DALLAS-FORT WORTH MARKET IS SIZZLING-HOT
REGIONAL SPOTLIGHT
NOV/DEC 2016
TRENDS & ISSUES WHAT’S AHEAD IN 2017 FOR REAL ESTATE INVESTORS
Q &A: MERRILL CHANDLER MAKING SENSE OF CREDIT SCORING
SPECIALAD SEC TIONS
• THE PIP GROUP • GREYSTONE RESIDENTIAL • FAST HOME SOLUTIONS
AWealth of Resources KATHY AND RICH FETTKE WANT TO SEE EVERYONE SUCCEED
PAGE 18
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TABLE OF CONTENTS
INSIDE THIS ISSUE
THE BIG PICTURE 12 Forward Thinking
NUTS & BOLTS 38 Turnkey Tips
Market observers expect real estate investing in 2017 to be healthy—if not easy. by Robert Springer 24 Get Into the Flow If you don’t have a continuous flow of leads and deals coming into your business, you will not survive for long. by Jeremy Brandt 28 Leading Question A well-designed, well-managed website is the key to getting more leads from online searchers. by Danny Johnson 30 Cautionary Tale How an overlooked mistake invalidated one inves- tor’s IRA even before it was created. by Bryan Ellis UP CLOSE & PERSONAL 46 Demystifying Credit Scoring Merrill Chandler discusses the importance of having a credit profile that’s not just good—but great. by Susan Thomas Springer
Turnkey’s appeal is that the strategy is relatively easy, but that doesn’t mean totally hands-off. by James Hart
108 The ‘Moat Theory’
If you could fail forward, what might your future look like? by Mitch Stephen
114 Seasonal Safety
10 tips to help eliminate holiday mishaps at your properties. by BreAnn Stephenson
120 Only the Strong Survive Do you have what it takes to be a successful landlord? by Kevin Ortner
BYTHE NUMBERS 128 Tax Advantages
Don’t overlook the long-term benefits of investing in real estate. by David Wieland 130 Measuring Risk RentFax analytics can help investors gauge rental income risk both close to home and far afield. by Heather Elwing-Dixon
ON THE COVER SHARING THEWEALTH
Real Wealth Network’s KATHY FETTKE believes in education and research freely disseminated.
by Teresa Bitler :: photos by Doug Ellis
50 With a Little Help
132 Adding it All Up
Investor credits Georgia REIA with making his real estate dream a reality. by Carole VanSickle Ellis
What does the ‘new housing crisis’ mean for the ‘real’ real estate market? by Carole VanSickle Ellis
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62
64
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52 Motivation ... or Excuse? The same characteristics define successful and not-so-successful real estate investors. It’s your choice. by Kevin Guz 54 Street Smart Panel Once a real estate investor buys a rental property, what can be done to safeguard that investment?
REGIONAL SPOTLIGHT
INVESTOR PROFILE
SEVEN THINGS
BY THE NUMBERS
ENTREPRENEUR’S CORNER 136 Lifelong Process
THE HEAT IS (STILL) ON Investing opportunities abound in Dallas-Fort Worth.
MASTERING THE DFWMARKET Rob Barney understands the needs and potential of the area.
PROFIT POINTS 7 ways to increase the monthly net on your rentals.
REAL VALUE IN SERVING RVs RV shelter can be a strong selling point for buyers and renters.
Smart entrepreneurs know that the learning never stops. Successful ones act on those lessons. by Ben Rao
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FROM THE EDI TOR- IN-CHI EF
PUBLISHER R. Michael Wrenn
Regional Spotlight Coverage Hits the Mark This Issue
PRESIDENT, AFFINITY ENTERPRISE GROUP Eddie Wilson | EWilson@AffinityEG.com
EDITOR-IN-CHIEF Linda Wienandt LWienandt@ThinkRealty.com
VICE PRESIDENT OF MEDIA SALES Robert Rakowski RRakowski@AffinityMediaServices.com 913-599-2020
arket changes can happen fairly swiftly, so investors want to be
a meteoric rise—40 percent—since the Great Recession. What goes up has got to come down at some point, right? So it is said, but what this area has going for it is a diversified—and growing— economy that is not totally dependent on oil and gas. The area also has been drawing in- dustries like high tech, defense, financial services, life sciences and others. Where industries and jobs go, so do people and the need for housing. And increasingly, that means rental housing. In fact, just the other day I saw Dallas—along with another Texas city, Austin—pop up on a list of the 15 best cities in which to own investment property from GoBankingRates.com. Our report bores down to the reasons why. In addition to an overview of the market, we take a close-up look at DFW Airport and its own history of strategic planning, development and investment. And Susan Thomas Springer, another regularly contributing writer for Think Realty Magazine, profiles Rob Barney, who as well as running lending company DHLC Invest- ments Inc., continues to find success investing in Dallas’ “M Streets” neighborhood. Upcoming in the January-February issue, we’ll be spotlighting the Orlando, Florida, area. That’s another hot area for investing—and one that is not likely to change by its press time. •
SENIOR STAFF WRITER James Hart EDITORIAL ASSISTANT Heather Elwing-Dixon
