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Having an Impact

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When “Nothing But The Best” in Life Will Do When David Offutt describes his experience in real estate, it immediately becomes clear that the two-decades-plus veteran of the industry is not just experiencing a great deal of success; he is having a great deal of fun. “I love what I do,” he explained. “I know that every day I’m going to find an opportunity where I am going to impact someone or they are going to impact me. I love that.” Offutt got started in real estate in the early 2000s after spotting what he hoped would be a great piece of investment property and being flabbergasted at the price tag. He jumped into the industry with both feet, taking his real estate exam, getting his broker’s license, and buying two real estate franchises all within about two years of that initial encounter. Shortly after the housing crash, Offutt found HomeVestors and has been with the company ever since. “It has been an amazing journey in the real estate space,” he said. A Family Operation One of the things Offutt likes best about real estate is it enables him to spend plenty of quality time with his family — especially his wife, Detra, who is a top-performing agent and partner with him in the family’s HomeVestors business. “She helps me with everything; beginning to end she is the best partner I could ever ask for,” Offutt said. The two have been serial entrepreneurs throughout the duration of their relationship. However, Offutt said, “[Homevestors] is the last one. We won’t do any more from this point forward — just own real estate and run the franchise.” Offutt’s son, Devante, recently joined the Offutt real estate team as a property coordinator. “I’m thrilled for him and my wife,” Offutt said, noting that he expects a change in the housing market in the near future. “[At present], we are putting ourselves in a better cash position, strengthening our relationships with local lenders, and building our relationships in the community.” Devante will play a key role in that process, Offutt said. Nothing But the Best When it comes to doing and being the best, Offutt applies that mentality to his real estate portfolio just as he has to his personal and professional life. This means that when he acquires properties as long-term investments, they must be what he describes as “‘A’ properties in ‘A’ locations.” In almost all cases, he prefers small multifamily properties ranging from four to six units. Offutt’s class-A-only approach to his long-term investments does not preclude the short-term acquisition of other promising pieces of real estate. Anything less than “prime” is relegated to the cash-flow division of the business. Offutt also cultivates relationships within the local HomeVestors community, where he is an enthusiastic participant in a variety of networking and educational programs. Making An Impact Every Day Offutt also loves the positive impact real estate investors have on individuals and on the communities in which they operate. “So many of the people we meet are in distressed situations,” he said, recalling a deal with a senior homeowner hoping to sell her extremely “cluttered” home. Offutt bought the house and assisted with the homeowner’s transition to a new home. Then, after the renovation, he invited her back. She was thrilled. Offutt makes it a policy to involve the former homeowner and any nearby neighbors in the investing process whenever possible, believing that this helps build community. “Often the folks we work with are in distressed situations, and that means the neighbors are usually kind of stressed, too,” he explained. “We introduce ourselves, let them know what we are doing, and then we address the exterior of the home first thing so that everyone can benefit.” HomeVestors What exactly does it mean to be a HomeVestors® business owner? Owning a real estate business is life changing and naturally comes with risks! When you become a HomeVestors business owner, you get immediate access to motivated seller leads, financing resources for qualifying purchases and repairs, one-on-one coaching with your local Development Agent, proprietary software for analyzing properties and deals, and access to a nationwide network of coaches and peers. Your house-buying business is yours and you run it as your own venture with a focus toward your individual business goals. If you are interested in a franchise, call 855-454-4578. Each franchise office is independently owned and operated.

