June 2019 – REI INK

Filling a Void in the Marketplace

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The NPLA serves as a full-time advocate for private lenders. Private lenders play a vital role in the health and growth of our national housing market and the broader economy. By making B2B (business-to-business) loans to real estate investors on deals that do not fit the standards of “conventional” lenders due to time frame or perceived risk, they play a crucial role in revitalizing local communities, preventing and ameliorating neighborhood blight, and creating new opportunities for homeownership. Despite their vital place in the financial ecosystem, private money lenders have historically held a near-invisible place in the lending industry. Leonard Rosen, CEO of the Pitbull National Hard Money Lending Conference, has plans to change that. “Private lenders are a valuable part of the economic infrastructure of the United States, but they are largely misunderstood and even mistrusted,” he explained. Rosen’s new organization, the National Private Lenders Association (NPLA), will fill what he described as “a void in our marketplace” by providing private lenders with “a strong, full-time voice in Washington D.C. and on a state level.” He added, “It is the NPLA’s job, our function as an association, to educate, inform and lobby for the growth of our industry and provide valuable information to legislators.” An Organization Unlike Any Other Rosen is passionate about the need for “full-time advocacy for the protection of our industry.” He described legislators as generally “confused” about private lending, which leads to well-intentioned but adverse policy decisions that hurt private lenders’ ability to deploy capital safely and productively in the real estate sector. “99.9 percent of our industry is making business-to-business loans. Lawmakers must understand how we work and, further, that we are not usurious in our efforts to deploy capital,” he said. “NPLA’s educational goals focus here.” The Foundation of the Financial Food Chain Under Fire Rosen noted private lenders are often self-directed investors using money in their individual retirement accounts (IRAs) to fund deals, making it imperative that those individuals’ interests be protected from a legislative angle just as any other lenders’ interests would be. “There is a whole food chain that begins with the deployment of capital from an investor,” he said. “These investors deploy billions upon billions of dollars into the marketplace every year, whether it be for the investor rehab market, the small-balance capital market, or midsize and large commercial projects. Support for all of these comes from private investment because traditional banks simply do not have the appetite for it.” Rosen, like the majority of the private lending population, worries electoral shifts looming in 2020 could bring in a new crop of legislators uneducated on how the private lending community functions and erroneously equating the industry with the check-cashing and payday-loan sectors. “People have good intentions when they want to regulate the private lending community. They want to protect the consumer. However, those good intentions adversely affect our industry when the legislator is uneducated about how private lending really works [in the real estate sector],” Rosen said. “NPLA’s strong, national voice, full-time representation in Washington, D.C., and its role as a clearinghouse for legislation that comes up on state levels will provide that education, create positive partnerships between lawmakers and private lenders, and, ultimately, fill that void,” he said. *** NPLA’s first meeting will be October 27, 2019, in Scottsdale, Arizona. To learn more about the NPLA private lending think tank—which will assemble leaders in the industry, including hedge funds, hard-money lenders, private lenders and investors in a series of panels dealing with legislative issues, education and ethics—visit NPLAOnline.com. You’ll find details on the association’s agenda and how to be involved. By Carole VanSickle Ellis Suggested Posts Perspective Grow Your Network, Grow Your Business by admin 0 Comments Profile Jeff Tesch Take the Reins at RCN Capital by admin 0 Comments Profile Jeremy Brandt: The Innovator Who is Making a Difference by admin Comment Off Regional Spotlight Kansas City: Stable Growth in a Hot Market by admin Comment Off Perspective It’s Time for a Checkup From the Neck Up by admin Comment Off Commercial Evaluating Your Commercial Real Estate Investment by admin Comment Off Commercial How to Become an Investor in the Best Investment in the World by admin Comment Off Risk Management Know the True Cost of Investor Insurance by admin Comment Off Single-Family Build-to-Rent Housing Garners Investor and Lender Interest by admin Comment Off Single-Family Here Come the iBuyers! by admin Comment Off

