By Bob Malecki

Every serious real estate investor should have a professional website as a foundation to manage their online marketing and social media content. A well executed online presence will provide you with the ability to tell your story and control how the public perceives you and your company. With over 90% of those looking to buy or sell a home using the internet as their primary search tool, and nearly 100% of businesses using it to find out about their colleagues and competitors, having a polished website and social media profile is critical in today’s business environment.

Once you’ve determined your business objectives, your target audience, and the tone of your site, you need to have it hosted with a service provider, then get it set up with a domain name. You’ll also need to determine how you’re going to manage all of this once it’s built. For years a professional webmaster was needed to build and manage a website for even the smallest business, but now there are applications that will let you manage your own content with paying consulting fees.

If you want to maintain your own content you will need a CMS (Content Management System) to allow you to modify your site at any time. A good CMS will help you simplify all the activities associated with publishing content, enabling search, managing edits, using plugins to add features and functionality, managing your layout, determining site structure, SEM (Search Engine Marketing), and lots of other helpful things you’d rather not have to develop expertise.

Over the past 15 years I’ve worked on quite a few CMS platforms and have found that WordPress is the ultimate tool for most small businesses to have a cost effective system to manage their own content. WordPress is one of the most popular CMS systems around with nearly 15% of all websites using it, and over 15,000 Plugins available to add functionality. And even better, WordPress is a free application developed through the Open Source consortium, and there are thousands of great looking templates available for free or very low cost. With its built-in blogging platform and plugins to enable have a cost effective system to manage their own content.”  SEO, forms, listings, squeeze pages and a plethora of additional functions I’ve converted all but one of my web sites to WordPress and always recommend it to my peers.

There are other online CMS systems available as well.  Vendors like GoDaddy provide built in website creation tools and management tools with their hosting packages. You should realize though that you are pretty much stuck with having to stay on their hosted platform to continue using their CMS tools. By implementing an independent platform like WordPress, you can move your website to any other hosting service without having to learn a new authoring system and in addition to the vast array of plugins, there is a large pool of consultants and digital artists who know the WordPress platform to help you when your time or capabilities are challenged.

Choosing the right foundation to build your online marketing platform is just the beginning. Take the time to do a little research. Choose partners and technology that will grow with you and support all of your efforts to build your business. As you learn to set up and manage your WordPress real estate website, you will be able to fill it with content, and keep fresh content ongoing. It will bring you leads that result in revenue, and you’ll be in control of your site and content at all times.

About the author …
Since 2006, Bob Malecki has been involved with the acquisition and management of both single and multi-family properties in his home state of Washington as well as other key markets in the U.S. He recently established REI Capital Investments LLC which is a private equity fund to raise up to $5M in private capital to and the acquisition and redevelopment of residential and commercial projects. You can reach Bob at 360.850.1252 or via email to [email protected]

REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at [email protected] and be our guest for free!”

 

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By Josh Maher

If you are investing with other people, the odds are that you are forming a Limited liability company (LLC) to do those investments. Many of the gurus that come through as speakers at REAPS events talk about this as well. When it comes down to actually doing a deal though, there are some important things to keep in mind about the agreements that will govern the deal. Although I will review some of the legal risks here, I Want to be dear that I am not a lawyer and you should always consult your lawyer if you need legal advice. Here is an overview of the issues to think about when investing with LLCs.

Pass Through Taxation – probably the main reason LLCs are used for Real Estate investments is the fact that they are pass through entities. This means that the tax status passes through to the members of the LLC. The LLC itself, as an entity, doesn’t pay any federal income taxes. Instead all tax benefits (such as depreciation) and liability is passed along to the members.

Ownership and allocations – are one of the more complex components. Many investors get started with an investment and then later realize that accounting for each members ownership can be a pain especially when it comes down to what is a distribution, what is a return of capital, and so on. These will be different depending on where the money is coming from (rents, refinancing, and so on). At the end of the year though, the K1 is where all of this is outlined. If you are managing an investment group via an LLC, you will need to either prepare or have a professional prepare K1s for all members in the LLC. If you are a member, you will need to include the K1 in your taxes.