assured they’re getting the most up-to- date, relevant information possible to use in their decision-making. At Think Realty Magazine, we make every effort to report the most recent news, trends and statis- tics—both in print and online. That sometimes can be challenging in the print magazine world, when you are dealing with strict early deadlines to accommodate printers’ and distributors’ schedules. But we regularly monitor various industry measures and markers and consult with recognized ex- perts in the field so that we can confidently deliver you actionable information on strategies as well as localities. For the latter, we plan ahead each year for the areas of focus for our Community Investor/Regional Spot- light special reports. Since the planning takes place so far ahead of time for the issues at the end of the calendar year, sometimes the topic areas change by the time their turn rolls around. Not so with this issue, in which we shine the “Re- gional Spotlight” on the Dallas-Fort Worth area. This is an area that has been red-hot for some time now. So much so, in fact, that it also has started showing up on some “overheated housing market” lists. As regular contributing writer Carole VanSickle Ellis notes in our report (beginning on Page 56), home prices have made
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CONTRIBUTING WRITERS Teresa Bitler, Jeremy Brandt, Clint Coons, Bryan Ellis, Carole VanSickle Ellis, Dawn Erling, John Gohde, Abhi Golhar, Kevin Guz, Steven Hickox, Danny Johnson, Kevin Ortner, Ben Rao, Pete Reeb, Dennis Spivey, Robert Springer, Susan Thomas Springer, Mitch Stephen, BreAnn Stephenson, Kris Taylor, Corinne Tesh, John Tesh, John Warren, David Wieland, and Ingo Winzer 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 Doug Ellis
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NEWS BRIEFS
NATIONAL UPDATES
estimated tax bill amounts. TLE results are provided through Black Knight’s LoanSphere Exchange, a Web-based technology that enables lenders and service providers to do business electronically through a secure, standards-based platform. Black Knight Financial Services Inc. is a Fidelity National Financial (NYSE:FNF) company and a leading provider of integrated technology, data and analytics solutions that fa- cilitate and automate many of the business processes across the mortgage lifecycle. •
Chinnici has nearly 20 years of experience in the property management industry, most recently working as the presi- dent of Corazon Real Estate, a company he founded in 2005. Seeking to improve revenue per unit managed, replace less profitable properties with higher quality accounts and increase overall company effectiveness, Chinnici decided to convert the business to a Real Property Management franchise. The Real Property Management franchise system hopes to introduce approximately 50 to 75 new offices to the system by the end of next year, which would propel its foot- print to reach over 325 offices nationwide. Many of these will be conversions of existing property managers to the Real Property Management brand. “With an increasing number of renters in the U.S., but limited quality of property management services, demand for quality support that renters and investors deserve has never been higher,” said Lukas Krause, CEO of Property Management Business Solutions, the franchisor of Real Property Management. “Because of this trend, we are at- tracting top-tier talent, like Tony, to Real Property Man- agement, which allows us to continue elevating property management standards across the nation.” •
PEOPLE IN THE NEWS REALOGY FRANCHISE GROUP: John Peyton has assumed the newly created role of president and chief operating officer for Realogy Franchise Group, a subsidiary of Realogy Holdings Corp. (NYSE: RLGY). Peyton formerly was senior vice president of brands and shared services for Starwood Hotels & Resorts Worldwide Inc., where he spent 17 years in a variety of roles. Alex Perriello , CEO of the Realogy Franchise Group, will now focus primarily on strategic growth while Peyton will be responsible for the op- erational management of Realogy’s franchise brands. Peyton is a recognized global branding leader in a multibrand environment. Realogy Holdings Corp. (NYSE: RLGY) is a global leader in residential real estate franchising and brokerage with many of the best-known industry brands including Better Homes and Gardens Real Estate, CENTURY 21, Coldwell Banker, Cold- well Banker Commercial, Corcoran, ERA, Sotheby’s International Realty and ZipRealty. Collectively, Realogy’s franchise system members operate approximately 13,600 offices with more than 261,000 independent sales associates conducting business in 109 countries and territories around the world. TRANZON LLC: Fourth-generation auctioneer Scott King has joined Tranzon LLC as president and chief executive officer, suc- ceeding DavidWarren . King, longtime executive vice president of J.P. King, currently serves on the National Auctioneers Associa- tion board of directors and serves as an instructor in the Certified Auctioneers Institute. He joins Tranzon after 35 years in his family business, the J.P. King Auction Company. Tranzon LLC is one of the largest real estate auction companies in the United States, with 30 independently owned and operated offices coast-to-coast. B2R FINANCE: Joe Hullinger has joined B2R Finance, the larg- est lender for single-family rental property investors, as a senior vice president. In that role, Hullinger is responsible for oversight of the company’s single property loan sales team as well overall operations for the organization. Additionally, Hullinger will over- see the portfolio loan sales team, which serves borrowers with more than seven properties and loan sizes greater than $700,000. Hullinger most recently was an operations executive at Genworth Mortgage Insurance, where he directed loss mitigation activities, created strategies for systematic targeted marketing campaigns and leveraged a predictive analytics model for increased cam- paign efficiencies. He also has worked at BNCMortgage, Finance America, Fieldstone Mortgage, America Mortgage Solutions and Transamerica Mortgage Company.