Making Magic: The Sam Kaddah Story

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I grew up in Damascus loving soccer. My position was goalie. In and of itself, that was a challenge! In Damascus, unlike in the U.S., the fields I played on were dirt and concrete. I loved swimming too. And, of all things, volleyball was a favorite (we won’t mention my height handicap). So, let’s just say I had a lot of imagination and heart! Wishing Upon a Star Once, when I was very young, I saw a picture of Disney World and the Epcot center. I remember thinking that it was a place out of this world! Something unattainable and unimaginable. Having been born to a modest family of an English teacher and an elementary school principle in a suburb of Damascus, I was grounded with modesty and thoughtfulness. But I never forgot that picture. I knew that someplace, somewhere out there, life was better. The Fairy Tale Unfolds Although I spent much of my youth on athletic fields, enjoying life, the atmosphere in Syria was changing. After my dad was detained by the regime when I was in the 10th grade for his peaceful political democratic views, my oldest brother planted a seed in us. He suggested that we leave Syria and seek better opportunities in this world. From that point on, I aspired to leave. It was only natural for me to look to England or the U.S. as options. My dad was an English literature and language teacher, after all. It is kind of funny that I grew up with the English proper composition and the British accent. Now, however, when people ask me where my accent is from, I quickly reply ARKANSAAA. So, when the time came for me to choose between my college transcripts for my electrical engineering degree or a passport to study at either MIT, the University of Maryland or Wichita State (where Boeing, Cessna, Learjet and Beach aircraft were all founded), there was no question about what I would do. I decided to travel to the U.S., the home of that picture from my youth. A place that had seemed unimaginable and unattainable. At Wichita State, I found my undergraduate studies boring, so I added computer science as a second major. I also earned an MBA with a focus on information systems, an area of study where I felt at home. I graduated with a 4.0 grade point average … the fairy tale was becoming real. It’s a Small World (After All) Out of school, I stayed in Wichita working for defense contractor Raytheon. But, due to a family member’s terminal illness, I moved to Kansas City, Missouri, where I landed a position as the director of the upper Midwest practice for e-security and e-commerce implementation at EY, formerly Ernst & Young. In 2001, I transitioned to leading the global technology and productivity group for GE Transportation/Global Signaling. During my tenure at GE, I oversaw 13 sites that spanned four continents. I was dealing with multiple cultures, waking up at 6 a.m. to communicate with India, followed by phone meetings with associates in Italy, Germany and the UK a couple of hours later. East Coast to the West Coast … I sandwiched calls throughout the day. I finished the daily globe trot by speaking with the Australian and the Chinese teams. Believing All the Way Truth be told, I never imagined moving from global operations into the financial industry, but life sometimes takes a funny turn. Because of my global experience, Microsoft recruited me to lead their internal global marketing and sales systems. I took 60 days off between jobs. During that transition period, a friend asked me to review a national lending platform that was being built and that had challenges after more than $2.5 million had been invested in it. The rest is history—or destiny—depending on your point of view. No matter what happened after that, the lending industry just kept sucking me back into it. I spent a couple of weeks at my friend’s company, discovering the issues and the challenges and implementing corrective actions. My task complete, I left to start my new job with Microsoft, thinking that working as a CTO for a lending bank was not something I could practically consider in lieu of my seven-figure executive position. A few days after joining Microsoft, the bank decided to outsource that software development to be sold back to them for a mid-eight-figure number over five years. That agreement made it worthwhile for me to start Liquid Logics (originally named bFocused for “business focused” to set us apart from techno empty slogans like fintech). I remember vividly sitting in one of my first meetings and asking what an LTV was. I’ll never forget seeing the president of that lending operation, who had just signed an agreement with me, turn red. It was obvious he was wondering if I was going to able to save this endeavor without “industry” knowledge. The proof came a few months later when we released our first version online, where 801 loan officers or the 12,000 brokers could fill in an application, run credit and get auto underwriting in less than 3.5 minutes. At the time there was no such thing as fintech or software as a service (SaaS). We simply referred to it as an online lending application, pre-approval and prequalification to accommodate niche residential lending products with complex underwriting rules. That group generated over $3 billion of loans annually. As the economy turned in 2008, we retooled and became a private-labeled lending platform for smaller organizations originating $500 million to $1.2 billion a year. In 2014, we stumbled across private funds and commercial lending. With collaboration from a Boston-based industry leader, we built the private lending platform based on the $10 million platform we had already built. Shortly after, we discovered that the industry was in dire need of a comprehensive system. The old dominant software was antiquated and built on old PC-based technology. I vividly remember their sales vice president

