WEB :: www.realpropertymgt.com
WEB :: www.juwai.com
8 | think realty magazine | may :: june 2016
WHERE THE HIPSTERS ARE — ALONGWITH INVESTOR PROFITS
Denver, followed by Seattle and Dallas-Fort Worth, top the list of Top 10 housing markets for 2016, as predicted by Zillow. All are major tech towns— ideal for job growth. Other places that made the list are Utah markets Ogden and Salt Lake City, along with Omaha, Neb., and Boise, Idaho. “Trendy tech centers like San Francisco, Seattle and Denver hogged the spotlight in 2015. But this year, the markets that shine brightest will be those that manage to strike a good
balance between strong income growth, low unemployment and solid home value appreciation,” Zillow Chief Economist Dr. Svenja Gudell said. To determine the Top 10, Zillow evaluated home value appreciation, unemployment rates and income growth. Those three variables then were scaled and combined to form a “hotness score.” • SOURCE :: www.realtytrac.com
TOP 30 HIPSTER ZIPS FOR HOME FLIPS:
2015 HOME FLIPS
FLIPS % OF TOTAL SALES
2015 FLIPPING GROSS PROFIT
2015 FLIPPING GROSS ROI
% AGES 20-34
% WALK OR PUBLIC TRANSPORT TO WORK
55408 29403 60611 19146 22305 19147 19125 20002 21211 60615 20782 27601 15201 60612 90026 89119 94606 19148 20781 94601 94702 07104 20032 07087 98115 07103 15212 19082 19003 19120
Minneapolis Charleston Chicago Philadelphia Alexandria Philadelphia Philadelphia Washington Baltimore Chicago Hyattsville Raleigh Pittsburgh Chicago Los Angeles Las Vegas Oakland Philadelphia Hyattsville Oakland Berkeley Newark Washington Union City Seattle Newark Pittsburgh Upper Darby Ardmore Philadelphia
MN SC IL PA VA PA PA DC MD IL MD NC PA IL CA NV CA PA MD CA CA NJ DC NJ WA
11 24 22 143 16 38 72 73 24 14 34 14 21 10 17 48 11 107
4.3 7.3 2.3 12.9
$168.026 $171,000 $176,250 $145,000 $173,250 $123,939 $142,250 $252,000 $120,250 $68,250 $185,950 $178,500 $117,500 $96,000 $270,000 $57,500 $185,000 $75,000 $137,500 $192,500 $310,500 $191,000 $140,000 $107,500 $257,000 $117,000 $27,500 $34,900 $125,950 $30,450
72.4% 79.3% 50.9% 193.3% 51.3% 72.9% 178.9% 63.3% 120.3% 83.2% 129.6% 230.3% 174.1% 147.7% 56.3% 57.5% 74.0% 88.2% 100.0% 87.5% 52.6% 254.7% 112.0% 55.1% 67.6% 188.7% 137.5% 77.6% 72.0% 85.8%
46.1 41.3 40.2 36.4 35.9 35.8 34.2 33.9 32.2 32.0 31.4 31.4 30.4 29.5 29.5 28.4 28.1 27.7 27.6 26.9 26.7 26.3 26.2 25.8 25.8 25.1 25.1 25.1 25.1 25.0
21.8 22.9 56.5 48.2 27.0 43.0 34.7 47.3 21.2 48.2 32.1 25.2 24.2 37.9 20.9 21.0 25.0 38.6 25.8 25.2 27.2 35.4 41.3 53.7 21.9 40.1 24.9 28.1 21.9 30.9
13.8 10.7 7.5 4.2 8.6 10.1 8.9 11.1 8.3 14.6 12.4 8.8 17.8 5.6 3.4 11.6
12 34 16 15 23 18 29 19 16 11 12 52
NJ PA PA PA PA
4.3 3.3 6.5 9.8
SOURCE :: RealtyTrac sales deed data, U.S. Census bureau
thinkrealty . com / mag | 9
owned a high-quality portfolio of homes that fit strategically in our markets,” Singelyn said. American Homes 4 Rent now owns more than 47,000 homes in 22 states with at least 1,000 homes in each of 17 markets across the country, representing about 81 percent of the homes in all markets, and at least 2,000 homes in each of eight markets, the company said. • CORELOGICREPORTS 1MILLION U.S. BORROWERSREGAINED EQUITYIN2015 Analytics and data provider CoreLogic reports that 1 million borrowers regained equity in 2015, bringing the number of mortgaged residential properties with equity at the end of Q4 2015 to some 46.3 million, or 91.5 percent of all mortgaged properties in the United States. Nation- WEB :: www.americanhomes4rent.com