REALTYSHARES SURPASSES $200 MILLION MARK
REALTYSHARES , a leading online marketplace for real estate investing, has announced that it has raised more than $200 million in capital from its network of investors for residential and commercial real estate projects across the country. The company connects more than 25,000 accredited and institutional investors with pre-vetted real estate companies and operators looking to raise debt or equity capital through its marketplace. This community of investors is using the Real- tyShares marketplace to review and participate in opportuni- ties for as little as $5,000. “As a leader in the online real estate investing space, this ac- complishment is not only important to the team here at Real- tyShares, but also to the industry as a whole,” said Nav Athwal, founder and CEO of RealtyShares. “By marrying technology with changes in regulations under the JOBS Act,
SOURCE :: Black Knight Financial Services
FLOODING EFFECTS STILL BEING FELT
Properties in 20 Louisiana parishes (counties) may be at an increased risk of loss as a result of major flooding
we have been able to streamline the invest- ment process, provide greater accessibility and reduce the barrier to entry substan- tially. This is game-changing for the real estate industry, and we’re excited to be at the forefront.” In addition to this milestone, Real-
in August. Some 300 proper- ties with an allocated property balance of more than $1 billion are at risk, according to a report recently issued by Morningstar Credit Ratings LLC (https://rat- ingagency.morningstar.com/). The properties are backed by 214 commercial mort- gage-backed securities. Most of the properties are in the Liv- ingston and East Baton Rouge parishes, which were included in what FEMA proclaimed as a major disaster area.
SOURCE :: Real Property Management
tyShares also recently announced that it has closed a $30 million line of credit through an institutional partner, which will allow the company to pre-fund every debt deal, as well as select equity investments, before making them available to investors through its marketplace. The credit line allows the platform to put its own balance sheet toward funding projects, bringing a new level of commitment to the invest- ments listed on the platform and better alignment between RealtyShares and its base of accredited investors. •
‘TAX FOR LOAN ESTIMATION’ TOOL INTRODUCED
The data and analytics division of BLACK KNIGHT FINANCIAL SERVICES INC. (NYSE: BKFS) recently introduced Tax for Loan Estimation (TLE), a new solution that helps lenders and real estate professionals quickly and accurately estimate property taxes during the residential real estate loan application process. TLE
“While we see the potential for physical and monetary damage for many of the properties in affected areas, the undamaged multifamily and hotel properties may see an uptick in demand in the short term as thousands of homeowners seek out both temporary and permanent residence,” the report said. The late-summer flooding “should have a limited (nega- tive) effect on commercial real estate investors, as we were only able to confirm flood damage at one of the collateral properties securing the 10 largest loans packaged in com- mercial mortgage-backed securities,” said Steve Jellinek, vice president at Morningstar Credit Ratings LLC. •
provides an immediate tax estimate and features nationwide coverage. In addition, the solution supports lender compliance with property tax tolerance rules for good-faith loan estimates under TRID. TLE can be tailored to meet a user’s specific needs and delivers most estimates in real time. It also provides tax bill values for new construction homes,
SOURCE :: RealtyShares
REAL PROPERTYMANAGEMENT BOLSTERS PORTFOLIO
PROPERTY MANAGEMENT BUSINESS SOLUTIONS LLC , the franchisor of Real Property Management, the nation’s leading full-service property management organization, recently signed a franchise deal that brings with it more than 600 prop- erties in Reno, Nevada. Entrepreneur and area native Tony Chinnici is the president and franchisee of Real Property Man- agement Corazon, which opened its doors in early summer.