6 Keys to Determine the Rent for Your Investment Property

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The rental market is hot, but be realistic when setting rental prices. It’s no secret that the rental market in the U.S. has seen incredible growth in the past decade. Rental prices have steadily increased 3-5% annually, with an average increase across the last decade of about 3.11% year to year. From millennials to retirees, more and more people are choosing to rent rather than to buy. The steady growth of the rental market tempts some owners to think they can charge top dollar. But that’s not necessarily the case. The market may be hot, but you still need to take several factors into consideration to arrive at a fair market rent value for your property. 6 Factors that Impact Rates There are a number of factors to consider besides the popular “Rent Zestimate” as you determine your rental rates. Number of bedrooms and bathrooms Property amenities included (e.g., utilities, lawn maintenance, internet/cable, trash service, etc.) Parking (e.g., no parking, 1-car garage/2-car garage, covered parking, assigned/designated parking, number of spaces) Community/neighborhood amenities included (e.g., pool, fitness center, walking trails, recreation room, laundry facility) Appliances (e.g., refrigerator, microwave, dishwasher, garbage disposal, appliance age and color, electric or gas) Pets (e.g., are they accepted, how many allowed, breed restrictions, weight, age) Walkability Score In addition to these six key factors, another factor that affects rental rates is a property’s “walkability score.” A walkability score is determined by the property’s proximity to such things as shopping, parks, schools, restaurants, nightlife/entertainment and transportation. Research Other Properties Finally, don’t forget to research comparable properties. Knowing the answers to the six key factors mentioned previously (these are also key items you’ll want to mention when marketing to tenants) will be helpful as you evaluate your property against comparable properties in your area that have rented recently or are available for rent. Understanding which properties are currently for rent (i.e., your competition) is as important as knowing what has recently rented. How do you find the rent prices of comparable homes? Several online resources can help you find comparable property rental rates. Websites such as Trulia, Zillow and Rentals.com are valuable resources for conducting your research. The old-school, but proven, way to do research is to go out into the field and research the area yourself. The surrounding homes and the area, in general, will impact the rent value of your property. You can also consider using a local professional property manager. Self-managing your rental property may seem like it will save you money, but it could easily result in unnecessary frustration, wasted time and lost revenue. By Jennifer Stoops Suggested Posts Perspective Grow Your Network, Grow Your Business by admin 0 Comments Profile Jeff Tesch Take the Reins at RCN Capital by admin 0 Comments Profile Jeremy Brandt: The Innovator Who is Making a Difference by admin Comment Off Regional Spotlight Kansas City: Stable Growth in a Hot Market by admin Comment Off Perspective It’s Time for a Checkup From the Neck Up by admin Comment Off Commercial Evaluating Your Commercial Real Estate Investment by admin Comment Off Commercial How to Become an Investor in the Best Investment in the World by admin Comment Off Risk Management Know the True Cost of Investor Insurance by admin Comment Off Single-Family Build-to-Rent Housing Garners Investor and Lender Interest by admin Comment Off Single-Family Here Come the iBuyers! by admin Comment Off