INVESTORS STILLOPTIMISTIC BUTTAKING STEPSTO ‘DE-RISK’ PORTFOLIOS, SURVEYFINDS KPMG 'S 2016 Real Estate Industry Outlook Survey finds investors still are optimistic about the U.S. real estate market, with 91 percent expecting real estate fundamentals to be about the same or better during 2016, compared to last year. However, the survey also found that investors are growing cautious
MAY 16-18 4th Annual Single Family Rental Investment Forum (East) Sponsored by IMN Miami, Fla. www.imn.org MAY 26-28 15th Annual MrLandlord.com National Convention Sponsored by MrLandlord.com St. Louis, Mo. www.mrlandlord.com UPCOMING EVENTS
about the longevity of the cur- rent expansion cycle and, as a result, are taking steps to "de-risk" their portfolios. "Investors are becom- ing more cautious in their decision-making as we near the end of the economic cycle, leading to changes in operations,
JUNE 2-3 2nd Annual Real Estate Private Equity Forum on Senior Housing
Sponsored by IMN Santa Monica, Calif. www.imn.org
portfolio management decisions and the timing of their investments," Greg Williams, KPMG’s national sector leader for build- ing, construction and real estate, said in a news release. "They need to be prepared for the coming change in momentum." In the KPMG survey, only 8 percent of investors said they will enter newmarkets, down from 28 percent last year. To view the full report: www.kpmg. com/US/en/industry/building-construc- tion-real-estate/Documents/kpmg-real- estate-outlook-survey-2016.pdf • AMERICAN HOMES 4 RENT, AMERICAN RESIDENTIAL PROPERTIES MERGE AMERICAN HOMES 4 RENT and AMERICAN RESIDENTIAL PROPERTIES have completed their merger, “further establishing American Homes 4 Rent as the largest publicly traded owner and op- erator of single-family rental homes,” ac- cording to American Homes 4 Rent CEO David Singelyn. Corporate headquarters will remain in Agoura Hills, Calif. “American Residential Properties
wide, borrower eq- uity increased year- over-year by $682 billion in Q4 2015, CoreLogic said in a news release. The company’s analysis also showed approximately 120,000 properties lost equity in the fourth quarter last year compared to the third quarter. The 4.3 million mortgaged
JUNE 17-18 Think Realty Expo Baltimore, Md. www.thinkrealty.com/events
JUNE 13-14 17th Annual U.S. Real Estate Opportunity & Private Funds
Investing Forum Sponsored by IMN New York www.imn.org
AUGUST 11-13 Think Realty Global Conference & Expo San Francisco, Calif. www.thinkrealty.com/events
residential properties with negative equity (also referred to as “underwater” or “upside down” homes) at the end of the fourth quarter last year represented a 2.9 percent increase over the third quarter. Home equity in the last quarter of 2015 increased by double digits for the 13th consecutive quarter, according to Core- Logic’s analysis. •
To list your upcoming event in our July/ August issue, please email the details, along with your contact information, to firstname.lastname@example.org by May 6.
WEB :: www.americanhomes4rent.com
10 | think realty magazine | may :: june 2016
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THE BIG PICTURE
TRUTH IN ADVERTISING
HOW TO SEPARATE THE ‘REAL-DEAL’ EDUCATORS FROM REAL ESTATE INVESTING GURUS AND SCAMMERS.