saving lenders time by eliminating the need to review complicated builder reports. The information provided by TLE includes property address, parcel number, current tax bill data, assessment data, escrow to collect at closing and
SOURCE :: Morningstar Credit Ratings
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NEWS BRIEFS
NATIONAL UPDATES
ATTOM DATA SOLUTIONS: Todd Teta is now chief technology officer at ATTOM Data Solutions, the nation’s leading source for comprehensive property data. As CTO, Teta will leverage his two decades of experience in technology and product innovation to lead ATTOM’s technology and product teams, includ- ing ATTOM’s three consumer websites: RealtyTrac.com, Homefacts.com and Ho- meDisclosure.com. Prior to joining AT- TOM Data Solutions, Teta was the chief technology officer at Meyers Research, a Kennedy Wilson company, where he led new product initiatives like Zonda, the first mobile-based real estate data and an- alytics platform targeting the new home building industry. Before that, he was vice president of technology at CoreLogic, where he launched the company’s first mobile application. Teta also was presi- dent and co-founder of VisionCore, Inc., a technology product and services firm focused on the real estate and financial services industries, where he led sales, business development, client relations and project management. AUCTION.COM: Industry veteran Patrick McClain is now senior vice president of Auction Portfolio Op- erations for Auction.com, the nation’s leading online real estate transaction mar- ketplace focused exclusively on the sale of bank-owned and foreclosure properties. McClain, who has managed portfolios of more than 200,000 real estate owned (REO) assets over the course of his career, will lead Auction. com’s portfolio management team to- ward establishing a “one-stop shop” ex- perience for sellers from onboarding to closing, regardless of disposition type. McClain comes to Auction.com with almost 20 years of experience working in the asset management field. He pre-
viously served as senior vice president at Atlas Nationwide, where he oversaw asset management services including marketing, preservation and main- tenance, refurbishment, title, HOA, vendor management and eviction/relo- cation assistance, and as a senior vice president at GMAC Mortgage, where he was responsible for management of the company’s Enterprise REO group. TEN-X: Camille Renshaw and Mau- reenWaters are the latest in a series of high-profile additions to Ten-X’s commercial real estate division. Ten-X, the nation’s leading online real estate transaction marketplace, is the parent company of Auction.com. Renshaw is now head of the institutional group, overseeing Ten-X Commercial’s grow- ing institutional division, which works with hedge funds, private equity groups, financial firms and large corporations to help investment managers buy and sell commercial properties on the company’s online transaction platform. Renshaw has more than 20 years of experience in real estate and has closed more than $20 billion in transactions over the course of her career. Most recently, she was a senior director at the Stan Johnson Company, where she founded the company’s New York office. Prior to that, she was the director of investment sales at Colliers Internation- al. Veteran marketing executive Waters has assumed the role of chief marketing officer for the division and will help align Ten-X’s marketing efforts with the company’s overall business strategy and provide strategic insight into each of its core CRE customer segments: institutional sellers, private sellers and brokers. Prior to joining Ten-X, she served as head of real estate and asset management at Bill Gates Investments. She also spent 15 years at Cushman & Wakefield and six years at CBRE. •
UPCOMING EVENTS
NOVEMBER 1 Borrower & Investor Forum on Real Estate Mezzanine Financing &
Subordinated Debt Sponsored by IMN New York, New York
www.imn.org/real-estate/conference/ Borrower-Investor-Real-Estate-Mezza- nine-Financing-Subordinated-Debt-16/ NOVEMBER 2 Next-Generation Practices for Real Estate Private Equity Sponsored by iGlobal Forum New York, New York www.iglobalforum.com/confer- ences-and-events.html NOVEMBER 4-7 National Association of Realtors Conference & Expo Sponsored by NAR Orlando, Florida www.realtor.org/convention.nsf/ NOVEMBER 15-17 REITWorld: NAREIT Annual Convention Sponsored by National Association of Real Estate
Investment Trusts Phoenix, Arizona www.reit.com/nareit-you/ upcoming-events
DECEMBER 4-6, 2016 Real Estate Investors Summit West 2016 Sponsored by Opal Group Dana Point, California www.opalgroup.net/conference/real-es- tate-investors-summit-west/
DECEMBER 9-10 Worthshop 6 Sponsored by Hawaii Life Real Estate Brokers Ko Olina, Oahu, Hawaii www.worthshops.com/koolina/
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THE BIG PICTURE
TRENDS & ISSUES
rates are still pretty low, and that supports house prices.” What’s driving the housing market is historically low rates, “reasonably solid” consumer confidence numbers and historically high wage growth, Sotoodehnia says. Smart real estate investors know that national numbers—whether they be rosy or grim—don’t necessarily apply to a local market. “Local markets are so dependent on local employment trends, even the subtle things just like what neighborhood is becoming more ‘hip’ in a market and what neighbor- hood is out of favor,” says Sotoodehnia. “A lot of local dynamics—economic, cultural and other factors—impact what individual houses may do in individual neighborhoods.” Experts have noted a softening in many high-end markets in 2016. San Francisco, for example, has seen prices “flatten out” in 2016, according to Blomquist, and RealtyTrac’s data
Francisco, high-end homes in Miami, Los Angeles and New York “are sitting on the market a little bit longer, and there’s less interest on the developer side to undertake big projects in those markets,” he says. “We’re hearing that the high end of the single-family market is falling off of a cliff,” agrees Jack BeVier, partner at The Dominion Group. The weakening in demand is a result of prices rising faster than incomes, according to Blomquist. He foresees weakening in more markets in 2017, with a slowing home sales volume and, “at the very best, plateauing home prices into 2017 in many markets,” he says. The combination of soaring home prices and slower wage growth is “one of the major reasons behind that; the housing market has become a victim of its own success,” Blomquist says. RealtyTrac’s affordability index shows that 20 percent of the markets analyzed
“I think in 2017 that will be a con- tinued theme,” says Blomquist. “The markets that are less affordable will cool off, and the ones that will still continue to do well are those that have a combi- nation of affordability and jobs.” Rehabbers might be in for a tougher 2017, as BeVier expects “continued de- clines in distressed foreclosure inventory, which will compress flipping margins and yields for rental investors,” he says. WHERE TO INVEST IN 2017 Although demand is decreasing at the higher end, many markets are still experiencing solid growth. Tampa, for example, has experienced 20 percent year-over-year growth yet still has a median home price below $200,000, according to Blomquist. Other markets that are experiencing double-digit year-over-year increases include Phoenix (12 percent), Port- land (12 percent), Austin (12 percent) and Denver (11 percent), according to RealtyTrac data. Portland, Austin and Denver are in- teresting markets, Blomquist says, as they aren’t exactly bargain priced with median home prices in the $300,000 to $350,000 range. Yet relative to markets like San Francisco, with a median price of $755,000, they look downright cheap, he says. “Housing most years is a very re- gional and a local phenomenon, so I think we definitely look at it regionally and locally,” Sotoodehnia says. “There are definitely some markets that are not as robust and other markets that are growing very, very rapidly.” With markets like Denver and Aus- tin starting to get expensive, investors are going bargain shopping. The No. 1 place RealtyTrac data shows institu- tional investors are looking is Bir- mingham, Alabama. “That is probably not the first market you may think of. Actually, in a lot of real estate it’s not a secret anymore,” says Blomquist. Alabama is well represented, as Mo- bile and Huntsville made the top 10 of institutional investor hotspots as well.