Raleigh, North Carolina

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Dedicated to an Upward Trajectory Raleigh’s real estate market is the product of careful and strategic planning—227 years of it, to be exact. The capital of North Carolina, Raleigh was designated such in 1788 in the wake of the Revolutionary War and incorporated shortly after. At that time, the city was laid out in a careful grid pattern that remains intact, in large part, to this day. One of the first examples of a planned city in America, Raleigh’s current market clearly indicates the municipality remains popular with scientists, analysts and academics. For real estate investors, the results are both positive and long-term. The overall trajectory in the Raleigh real estate market has remained positive and upward for the better part of three decades. “The last 20 years, in particular, there has been a lot of growth in Raleigh,” said John Tedesco, senior vice president of business development at Appraisal Nation. Tedesco cited several examples of what enables Raleigh to remain planted so firmly at the top, while other cities tend to “pop in and out” of such lists. Among those examples are carefully placed and planned infrastructure projects; a well-curated public school system boasting 175 schools and a board with both a $2 billion budget and the accolades to indicate the money is well spent; and a growing, strategically designed highway system. “Raleigh is often overshadowed by the larger Charlotte market, but it is the second-largest city in the state, the capital of North Carolina, and home to roughly half a million people,” said Marco Santarelli, president of Norada Real Estate Investments, a national provider of cash-flowing, turnkey real estate. “What people do not realize is the Raleigh housing market is much larger than this, with the metropolitan area alone (the city and its suburbs) accounting for about 1.5 million people.” “We’re one of the smartest cities in the country when measured by percentage of the population with bachelor’s degrees,” Tedesco added. He noted the high concentration of academics and tech professionals is largely maintained by Raleigh’s position in the heart of the Research Triangle, an area that includes North Carolina State University, Duke University and UNC Chapel Hill. The high concentration of these professionals is one of the main reasons for Raleigh’s market steadiness and growth. Because of the area’s relatively high median income and steady job sectors, Raleigh was one of the last major metro areas impacted by the housing and financial meltdown in the mid-2000s—and one of the first to come out on the other side. Sitting in the Sweet SpotSince hitting a nadir in 2012, Raleigh home values have trended steadily upward for the past seven years, and they appear poised to continue to rise. Even in 2012, Raleigh values were relatively strong, nearly $30,000 higher than the national median home value. From that point, values have risen nearly $100,000 in the area. What makes this market so attractive? In addition to the many social, cultural and financial advantages associated with living and working in the Research Triangle, Raleigh is sitting in a geographic sweet spot. Part of the southeastern United States, the climate is pleasant with short, cool winters and hot, humid summers. Perhaps most important, however, is the city’s proximity to other major metropolitan areas on the East Coast. “Raleigh is dead center,” Tedesco said, “just a little over an hour flight to New York City and a little over an hour flight to Florida.” “For us, the market is really strong right now and has been for quite some time,” said Neal Barnett, co-owner with his brother Cory at Garner Investment Company. The Barnetts have been active investors in Raleigh for more than a decade, working through the housing crash using short sale strategies and, in more recent years, focusing mainly on rehabbing properties for sale to retail buyers or for use as Airbnbs. “At present, our primary strategy is rehab-and-sell,” said Barnett, “but we are always looking to put a few more properties in our portfolio long-term.” Garner Investment Company is active mainly in the sub-$250,000 tier of the Raleigh-area market, which many analysts describe as prohibitively low on available inventory. At the end of the first quarter of 2019, analysts warned sales volumes would likely continue to fall, even as prices rose across the board because there are fewer and fewer homes available below $300,000. “Under $300,000, there [are] going to be multiple, competitive offers,” local agent Sharon Webb of Webb Realty told Raleigh’s News & Observer in March. “There [are] a lot of people looking [in that range] and not a lot of inventory.” Barnett noted that nearly all his investment properties are coming to him through leads generated from his network rather than through more traditional (and less personal) methods of lead generation that are reliant on publicly available inventory. “There are a ton of investors in this market right now and a lot more jumping in,” he said. “We find most of our deals off market. They come through relationships within our network as well as referrals.” It is easy to see why Barnett opts to rely on his network for deals these days. Competition for distressed properties in traditional venues is becoming increasingly fierce. For example, while properties certainly are still going for deep discounts at auction, sometimes as much as 21% less than their as-is value at time of purchase and much farther below after-repair retail value, the volume of inventory at the auctions is relatively low in the Raleigh area. According to data from Auction.com, although those properties sold at foreclosure auctions for about $160,000 in April (compared to a median monthly sales price of $260,000 on the retail market side), only 26 were brought to auction at all. This steep competition and scarcity of inventory makes it imperative that investors leverage every advantage to gain early access to potential deals, said Daren Blomquist, vice president of market economics for Auction.com. “More of our buyers are leveraging technology to gain a competitive edge