The Most Important Lesson
by Eddie Wilson
n real estate investing, as in other aspects of life, education is the foundation for success. But it’s not as simple as randomly picking up a book on the subject, answering the pitch from that late-night TV ad or choos- ing the “only mentor you’ll ever need” from the top of Google’s search results. The growing acceptance of investing
in residential real estate as an effective wealth-building strategy has resulted in an explosion of educators in the space. But to date, this corner of the industry has been largely unregulated, which makes it that much more important for an investor to do the same due diligence in evaluating an educational offering as in contemplat- ing a multimillion-dollar deal.
While many individuals are qualified and eager to share their expertise, other self-proclaimed gurus are expert only at taking thousands of dollars from unsus- pecting investors in exchange for empty promises of overnight success and riches. A good place to start your search is with established, respected networks and orga- nizations or your local real estate investors
12 | think realty magazine | may :: june 2016
association or meet-up group. There you’ll find many other like-minded investors who are more than willing to share their knowledge and provide referrals to credi- ble learning systems and educators. And it won’t cost you thousands or tens of thousands of dollars. The price to attend a typical real estate investors association meeting is nominal, and you’ll find an even better value in an annual membership, which will provide you with access to a rich cache of source material as well as educational speakers, training and discounts from major-brand vendors. There also are online sources—Bigger Pockets is the best-known—that offer valuable networking opportunities with other investors who have first-hand knowledge of the strategy you want to pursue. Now there also is ThinkRealty.
com, which goes beyond networking and archived information and also offers its members buying power, legal advocacy assistance, admission to multiple real estate investor expos and a global conference, plus a subscription to this magazine. Aside from those who are more than willing to share their advice with you for the price of a cup of coffee, you can connect with more-experienced inves- tors who will take you under their wing, some for a fee and others in return for your efforts toward their deals’ success. Of course, even these resources aren’t without their share of bad actors. So how do you separate the good from the bad? When evaluating potential mentors or educational program providers, ask yourself these questions:
• Does he or she “walk the walk” or simply “talk the talk”? Is this person an investor who is actively practicing the strategy being touted? • How long has he or she been in business? What are the results of his or her deals? Independently verify the person’s claims. • What do former students or business associates say about this person? Does the program actually work? Check online reviews. Ask for references and call them yourself. • What about his or her business practices? Is the program ethical and legal? Check with the Better Business Bureau, look for certifica- tions and review public records. • How much does the program cost? Beware of hidden fees, or a bait- and-switch scheme, in which you are drawn to an event for a small fee (or none at all), only to be upsold into a pricey program that’s available “today only.” • Do you have recourse if the program does not produce the promised re- sults? Can you get your money back? Finally, beware of those claiming to of- fer the key to overnight success. Anyone who’s truly on the up-and-up will tell you that real estate investing is no get- rich-quick undertaking but rather more like a marathon. It takes commitment and dedication—long hours, hard work, plus a recognition that this is a lifelong process. The learning never stops, no matter how experienced you become. • EddieWilson is president of Affinity Enterprise Group, parent company of Think Realty, a hub of investor resources for its members, including networking, events, buying power, legal advocacy and a growing archive of valuable information and expert advice. For more information, visit www.ThinkRealty.com
thinkrealty . com / mag | 13
THE BIG PICTURE
TRENDS & ISSUES
INTERNATIONAL INVESTORS SWOOPED IN WHEN THE U.S. ECONOMY FALTERED. NOW THAT THE DOLLAR IS REGAINING STRENGTH, THEY’RE STILL HERE.