THE MARKETS THAT ARE LESS AFFORDABLE WILL COOL OFF, AND THE ONES THAT WILL STILL CONTINUE TO DO WELL ARE THOSE THAT HAVE A COMBINATION OF AFFORDABILITY AND JOBS.”
Forward Thinking MARKET OBSERVERS EXPECT REAL ESTATE INVESTING IN 2017 TO BE HEALTHY—IF NOT EASY.
fordable, real estate investors will be able to find values in 2017.
shows that prices actually dropped in San Francisco County in May. Realt- yTrac’s researchers also noticed that demand for starter homes is strong, and that buyers priced out of the higher-end markets are looking for homes in relatively pricey but less-af- fluent areas like Denver. OUTLOOK FOR 2017: ‘VICTIM OF ITS OWN SUCCESS’ The softening of the higher-end market was something that Real- tyShares “noticed in the spring, and it carried through in the summer,” Sotoodehnia says. In addition to San
are unaffordable by their historical standards, according to Blomquist. “So affordability is a big reason I think we are starting to see signs of demand weakening and that we will continue to see that into 2017,” he says. Sotoodehnia says that RealtyShares has noticed a “builder-enhanced focus” on starter homes. A report by the U.S. Census Bureau and the Department of Housing and Urban Development said that more new homes were sold in July 2016 than in any month since October 2007. The price for a new home fell by almost $15,000 in June, which is a strong indication that builders are tar- geting the lower end of the market.
LATE 2016 U.S. MARKET SNAPSHOT Although the U.S. economy is growing very slowly (about 1 percent annualized for the past three quar- ters), home appreciation in many areas of the country is experiencing double-digit growth. Slow economic growth would seem to deter home purchases, so other factors are power- ing the market, says Arash Sotoodeh- nia, chief credit officer and chief risk officer at RealtyShares. “What we have is a continued, very benign financing environment,” he says. “So if you qualify for a loan, the cost of financing is pretty low, interest
by Robert Springer
he constant flurry of news about the housing market has been consistently upbeat the past few years, as home prices increased, wages took a historic jump in 2015 and the market worked through the foreclosures left over from the Great Recession. “A lot of the data looks very healthy, and I would say we are in most markets back to a normal—what- ever that is, exactly—but a normal, T
healthy housing market,” says Daren Blomquist, senior vice president of communications at ATTOM Data Solutions, the parent company of RealtyTrac. Although experts say the hous- ing market is back to “normal,” that doesn’t mean that real estate investing has suddenly become easy. Experts say that while the run-up in home prices has made many markets unaf-
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+
The secondary and tertiary markets “are going to be the best options for real estate investors because of the lower prices,” Blomquist says. He adds that while lower prices are good, the combination of lower prices and strong underlying economic fundamentals are what make a market truly desirable. “I think there will still be that strength in the market when you have that combination of affordability, job and wage growth—population growth is the other one I’d throw in there as a good kind of nexus of factors that are going to be the strongest markets in 2017,” Blomquist says. Other markets that institutional investors are heavily into include Memphis; Augusta, Georgia; Lakeland, Florida; and New Haven, Connecticut. New Haven doesn’t necessarily have
a lot of jobs, Blomquist notes, but it’s close to a city with a plethora of jobs: New York. “With some of these markets, it’s not always that there are a lot of jobs right there, but it’s at least access to jobs,” he says. The bottom line for real estate investing in 2017: While still good, experts agree that real estate investing will be more challenging than the past couple of years. “It’s still a very favor- able market, I would say, for real estate investors, but 2017 won’t be as good as 2016, and 2016 wasn’t as good as previous years, honestly, as the market has risen,” says Blomquist. •
RESOURCES
THE DOMINION GROUP www.thedominiongroup.com 410-727-0908
REALTYSHARES www.realtyshares.com 855-880-6050 REALTYTRAC www.realtytrac.com 800-550-4802
Robert Springer is a regular freelance contributor to Think Realty Magazine. Contact him at rtspringer@gmail.com.