Changes to the LLC – can be a bit opaque, often the manager has sweeping control over the LLC and voting for changes is usually done by a basic ownership majority. In other words if there are two investors who own 51% of the LLC, they can make changes that will seriously impact all the minority owners (even if the number of minority owners is greater than the number of majority owners). As an investor this can be difficult to swallow if suddenly your rights as an owner have been changed.

State Income Taxes – LLCs can be problematic for state income tax purposes. If you invest in an LLC you might become liable for state income taxes in states in which the LLC does business, but in which you are neither a resident nor a visitor. This can come as an unwelcome surprise. Usually if the LLC is just owning real estate, this isn’t a problem though. It becomes more of a problem if the manager of the LLC does other business under the LLC. For example operating an on-site daycare.

Tax Distributions – if you invest in an LLC you will want the LLC agreement to require the LLC to distribute sufficient cash to you so that you may pay the tax on the LLC’s income allocated to you. Sometimes LLC agreements do not mandate tax distributions. You don’t want to have income allocated to you and not receive any cash from the company with which to pay the tax on the income.

Withdrawal - if you invest in an LLC, you may want to negotiate the right to withdraw from the LLC under certain circumstances, such as the LLC failing to provide information required for your taxes or the LLC failing to observe your information rights. Most LLC agreements expressly provide that members cannot withdraw. Negotiating a withdrawal usually entails a situation in which you can walk away from the investment without a return of capital.

Debt – can be problematic if the LLC borrows money, and then uses the funds from the borrowing to incur tax expenses, your “capital account” might go into the negative. Then, if you sell or transfer your interest in the LLC, or if the LLC redeems your interest, you might have taxable income as a result of your negative capital account.

About the author…
Josh Maher is an entrepreneur and investor with over fifteen years of experience in the technology and banking industries. His experience includes working for larger firms as well as advising, investing in, and starting early stage companies in the Northwest. His real estate projects include SFRs, retail strip malls. mixed-use buildings, & multi-family complexes. Josh can be reached at [email protected] or you can follow rum on the web at joshmaher.net or on twitter @joshmaher.

REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at [email protected] and be our guest for free!”

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By Doug Owens

Sometimes it is hard to see the forest from the trees. We get so involved in the concepts of the deal, or the objective we are trying to achieve, that we do not sometimes pay sufficient attention to the words that are used to put the concepts or objectives into a binding agreement. And it is by definition in real estate that if it is not written, it is not binding. If you are the investor, most of the time you will want your agreements to be binding and so it is important that you know exactly what it is that will bind you and the other party to the transaction.

I have previously written about the Statute of Frauds, which requires that an agreement to convey real estate be in writing with a sufficiently definite legal description that the property can be readily identified. It is possible for a seller to enforce an agreement to convey real estate that does not comply with the Statute of Frauds under some circumstances, but in general it is preferable for your written conveyance agreements to comply with the Statute of Frauds. That generally means you should use the legal description that most recently was used to convey title, and this description should be attached to or included in the text of your agreement.

There are other documents that can affect your deal that need to be attended to carefully. The Form 17 is a disclosure document required by statute for the seller to provide the buyer of real property. The disclosures are not part of the contract but it is important to carefully inspect the form before you sign it and deliver it as seller or when you receive it as buyer. There are different forms for residential and commercial transactions and if the wrong form is filled out and delivered, it is as if no form was delivered. Failure of the seller to deliver the correct form gives the buyer the right to rescind the deal, even if the other contingency clauses in the agreement have been satisfied. So if you are a buyer, you should carefully look over the Form 17 to make sure it is the right one for your deal. If it is not, you have a “back door” out of the deal if you decide not to close, and you can receive a refund of your earnest money. If you are the seller, you should make sure that the form is the correct one, and that will close off a buyer’s right to rescind based on non receipt of the Form 17.