by Robert Springer
merica – the land of the free, home of the brave and beacon to international real estate investors? While Francis Scott Key might spin in his grave with that last phrase, the entrepreneur in him would be astonished at how much foreign investors crave American resi- dential real estate. Foreign investment in U.S. real estate has surged, reaching $87.3 billion of A
completed deals in 2015 after only notching $5 billion in 2009, according to a January 2016 Bloomberg Business report citing data from Real Capi- tal Analytics Inc. Chinese investors are now the top foreign purchasers of U.S. homes and condominiums, finally surpassing Canadian investors. And Chinese investors have expen- sive tastes, purchasing homes with an
average value of $831,800, far ahead of second-place buyers from India at $460,200, according to the National Association of Realtors. For the first time, clients from China (People’s Republic, Taiwan, and Hong Kong) accounted for the largest share of sales transactions at 16 percent, up from 9 percent since this data was collected in 2007. In contrast, purchases by Canadian
14 | think realty magazine | may :: june 2016
buyers declined to 14 percent of trans- actions. Purchases by buyers from India increased to 8 percent, while purchases from Mexico held steady at about 9 percent. Purchases from the United Kingdom accounted for 4 percent, down from 9 percent in 2010. There’s an active debate about whether foreign real estate investment helps or hinders the U.S. economy. One expert who works with international investors believes that we have international real estate investors to thank for pulling us out of the recent economic downturn. “You know, we had the Great Recession, and if it wasn’t for international money coming in, we could still be in a Great Recession,” said RJ Palano, real estate investor and owner of BuyCashFlowProperties.com. And while that debate simmers, foreign investors show no sign of losing their ar-
dor for American real estate. Here’s a look at why and what they’re buying.
The strong economy that Cadman mentioned is the second major factor that draws investors to U.S. real estate. Americans may grouse about their econ- omy, but it’s still the world’s largest and viewed as very stable. It also presents real estate investment opportunities most other countries can’t match. Take Australia, for example. “I think the average home price over there is like $350,000, and the amount of rent they can get is not enough to really make the numbers work,” said Craig Jennings, president and founder of BuyMemphisNow.com. Jennings added that Australians can buy several $100,000 U.S. houses for the price of one house in their home country. “To them, that seems unbelievably cheap,” Jennings said. Lastly, American real estate companies that cater to international investors have made it easier for international investors
WHYAMERICA? There are several reasons why inter- national investors crave U.S. real estate. Combining all of the factors makes American real estate a compelling buy. International investors purchase U.S. real estate for the same reason bond investors buy U.S. Treasury bonds when they’re nervous about the state of the economy: safety. “From the Canadian per- spective, we view American real estate as relatively safe. The rules surrounding all of your property are well defined, and the economy is viewed as being strong and stable,” said Travis Cadman, president of Investar USA, a Canadian company that provides turnkey real estate investments in the United States.
thinkrealty . com / mag | 15
were selling for $50,000 or $60,000 with rents in the $750 to $800 range. “Once I started showing it to them, and we had the full turnkey system, it was almost like just a complete overnight—shot out of a cannon—change in our business,” he says. His business with Aussies turned out to be a currency and cultural play, as the dovetailing of a strong Australian dollar and a similar culture and language made for good business. At its peak, Australian customers represented 80 to 90 percent of Jennings’ business. The strengthening U.S. dollar has brought that figure down to about 20 percent. Investors who bought when the U.S. dollar was weak are still prospering now that it’s strong. Those who