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Sparrow: 3D Study

Executive Summary By Kori Covrigaru PlanOmatic, the biggest and fastest provider of Property Insights and marketing services for the single-family rental industry nationwide, partnered with their client, Sparrow, a leading provider of well-kept single-family rental homes nationwide, to measure the impact of using a Matterport 3D Tour for rental property marketing. Challenge Sparrow had 2 main challenges to address in this study: 1. They needed to determine if there would be an ROI if they invested in 3D tours on all properties nationwide. The ROI would be measured in lead generation, self-showing tour activity, website views, and days on market. 2. They wanted to pilot the operations and technology needed to roll-out 3D. Could PlanOmatic perform the 3D service in Sparrow markets? Could the Sparrow IT team accept the 3D tour and include it in the feed to their website and to Zillow? Solution The data showed that using a Matterport 3D tour to market a property online has a significantly positive impact on leasing activity. Additionally, we confirmed that the operations and technology needed for a nationwide roll-out is ready to go. Details ROI The data showed a positive impact on leasing activity, specifically: • Zillow Leads per day per property increased 18% when a Matterport Tour was used to market the property in Charlotte, NC, compared with properties that only had photos • Website page views per day per property increased 66% in Charlotte, NC and increased 58% in Dallas, TX when a Matterport Tour was used to market the property, compared with properties that only had photos • Days On Market decreased 25% in Charlotte, NC and decreased 9% in Dallas, TX when a Matterport Tour was used to market the property, compared with properties that only had photos. Operations & Technology The PlanOmatic team was able to perform the 3D service in all markets for Sparrow, while keeping a consistent turnaround time and meeting the standard SLA expectations. The Sparrow IT team was able to retrieve the 3D tour URL, embed it into the Sparrownow.com website, and also include it in the feed to the Zillow Group Rentals Platform. We confirmed that the 3D tour was visible on the following websites: • Sparrow • Zillow • Trulia • HotPads 3D Tour Concentration One additional finding from the study is that 3D Tours are gaining traction in the Single Family Rental Marketing space. In 2021, in Maricopa County (Phoenix, AZ), 3% of all available Single Family Rental Homes used a 3D tour to market. In 2022, that number has more than doubled to 8%. Here is the current 3D Tour concentration of each marketin the study: % of all available Single-Family Home Rentals that have a 3D tour San Antonio, TX — 15% Charlotte, NC — 12% Phoenix, AZ — 8% Dallas, TX — 6% Method We tracked 233 properties across four markets: Charlotte, NC, Dallas, TX, Phoenix, AZ, and San Antonio, TX. We created a test group in each market by adding a Matterport 3D Tour on approximately half the properties in each market, and compared that to a control group (the other half) that received the normal marketing services from Sparrow’s existing solution. We created this test group and tracked the properties from January 10, 2022 to March 23, 2022.