In a lease with option to buy, it is especially important to review the documents carefully and make sure that they are harmonious and consistent. I have previously written about the impact of the Residential Landlord Tenant Act on such practices as lease option sellers seeking to impose maintenance obligations on their tenant buyers. The lease and option should be carefully written to address these issues.

Financing contingency clauses in purchase and sale agreements are another area in which precision in writing the terms can be critical to the ability of a buyer to recover earnest money when financing does not materialize. In current conditions when approval of loan requests can take longer than the historical norms, it can be important to have language dealing with whether the deal fails when the buyer’s financing is approved but not in time to close according to the date specified in the agreement.

It is also important to review any warranties in the purchase and sale agreement carefully. Warranties are promises that generally survive the closing of the transaction, and they can relate to the status of title or other things such as the physical condition of the property. In order to be comfortable with these obligations, the investor should be sure to understand them thoroughly.

The preceding is intended to be educational and should not be considered legal advice.

About the Author…
REAPS Doug Owens Back to Basics   It Is Important For Investors To Read What They Are SigningDoug Owens practices real estate law and general business law from his office in Seattle.  He offers a 20% discount for REAPS members and he can be reached at 206-985-6679 or [email protected]

REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at [email protected] and be our guest for free!”

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How should I go about negotiating repairs after a home inspection?

First, ask for a credit for the work to be done on the house. The sellers are most likely packing up, dreaming of their new home, and not thinking of all the repairs that need to be completed. They are unlikely to treat the work as a high priority. Look into taking a cash-back credit at the close – you can use that money to complete the projects yourself, on your own time, and to your own level of satisfaction. If you get the credit, there will be less confusion later on to confirm that the work has actually been completed. Secondly, be careful what is said out loud to the listing agent. If you mention a plan to renovate the kitchen, then sellers will certainly hear about it, and they will be less likely to offer credit for kitchen repairs. Finally, remember that you should never complete the original contract assuming that you can negotiate could!s later on. If the inspection comes back flawless, or if the market is competitive, negotiations could alienate the sellers or give them a reason to choose another buyer.

Should I even consider selling my home during the holiday season?

Yes. Today’s buyers never stop looking online, despite the time of year or type of holidays coming up. Working buyers do not shift into “holiday mode” until the very last minute. Even during the holiday break, they are still working from time to time, and they will continue to monitor real estate listings as well. Also, many sellers with stale listings tend to take them off during the holidays. This creates less competition for sellers as buyers are still motivated to look. While buyers are flipping through listings, they will be excited to see something new hit the market – especially with the lack of quality inventory. However, if you do not feel you can keep the house clean, hold open houses, or accommodate last-minute showings during the holidays, then consider listing your property after New Year’s. Generally, the competition is low in January, as many sellers wait until spring to sell. Often, new buyers with fresh New Year’s resolutions will come to the market, and your home will catch their attention. If you are ready to sell, you will have a more motivated market of buyers during the holidays.

I’ve finally decided to buy my first house – do you have any tips on saving up for a down payment?

Typically, down payment requirements range from 3.5 to 20 percent of the purchase price of a home, depending on the lender and loan type. Talk to your real estate agent and come up with a good estimate for exactly how much you will need. No matter the price, it will take a while to save up enough money for your payment. Make visual reminders of why you’re saving and place them around the house. Take a picture of the house you want to buy and hang it up in your living room. Write a message below it such as “My future home!” Also, reflect on your spending to identify budgeting downfalls. In examining your spending habits, you can make a plan for minimizing them, which in turn, increases your savings. Finally, it is a long and hard process to save up enough money for a down payment. Set small and achievable goals for each month, and then celebrate once you’ve accomplished them! Allow yourself a meal at your favorite restaurant when you reach every say, $5,000 instead of $30,000. You’ll never lose sight of what’s ahead if you have these rewards to look forward to. Make it fun, and it will help you overall. Got a question? For more information about Heaton Dainard, visit our website at www.heatondainard.com or give us a call at 425.881.5131.

