Navigating the Shift What you need to know in a changing market 2020 REI is hosting a one day summit for real estate investors. This summit is for all investors, of all skill levels. We’ll be discussing the state of the market, housing forecasts, single family, multifamily, and other investment strategies you can leverage. The (more…)
TREC CE: Working With Investors August 29, 2018 10:00 AM - 11:30 AM
Working With Investors TREC Course # 33209 Provider DFW REIA, LLC Provider # 10156 Instructor Tim Herriage Instructor # 4084 Join us as we take you inside the mind of an investor. We will show you the importance of recurring revenue not only from owning property, but by having real estate investors as customers. We’ll (more…)
This month, Lu Ann Blough will present “The Power of 1031 Exchanges – Multiply your dollars” as the June Continuing Education (CE) for Texas real estate agents. Agents receive complimentary CE, but everyone can attend this session. The course will cover: Identify those real estate transactions which are eligible for IRC 1031 consideration. List and understand the six (6) basic components. Identify the statutory requirements for a Qualified investment(QI). List and describe the specific functions and role of a QI. Recognize that 1031 Tax Deferred exchanges need to be a part of a client’s tax planning strategies. Taught by Lu Ann Blough with ERG. 1hr MCE. Course number: 30958
In this class you will learn how to:
1. Identify those real estate transactions which are eligible for IRC 1031 Exchanges.
2. List and understand the six basic requirements for a 1031 Exchange
3. Identify and understand what to look for when choosing a qualified Intermediary
4. Recognize that a 1031 Exchange should be part of an investor’s retirement planning strategy.
MORE ABOUT LU ANN: Lu Ann Blough brings 20+ years experience in the title industry, reinsurance and real estate industries to the Exchange Resource Group team and acts as Regional Development Manager. She is the proud mother of three sons, Matt, Daniel and David. Matt currently works in the insurance industry, Daniel works for a commercial real estate company and David is currently attending Purdue University and plays quarterback for the Boilermakers. Lu Ann grew up in Deerfield, IL attending Deerfield High School. She spent her undergraduate years at Vanderbilt University in Nashville, TN where she received a Bachelor of Science in Psychology. She began her career working in London for a Lloyds of London Insurance Broker.
MORE ABOUT ERG: ERG is a nationwide qualified intermediary (QI) specializing exclusively in all types of 1031 tax deferred exchanges, including complex reverse, construction, and improvement Exchanges. The principals of the company have a combined 50+ years facilitating 1031 Exchanges.
1031 Exchange Services – Texas – Exchange Resource Group, LLC is a qualified intermediary (QI) handling all types of 1031 exchanges in Texas, including reverse, construction, and real property exchanges. We provide 24/7 support so you can ask us questions anytime.
We provide educational and transaction support to investors, buyers, sellers, CPAs, attorneys, brokers, real estate agents, banking and title professionals to ensure that clients are comfortable (and even excited!) using a 1031 exchange to defer paying taxes on even the most complex deals.
Secure Holding of Funds
With 40 years of experience and 12,500+ transactions behind us, you’ll get expertise that saves closings and keeps deals from falling apart.
Our team prepares and reviews the documents necessary to complete your exchange and properly comply with current Section 1031 tax law offering you the protection and assurance you need to complete an exchange.
One Day Wholesale Class June 9, 2018 9:00 AM - 5:00 PM
We have trained hundreds of investors (some of Dallas’ most successful) in the art of wholesaling. We enjoy fruitful relationships with these individuals to this date, and have decided to make this training available once again, before the summer. What you will learn: Marketing that works (Direct Mail, Signs, PPC, and Social) Driving for dollars (more…)
June Monthly Meeting June 7, 2018 5:30 PM - 9:00 PM
Come early, come late, we have something for everyone. Below is the schedule of events, in which you are free to come and go as you please (excluding the CE-you need to be there on time and for the full hour to receive credit). Special Thanks to our sponsors! 5:30 – 6:30 PM (more…)
REQUIRED PACKAGED COVERAGE FOR VACANT &/ OCCUPIED DWELLINGS
FULLY PRO-RATED INSURANCE WITH NO MINIMUM EARNED PREMIUM
AVAILABILITY IN ALL STATES
REI Choice Insurance
1.972.755.1880 www.REIChoice.com How Does This Differ From a Typical Homeowners Policy?
No penalty for property being vacant.
No exclusion for intentional acts by the tenants.
No up charge in premium for a roof due to age.
You do not pay premium for coverages you may not require, such as contents or temporary housing.
Claims filed on this policy will not have a negative impact your Homeowner’s claim history
Keep Your Cash Up Front
Keep more cash in your pocket and take advantage of monthly premium payment plans for no additional fee! So, instead of paying a bulk annual amount up front, you can budget your cash in a manner that makes sense for your business.
The abbreviated outlines of coverages used throughout this proposal are not intended to express any legal opinion as to the nature of coverage. They are only visuals to a basic understanding of coverages. Please read your policy for specific details of coverages.