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Tax Planning

The Secret to “Making Your Own Math” By Teresa Bilsky A business owner is interviewing accountants with a one-question interview, “What is two plus two?” Applicant after applicant answers four until finally an experienced applicant looks directly at the business owner and without any emotional reaction answers, “What do you want it to be?” Though this is intended to be merely humor, those who are experienced in tax planning smile because there is a great deal of truth in that final answer. Yes, you can have your investment and your money too. You can make your own math. You just need to know where to begin. We begin each new business, new investment, or tax plan with the exit strategy Why? Well because we need the destination to formulate the map. Step two is determining the most cost-effective way to achieve that journey. This is where the plan arises to acquire your investment and keep your money. But how? We use special game pieces we call tax laws. Tax planning is much like playing Tetris: New pieces are continually falling; existing pieces are continually changing, and you (the investor and taxpayer) are the player. You start slowly with a blank playing screen where you have more control; but the longer you play, the more the pieces add up, obstacles present themselves, and everything seems to speed up. Know your pieces The falling pieces are tax laws, tax court cases, IRS interpretations of laws, investments, financial resources, time, your desired effort, input and knowledge. Start with where you want to end up » Do you want to acquire wealth through owning and retaining real property? » How much wealth? » Do you want to buy and sell to obtain cash wealth? » How will you make the cash work for you? » Are you investing to accumulate assets for estate purposes? » Will you need the properties to provide cashflow? If so, when and how much? » Do you prefer to work with residential real estate or commercial? All of these questions tell you what type of tools you will need. Knowledge Even though business owners need general knowledge in areas far outside their expertise, remember that investing in real estate does not make you a tax expert. The penalties for tax mistakes – both overpayment and financial losses for underpayment – are serious. The IRS does not care what you know; they only care about the rules and the money. Why do the tools change? The market changes, future earning capabilities change, buyers change, and Congress goes into session and the rules change. However, the most important factor is you. You change. Your knowledge and experience grow. Your portfolio grows. Your plan changes. Let’s start with some basics: You need to know what your assets are and what they are worth. All of your assets should be working for you in some way. I have yet to see that money stuffed in a coffee can duplicates in any way. Identify your assets and their value, then put them to work. Understand that the same piece of real estate may be presented with three different values depending on who is viewing the value and the purpose for the valuation. A written appraisal is based on the opinion of the market value by a professional trained to make those determinations which generally satisfies lending requirements. A valuation of the same property may arrive at a different number because it includes influences such as location, zoning restrictions, life expectancy of the building, and other permanent factors. Valuations have legal standing because they provide a definitive value. A good example of this is the tax court case for the Estate of Michael Jackson. The entire case was a dispute about the valuation of his assets at the time of his death. Finally, a financial statement would reflect the value in terms of basis without regard to market value. Let’s talk money. How do you keep more of your own money? You plan. The difference between tax preparation and tax planning is the answer to the question of “How much is two plus two?” Taxpayers in general should not wait for the tax return to be prepared before knowing where they will be for the year. They should already know. Tax preparation is reporting the results of the decisions you made in the prior year. Tax planning is impacting the outcome. We begin in the fall because it is late enough to project the income and early enough to achieve the desired results. Take charge of your pieces to impact the outcome by using the different tools available. If you are planning to acquire real estate to leave in your estate then know that the basis is stepped up at the time of your passing. A stepped-up basis means your beneficiaries get the tax benefit of the value of the asset at time of your death and not the basis you possess in the property, hence the dispute on the Michael Jackson case. A 1031 Exchange is a good tool to defer taxes on gains. As with any tax tool in the toolbox there are rules. The idea is simple: If you are allowed to defer tax on a gain by reinvesting into a bigger project that generates a larger gain, then government will see a larger return in the form of more tax. This is a great tool but it isn’t designed to help you, it is designed to generate more tax. However, it does benefit you because there is value in the use of money, also known as interest. The longer you get to defer taxes, the longer you get to use your money. You win. The more you grow an asset to produce a larger income, the more tax you generate, then they win. Investment in an Opportunity Zone is an advanced tool with rules by way of tax savings; this program encourages you to invest in economically depressed areas. Again,