The Key to Turn-Key Notes

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Turn-key notes could be a valuable addition to your investment portfolio. It’s hard to dispute this quote from Robert Kiyosaki: “Toobtain financial freedom, one must be either a business owner, an investor orboth, generating passive income, particularly on a monthly basis.” Passive monthly income investments are available in the realestate market today in the form of “turn-key notes.” Record inventory levels of performing notes (PN) werecreated in the years following the crash. Some were created as a result of aloan workout, while others were created to sell newly renovated property. Muchof that inventory has now been seasoned for six years or more. In addition,property values have increased nationwide, making these notes an outstandingvalue. The beauty of these notes is that with a minimal amount ofeffort, investors can run their initial due diligence in about the same time ittakes to analyze a stock. If it passes the initial due diligence phase,investors can lock up the deal and finalize it after a secondary level of duediligence such as appraisal, external property inspection or title reportbefore financing or closing the deal. If you close a deal this month, you get paid next month andevery month thereafter for as many payments that you purchased. The paymentsare collected, sometimes auto debited, by servicing companies that then forwardthe payment to you—passive, secured and high yielding. What to Look ForWithout a doubt, the best turn-key notes technique is to buy short term,two- to five-year, partials on PLs. Your yield will typically be between 7%and11%, and your investment will be backed by a property worth two to threetimes what you have in it. In addition, the loan will already be third-partyserviced, and you will be buying from a note seller who has a vested interestin getting the income stream back at some point in the future. The graphic at the top of the page illustrates this investment. Just over two years ago, a real estate investor purchased aproperty. After renovating it, she decided to sell it with seller financing.She had a mortgage residential mortgage loan originator (RMLO) facilitate aseller-financed note by qualifying the potential buyers and handling thepaperwork. The borrowers have been making payments for two years. The paymentincludes principal, interest, taxes and insurance. The payments are collected,escrowed and accounted for by ABC servicing company. [In another scenario, shecould have just purchased the note directly from a note investment company.] This investor decides that she needs to raise some capitalfor another investment. Instead of borrowing money, she decides to sell a partof her note. Here is what you found on just the surface level due diligence: The note has two years of seasoning. According to the payment history, the paymentsare auto debited on the first of the month. Property taxes are current. According to Realtor.com and other free sources,the property value appears to be around $130,000. The loan was written for 360 months, and thepayments are $880 per month. You can purchase the next 60 payments for theseller price of $42,400. Sizing It UpEven though sellers will provide more information than this, if this is allyou know, does it seem to make sense of the surface? Well, six months of seasoning is considered OK and this hastwo years of verifiable payments, so we are good there. The house is worthabout $130,000 and was renovated just over two years ago. We will have only$42,400 in the deal, so we are good there. If we invested $42,400 and received$880 per month for 60 months back, we would be making 9% yield per year, so weare good there. You could invest using cash on hand or your IRA or other taxpreferred retirement accounts. You could partner with another investor. These income streams can be: Done from any place with an internet connection. Analyzed in 20 minutes (including documentverification). Utilize third-party verification. You don’t need to travel or canvas neighborhoods, and thepayments are automatically deposited every month while you sleep. This is asecured passive monthly income that, as Robert Kiyosaki pointed out, enablesfinancial freedom By Kevin Shortle Suggested Posts Perspective Grow Your Network, Grow Your Business by admin 0 Comments Profile Jeff Tesch Take the Reins at RCN Capital by admin 0 Comments Profile Jeremy Brandt: The Innovator Who is Making a Difference by admin Comment Off Regional Spotlight Kansas City: Stable Growth in a Hot Market by admin Comment Off Perspective It’s Time for a Checkup From the Neck Up by admin Comment Off Commercial Evaluating Your Commercial Real Estate Investment by admin Comment Off Commercial How to Become an Investor in the Best Investment in the World by admin Comment Off Risk Management Know the True Cost of Investor Insurance by admin Comment Off Single-Family Build-to-Rent Housing Garners Investor and Lender Interest by admin Comment Off Single-Family Here Come the iBuyers! by admin Comment Off