About the author …

James Dainard is one of the Founding Partners of Intrust Funding, LLC. He bas been buying and selling real estate in King, Snohomish and Pierce County for the past seven years.. James has built a reputation in Washington for providing investors with multiple exit strategies and supplying them with easy and fast lending sources. James Dainard and , Will Heaton are recognized as the founders of one of the Fastest Growing Companies in the Eastside in 2012. He enjoys staying fit, spoiling his dogs, and traveling. He and his wife Clair are the proud parents of a baby son .

REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at [email protected] and be our guest for free!”

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Why? Because you can get amazing results for a fraction of replacement cost. The range of materials and surfaces that can be refinished is impressive and every item that you refinish rather that replace is money in the bank – literally. As you view properties keep this in mind as an option. It can turn a dud into a deal!

Kitchen cabinets can be refinished and this is a money saver. If the cabinet boxes themselves are OK then take the doors off and re-skin the face frames and end panels. Buy new doors to match the skin and put them back on. You won’t believe the transformation or the bill. Sometimes the interiors of the cabinets are worn. Here it’s not practical to re-skin due to the quantity of surfaces. Priming and painting may be an option. An exact match to the surface skin is not necessary. Just get it close.

My personal favorite is refinishing tubs and surrounds. Surround replacement is not a big deal but tub replacement is and it should be done only as a last resort. Refinished tubs look almost indistinguishable from brand new for about $350. A new tub is cheaper you say? Not when you consider the demo, carpentry, drywall and plumbing required to make it happen. Also, the surround is usually damaged during replacement and needs to be repaired or replaced. Surrounds made of tile, vinyl or fiberglass can be resurfaced. There are resurfacing paints now that look similar to granite which can add a really cool look to a surround for a small upcharge. One caveat – the grout lines are simultaneously refinished so the tile has a more monolithic look afterwards than tile and grout.

Have you ever walked into a house and looked at otherwise perfectly good bath fixtures in crazy colors like yellow, purple, and blue? Before you used to groan and add on another $1,500 for replacing all the fixtures with a neutral color. Now you can say “Cha-ching” and take half of that off while your uninformed competitors shake.

their heads and move on to the next house. You should still replace the toilet at least but you don’t even really need a plumber for that. Those dated and worn laminate counters don’t need to be replaced. Much easier and cheaper to refinish. them.

“Refinishing is here to stay. You might as well make it a part of your repertoire and let it help you do more. You’ll be amazed at the results. Finishes called “multi-specs” can make your counters look high end in a hurry. If you want to go from a square edge profile to a bullnose you can rout the edges and then refinish. What do with that ugly fireplace brick and the green tile in the entry? Refinish them of course. They’ll be gorgeous!

One other location to get a big bang for your buck is the front concrete steps and landing. Many cookie cutter homes have concrete steps and landings going in the front door. Sometimes they’re painted and sometimes they just look like old concrete. Now you have an inexpensive way to really dress up that entry. It will actually get your buyer’s attention. Refinishing is here to stay. You might as well make it a part of your repertoire and let it help you do more and better deals. Those who don’t know don’t know, but now

About the Author …
Brian Sorensen is a general contractor and investor who partners with REAPS members. His company, Unity Construction LLe, is a full-service residential construction company in Puget Sound. His construction company also invests in single and multi-family properties to both flip and hold. Brian is a Sounders fan and plays tennis for fun. To contact Brian, send an email to: [email protected] or call 360-731-1963.

REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at [email protected] and be our guest for free!”

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If you are not getting an enthusiastic response to your search for a good real estate broker to put on your team, there may be a reason.

“I’m a new real estate investor and I am looking for a real estate broker… “

Oh dear! I’am a real estate broker, and what did I just hear? I just heard “new” (meaning novice, inexperienced) “investor” (meaning lots of low ball offers that don’t get accepted, lots of time and paperwork, and no money to actually close the deal).

