My morning at the Foreclosure Auction
I was up bright and early go bid on a property at a trustee sale yesterday. It was a 9:00 AM sale so I wanted to make sure I got there on time. What typically happens is the trustee will call out all the postponements first & that usually burns up plenty of time, then 20 to 30 minutes later or more they call out the properties going to sale . This was deja vu for me. I was an active bidder at the courthouse steps when I was just a kid in college. I worked for a group of savvy investors who bought a ton of property at those auctions in the late 80′s & early 90′s. Although I have been to many more foreclosure sales in the past decade, I am not even close to being as active as I was in the past. Watching the drama & adrenalin rush is always entertaining. In fact, I saw a multi-million dollar commercial property go to sale for 1.8 million that morning. That is far from typical. I am used to seeing low to mid range houses go to sale all day long with furious bidding. It was a real treat to see some major players stepping up & bidding on some commercial in the figure range. I figure that property is worth maybe $2m to $2.1m fully leased up. The would be some cost for TI (tenant improvement) the final winning bid was $1.6 million (no I didn’t buy it).
so maybe that could get 200k-250k profit at the end of the day if all goes smoothly.
The usually shenanigans were going on in the background, one bidder saying “hey why don’t you cool off & not bid so high so everyone can get their share. Let’s work together.” ( gee, do you think it’s illegal to collude at an auction?) “Hey back off, man, I get what one measly house to your ten” This was from the guy that just bought the house at a price that seemed a bit skinny.
The good news (I guess) is that at this particular auction, there were about 10 people who showed up & 6 of them were serious bidders & I recognized 2 big “Gorillas” companies that have raised a ton of capital & buying houses like it’s going out of style.
There used to be a lot of amateurs at the auctions, I mean 40 to 50 people screaming their bids to get them in & bidding way to high, many times over the retail price.
This could be a sign that the pro’s will rule the roost once more, at least for the time being.
Most of the loans going to sale were originated in 2006, 07 & 08. with the lenders dropping the bid lower that what is owed. (aka specified bid). These guys/sharks are on top of their game equipped with dark glasses, ipads & bluetooth earpieces (picture the world series of poker, with tablets & cellphones, outdoors on a cold rainy day)
Professional Speaker or Real Investor?
This video was brought to my attention by Matt Scott www.newrulesofprivatemoney.com. He is a prominent investor who also teaches other investors how to raise private capital correctly according to securities law.
Here is a quote from Matt’s blog
“As you progress as an active real estate investor, developer or passive investor, it becomes more apparent that some of the gurus you looked up to in the beginning are not as they appear. I too discovered this as I have trained, advised, and consulted with some of the ‘top speakers’ in the industry.
It’s important for me to not use the word “investor” because many that I have worked with privately are not profitable investors. Others were not actively closing transactions until they became well-known as a guru on the seminar circuit.
You will not be surprised to know two speakers that partnered before they came gurus were terrible investors. Terrible in the sense they could not make a profit. It’s unfortunate that the seminar & coaching industry thrives on the weak and wannabe investor without having proven themselves first. When you seek out an expert to coach or advise you, remind yourself they may be like the gentleman in this video.”
Building a real estate compounding machine.
I am currently reading a great book recommended by Tim Ferriss, author of “The Four Hour Work Week” & more recently “The Four Hour Body”. The book is called “Poor Charlie’s Almanack- The Wit and Wisdom of Charles T. Munger by Charles T. Munger. Charlie Munger is the lesser know genius behind Berkshire Hathaway. Warren Buffet get’s the lions share of notoriety as a brilliant investor. However, this partnership which has lasted since 1959, exhibits some of the brilliance of decision making skills that have taken place through economic cycles & turbulence.
There are a few great quotes from the book that I intend to have mounted on the wall on my office at Provestors, here is one of my personal favorites…
“It takes character to sit there with all that cash and do nothing, I didn’t get to where I am by going after mediocre opportunities”. –Munger
“Accordingly, Charlie is willing to commit uncommonly high percentages of his investment capital to individual “focused” opportunities. Find a Wall Street organization, financial advisor, or mutual fund manager willing to make that statement.”– Michael Broggie
Did you know that Berkshire Hathaway’s annual compounded return since 1965 to 2009 was 20.3%?