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FEATURED STORY
Master Investor
SHARING THEWEALTH
Real Wealth Network’s Kathy Fettke believes in education and research freely disseminated, benefiting the organization’s growing membership of successful real estate investors.
OURMEETINGSARE FULL OF PEOPLE WHO LOSTMONEY IN REAL ESTATE, BUT I THINK THEY UNDERSTAND THAT THEYLOSTMONEY BECAUSE OFWHAT THEYDIDN’T KNOW”
BYTERESABITLER PHOTOS BY DOUG ELLIS
KATHY FETTKE , CO-FOUNDER OF REALWEALTH NETWORK
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FEATURED STORY
Master Investor
many of whom were successful inves- tors and, in the process, got a crash course in the real estate industry. The broker’s segments became her favorite part of the show. She also noticed that a lack of money was one of the main reasons the people on her show, “Dream,” had difficulty actually achieving their dreams, and the more she learned about real estate, the more it looked like it might be the answer to their— and her—financial concerns. GETTING STARTED The mortgage broker’s segments were so successful for him, Kathy says, that he soon had more work than he could handle, and he asked her if she would be interested in get- ting her mortgage broker’s license to help him out. Seeing an opportunity to earn a good income and learn more about an industry she found fascinat- ing, she accepted the offer. “It was the height of the real estate boom, and you could make $10,000 off one loan,” she says. “That solved our immediate financial problems.” As Rich improved and outlived his six-month prognosis, the Fettkes began to accumulate enough mon- ey to start investing, but Kathy sensed something wasn’t right with the market when she saw mortgage companies change applicants’ salaries so they could qualify for loans. They decided to proceed with caution, especially when it came to investing in California real estate. Everyone at the time was invest- ing in California, Kathy says, but the investors and experts she interviewed for the mortgage broker’s segments all advised against it. In fact, they were actually selling their California prop- erties and buying in Texas. Had the Fettkes followed common wisdom, they would have lost money. Instead, they listened to the experienced investors, bought properties in Dallas
in 2004 and 2005, and made money. Kathy says it opened their eyes to the importance of market timing and cycles. It also taught them that where you get your information matters. GATHERING INFORMATION From the beginning, Kathy recog- nized how important it was to educate herself on every aspect of real estate investing, including the markets and cycles, and how important it was to keep current on what’s happening in the industry on a daily basis. “I was just fascinated by a whole world I didn’t understand,” she says. Today, Kathy is considered an expert in the field and is a frequent guest on CNN, CNBC, Fox News, NPR, CBS MarketWatch and The Wall Street Jour- nal. She’s also the author of “Retire Rich with Rentals.” Rich immersed himself in real estate investing as well and is now a licensed real estate broker. But not everyone has the time to sift through all the information out there or even has access to the successful investors the Fettkes did when they got started. As Kathy continued to educate herself, she noticed a lot of people were jumping into investments they didn’t understand or were relying on information peddled by people who were not actively investing themselves. “There were a lot of gurus out there that had never done a deal,” she ex- plains. “You would ask them what they owned, and they didn’t own anything.” It reminded Kathy of the agencies she had encountered years earlier that sold those expensive but essentially worth- less classes to aspiring models and actors. The real estate gurus and boot camp instructors were more concerned about making money than providing quality information, and Kathy saw an opportunity to create a place where people could learn how to invest in real estate and find reliable information on the industry. What’s more, Kathy decid- ed to provide the information for free.
Kathy co-founded Real Wealth Network with her husband, Rich Fettke, in 2003.
with proceeds from the sales of his book, “Extreme Success,” which ap- plies the principles of extreme sports to business, as well as from seminars and speaking engagements. “Everything was going great,” Kathy says. Then the unexpected happened. Rich found out he had melanoma and was given six months to live. As the family quickly burned through their savings to pay medical bills, Kathy real- ized she was going to have to find a way to earn an income without spending too much time away from the family. TURNING TO REAL ESTATE Her thoughts quickly turned to their 4,000-square-foot, six-bedroom home. It was more space than they needed and, with its private entranc- es, could easily be turned into a four- plex. After moving into one section of
the house, they were able to rent the remaining space to tenants, includ- ing international students who were willing to pay for a shared room with bunk beds. The rental income was enough to pay their mortgage. “I became a landlord without realiz- ing it,” she says. But she may not have become an investor if she hadn’t resurrected her “Oprah-style” radio show on pursuing dreams. (Kathy is also a certified per- sonal coach.) While producing the show would allow her to spend more time with Rich than a full-time job, she need- ed a show sponsor to earn an income. That sponsor turned out to be a mortgage broker who was willing to pay “a lot of money” in return for segments on her show. At first, Kathy wasn’t sure how to make the segments appeal to her audience, but eventually, she decided to interview his clients,
INVESTING IN REAL ESTATE can change your life. Just ask Kathy Fettke, who started by renting out rooms in her own home when her husband, Rich Fettke, was diagnosed with cancer. She now has a diversified portfolio of single-family homes and commercial real estate throughout the country. Most people would have stopped there. Not Kathy. As she studied the industry and researched specific markets, she real- ized just how much misinformation was out there and how many people who didn’t invest were nonetheless trying to sell how-to programs to others. Kathy decided to take action, and in 2003, she co-founded the Real Wealth Network with Rich. Today, the California-based investment group offers daily podcasts, educational events and investment opportunities to roughly 24,000 members.
