Investor Nation: Now

August 2009

Investor Nation at Inman Connect in San Francisco

On August 5-7, Investor Nation attended the Connect Real Estate Conference in San Francisco, a conference dedicated to cutting edge technology in the real estate market. This year’s conference drew more than 1,500 leaders in real estate, technology, lending, title, and financial services to the historic Palace Hotel in San Francisco.

“The event was inspiring,” said Investor Nation Chief Marketing Officer Ryan Hinricher. “I fortunate to see Craig Newmark from Craigslist speak, I met the COO of Zillow, and I networked with several up and coming CEOs.”

Investor Nation is committed to embracing the changes in technology and customer behavior to remain the leading investment home provider.

Why Buying Investment Property is Like Eating

Have you ever enjoyed a nice 8oz. filet mignon cooked to perfection?  Satisfying isn't it. But how would that enjoyment feel if the minute you finished,  the waiter at your favorite restaurant brings you another one?  And then another one?   The enjoyment suddenly vanishes and you are not only overstuffed but miserable.  This is a common mistake in the investment home world.   Someone wanting to buy investment homes buys one and before it is rented/renovated, (let's just say stabilized), he/she buys another one, and another one.   Next thing you know everything that CAN go wrong, DID go wrong.   I've actually done this a few years back.  Suddenly couldn't get refinanced and ended up with a couple of properties on less than favorable mortgage terms temporarily. New investors should pay attention to this overeating syndrome of real estate.  If you buy investment homes and take quality time to digest them, you'll likely find the experience of owning investment homes much more enjoyable.  The fears of vacancy, contracting, property management suddenly aren't amplified and it will be much easier to handle a single crisis at a time then feeling like a doctor working the ER on Saturday night.  Buying investment homes has a lot of parallels to eating.  Do you remember what your mother told you about eating to fast?

Taking Action, the Hardest Part.

I've talked to a lot of people looking to purchase investment property over the last few years.  Some people have learned more about the theory of owning investment property than I will likely ever know.  Only one problem.  They've never purchased. I've met people who've been studying investment property ownership since the early 80's and still own zero properties.  If this comes as a shock to you, you'd be even more surprised by how common this story is.   The hardest part is buying the first property.   Analyzing investment properties is becoming more and more of a science but in the end it is still partly an art.   This is what keeps many people from starting. The art involves the human elements of tenants, property management firms, weather, to name a few.   It is no more similar to investing in the stock market than farming.  And in reality it probably is somewhere in the middle of the 2.  I should know, I grew up a farmer's son.  Taking action is getting easier though.  The internet is tearing down the barriers of accessing information.   This has created a surplus of information, websites, and companies focusing on investing in real estate. Look for a vendor or company who is focused on you.  That focus should be in your success as a part-time or full-time investor.  In succeeding you will refer them much business for years to come.   If the sole product someone is selling is a course or bootcamp, beware.   Coaches should help you take action too.  There has to be an endgame which is ultimately succeeding.

Worth Following

Want to find out the latest at Investor Nation? Follow us on Twitter: @InvestorNation And if you really want to get inside our heads: @StephenKGreen @RyanHinricher @CurtDavis @JBWilli3 @AS_Bentley

The Secret to 100% Occupancy

I've owned quite a few investment homes over the last decade.  The number is somewhere around 500 even if some were only for a few days.  A fear many people seem to have is how to prevent vacancy.  They are searching for 100% occupancy with their real estate portfolio. A Return On Investor or ROI requires an "I". Many people have invested a few years ago with little to no money down when lending was easy.   This was actually possible and still is possible but is definitely a rarity. I've seen the mistake though of poor upkeep which often doesn't entirely rest on the tenant that is in the property.   Proper upkeep often requires the investor to improve the property over time.   Example, I just spent $1000 on reseeding the yard of one of my homes.  I bought this zero down when money was flowing freely.  I'm investing in the home.  Don't expect infinite returns from zero investment.   Equate it to chasing rainbows (in the end frustrating). Location quality is often overlooked. Buying an investment home because it is in the cheapest area is a common mistake resulting in long term vacancy, theft and vandalism.   Many times an investor buys the $20,000 house which is supposed to generate a rent of $700.  That $20k you paid? Trust me, it won't be that simple.  If these types of deals were automatic paydays, everyone would be doing it.   Did you buy on a dead end street?  I have.  Good luck getting it rented quickly.  How about in the bad school district?  Boarded up neighborhood?  What you didn't use Google Streetview to check out the street scene? Return on Effort is critical. Don't buy an investment property and just wait for the statement to come in at the end of the quarter showing all the profit. Even with a property management company, you still need to keep on top of your investment homes.  Remember you've bought a structure, a building, a home.  These things breakdown, management companies certainly aren't perfect, and sometimes people just flee in middle of the night. This means not only do you have to pay attention but you need to flex your communication skills with the management company, make sure they are actively marketing your home both online, and with adequate signage. In the end, it is your investment.  You've bought and probably committed to a 15 - 30 year loan.  Buying in the right area, investing dollars into your property will only get you so far.   Investment property is and will be a team sport.  Picture yourself as the coach who is managing all the players and you'll find your portfolio at 100% occupancy.

Multiple Offer Wave Makes Landfall on Foreclosures

Our business requires us to purchase a lot of homes which we then perform extensive due-diligence and prepare for sale to our buying clients.   This means we need to constantly be purchasing homes from a variety of sources including; bank foreclosures, motivated sellers, and bulk REO sellers.   After being a real estate investor for nearly a decade now it is surprising to see the dramatic changes in the market in short periods of time. For example, earlier this year we had the pick of the litter with the foreclosures abound and the buyers all waiting on the sidelines.  This allowed for easy acquisition of investment homes.  However now we are seeing tremendous competition for foreclosed homes.  This is because of a number of reasons;  buyer think we are at the bottom, rates are low, first-time buyer tax credits, and more.  Even with foreclosures up 32% over last year, multiple offers are everywhere. For you as a potential investor that means 1 of 3 things if you in buying mode.