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Birmingham, Alabama

There’s Plenty of Charm Left in the South’s “Magic City” By Carole VanSickle Ellis If you were hoping the much-hyped housing “cooldown” would make things more affordable in southeastern cities like Birmingham, Alabama, then it might be time to change your wait-and-see strategy for a faster-paced approach. In the southern “Magic City,” which boasts the largest metropolitan area in Alabama and claims a history of economic growth of nearly 4,000% in its first four decades of existence, the housing market is hotter than ever. “We are seeing a surge in buyers trying to outpace interest rates because their buying power will shrink over the next few months,” observed Richard Grimes, CEO and president of RealtySouth, in a Bham Now-hosted panel in late May. He added, “There is no mechanism in our market to create 1,000 more homes, so supply is still going to be short.” Co-panelist Stuart Norton, associate director for the Alabama Center for Real Estate (ACRE) at the University of Alabama, predicted that upward pressure on home prices might diminish over the coming months while the rate of home sales slowed, but he did not expect prices to fall during the “cooling” period. Birmingham’s biggest real estate-related bottleneck is, as Grimes implied, a lack of new construction in the area. “The 211 new homes sold [during March 2022] represented 13% of all residential sales in the Birmingham area,” noted Marco Santarelli, CEO of Norada Real Estate Investments. The pickings are particularly slim when it comes to affordable housing, and the local housing authority recently reported that building material cost increases are going to delay projects intended to cater to senior residents and families. The authority demolished 29 residential buildings last year but has found itself unable to replace the demolished housing, thus displacing families and other residents and creating more strain on local residential inventory. “We continue to see historically low inventory [and] buyers are bidding more aggressively than they were in 2021,” said Lucy Parker, a local realtor. “It is rare to find a house that has been on the market for more than a few days,” she added, noting the out-of-town buyers are also keeping the housing supply tight. With just under half (49%) of all single-family residences in the city registered as rental properties, many of those buyers are likely investors hoping to leverage the area’s skyrocketing rental rates and relative affordability compared to the rest of the country. According to a recent report from RealEstateWitch, rates are currently rising four times faster than median income in the area for a year-over-year increase of 13%. In fact, in Birmingham it is currently cheaper to buy a home than rent one. Nevertheless, home flipping returns in Birmingham, as in many other areas of the country, have been falling since 2020. According to a Q1 2022 report from ATTOM Data Solutions, although home-flipping volumes skyrocketed in 2021 to higher than had been seen since 2006, profits sank in Birmingham as well as nationally. In Birmingham, fix-and-flip returns fell by seven percentage points between 2020 and 2021 (the most recent annual data available). The “Comeback Market” Comes Back (Again) When Birmingham was founded in 1871, the area was ripe for economic expansion in the wake of the Civil War. Over the first 40 years of its existence, Birmingham earned its “Magic City” nickname thanks to 4,000% economic expansion thanks to a large steel industry presence in the area. While this industry has declined in prominence overall since the late 1800s and early 1900s, the city still supports steelmakers like U.S. Steel, CMC Steel, and Nucor, and U.S. Steel completed the construction and start-up process for an advanced electric arc furnace (EAF) in 2020, adding 1.6 million tons of steelmaking capability to the market. This is increasingly important for markets like Birmingham with large steel industry presence because the ongoing Ukraine-Russia conflict is limiting access to foreign iron-ore products. Although Alabama as a state does not typically call to mind words like “innovation,” “biotechnology hub,” or “financial center,” the truth is that Birmingham boasts strong representation in all of these sectors and many more. During the COVID-19 pandemic, much of the informal work to bring startups, biotechnology employers, and international industry presence to the city was formalized under state governor Kay Ivey’s Alabama Innovation Commission. The commission makes policy recommendations related to attracting job seekers, building an “innovation economy,” supporting entrepreneurs and startup communities, and improving Alabama’s global reputation. Birmingham is ahead of the curve in this effort and benefiting from the head start. From July 7-17, 2022, the city will host the World Games 2022, an 11-day international multi-sport event organized with the support of the International Olympic Committee (IOC). This event alone is expected to bring in more than 3,600 athletes from at least 100 different countries and should lead to significant appreciation in areas in close proximity to the World Games venues, including Avondale Park, Sloss Furnaces, Legion Field, and Central Downtown. Birmingham mayor Randall Woodfin noted that the city’s role as host of the games has been a deliberately thought-out process, saying, “We know about the historical perceptions of Birmingham, and…we are not going to forget our past, but we have evolved…. When a lot of people talk about Birmingham, the images that come to mind are [black-and-white photos from the 1960s], but that is not who we are today.” Woodfin has said on multiple occasions that The World Games 2022 will send a positive “ripple” of information about Birmingham outward around the world. Although The World Games certainly have the potential to be a defining moment for the city, Birmingham already had begun to refurbish its image when it was named host city for the event. The Birmingham-Shuttlesworth International Airport has undergone more than $7 million in improvements; the local transit authority has designed and upgraded miles of heavy and light rail along with the local bus systems, and the city’s City Walk BHAM has recreational space, water features, market space, wine gardens,