AN UNEXPECTED CRISIS Kathy has always been passionate about researching and sharing infor- mation, skills that served her well in the newsrooms of CNN, FOX, CTV and ABC. They also came in handy when, as a young model, she noticed agencies charged extravagant fees for subpar modeling and acting classes. She reached out to casting directors to find out what skills models and actors needed to be successful, started her own agency and offered classes to her clients taught by those same casting directors at a reasonable price. Although the agency was suc- cessful, the business was extremely demanding—try finding 100 people to audition for a casting director the next day—and she left when she had children, becoming a full-time, stay- at-home mom. Rich, a former ESPN X Games competitor, supported them
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FEATURED STORY
Master Investor
the market and building stopped. Now, there’s very little inventory, and developers are scrambling. At some point, though, the market will shift again, and when it does, Real Wealth Network will shift its focus, too. That’s one of the advan- tages of working with an investment group like Real Wealth Network, which studies the market so closely— you don’t have to try to figure out the timing and cycles on your own. again, just how difficult it can be to try to invest in real estate on your own. One of her favorite examples is that of a woman who owned three properties in Stockton, California, each worth about $400,000 in 2005. She wanted to retire but wasn’t sure how she could on the $1,200 per month each of the properties generat- ed and asked Kathy for advice. Kathy told her to sell because there was a bubble in California real estate. On her advice, the woman sold all three properties in California and purchased nine in Texas. These nine properties now generate three times as much profit as what the three properties in California generated, making it possible for her to quit. If the woman had held the California properties, they would have dropped in value to $100,000 each, and she’d still be working, according to Kathy. Another example is a man who inherited a dilapidated home in San Francisco with a tenant who didn’t consistently pay his rent. Kathy pointed out to the new owner that he had all of his “eggs in one basket,” so to speak, and it wasn’t even a real- ly good basket since San Francisco has earthquakes, rent control and tenant-friendly laws. She advised him to sell the property and buy elsewhere. Despite its run- CHANGING LIVES Kathy has seen, time and time
CREATING REALWEALTH In 2003, she and Rich co-founded Real Wealth Network, an investment group based in California. Anyone can sign up to become a mem- ber—regardless of where you live—and gain free access to online educational materials, 500-plus infor- mational podcasts and a daily news podcast. Members can also attend monthly events held in northern and southern California or sign up for a market tour to see what’s available in an area where the investment group has inventory available. Again, this is all free, Kathy em- phasizes. Real Wealth Network makes money by referring members to local resources, such as real estate agents, brokers and property management companies when they make a pur- chase through the investment group. If you use one of these local resourc- es’ services, that company will pay a small referral fee to Real Wealth Net- work. Kathy believes their business model probably has put a few gurus out of business. “A lot of the boot camp guys couldn’t compete with free,” she says. In addition to their online academy, podcasts and single-family inventory, Real Wealth Network started offering other investment opportunities about six years ago. A developer approached them with a deal for 27 waterfront townhomes in Portland, Kathy says, and asked if they could raise $2 mil- lion. She was able to raise the entire amount after sending out one email to members, who made 20 percent on their investment. Based on the enthusiastic response to the email and the strong return on investment, Real Wealth Network began looking for additional oppor- tunities to work with developers. It’s all about the market, according to Kathy, who points out that for a long time there was a glut of property on
PERSONNEL FILE NAME: Kathy Fettke COMPANY: Real Wealth Network
WEB: realwealthnetwork.com
PHONE: 888-796-9675
FIRST REAL ESTATE DEAL: FETTKE We bought our first properties in Dallas in 2004-2005. At the time, so many people were investing in California, but the investors I was interviewing were selling their California properties and buying in Texas, so that’s what we did. THE NEXT DEAL: FETTKE We haven’t always done everything right. The next property we bought was in Boise, which has only one employer. That was a mistake. We learned on that one. WHEN YOU’RE NOT WORKING: FETTKE I’m an avid traveler and enjoy hiking, rock climbing, skiing, figure skating and surfing. FAMILY LIFE: FETTKE We have two daughters, one 17 and one 24. Investing in real estate gave me the opportunity to raise my children and to attend anything they wanted me to be at, like games or school programs. WHY SHE LOVESWHAT SHE DOES: FETTKE We get to help people who don’t know how they are going to pay for retirement or even their daily expenses use real estate to make their dreams come true.