1. You're already a real estate agent and have your work cut out for you.  You'll be sending in tons of offers in order to buy 1 house.
2. You have an experienced real estate agent that will do this for you.   Be prepared to be patient and miss out on a lot before you pick one up.
3. You can buy from an investment company direct who already has an equitable interest in a property.

Knowing the current market will make the inevitable delays on aquisition easier.  I've seen many investors frustrated right now because of the difficulty in aquiring property.   Ultimately the deals are out there.  Good ones will have competition.  Be prepared to compete.  This may mean paying over list price.  The days of low-balling tons of offers are a thing of the past in most markets.

For the Wealthy Only?

For some of you it may come as no surprise that the wealthy own a big chunk of all the investment property in America.  But did you know that the wealthiest 10% own 79.4% of all the investment property?   According to a recently updated report by the Sociology Department of the Unversity of California at Santa Cruz, this is the case. That of course doesn't mean that buying real estate makes you wealthy.  Real estate tends to be a get rich slow business where wealth is created over time by paying down mortgages, dealing with property management, and having months where cash flows are low or even negative.  This is investing, afterall.  But by investing in the right markets, property types, buying the deal at the right price, and having access to a solid team of vendors, real estate can a good addition to your overall investment strategy. Making smart real estate aquisition available to those who qualify but may not know about, it is at the core of Investor Nation's mission.

Real Estate Deals Everywhere as Listing Price Cuts Flourish

I was catching a stream of tweets from Spencer Rascoff, CFO of Zillow today and it was riddled with price reduction stats happening all over the country.  It seems about 25% of the listings out there are being reduced showing there is still a considerable excess of inventory on the market. I met Spencer recently in San Francisco and had a brief conversation about the improved data coming from Zillow.   Their Zestimate was once laughed at by colleagues(at least here in The South) in the real estate market but now is becoming increasingly accurate.  Now they have tons of data on each market including this most recent data on price reductions all they way down to the neighborhoods. In saying this I want to point out the incredible reductions happening across America making an even stronger case for the "Now is the time to buy" crowd.   I've talked to many people who are considering buying an investment home but are simply too focused trying to time the market.  I think it is pretty clear that we are somewhere near the bottom if not at it.   We'll be looking at 2million foreclosures for the next 3 years so a run up in prices might not happen anytime soon.  Why not reap the tax and cash flow benefits now? Couple options, work with a turn-key company or know that if you prefer to go it alone, the price reductions mean you can negotiate the list price on the market down.

Old School Graph, New School Thinking

Real estate has certainly changed my life.  I own pieces of real estate which I've structured to supplement my IRA.   I've done the analysis.  There are many short and long-term benefits of owning investment property.   Real estate is a get rich slow business. While the inflation-adjusted prices of real estate show very little increase in the cost of housing (1890 $125,000, and 2009 $185,000), the nominal or actual dollar cost of housing has skyrocketed (1890 $2500, and 2009 $185,000).   This is important because the cost of the debt is fixed.   This simply means that over time houses get more expensive but your mortgage payment is usually fixed for 15 or 30 years.   All of this and the fact that rents rise over time as well (Tennessee rents rose 60% in the most recent 30 year period according to census.gov). So if the average American could buy 1 investment home say $100,000 to supplement their retirement with a $1000 per month rental, they could have a free and clear home paid for at the end of 30 years.   Using a 60% rise in rent, have a check coming in for $1600 per month, and an  asset worth potentially triple or more.   The other benefit of this quick analysis is the potential tax deductions they can during the duration.  All of this with a one time cash investment which reaps long term dividends. Now I'm doing this a quick example only but you can see how the numbers start to get big.   I don't think every American needs to own 10-20 rental homes but I think owning even 1 can really accellerate ones wealth building journey.   Add 2 to the mix and you've probably replaced the social security that you likely can't count on the way the feds are spending. This can provide a good tangible balance to the 401k and at today's prices, real estate is available at a steep discount.   The hardest part is changing the mind set from what's possible to actually taking the first step.

And Then There Were 10,000....

I'm excited to see Investor Nation on Twitter reach 10,000 followers today.  A special day indeed.  But what does 10,000 followers mean?   We have much more to offer than the current monologue that Investor Nation's Twitter presence.  But to quickly recap.  Today on our Twitter profile, you'll primarily get property updates, info sent out from our blog, and relevant real estate investment news.   Most of it so far has been one-way communication.  If you are a real estate investor looking to keep a beat on the market and what we have in our present offerings, than this is a perfect fit, however Twitter has more to offer and so does Investor Nation. So I wanted to introduce you to a few people that you can have a true dialogue with on Twitter: @StephenKGreen - Stephen is President and CEO of our company and offers insight on the market as well as the opportunity talk to him one-on-one @RyanHinricher - This is me obviously, CMO and co-founder of Investor Nation.  Also I act as the primary voice on @InvestorNation @CurtDavis - Curt is Vice President, Sales, he works with clients on a daily basis discussing real estate investing methods and is himself a real estate investing success story. @JBWilli3 - Jim is Real Estate Investor Advisor and also heads up expanding our footprint beyond the borders of Memphis These are just a few of the thought leaders on the Investor Nation team.  We hope you'll connect with us on Twitter and have a conversation.  We'd like to get to know you better and would like you to get to know us. If you're part of the 10,000 Investor Nation sincerely thanks you.  If not, join us today, @InvestorNation.