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BLOCKCHAIN

Keep the Crypto. The Future is the Technology. By Jake Harris & Juan Huerta Imagine a bank that was purpose-built to handle nothing but projects. Every party associated with a project was welcome to come in and get their own bank account so they could buy and/or sell goods and services to others in the bank. Even the project itself could get a one-time-use bank account through which all the funds for the project would flow. This bank’s entire purpose would be the safe and successful movement and transactions of the project funds from the source through the project’s bank account until they were distributed directly to the bank accounts of the parties who supplied labor or material for the project. All of this through a single platform with simple universal rules and procedures, and all traceable down to the last penny. Blockchain is that bank. Pre-programmed smart contracts move funds between the digital wallets upon authorized release with full accountability and transparency and without human error at the speed of a single platform verification cycle (around 12 seconds). Of course, as with any new technology, things are not necessarily as simple as they first appear. Banking in blockchain comes with some “debates” you should understand. Open vs. Closed System debate Everyone knows of the rivalry between Bill Gates and Steve Jobs and their lifelong battle for Open vs. Closed systems for rival software and technologies Microsoft and Apple. Gates took the position that open systems allowed greater application and integration. Anyone could make a complementary add-on and plug-in at any point for greater inclusion. Jobs took the approach that systems (both hardware and software) are too delicate and fragile to work efficiently with random input from non-qualified engineers and technicians. So Apple was built in a closed-loop system to ensure the greatest customer experience. Blockchain resonates with the Jobs closed-loop-system approach. Everyone who wants to engage in a project needs to be on that blockchain and create a personal digital wallet. This allows smart contracts to easily transfer their payload (funds or other) from digital wallet to digital wallet. However, with the rigidity of a closed-loop platform comes the control and performance for the highest customer experience. Perhaps that is what Blockchain can provide the lending community: a more rigid platform to lend, but one that will result in less problems, confusion, and overhead to track and keep tabs on funds distributed. Proactive vs. Reactive Cost Accounting The current lending model with its reactive cost accounting is very time consuming and not very accurate, relying on an individual’s arbitrary quantitative guesses — a perfect example being the reporting of percent complete (PC). Funds are released for a project, then before additional funds are released the loan servicer spends time and money trying to identify exactly where the previous money went. With blockchain, loan funds may be “programmed” prior to releasing, then using Smart Contract to transfer the payload (funds) to a specific destination digital wallet upon approval and release, thereby providing full transparency and instant trackability into exactly where the funds went. Think about how much time would be saved by “programming” the fund distribution so funds can only be used for their explicit purpose. Then having instant and ongoing verification of fund transfers for future reconciliation, all at the lender’s fingertips. Death of Percentage Complete? One of the interesting by-products of the blockchain lending movement is that smart contracts (the vehicles that transfer the funds from one digital wallet to another) does not work well with fractional delivery. For example, Smart contracts are an “IF/THEN” statement and have a tough time being fractured for partial delivery. Instead, the smart contract needs to be written in a way that the full amount is split into smaller sub-smart contracts that can be delivered as written. Line items need to be delineated into their individual payment milestones and written at the onset. An example of two smart contracts in sequence would be that a painter will receive $1,200 upon start of the project at 123 Any Street, and $1,200 upon the successful completion of painting 123 Any Street. These two smart contracts run in sequence and are two separate transactions in the blockchain, both trackable from inception and funding to distribution and verification of receipt. What about Lien Releases? Lien releases are both a verification of funds received by parties who worked or performed services on a specific project, and a promise that no further liability is left open through secondary purchase or commitment made by the signor. While blockchain lending won’t be able to verify any secondary commitments, it can with exacting specificity detail who was paid on the project and for what. That is the real beauty of blockchains’ immutable ledger system. It keeps a distributed ledger system showing what was paid and to whom, when for all time. It never changes and not held in one location, so it is impossible to corrupt, change, or loose. Think about the ability to pull up any project and instantly trace funds from the source all the way down to the final mile provider with the confidence in blockchain that every transaction of funds was transacted and recorded in the blockchain forever. Reading the contracted commitments (smart contracts) and verified distribution of funds to each party’s digital wallet is like a detailed financial book. With this level of transparency, lien releases (and construction payment arbitration all together) will become all but obsolete. In a world of simple transparent financial commitments and fulfillments, all parties can focus their time and brainpower on the work at hand and find ways to innovate and upgrade both their projects and their operations for greater return for all! Psychological Impact of Blockchain Lending More than 50% – that is the amount of time key personnel in small/mid-sized businesses think, task, and worry about cashflow/money management. Blockchain lending allows the parties involved to not worry about the cashflow because the funds are being handled by an