Emerging Trends in Corporate Housing

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Private equity and venture capital funds are investing heavily in all types of furnished monthly rentals. 2nd Address, a rental platform for furnished monthlyrentals, just received an additional $10 million in additional funds tocontinue to expand their service area providing a transactional platform forprivate property owners offering furnished monthly rentals. Stay Alfred, a company trying to add professionalism toAirbnb by leasing thousands of apartments and offering a standardized furnishedresidential hospitality product, has now raised more than $47 million ininvestment dollars. Sonder, another company competing with Airbnb in the worldof hospitality and private rentals, has raised more than $135 million to buildout their program. In the industry segment of corporate housing, ResideWorldwide, has raised hundreds of millions of dollars in an attempt to purchasemultifamily buildings exclusively for furnished monthly rentals and toconsolidate smaller corporate housing providers under the larger brand. AvenueWest Global Franchise, a firm that provides realestate management of corporate housing rentals, is on track to have 25 local by2020. What’s going on here? Layered under this massive rush to provide managedresidences as a hospitality option is the growing demand for the properties.Corporate housing has emerged as more than just an essential business servicefor relocated or traveling business executives. Today, corporate housing is afull-fledged lodging solution for everyday individuals who need short-termfurnished and even unfurnished housing that has the space and convenience of ahome on the road. Some examples of today’s corporate housing tenants areincluded in the chart on page 30. Making Sense of the OptionsLong before there was Airbnb, the multibillion dollar corporate housingrental industry existed. These fully furnished and managed residences were—andstill are—available for monthly lodging needs. Traditionally, these propertieswere rented by the experienced business traveler on assignment or as part of acorporate relocation. Today, the options have multiplied—and can beconfusing. Here are several of theoptions available in today’s market. Aggregators/online platforms. These areonline platforms that allow tenants and property owners/managers to connect andtransact a rental agreement. Service companies. These companies rentapartments, furnish and equip them and then offer the apartments as corporatehousing rentals. They may buy or lease the furniture for these properties. Apartment companies. These companies ownor manage large apartment complexes. They use some of their inventory asfurnished corporate housing units. They may buy or lease the furniture forthese properties. Management companies. These companies arereal estate property management companies that manage properties owned andfurnished by individual real estate investors. By owner properties. These are realestate investors who provide their individually owned and furnished propertiesas furnished corporate housing rentals. Two TrendsAcross the country, two trends are emerging. The first is 401(k) roll overinvestment. The other is investing in retirement properties before retirement. With the stock market again hitting high levels, analystsare concerned about how long this bull market will last. As a result,individuals are getting smarter with their retirement dollars. By taking 401(k)investments out of stocks and rolling them into traditional real estaterentals, investors are able to gain more control over their money compared tothe volatility of stocks. The second trend is investors deciding to buy theirretirement home 10 and even 20 years before they need it. For example, someonewho is looking to retire in Phoenix, Arizona, may purchase that property now,locking in low interest rates and giving the investors the peace of mind of knowingexactly what their retirement property will cost. What to Know Before Investing If you’ve decided that corporate housing is right for you, here are someimportant considerations to make before you purchase a property specificallyfor use as a corporate housing rental. Evaluate price per bed, not square foot.Evaluate the price per bed, not price per square foot. While some people thinkmore space or a bonus room is a great perk for their own home, keep in mindthat those features are just added liability in a home you plan to rent. Purchase the least square footage with thegreatest number of bedrooms. Just like a hotel, when you rent out acorporate rental, it’s priced per bed, not by square footage. Avoid first-floor units. If you’repurchasing a condo as a rental property, avoid first-floor units. People whodon’t know the city may not feel as safe in a first-floor unit, which cannegatively affect your rental success. And, often people will use a first-floorrental to advertise a business that they may conduct in the unit. Location matters. Location. Location.Location. Location can single-handedly ensure your property is rentedcontinuously. Look for homes in urban areas, near train stations and airports,and close to universities and hospitals. Typically, these locations rent welland have the best resale value. Functionally obsolete homes can make goodrentals. Don’t rule out functionally obsolete properties. Sometimes aproperty that appears to be a poor long-term home is a perfect short-term,furnished rental home. For example, homes with tiny closets or outdatedkitchens make ideal furnished rental properties because a corporate renter maynot need all the space or features. Moreover, these properties are usually lessexpensive to buy and provide good cash flow. Views and amenities matter. When peopleare visiting a new city for business or pleasure, they want to enjoy all thatcity has to offer. Corporate tenants like city views, covered parking and freegym access. Keep these things in mind when choosing a desirable corporaterental property. Return on Investment What can you expect in terms of ROI? That is the question of the century.There are a lot of moving parts, and each market is completely different. In a market like Fort Collins, Colorado, which you normallywould consider a quieter market, you might be able to buy a two-bedroom condofor $175,000. Then, you may be able to turn around and rent that property ascorporate housing for $3,500 a month, whereas if you were renting it unfurnished,you might be able to get only $700 or $800 a month for it. Corporate housing rentals are an essential part of aninvestor’s portfolio diversification. For example, if you are a full-timeinvestor and you watch your properties 100% of the time, then sure, make yourwhole portfolio corporate housing if that interests you. But normally you willsee a strategy more like this: An investor with 10 units might