Real estate investing has allowed Rich and Kathy Fettke to live life on their own terms.
down condition, the house sold for $1.5 million, and the investor was able to use that money to purchase 20 properties in Houston, Cincinnati, Indianapolis and Jacksonville. Now, instead of getting the meager amount he would have if the tenant decided to pay, the investor earns $20,000 per month. Essentially, that’s what Real Wealth Network is really all about—generat- ing enough income to live life on your own terms, she says.
you’ve tried before and lost money. “Our meetings are full of people who lost money in real estate, but I think they understand that they lost money because of what they didn’t know,” Kathy says. “I think they un- derstand that they didn’t understand.” But, by taking advantage of the re- sources available through Real Wealth Network and educating yourself, you can invest in successfully and have enough money to live your dreams, whether that means staying at home with your kids or retiring and travel- ing around the world. If you want to get to that point, though, Kathy says, education is key. “Educate yourself thoroughly,” she advises. “Don’t jump into anything you don’t understand.” She adds that once you have a good
understanding of real estate and the market, you need to continue to educate yourself because the markets are cycling faster than ever before. What worked this year might not work next year. That’s why, no matter who you are or what your goals as an investor are, it makes sense to become a member of Real Wealth Network—the daily news podcasts can keep you up- to-date on what’s happening in the market and help you avoid a costly mistake. Plus, you may just find a few great investment opportunities while you’re visiting the site. •
LIVING LIFE ON YOUR OWN TERMS
Investing in real estate is one of the best ways to generate passive income, and Kathy believes Real Wealth Network can give you the information and tools you need to invest successfully, even if
Teresa Bitler is a regular freelance contributor to Think Realty Magazine. Contact her at teresa@teresabitler.com.
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THE BIG PICTURE
DEALFLOW
tic brand people recognize—or license a well-known brand and system. After all, this business is about getting leads and finding deals, getting into the deal flow. It’s not about building websites, figuring out how to mail a post- card and unraveling the complexities of Google advertising. We built WeBuy- Houses.com to help investors get into the deal flow and win in a very crowded and competitive market. In addition to the best possible brand for an investor, we
Get into the Flow IF YOU DON’T HAVE A CONTINUOUS FLOW OF LEADS AND DEALS COMING INTO YOUR BUSINESS, YOU WILL NOT SURVIVE FOR LONG.
closings—not generic advertising that may or may not lead to more business.
back it up with our proven processes for call tracking, lead management and ad- vertising, along with amazing customer service and a members-only Master- mind meeting that people rave about. I’ve seen too many investors waste time and energy working on things that will not result in their success. And I’ve watched many struggle to be noticed in a market where there are hundreds of other “inves- tors” making the exact same promises. As you build your business, make sure you have a laser focus on getting into the deal flow. Those who learn how to crack that code are the ones that reach the highest levels of success in our business. I hope to see you there! •
YOUWANT QUALIFIED PROSPECTS, NOT CLICKS OR VIEWS
Many of our clients were doing their own marketing, both online and offline. They found that they could generate ac- tivity, but not a lot of real results. They were advertising for clicks or views or likes or impressions or followers. When what they really needed was actual con- tact from potential customers. That’s really my first point about get- ting into the deal flow. Having people watch your video or click on your ad is great, but that’s almost irrelevant if it doesn’t result in qualified prospects. Structure and measure your marketing around contacts (leads) and closings (home sale/purchase). Everything higher in the funnel is nice, but doesn’t matter if it isn’t producing contacts and closings. That’s one of the secrets to the success of our strategy—we sell contacts that lead to
NEXT LEVEL: ADD A PROVEN BRAND AND SYSTEM As real estate investing has become more popular, many new investors have crowded the market. Most have no real brand or business processes, so it has been like the Wild West as investors compete with one another to differen- tiate themselves and get into the deal flow. For motivated sellers, this presents a problem. When they start looking for someone who can buy their house for cash, there are hundreds (if not thou- sands) of “investors” offering to do that. When consumers are presented with too many options, what do they do? They look for something they can trust. They seek a professional brand that lets them know a business is legitimate. Spend the money to build an authen-
by Jeremy Brandt
I
hear it every day from clients and partners, and at conferences: “My real estate business would be growing faster if I could just find the deals!” Our companies work for people just like you. Our clients include thousands of real estate investors and agents in markets all over the world who are grow- ing their businesses through systematic, automated and world-class marketing. We get our clients into the deal flow in their local market. If you don’t have a continuous flow of leads and deals coming into your business, you will not
survive for long. But, if you crack the code and figure out how to get “into the flow,” you can dominate your area and leave other local investors wondering what you know that they do not. That’s what I hope you take away from this article—how to crack that code and build a system that will help you consistently win in your market. About 14 years ago as a new investor with a tech background, I started adver- tising online using a very specific strat- egy that brought me thousands of moti- vated home sellers. I was being contacted
by sellers all over the country looking for a cash offer, and I bought every house I could, then started forwarding the leads outside Texas to other investors. They were so successful for these sellers that there was a huge demand for the system I’d built. After a while, I started a company purely focused on getting local investors into the deal flow in their own markets and now, over a decade later, Fast Home Offer is one of the largest providers of exclusive motivated seller leads in the country because clients were desperate to get into the deal flow in their area.
Jeremy Brandt is a serial entrepreneur and has been interviewed as a real estate expert by CNN, CNBC, FOX News, Larry King and many others. He is the founder of WeBuyHouses.com and Fast
Home Offer, companies that together have helped more than 1 million motivated home sellers find a local real estate professional.
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