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VANTAGE POINT TITLE

Building Relationships & Doing Good Business By Carole VanSickle Ellis At Vantage Point Title, Inc. (VPT), everything is about execution. However, there is a caveat that comes with a national title, escrow, and default-services provider that has, as senior co-president David Silcott proudly explained, “the experience that allows VPT to do the deals that other companies either choose not to or are not able to take on.” Silcott explained, “We have so many clients who will literally say, ‘I have some deals my other title company cannot do,’” and VPT nearly always is able to take on these challenges and close them. “The caveat,” Silcott said, “is that we fix them properly, and then we close them.” Vantage Point’s leadership team, most of which has been working together in the industry since 2000 (years before the company’s founding in 2008), prides itself on an intense work ethic, determined innovation, and a willingness to go above and beyond. This creates a particular determination to constantly identify new ways to eliminate sources of potential errors and improve efficiency. “We do not talk about how we can’t get a deal done; we talk about how we can,” said Shelley Hickson, vice president of national sales. The group recalled a recent triumph in which they had to track down an original owner on a commercial property associated with a business that had been dissolved, causing ownership of the property to revert to the individual who had sold it in 2001. “We had to track the owner down (after determining he was still alive) and he had to sign a brand new deed,” said Mark Geiger, senior vice president at the company. “The current ‘owner’ had apparently tried to sell the property last year and failed because the title company in that deal was not able to handle the legwork,” Geiger added. VPT closed the deal mid-June 2022.  “We tell our clients over and over that we are partners with them,” said Silcott. “First and foremost, as a business, we partner with our clients, and that means it is our job to help them get through the difficult and even nasty files so they can close successful transactions.” One-Point-of-Contact Customer Service Paul Sobina, VPT’s REO & purchase manager, helps manage the company’s national purchase team. He said the key to Vantage Point’s successful track record is its team, which includes “processors, closers, warehousers, everything you need to close all sorts of transactions from retail purchases and refinances to REO purchases to commercial deals and even cannabis-related deals.” That team, while vast and varied, uses a variety of strategies to keep things simple and seamless for clients. The most apparent of these strategies may be found in VPT’s one-point-of-contact customer service, which helps prevent confusion while keeping clients fully informed about their transactions. Typically, a full-service title and escrow company will require customers work around the internal structure of the business in order to take advantage of a variety of services. Vantage Point’s title services take clients from the beginning to the end of a transaction, which can get complicated when a company uses a “traditional” format that passes the customer through multiple divisions within the business. This is where the one-point-of-contact model comes in, supported by the company’s client portal. “Everything we do internally shows up on our client portal, so clients can see where the title is in the process and when it is done,” Silcott explained. Vantage Point uses the ResWare platform, a workflow automation platform designed to create transparency between companies and customers in the title and escrow industry. Silcott said VPT has developed a custom workflow and automation process that maximizes that transparency, explaining, “Our clients log into the portal [and] they are able to see exactly where things are at present. They can track, balance, and run reports on what is coming up to close.” For the Vantage Point team, transparency and one-point customer service is just the beginning. The company is also expanding beyond the portal and into robotic systems. “The portal helps with a lot of different aspects of the business, but at the end of the day it is just a tool,” said Silcott. “Our technology goes way beyond that.” Silcott was referring to Vantage Point’s robotic process automation (RPA), which utilizes a proprietary system of bots working within the ResWare system to manage, balance, and maintain client files and portfolios. The advantages are twofold: Computers make far fewer errors than humans working on this type of data entry and analysis, and the system frees up Vantage Point’s employees to keep close to customers and be fully customer-facing, as Silcott describes it. “RPAs do not replace people. They enable us to be customer-service focused, and they are hundreds of times more accurate than humans,” he said. Of course, at Vantage Point, the hours of operation have never been conventional for humans, either. Since the founding of the company, the team has prioritized a “we work when you work” policy that provides live contact 18 hours of every 24, dedicated IT on-site and available 24/7, and extremely flexible scheduling when it comes to getting documents notarized and closings done. “It comes from our shared experience in the industry in the early 2000s,” Geiger said. “If a client really needs to close a deal at 10:30 at night, we will find someone to close it.” Silcott chimed in, “Our mentality is always to get the deals closed whatever it takes. It is our passion, and we do not have internal rules about what time of day we schedule closings.” In the Partnership for the Long Haul When Vantage Point leaders and employees talk about their clients, you soon notice that they seem to be talking about partners rather than customers. That mindset has led to some extremely long-lived business relationships and strong ties between Vantage Point and the businesses with which it works. “It is so fun to see our clients in person because we can all kind

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