sell are seeing healthy profits, as prices have risen and benefiting as well, according to Jennings, as they’re renting in the same strong U.S. currency. The strengthening dollar has slowed Canadian and Australian investment in U.S. real estate, but the Chinese are still investing heavily in American property. SINGLE-FAMILYOR MULTIFAMILY? YES Experts say investors’ appetite for a certain type of residential property de- pends on several factors, with familiarity and the buyer’s reading of the market- place being the two most important. First-time Chinese buyers, for exam- ple, tend to buy multifamily as “the pro- cess of buying apartments is much easier to comprehend, because it's what they know from their own experience back home, where most people are urban and live in apartments,” said Charles Pittar, CEO of Juwai.com, a company that helps Chinese invest in U.S. real estate. Cadman said Canadians were very practical and bought single-family after the Great Recession because it was “on their sales proceeds will be brought home in the now- strong U.S. dollars. And those who are still renting their U.S. properties are
sale.” By 2013, they were looking at mul- tifamily because single-family prices in the United States had normalized. Foreign buyers can have an effect on housing prices in certain neighbor- hoods, effectively bidding up prices. “This typically happens in premium areas that attract a large number of new buyers from China and where supply is constrained,” Pittar says. “In areas where new supply can be created, Chinese buyers often spur new construction and thus enable local markets to more than meet the new wave of demand." OUTLOOK FOR FOREIGN INVESTORS Experts say that once the dollar drops in value, international investment in U.S. residential real estate will pick up again. “So when the loonie starts to rebound, regain strength against the U.S. dollar, you’ll see the level of interest from Canadian investors spike up again because of the opportunities made available in the U.S.,” said Cadman. Pittard said Chinese buyers will become even bigger players on the international scene as they’re making up for lost time. "Despite Chinese buyers being the biggest buyers these last few years in global real estate markets, China has far to go before it arrives at ownership lev- els of foreign assets consistent with the size of its economy. It’s trying to catch up,” Pittar said. “A big driver is massive pent-up demand for overseas invest- ment, because they just couldn’t do it at all until very recently." With the shifting fortunes of the dol- lar, it’s hard for U.S. investors to com- pletely depend on foreign investors for the bulk of their income, yet many have profited by seeking out foreign investors and helping them find U.S. residential investment properties. •
RESOURCES BUY CASH FLOW PROPERTIES WWW.BUYCASHFLOWPROPERTIES.COM 813-435-1551 -
BUY MEMPHIS NOW WWW.BUYMEMPHISNOW.COM 901-417-8427 - INVESTAR USA WWW.INVESTARUSA.COM 855-456-3223 -
JUWAI WWW.JUWAI.COM 646-281-7322
to buy and manage investment prop- erty. One way is by providing turnkey investments, with the company finding the investment property, assisting with the purchase and providing property management services to the investor. U.S. regulations and tax laws are dif- ferent, and some companies have done a good job helping international investors understand the differences so they know what they’re getting into. IT’SALLABOUTTHE DOLLAR When the dollar is weak, as it was as recently as 2012, U.S. real estate can be a very profitable investment for foreign investors. Australians and Canadians poured money into U.S. real estate when their dollar and loonie, respectively, were strong in the early part of this decade. When Jennings heard about how strong the Australian dollar was becom- ing relative to the greenback, he started cold-calling Aussie real estate agents. He says they “could not believe” U.S. houses
Robert Springer is a regular freelance contributor to Think Realty Magazine. Contact him at email@example.com.
16 | think realty magazine | may :: june 2016
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Founders Brandon Thompson and Will Hardy have found a formula for successful growth of their company, Investor Network, and they freely share it.