The term “Compounding Machine” is borrowed from a money manager Chuck Akre (FBR Focus Fund). Two major components of his definition of a compounding machine were
1) A business that earns an above average rate of return on owner’s capital (equity).
2) A business that also has the ability to reinvest excess cash at above average rates of return.
We just may integrate this definition into the mission statement & identity of Provestors.
We are a real estate company that focuses our capital in exceptional opportunistic investments to earn above average returns on our capital & also reinvests excess cash at above average rates of return.
Happy investing
Ten Advantages to Consider Owner Financing If you are selling
This is a great article from Tracey Rewey
The word is out and seller financing is on the rise as buyers and sellers look for creative ways to finance property in the struggling market.
So what’s all the hype? Here are ten advantages to using the seller carry back to buy or sell real estate.
1. Shorter Marketing Times – Properties marketed with “Owner Will Finance” will draw a greater response rate and generally sell at least 20% faster than properties requiring conventional financing.
2. More Buyers – With many lenders’ tightening their approval process, the seller carry back enables a greater number of buyers to purchase and finance a home.
3. Speedy Closings – Without the red tape of a conventional mortgage lender, a real estate transaction can close in as little as two to three weeks.
4. Maximize Selling Price – The seller has an opportunity to realize full market value for a property when providing financing. This is viewed as a sales concession in many markets
5. Reduced Restrictions – Restrictive lending requirements don’t apply providing greater flexibility when it comes to the buyer’s credit history, down payment, debt to income ratios, and other underwriting criteria.
6. Fewer Costs – There are no expensive loan costs to worry about. A buyer can put the money they save on origination fees, points, underwriting fees, mortgage insurance premiums, and junk fees towards the down payment and building equity.
7. Interest Income – The seller is able to collect long-term interest since they are essentially acting as the bank by extending terms to the buyer. On average a buyer will pay back 2 to 3 times the amount of the mortgage on a 30-year term as a result of interest.
8. Installment Sale Tax Deferral – When property is sold at a gain and subject to tax there can be an opportunity to delay a portion due when reporting under the Installment Sale Method (Refer to IRS Publication 537, Form 6252 and speak to a qualified tax professional for further details).
9. Secure Asset – The balance of the purchase price is collateralized by the property. If the buyer stops making payments the seller can take back ownership of the home.
10. Liquid Asset – The seller owns a liquid asset, which is just a fancy way of saying somebody will purchase the note, mortgage, trust deed, or contract on the open market. Many sellers elect to sell their future payments to a note investor or note buyer for cash today rather than payments over time.
Seller financing offers a creative solution to financing real estate but there are some risks. For the flip side of the coin be sure to read the The Downside of Owner Financing – Disadvantages to Providing Financing. It also pays to consult with qualified real estate, tax, and legal professionals to make sure today’s solution doesn’t turn into tomorrow’s problem.
About Tracy Z. Rewey
Since her first exposure to the cash flow profession in 1985, Tracy Z. Rewey has handled millions of dollars in note and alternative cash flow purchases, becoming a recognized industry expert. Consistently placing as one of the nation’s top 10 note buyers. Tracy Z and Fred Rewey http://noteinvestor.com (“Reprinted and used with Permission of the author – 10-2010″)
Crusty Investors & Veteran’s Day
Have you ever read the book “The Millionaire Next Door”. As you may know it’s one of my favorite books. I have personally met many investors who meet this prototype. My good friend Hutt Bush & I call them “Crusty Investors” because they aren’t flashy, & usually drive old used cars. They are also smart investors that have incredible wealth. Picture Sam Walton & Warren Buffet. They are great examples of incredible investors & businessmen who have created tremendous wealth, without being flashy or flamboyant. It seem like there was a whole generation of crusty investors born in the 1930′s & 40′s.