Better to tell me that you are a buyer looking for an income-property, that you will be using hard-money to purchase fixers, and that your price range to purchase is $100-300,000. If you also tell me that you will use me to list the property after it is fixed up, I am much more interested as that means two commissions for me. Tell me that you are planning to buy and resell four houses this year, and now you have my attention. I am more willing to spend time and money helping you find the right property, and it sounds like you know what you are doing.

If you tell me that you typically offer 75% or less of list price for a property, then we can discuss the statistical chance for success, and I can negotiate a fee for my services that makes sense. I will probably want to know why you are looking at listed properties, and perhaps suggest we look at off-market opportunities.

“I am looking for a few different real estate agents to send me their best investment deals…”

Oh dear! You want me to compete for your business? Why would I do that when I have clients who have made a commitment to me by signing a buyer’S agency agreement (basically, hiring me to represent them)? Please know that my best deals are going to those clients who have made that commitment.

“I am interviewing several real estate brokers, and want to know whether you will discount your commission…”

Like most reputable brokers, I offer a discount to clients who do multiple transactions with me. This is one reason I enjoy working with investors, in addition to the fact that I am an investor as well. I enjoy the investment process. But if a client is only planning to do one real estate transaction, I rarely discount my fee.

If a client is making a decision based solely on the lowest price, I would have to wonder how well that discount broker is going to be able to negotiate the best deal for their client? If they cannot support a minimum amount for their own time and experience, how will they be able to justify a good sales price for their client?

If you are interviewing real estate brokers, you might want to ask how long they have been in business, how many transactions they closed in the last year, whether they have testimonials from satisfied clients, what is their area of expertise, and whether they themselves invest in real estate. How can they help you achieve your real estate goals?

Keep in mind that real estate brokers are professionals like your CPA, attorney, money lender, and other team members that are required to meet legal and educational criteria for licensing. How you approach them can make all the difference in the world to your bottom line as an investor.

About the author …
Wendy Ceccherelli is the volunteer membership coordinator for REAPS. She has been a full-time real estate investor since 2006, and is the designated broker and owner of I lome Land Seattle. Prior to her career in real estate. she spent twenty-five years as a government arts funder. More information on real estate topics may be found on her blog at www.wendywonder. blogspot.com.

REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at [email protected] and be our guest for free!”

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Retaining good tenants in your property can be more challenging than finding reliable tenants in the first place. Continuing with the same people in your properties is hugely beneficial for you as either a landlord or a property manager, as it prevents void periods where the property is empty and receiving no rental income. It also reduces the amount of time and paperwork dedicated to each property, due to the fact that the current tenants do not need to be continuously regulated and checked in the same way new tenants require. Here are some pointers to help keep your tenants happy and encourage them to stay in your property:

Go the Extra Mile
Don’t underestimate how much a little extra effort on your part will be appreciated by your tenants. Always keep in mind there is influx of rental property due to poor selling conditions and homeowners becoming DIY landlords.

Be Responsive
Communication is vital in the tenant/landlord relationship, especially if you are wishing to keep them as renters. Don’t ignore their requests simply because you don’t agree. Talk through the issue and explain why you’re not happy with their suggestion and try to reach a compromise between both parties. Never ignore calls, texts, or emails from tenants. Make sure to answer or return calls immediately, as delaying the conversation is more likely to cause issues to increase in severity. Tenants do not like to be ignored, and this practice will make them disregard the property and you as an authority figure.

Address Problems Quickly
If your tenant complains of a loose drawer or squeaky door, try to fix them as quickly as possible. It may seem a minor issue in the grand scheme of property management, but these problems cause irritation and annoyance to tenants on a daily basis. Do not wait for tenants to call several times before you address these problems. Make sure to have a contingency plan if you are busy, rather than leaving a backlog of issues to resolve when you finally have time. Be sure to call a contractor promptly if you feel you cannot fix it properly yourself. If the problem needs time or extra parts you need to order, explain the process to the tenants so they have a better understanding of progress being made.