BYSUSANTHOMAS SPRINGER PHOTOS BY TIM GLOVER
18 | think realty magazine | may :: june 2016
WE’RE FOLLOWING THE PRINCIPLES OF HELPING OUT OTHERS AND STEWARDING THEIR MONEYWELL— THAT HAS GIVEN US THE REPUTATION WE HAVE.” WILLHARDY , RIGHT, CO-FOUNDER WITH BRANDONTHOMPSON , LEFT, OF INVESTOR NETWORK
thinkrealty . com / mag | 19
expanded outside their home turf of Atlanta, Ga., to Memphis, Tenn., and have their eyes set on other markets, too. They’ve started providing real estate education for free. They’ve even launched a technology product. And this targeted growth is benefiting both the company and investors. “Since 2014, we’ve actually had a
and have continued to analyze the real estate investment market to find opportunities to adapt and grow. Their goal is 500 to 1,000 properties in the next five to seven years. The partners have rebranded Inves- tor Network to reflect the fact that they now offer—under one roof—all the in- vestment services clients need. They’ve
THERE’S NO GRASS GROWING under the foundation of one Atlan- ta-based investment company. Investor Network is on the move. Not ones to be idle, founders Brandon Thompson and Will Hardy have expanded in both traditional and unexpected ways. These partners regrew a successful business after the economic downturn
LEARN FROM INVESTOR NETWORK TWITTER: @investornetwork FACEBOOK: facebook.com/investornetworkstore
INSTAGRAM: investornetwork ITUNES: Investor Network's Podcast
YOUTUBE: Investor Network
GET A FREE 90-DAY TRIAL OF REALTY CABINET WITH PROMO CODE 90DTBPIR
20 | think realty magazine | may :: june 2016
world can come to us and buy bulk real estate from either our Memphis or Atlanta inventory.” Whatever strategy, Investor Network has refined the most effective systems, logistics and teams to make properties perform well. One guideline is that Investor Network only makes money upon the successful running and resale of the properties, which the partners say makes investors feel safe and secure knowing “we don’t make money until they make money.” The company
40 percent increase in business, year in and year out,” says co-founder Brandon Thompson. “Our main focus for our second market is Memphis, but here in Atlanta, we’ve been strong in the big flip market.” In addition to Investor Network’s growth, their clients appreciate how the various investment options grow
their portfolios. “The lowest return is 20 percent on our flip program and upwards of 66 percent—but right now the average re- turn is 36 percent,” says Thompson. “So our investors are extravagantly happy at this point with those strong returns.” STRATEGIES FOR SUCCESS The partners offer four strategies depending on what’s most profit- able in market conditions. The flip program in Atlanta uses the investor’s capital to buy a residential property. Investors get 5 percent annual return for the duration of the note, with 50 percent of the profits when the property sells. A second strategy in Atlanta is buy and hold for multifami- ly and commercial property. It’s a new approach that’s booming. “We’re buying in a lot of historic communities and taking these commer- cial, dilapidated properties and renovat- ing them, bringing them up to code and leasing them out or tending to them for great ROI,” says co-founder Will Hardy. In Memphis, the company specializ- es in a buy-and-hold strategy thanks to the low cost of homes. “Nowhere else in the United States can you get single-family homes fully reno- vated for less than $50,000,” says Hardy. Their goal is several hundred units in Memphis in the next few years. They plan to sell those units whole- sale to hedge funds to buy out their investors. So investors will earn 9 percent return on that program. The fourth program is wholesale—a strategy that has earned them a name beyond their home turf. “We have real estate ready to sell to investors in bulk packages,” says Hardy. “These properties are either ful- ly renovated that have just been flipped and ready to be sold at wholesale cost, or they’re also tenanted and cash-flow- ing. So investors from all over the
is interested in the long-term advancement and protec- tion of the investor. That value has resulted in a waiting list of investors.
“We’re following the principles of helping out others and stewarding their money well—that has given us the reputation we have,” says Hardy. “One of the most gracious compliments we can get from our investors all over the world is, ‘We’ve never dealt with a company that gives us the communication like you as owners of the company do.’ We are personally involved by phone, email or in person with every one of our investors on a weekly basis.” ONE-STOP SHOP Investor Network rebranded to better communicate the company’s full offering to investors. Thompson and Hardy noticed competitors might offer in-house flip programs or in-house wholesale programs, but few compa- nies offered a true one-stop shop for all services. Since 2014, they brought everything in-house, including real estate agents, property management,