I spent a few hours with Clyde Wilson, one of my favorite “Crusty Investors”. Whenever I spend time with him, I am so grateful for the wisdom & brilliance he shares with me about his investing experience & knowledge. You have to pay attention, because he will drop a hint or two, a contract clause here, a contract clause there, that makes the difference between a good investment & a great one. The best part is I am using them now to acquire & control more property for myself & my clients.
He is also a veteran of the U.S. Marines Corps. Thank you to all the other Americans who have served & continue to serve our country.
Stay tuned, more to come…
A boring method to get rich slow…
Wealth comes from making prudent conservative investments that create income & appreciation year after year. Just like how a California Redwood tree grows, it’s strength & durability to withstand the elements isn’t created overnight, it takes time.
For example, a diversified portfolio of real estate holdings, bought at the proper time in the real estate cycle, selected for stable income, and managed by professionals, offers significantly superior historical investment results than the S&P 500 & with less volatility.
Provestors makes owning such a real estate portfolio nearly as easy as owning a stock or mutual fund portfolio.
Provestors builds an individual real estate based “Get Rich Slow Plan” for each client based on needs, goals, capital, and time horizons.
Using our strategic investment system, Provestors carefully selects income producing property from single family homes to units, to provide the optimal balance of future appreciation and current cash flow for maximum return on capital over a 5 to 15 year time frame.
Provestors, selects, acquires, manages, & maintains the clients portfolio and provides a unified monthly statement showing overall portfolio performance. You invest, we do the rest.
Over time, the client can execute strategies to convert equity into profit or income as desired.
Provestors is founded on over 20 years of experience in real estate investing. we combined our specialized knowledge of real estate with the principles of sound financial planning.
Is this for everyone? No, this strategy is one that takes money to make money and is best suited for investors that want to leverage their existing wealth, income, and credit to conservatively grow wealth over time..although much faster than most other traditional investments.
Why real estate?
Real estate offers many benefits over other investments:
Leveraged appreciation
Investing in REAL assets with intrinsic value
The most proven investment strategy:
Appreciation: Compounding wealth over time
Depreciation: for tax benefits
Amortization:Tenants paying down your “good” debt
Passive Income/Cash flow: The crucial element in creating financial freedom that grows over time
Diversification: From stocks & bonds
Hedge: Against inflation
Why now?
We have historically low interest rates
We are going through one of the most drastic real estate corrections in history.
There is opportunity in crisis.
Traditionally, the foundations of wealth are developed in times exactly like this.
Want to learn more?
Call us for a free consultation & profit projection.
Mission: Cash flow & wealth launching pad
My purpose and vision is that on January 1st, 2016. I will have taken a major role in creating income producing portfolios for my clients, friends, & family to last generations. What is your vision?
I sincerely believe that the possibility & opportunity is astounding in this cycle. I have seen & experienced bubbles, crashes, & subsequent recovery. Each time, those that paid attention & took it seriously, made significant wealth to create the lifestyle & freedom they desired.
It doesn’t have to be a big splash, just pick up 3-5 really good deals every year. After 5 years thats 15-25 income producing investments. If you feel you want more income as you get more confident, go ahead feel free. This is your game.
I want to thank the people & investors who inspire me everyday to become a better person & smarter investor. Clyde Wilson, Gary Johnston, Ward Hanigan, Reggie Lal, Mic Blackwell, Rick Harmon, Mike Cantu, Bruce Norris, Hutt Bush, & many more (there are too many to mention). But most of all I want to express my gratitude to my wife Marni, who has supported my dreams & aspirations from day one. She holds the family together while I am out doing what full time investors do, for that I will be eternally grateful.
I am pulling out all stops to load up on income producing notes & real estate. I have methodically built the systems, received the education, & enrolled the team members required to make sure that I capitalize on the opportunities in this cycle. If you would like to learn more & perhaps become involved. I am considering adding more team members. Contact me with what you think you can contribute to this mission.