Invest in the Fixtures and Fittings
Quality materials and appliances make everyday life easier, as well as giving the property a more luxurious feel. Renters are more inclined to pay slightly higher rental fees if they can see it is a high standard of property that is well maintained. They also tend to stay longer in a place they can be proud to show and entertain family and friends in.

Rent to Pet Owners
The thought of tenants having pets is enough to make many landlords think twice about accepting a tenant. However, it has been proven that properties accepting pet owners are in much more demand, and tenants are less likely to move once they and their pets are settled. Ensure that there are rules in the contract that the tenants must repair or replace any damaged areas, clean up after their pet and adhere to respectful practices concerning communal areas and interactions with neighbors.

Keep in Touch
Do not become overly involved in your tenants’ lives because they can see this as interfering, and it may cause boundary issues later on in the tenancy. However you should always remain approachable and friendly. Regular communication will give your tenants a heads up to any issues or future work that is planned.

Respect Their Privacy
Even if you own the property, do not just barge in whenever you feel like it. Not only is this illegal to do without giving proper notice, but it is also extremely rude and disrespectful to your tenants. Unless it is an emergency, make sure to call in advance and schedule a visit.

Screen Potential Tenants
Screening potential tenants will not only help you rent to trustworthy people in the first place, but it will help maintain your current renters. In shared properties and apartment blocks in particular, a bad tenant can affect the rest of the renters and discourage them from staying long-term.

About the author …
Tracy Minick is the owner of A Property Shop, a full-service Property Management company serving King, Snohomish and Pierce Counties. Tracy and her team has been investing in real estate since 1999 and that’s exactly what makes A Property Shop different than most property management companies. We have 24 years of combined experience in managing our VERY OWN units. You can learn more at: apropertysbop.com or [email protected]

REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at [email protected] and be our guest for free!”

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By Bob Malecki

Anyone who is in the business of buying single family homes for rental or flip income is most likely aware that some large hedge funds have entered this market on a very large scale, mostly in the tier 1 and tier 2 markets. One of the major players in this area is the Blackstone Group who completed the first ever U.S. securitization of single family rental homes, and from all accounts the deal was a success for Blackstone – but what does this mean for you, the average SFR investor?

For those unfamiliar with securitization, it is basically a fancy form of financing that enables those large investors, with assets in the $100′s of millions, access to the bound market where they can get cheaper debt than can be had in a traditional real estate transaction. These hedge funds started investing in real estate, based their model on purchasing large pools of REO’s or non performing loans from banks then sell the homes as short sales, REO’s or give the owners loan mods.

Hedge funds like Blackstone are now using a different strategy to profit off of real estate. They are buying single family homes in key markets in the U.S. and rehabbing then renting out the homes for cashflow and appreciation. Similar to the “buy and hold” strategy used by us small investors, but on a scale of tens of thousands of homes in only a few months. Blackstone is among many hedge funds who have entered this market in the last five years and have already purchased $3.5 billion in residential real estate and they recently secured a line of credit to purchase 2.1 billion more.

How does this affect the small investor?

While individual investors like you and I need to go to banks or private lenders for loans and pay 5% to 12% interest rates, securitization allows large investors such as Blackstone to get insanely low interest rates on properties they purchase. So even though a rental may producer only 7% annual ROI, borrowing the funds at 2% provides a spread of 5% which is sufficient for many institutional investors. We as individual investors cannot economically compete at that level, but because we are smaller and more agile, we have other advantages.

Investors are on the ground and can physically check up on their properties to ensure they are maintained. Many hedge funds have as much as 50% of their inventory vacant, because they don’t have the manpower in place to repair and rent homes.

An individual investor can easily take care of a few properties themselves, or hire a property manager to do everything for them for a small percentage. This translates to a higher profit margin compared to institutional investors who require large staffs and vendor networks to execute their strategy.