thinkrealty . com / mag | 21
depending on what’s most profit- able in market conditions. The flip program in Atlanta uses the investor’s capital to buy a residential property. Investors get 5 percent annual return for the duration of the note, with 50 percent of the profits when the property sells. A second strategy in Atlanta is buy and hold for multifami- ly and commercial property. It’s a new approach that’s booming. “We’re buying in a lot of historic communities and taking these commer- cial, dilapidated properties and renovat- ing them, bringing them up to code and leasing them out or tending to them for great ROI,” says co-founder Will Hardy. In Memphis, the company specializ- es in a buy-and-hold strategy thanks to the low cost of homes. “Nowhere else in the United States can you get single-family homes fully reno- vated for less than $50,000,” says Hardy. Their goal is several hundred units in Memphis in the next few years. They plan to sell those units whole- sale to hedge funds to buy out their investors. So investors will earn 9 percent return on that program. The fourth program is wholesale—a strategy that has earned them a name beyond their home turf. “We have real estate ready to sell to investors in bulk packages,” says Hardy. “These properties are either ful- ly renovated that have just been flipped and ready to be sold at wholesale cost, or they’re also tenanted and cash-flow- ing. So investors from all over the world can come to us and buy bulk real estate from either our Memphis or Atlanta inventory.” Whatever strategy, Investor Network has refined the most effective systems, logistics and teams to make properties perform well. One guideline is that Investor Network only makes money upon the successful running and resale of the properties, which the partners say makes investors feel safe and secure knowing “we don’t make money until
THERE’S NO GRASS GROWING under the foundation of one Atlan- ta-based investment company. Investor Network is on the move. Not ones to be idle, founders
PERSONNEL FILE NAMES: Brandon Thompson and Will Hardy COMPANY: Investor Network LLC, Atlanta, GA
Brandon Thompson and Will Hardy have expanded in both tradi- tional and unexpected ways. These partners regrew a successful business after the eco- nomic downturn and have continued to analyze
HOMETOWN: Brandon - Atlanta, GA; Will - Louisville, KY
the real estate investment market to find opportunities to adapt and grow. Their goal is 500 to 1,000 properties in the next five to seven years. The partners have rebranded Inves- tor Network to reflect the fact that they now offer—under one roof—all the in- vestment services clients need. They’ve expanded outside their home turf of Atlanta, Ga., to Memphis, Tenn., and have their eyes set on other markets, too. They’ve started providing real estate education for free. They’ve even launched a technology product. And this targeted growth is benefiting both the company and investors. “Since 2014, we’ve actually had a 40 percent increase in business, year in and year out,” says co-founder Brandon Thompson. “Our main focus for our second market is Memphis, but here in Atlanta, we’ve been strong in the big flip market.” In addition to Investor Network’s growth, their clients appreciate how the various investment options grow their portfolios. “The lowest return is 20 percent on our flip program and upwards of 66 percent—but right now the average re- turn is 36 percent,” says Thompson. “So our investors are extravagantly happy at this point with those strong returns.” STRATEGIES FOR SUCCESS The partners offer four strategies
COMPANY FOUNDED: 2007
NUMBER OF TRANSACTIONS SINCE INCEPTION: More than 1,300
NUMBER OF CURRENT INVESTORS: 47 key international investors, and more than 500 on a wholesale insider list TOP QUESTION NEW INVESTORS ASK: How am I protected? MOST MISUNDERSTOOD REAL ESTATE TERM—AND WHAT IT ACTUALLY MEANS: Cap rate. “Believe it or not, there are a ton of investors that call us that don’t un- derstand this term,” Thompson and Hardy say. “Cap rate is essentially a way to esti- mate a rate of return on your investment. You take the net operating income and divide it by your purchase price and then you get your cap rate or rate of return.” TOPIC OF INVESTOR NETWORK’S MOST POPULAR YOUTUBE VIDEO: “What Is a Blind Offer?”
FULL-TIME EMPLOYEES: 16
COMPANY CULTURE: “When it deals with your money, you want to be in the know. Our personal lines are open for the investor anytime they want to talk to us,” the two say.