Are you ready? It is time, be diligent,smart,ethical, have fun, make money, give, contribute, live…
As a real estate professional, standing out from the crowd of real estate brokers & agents is a challenge. One way to do this is to become a problem solver for a buyer or seller.
Here is one very specific situation where I may be able to save a seller a significant amount of taxes when they sell their property.
Case study:
Mr. & Mrs. Smith have lived & raised their family in a very desirable neighborhood for many years. They have been very conservative & prudent with their finances & have paid off their mortgage. Mr. & Mrs. Smith are retired & would like to downsize to a less expensive home. Their home is now worth over $1,300,000 according to current data of comparable homes in the area. They bought their home over 30 years ago for $300,000. The IRS gives a married couple a $500,000 exclusion from capital gains taxes. However, that still leaves them with a $500,000 capital gain that they would have to pay taxes on.
I show them a 2 step strategy that can help them utilized the tax code in their favor to shelter the entire gain. I sit down together with Mr. & Mrs. Smith and their CPA/Tax Advisor & outline the steps to make sure it is suitable for their situation.
What is the result? A total tax savings of at least $100,000.
Imagine how much money in taxes you could save for your clients for their situation.
Want to find out more? Call me & let’s work together.
Section 121 exclusion & debt free property
As a real estate professional, standing out from the crowd of real estate brokers & agents is a challenge. One way to do this is to become a problem solver for a buyer or seller.
Here is one very specific situation where I may be able to save a seller a significant amount of taxes when they sell their property.
Case study:
Mr. & Mrs. Smith have lived & raised their family in a very desirable neighborhood for many years. They have been very conservative & prudent with their finances & have paid off their mortgage. Mr. & Mrs. Smith are retired & would like to downsize to a less expensive home. Their home is now worth over $1,300,000 according to current data of comparable homes in the area. They bought their home over 30 years ago for $300,000. The IRS gives a married couple a $500,000 exclusion from capital gains taxes. However, that still leaves them with a $500,000 capital gain that they would have to pay taxes on.
I show them a 2 step strategy that can help them utilized the tax code in their favor to shelter the entire gain. I sit down together with Mr. & Mrs. Smith and their CPA/Tax Advisor & outline the steps to make sure it is suitable for their situation.
What is the result? A total tax savings of at least $100,000.
What is financial freedom?
When you hear the words “Financial Freedom”, what images come to mind? For me it’s being able to choose how I spend my time without regard to cost. I always picture myself looking out over a balcony at a beautiful ocean vista. It also meant for me, I had to achieve a certain “number” for net worth. My perception & definition was slightly altered by a friend of mine. I consider Gary Johnston one of my mentors not just in real estate investing but in life in general. He teaches a class with one of my other mentors, Clyde Wilson on Financial Freedom. There is a lot of lip service given by so called “gurus” claiming to be able to teach you about becoming financially free. Seldom have I been exposed to any real usable education about understanding money by those gurus. Most of it is recycled “motivational” material.
Gary asks this question about wealth, “If you had a lump sum of one million dollars & spent $10,000 per month to live, how long could you live without working?” (assume that your cash is not invested but in a 0% bank account). The answer is, 100 months or roughly 8.3 years. Now what if you had 10 free and clear houses that (or assets) that would pay you $1,000 each house, or $10,000 a month net, for the rest of your life, then how long could you live? What would you rather have, a lump sum of $1,000,000 or 10 houses that pay you $10,000 a month?
This simple question has helped me clarify my definition on what is financial freedom. It has also given me a new awareness on where I choose to spend my time and effort . My focus is to create long-term income for my clients, myself & my family.
Here is a quote from one of Gary’s mentors, the late Norbert Volney. He would ask Gary this question when he was a young boy, “What two things pay you while you sleep? The answer is…Rent and interest.
My work is to find & acquire assets that will pay me either rent from real estate, or finding notes & trust deeds that pay me above average interest for a very long time. If you would like me to do the same for you, please contact me & let’s see how I can help you.
Share your thoughts..