Individual investors know their markets well and can use many creative strategies to acquire properties with added value. The hedge funds are buying “in bulk” and will most likely have many problem properties in their portfolio which will lower profit margins.

Working around it.

The participation of Blackstone and other hedge funds has had an impact in many local individual investor communities, but in general their participation has bolstered awareness of the single family investment model across Wall Street and those who follow it. We as independent real estate investors have many more tools than the “one size fits all” model of the institutional funds. By employing the creative tools that we have gathered from our exposure to REAPS and partnering with our fellow investors, I have no doubt that we all will find prosperity in 2014 and many years to come.

 About the author…
Since 2006, Bob Malecki has been involved with the acquisition and management of both single and multi-family properties in his home state of Washington as well as other key markets in the U.S. He is the principal at REI Capital Investments LLC which is a private equity fund for the acquisition and redevelopment of residential and commerical projects. You can reach Bob at 360-850-1252 or via email at [email protected]

REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at [email protected] and be our guest for free!”

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James Dainard, Co-Founder of Heaton Dainard Real Estate has completed over a thousand real estate transactions in Western Washington. We are giving you the opportunity to ask an expert your top real estate investment questions.

“What are the hottest areas in Western Washington to invest right now?” – George of Seatde, WA

James Says: My top picks are all in Seattle right now with Queen Anne, Central District, Madrona and Ballard topping the list. They are all hot family friendly neighborhoods with some great opportunities to acquire older houses and fix up. Many of the houses have really beautiful bones and when we list flips in these hoods, we always expect a bidding war.

I went ahead and asked some of our buyers’ agents their favorite top spots and here’s what they said: John Whitney: “Des Moines! I bought some properties for myself in this area and there’s some great buys out there. What do I like most about it? Honestly, it’s cheap. It’s the perfect spot to look if you are an investor that doesn’t want to spend a whole lat.”

Jason Howdeshell: “I’m a fan of Marysville. The last property I purchased for myself was there and it’s a hold for now. The area has seen a lot of growth in the last decade. Many of the residents there work for Boeing, which creates a lot of new jobs in the area bringing up the demand for houses here. ”

Bryan Howdeshell: “Puyallup is my personal pick. Easy, cheap and newer construction. Lots of great cosmetic fixers in this area. Ihelp investors find cash flow properties and many of these are turn-key or require very little renovation work.”

“I know staging can really help a house with a funky floor plan but I’m going to be listing a relatively new house… it’s a 2006 with a very straightforward floor plan. Is it worth it to hire stagers?” – Denise of Bellevue, WA

James Says: Nice question Denise! We just listed a property for one of our investors. It was also fairly new and built in 2006. It sat on the market for a good two months and the offers kept rolling in $20,000 under list price with remarks about minor imperfections in the home like a small stain on the carpeting or a chip in the granite with buyers remarking, “It will cost me that much to fix that!” or “I’ll need to replace all the countertops.”

Katie Kepler, one of Heaton Dainard’s top listing brokers, suggested the investor stage the downstairs of the house for a minimal amount of money. In 6 days we had a full priced offer on the table. What we found was that when the house “My top picks are all in Seattle right now with Queen Anne, Central District, Madrona and Ballard was staged, even in a newer and straightforward floor plan, that it really created a perfect environment for buyers to envision themselves living there. Plus, there is the added benefit that they didn’t zone in on minor flaws in the house. It’s not free to stage a home but it made a $20,000 difference in this particular listing.

Got a question? For more information about Heaton Dainard, visit our website at www.heatondainard.com or give us a call at 425.881.5131.

About the author…
REAPS James Dainard1 Ask James Dainard   What Are The Hottest Areas of Western Washington To Invest?James Dainard is one of the founding partners of Intrust Funding, LLC. He has been buying and selling real estate in King, Snohomish and Pierce Counties for the past seven years. James has built a reputation in Washington for providing investors with multiple exit strategies and supplying them with easy and fast lending sources. He enjoys staying fit, spoiling his dogs, and traveling to exotic locations with his wife Clair.