22 | think realty magazine | may :: june 2016
change in their re-brand is their values. For example, they don’t call themselves experts in every area. In the Atlanta area, they know 17 counties “like the back of our hand,” so they haven’t expanded into more counties. “We know the area. We know the strategy. We know the agents,” says Hardy. “We know what the buyers are desiring—and that’s made us success- ful.” In their new market of Memphis, they buy in seven counties. “So the reality is, we don’t call our- selves experts all across Georgia and Tennessee—our guidelines have kept us true to who we are,” says Hardy. “And that’s why we keep money hand over fist for our investors.” “We wanted to create the atmosphere and the concept that when the outside investors came to us, we took them by the hand and made buying and selling real estate easy for them,” says Hardy. “We’ve relaunched ourselves as a private equity company specializ- ing in real estate investments,” says Thompson, adding that real estate in America is where true wealth is built year after year. MOVING INTOMEMPHIS The partners researched many mar- kets before they decided to put “boots on the ground” in their second market of Memphis. The city was a good fit for their company, so they expanded using their proven systems and getting the right people in place. They’ve been operating in Memphis for more than a year and have purchased more than 50 properties so far. With Memphis just a half-day drive away, Thompson and Hardy visit the area once each quarter to oversee properties and process. The low cost of real estate was a compelling factor in their choice. While inventory is limited across much of the United States, the part- ners are “extremely excited” about the
they make money.” The company is interested in the long-term advancement and protec- tion of the investor. That value has resulted in a waiting list of investors. “We’re following the principles of helping out others and stewarding their money well—that has given us the reputation we have,” says Hardy. “One of the most gracious compli- ments we can get from our investors all over the world is, ‘We’ve never dealt with a company that gives us the communication like you as owners of the company do.’ We are personally involved by phone, email or in person
with every one of our investors on a weekly basis.” ONE-STOP SHOP Investor Network rebranded to better communicate the company’s full offering to investors. Thompson and Hardy noticed competitors might offer in-house flip programs or in-house wholesale programs, but few compa- nies offered a true one-stop shop for all services. Since 2014, they brought everything in-house, including real estate agents, property management, remodeling teams and brokerage. One thing the partners didn’t
thinkrealty . com / mag | 23
THE BIG PICTURE
At the time, the Days On Market (DOM) was longer than 90 days, with an increasing inventory and some drops in the appreciation rate for entry-level houses. The unemployment rate was low, as there had been a couple years’ build- up for hosting the Olympics. But I knew joblessness was going to increase due to the inevitable loss of jobs post-Olympics. I was terrified to think of getting into a property for $200,000, only to see the market shifting before I could get it rehabbed and back on the market. Plus, I wanted more than an 8 percent return, but the rentals in the same area were just offering that amount. I wanted a low-cost investment with a high cash-on-cash return that would generate a nice ongoing income. For me,
IN REAL-LIFE REAL ESTATE INVESTING, IT IS ABOUT WHETHER YOU WIN OR LOSE.
Playing toWin with Mobile Homes
by Dawn Erling
ave you ever played Monopoly and through well-played strategy ended up with expensive, money-making properties? Did you always win the game when you played? I will admit to being competitive when I play games. And I will admit that many of our ideas as adults are proba- bly shaped by childhood games. Yet the properties in which I now invest as an adult are the kind you’ll never see on a Monopoly game board. Who would choose “Trailer Park Way” when you have the option of “Park Place”? It would be nice if someone just handed me cash and said, “Invest this in real es- H
tate for me, please, and keep all the mon- ey and profit for yourself.” In a game, this can happen, but in real life, it does not. Still, that doesn’t mean I can’t win the game. It simply calls for some creativity in your thinking and in your investing. Having taught aspiring real estate in- vestors for more than 14 years, I am often asked, "How did you get started investing in mobile homes?" For me, it was a necessity. When I started investing, the real es- tate market was volatile. I could tell that the local market would change quite a bit in the six months as the 2002 Olympic build-up in Utah finally subsided. (Guess what? I was right!)
> Continued to :: PG 136
Dawn Erling has been in the real estate industry for 20-plus years, investing in mobile homes for more than 10 years. She is a nationwide professional speaker
and trainer and co-founder of SellThisMobileHome. com, which offers a variety of training programs and tools for anyone interested in investing in mobile homes on leased land, purchased land or entire mobile home parks. For more details, go to www. sellthismobilehome.com/premium.
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