So you have completed the renovation. You are excited. The house (product) is genuinely impressive and well presented (presentation) you expect some retail buyer to snap it up as the price compares well with new properties in this neighborhood (price.)
It’s listed and on the market. You (or your agent) are ready to show…..but you are greeted by “crickets” or a few people that are nowhere near as excited to buy it as you are to sell it. The visitors over the first open house weekend give you lame feedback most of which is criticism about the price.
This is your first project and in the back of your mind you know the hard money clock is running. Should you drop the price and see if that stimulates more interest and excitement that will lead to a buyer? In a word, NO. THE MAGIC OF SEVENTEENS
Tim Herriage, CEO of 2020 REI and veteran of over 1200 single-family home sales knows you cannot comprehend, process or react to prospective buyers impressions too quickly. “First, they have not qualified themselves as real buyers or even good critics,” says Herriage. “Second, as a seller you probably do not have enough time and/or feedback to make a decision about any price adjustment. We use a rule of 17 showings or 17 days before we consider modifying any of the 3P’s (product, pricing, or presentaion) on a property that is not leaping off the proverbial shelf.”
Seventeen days allows a property to be shown over the course of nearly three weeks and certainly two full weekends. “This amount of time is needed to validate buyer feedback (product, presentation and price.) Seventeen showings over a shorter period with a decent amount of meaningful feedback may make the seventeen days timeframe less critical. Expect a third of visitors to give you some sort of useful response. No more.
If there are no offers then and there is a distinct and unprompted response about pricing being too high (or other items that can be changed easily), after seventeen days a price reduction may now be justifiably considered, but not before. This discipline has helped us and our investors protect our margins.”
Getting Product, Presentation and Price balance right is key to maximizing flip profits. 2020 REI and Investable Realty can help you both understand and execute for better margins.
As resale house inventory becomes tighter, smart flippers are making more money. Are you among these? “Home flippers are realizing a much bigger gross ROI in 2016, averaging 49% in the first two quarters,” says Daren Blomquist, ATTOM Data Solutions SVP. (Average 2006 gross ROI was 27%.) “An increasing number of flippers are financing their purchases, more than two-thirds still use cash compared to about one-third using cash to purchase back in 2006.” FLIP STEADY
Attom Data Solutions, the new corporate parent name for RealtyTrac, reports that there are more flippers participating in the market in Q’2 2016. “The total number of investors that completed at least one home flip increased to 39,775, the highest number of home flippers since 2007,” says Blomquist.
Because RealtyTrac has been a consistent source of data we have this to help scope the size of the fix and flip and F&F finance market. Look for this comprehensive NATIONAL ECONOMIC IMPACT OF SINGLE FAMILY REAL ESTATE INVESTORS Report to become available by October 30th 2016. Contact Tim@REI2020.com to get your copy RealtyTrac reports that home flipping sales increased to 51,434 single-family homes and condos in Q’2 adding 14% over the Q’1 run rate of 44,234 homes sold. Averaging these two number is predicts the fix and flip sales run rate for 2016 to be at 191,000, or 1% ahead of 2015.
Homes flipped in the second quarter made up 5.5% of total home sales. This is down from 6.7% of total home sales last quarter, but up from 5.4% in the second quarter of 2015. SHOULD INVESTORS BE CONCERNED?
“Home flipping is becoming more accessible …. with more loan options for real estate investors, who are also benefitting from the historically low mortgage interest rates,” said Blomquist.
“We’re starting to see home flipping hit some milestones not seen since prior to the financial crisis, which is somewhat concerning, but there are a couple of important differences in the home flipping of 2016 compared to 2006 when home flipping peaked during the last housing boom,” Blomquist said. In Q’2 2016 investors using cash decreased to 68.3%, down from 71.1% last quarter and 69.6% last year. This marks the lowest level of those using cash for their investment since 2008 and is probably a result of growing investor sophistication, more entrepreneurial loans and the desire to use leverage to get better returns.
If you are in need of a fix & flip loan, 3L Finance can help. Go here. *(The industry defines flips as a property that is sold in an arms-length sale twice in a 12-month period based on publicly recorded sales and deed data. Attom collects data from the 950 (of 3200) most populous counties where 80% of the U.S. population lives.)
TURN KEY REAL ESTATE INVESTMENT DEFINED
Many people interested in the returns real estate offers feel they are not qualified to do the work. They recognize succeeding with just a weekend education course is remote but a viable alternative is to work with turnkey fix and flip or buy-to-rent companies that populate this country. In this case understanding a property financial analysis is indispensible. HANDS-OFF – BRAIN-ON
Before you begin don’t make the assumption that turnkey investment provider does all the work, and the investor sits back and collects the checks. The issue is you should understand how things work, especially the financials. This is because the market does not adhere to the standards or regulatory oversight of stocks, bonds and funds.