Previous REAPS articles by James Dainard:
Q & A with an Expert in Real Estate Investing
Q & A: Green Edition
Ask James Dainard: How’s the Rental Market?

REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at [email protected] and be our guest for free!”

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By Doug Owens

These days we often hear of borrowers who are misled by unscrupulous lenders into taking on larger mortgages than they can afford, or agreeing to low “teaser” interest rates without full knowledge of the reset process.

Sometimes, however, borrowers are the ones that do the misleading, and it can be difficult for lenders to recover. In such circumstances, the courts can provide relief to lenders against a strict interpretation of recording laws. The ability of courts to soften otherwise harsh applications of law is known as equity. Equity operates in a somewhat parallel fashion to the system of interpretation and application of the law, and when a party to a legal case shows sufficient grounds, the courts will act to give relief that one might otherwise think impossible.

A recent case decided by the Washington Supreme Court is a good example. A group of twelve investors formed an LLC in 2004 and bought property in Thurston County. The LLC sought and obtained a loan from Hometown National Bank to develop the property. This loan was for $400,000. One of the members of the LLC was another company which had 39% of the ownership of the borrower LLC. The owner of this other company negotiated the loan with the ratification of all the other members.

In 2008 Mr. Sturtevant, the owner of this other company, approached a different lender, Columbia Community Bank, and sought a loan of $1.5 million for other projects. Although the loan had nothing to do with the land that was owned by the LLC, Mr. Sturtevant offered to collateralize the loan with a deed of trust on the land owned by the LLC. Under the LLC’s operating agreement, only owners of at least 80 percent of the membership interest of the LLC could encumber property owned by the LLC. Mr. Sturtevant did not disclose this action to the other members. In fact, Sturtevant forged some of the LLC documents to show that he did have sufficient ownership to authorize him to grant a deed of trust against the LLC’s property. Columbia Community Bank agreed to the loan without knowledge that Mr. Sturtevant had no authority to grant the deed of trust, but it required that Mr. Sturtevant use $400,000 of the $1.5 million loan to payoff the existing first deed of trust on the Thurston County property owned by the LLC. Columbia Community Bank expected that it would have a first deed of trust on the property because there were then no other loans against the property.

Several years later Sturtevant’s company defaulted on the loan and Columbia Community Bank tried to foreclose the deed of trust Sturtevant had fraudulently granted. The LLC that owned the property objected on the basis that the deed of trust had been obtained by the signature of Sturtevant who did not have authority to issue the deed. The LLC argued that although this meant that it now owned the property free and clear of the $400,000 obligation, nothing could be done by a court of equity because Columbia Community Bank was considered a “volunteer” in paying off the previous mortgage and equity will not help a volunteer.

The Supreme Court reviewed the case law that indicated a “volunteer” was anyone who acted to payoff a higher priority loan without being motivated to protect a previous legal interest in the property. The court noted that Columbia Community Bank did not have such a previous legal interest, but it then decided that under the circumstances of this case, the “volunteer rule” would not apply to prevent relief to Columbia Community Bank. The important circumstance was that the bank had been defrauded by Sturtevant’s use of forged documents to demonstrate that he had authority to bind the LLC to the deed of trust. As a result Columbia Community Bank was subrogated to, or allowed to assume the position that Hometown National Bank had held ‘with regard to the property, as holder of a first deed of trust to secure the $400,000 that the LLC had originally borrowed. The preceding is intended to be educational and should not be considered legal advice.

About the Author…
REAPS Doug Owens Equitable Subrogation   How A Lender That Was Tricked By A Borrower Turned The TableDoug Owens practices real estate law and general business law from his office in Seattle.  He offers a 20% discount for REAPS members and he can be reached at 206-985-6679 or [email protected]

Previous REAPS articles by Doug Owens:
HOA Lien Foreclosures
DODD-Frank and Seller Financing as an Exit Strategy

REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at [email protected] and be our guest for free!”

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