Real estate investing is not “armchair investing.” It may be “hands-off” investing in that you are not swinging hammers or cleaning up after tenants, but it is very definitely “brains-on” as far as understanding the strategy, financials and exit plan, otherwise how do you know you are not being taken for a ride. This is why basic real estate financial literacy is vital. TURNKEY ALTERNATIVES
Before you jump at this opportunity understand the variations on turn key process. The most complete arrangement is where you do business with one company who helps you buy, renovate, sell or turn into a rental, property manage, account and report. There are a number of companies that do all of this, however they do subcontract things like renovation and maybe property management. The key is a singular point of contact and responsibility to you as an investment client.
Other companies will contract with you, using your money to buy the house, fix it up, and help you find a tenant – then assign management to an associated or third property manager. The advantage often is the property can be purchased more inexpensively, but the investor offsets time and uncertainty for income. This is not what we define as turn key experience as the different contractors are driven by different goals that are not necessarily those of the investor. This further complicates any financial analysis because of disconnect physical and financial processes. STRAIGHTFORWARD MODEL
Some turnkey vendors provide the investor with a leased-up property already generating income. This removes many of the uncertainties of price and contingencies of unknown costs, delays and time it may take to renovate, sell or find a tenant. Experienced turnkey vendors are going present you with a pretty detailed spreadsheet prior to acquisition of a particular property. If they are not willing to do this, walk away. You also need to understand the numbers you are looking at.
Ask your turnkey vendor these questions: Can I buy the house you are showing me as the typical investment house? Do you own it as principal or acting as agent? Is it renovated and habitable by a renter? If not what will it take to bring it to market ready condition? Is the property leased to a rent-paying tenant paying market rent? (check rents at www.rentrange.com.) If any answers are in the negative get more inquisitive. 2020 REI Companies Consulting Services is happy to offer a second opinion on any analysis on a property you may be considering. STANDARDS NEEDED
Current real estate accounting standards are quite sufficient for any analysis, but using them requires understanding. The information we are going to present is here to help.
These analyses and explanations follow standard real estate accounting rules and will be broken out with examples. Where appropriate we will also provide you with some baseline rules related to industry insights that have served and real estate investors well over the years. 2020 REI invests using these same rules.
It is the intention of this blog to update this data and provide on-going education to those involved in the investment in real estate. The blogs will provide building blocks related to real estate analysis and progressively work towards more complex financial return metrics. It is important to have a basic understanding of cash flow analysis before you begin any real estate investment or buy real estate as an investment. Investors can avoid pain if they use and implement the analysis and decision tools we will present going forward.
If you want a second opinion on any investment you are about to make, 2020 REI Consulting is happy to provide a second opinion. DO YOU CARE ENOUGH TO MAKE MONEY? Succeed with Sound Real Estate Analysis (Part 1.)
Succeed with Sound Real Estate Analysis (Part 1.)
There is no dispute to this, real estate Investing is about numbers. If you do not like dealing with numbers and this is something you are not interested stop reading and find something else to invest in. There is nothing quite as powerful as real estate but a key to success in real estate investment is leaning how to analyze a deal and how the asset fits your needs. If you care enough, read on.
Numbers are at the heart at of real estate investing and connect to the four critical elements that surround income property investments including,
Cash Flow – The net spendable cash generated from an income producing property
Appreciation – The increase in value of a real estate asset over time.
Loan Amortization – The pay down of debt over time.
Tax Benefits /Tax Shelter – The effect of deducting depreciation and loan interest against taxable income.
To be successful in real estate you have to know the market numbers. Your specific deal has unique combination of vitals. These numbers include but aren’t limited to the following questions. Property Analysis – Cash flow and Appreciation
The sale price?
The market comparable values?
Price appreciation history – for this house and this neighborhood?
Market rental comparables?
The number of days on market?
The income capitalization rates?
The current vacancy rates?
Are rental concessions being offered to win renters?
The average expenses per square foot?
The expense ratios for the property?
The current property tax rates?
What does insurance cost?
Any loan terms?
Loan origination costs?
Tax and Depreciation Accounting Benefits
Any recapture provisions if sold before depreciation schedules run?
Ordinary income tax rates?
Capital gains tax rates, as well as
Passive loss rules?
This series of blogs will give background information so that you can become a more thoughtful and successful real estate investor. This will provide a background on how to choose a market and perform cash flow analysis of a specific property. Understanding and using these numbers will greatly improve your chance of success dramatically, even though you may be working with a trusted third party to help you.
A particular attractive aspect of real estate investment is the knowledge that one can have a reasonable expectation of returns. This is not so assured of the stocks, bonds and funds that can be traded on exchanges.
Once you learn the numbers, relationships and processes, you will see how easy this can be. If you are committed to succeeding in real estate investing the tools to learn can be a pencil and paper, spreadsheets or sophisticated financial software programs. Whichever path you take or tool you use, make sure you know how to use it. Developing an understanding of real estate analysis is vital. Investors are sheep to the slaughter without understanding and putting these basic principles into use. Don’t be a sheep. 2020 REI Companies can help. Author’s note: This blog is inspired by a set of investor accounting standards the author developed with Carter Froelich, CPA, publisher of “The Property Ledger.”
Part 2. DO YOU CARE ENOUGH TO MAKE MONEY? Succeed with Sound Real Estate Partners (Part 2.)