10 Things Investors Should Know About Real Estate Syndication

July 31, 2015

Guest article by Kim Lisa Taylor:

No doubt if you have a self directed IRA or substantial investment funds, you have considered investing in real estate. However, you may lack the funds to invest on your own or the desire to deal with the hassles of property management. A viable option for you may be to invest in a real estate ‘Syndication’ (i.e., a group real estate investment, also known as a Private Placement Offering) as a passive investor.

What is a Real Estate Syndication?

In a real estate Syndication, a ‘Sponsor’ or ‘Syndicator’ (which may be an individual or an entity) will typically identify a real estate asset, such as an existing commercial or multifamily property (or vacant land for development) or single family fix and flips, that will yield a sufficient return to pay themselves and their investors from cash flow during operations and/or equity on resale.

The Sponsor may obtain institutional financing for a portion of the purchase price and then pool funds from private investors to finance the down payment and closing costs, or they may raise all of the purchase money from private investors. The Sponsor’s job will consist of finding a suitable property, putting the group of investors together, and managing the asset on their behalf. For its efforts, the Sponsor will receive fees and/or a percentage of the ‘Distributable Cash’ (i.e., profits) left after all expenses and loan obligations have been paid.

What Kind of Returns Do Syndications Offer?

Typical investor returns can range from 6-12% (or more) annualized, calculated against the amount of money invested. The range varies based on the type of investment and the level of risk to which an investor may be exposed. The higher the return offered, the greater the risk.

For example, an investor or self directed IRA might take a position as a ‘debt partner’, in which case the returns will be calculated as interest on the amount invested. Such returns may be in the lower ranges, but the debt partnership position may be ‘preferred’ or ‘secured’ by a lien against the real estate, which is a lower-risk position.

Another option for investors is an ‘equity partnership’ position, where the Distributable Cash is split proportionately between the group of investors and the Sponsor, whose compensation can range from 25-50% of the Distributable Cash. In this case the investor returns may be greater, but they will be dependant on the performance of the property and the Sponsor’s ability to maximize returns by increasing income and minimizing expenses.

What Information Should I Get from the Syndicator?

Prior to accepting any investor funds, the Sponsor is required by securities laws to provide a set of offering documents that explains the terms and discloses the risks of the Offering to prospective investors. Further, Sponsors typically answer to their investors by means of periodic newsletters, financial reports, and/or teleconferences. Unlike a stock investment, investors may also have some limited voting rights regarding major decisions affecting the company or their investment.

10 Things Investors Should Know

Before investing in a real estate syndication, you should carefully review all of the offering documents provided by the Sponsor and look for (or ask) questions regarding the following things:

  • The Sponsor’s background, education, and experience with similar investments, if any.
  • The team members involved in acquisition and operation of the property, including attorneys, CPAs, other members of the Sponsor, property managers, and affiliates that may receive fees, etc.
  • Cash distributions to investors during acquisition, operation, and disposition of the property including the proposed timing and anticipated percentage returns.
  • Sponsor fees and cash distributions.
  • Anticipated duration of the investment.
  • Property information, including the type and condition of the property, the purchase price, financial history, proposed ‘value add’ and exit strategies, and pro forma financial projections.
  • Dispute resolution provisions.
  • Voting rights of investors.
  • Provisions for removal of the Sponsor.
  • What law firm structured their offering and drafted the offering documents, and is the firm experienced with securities offerings?

Seek Professional Advice

In addition to satisfying yourself with respect to all of the items listed above, you should seek advice of your own attorney, financial advisor or accountant regarding the investment.

  • Your attorney should determine whether the offering complies with applicable securities laws. A Sponsor that disregards the applicable laws (or drafts their own documents) may expose itself and the entire investment to unnecessary civil or criminal liability, or they may be unaware of their fiduciary obligations to their investors.
  • Your CPA or financial advisor should evaluate the financial merits of the investment based on past financial statements for the property and pro forma projections provided by the Sponsor, and its suitability for your investment portfolio.

Where Can I Meet Syndicators?

Become a member of your local real estate investment clubs and attend their meetings on a regular basis, and attend the informational seminars offered by your self directed IRA administrator.

Kim Lisa Taylor, of TROWBRIDGE & TAYLOR LLP, practices Securities Law and handles Real Estate Syndication, Private Placement Offerings, Private Lending Documents, Partnership Agreements, and Entity Formation. Kim can be reached at (904) 584-4055 or by email Kim@SyndicationLawyers.com.

Wouldn’t it be Great if a Tech Startup Helped Investors?

July 7, 2015

Guest article by: Ron Richards

In 2008, my colleague Steve Perez and I pondered what our next move would be. The “Housing Crisis” was in full-effect, and the company we worked for at the time had just dissolved. The company we worked for was a real estate investment brokerage. We learned a lot and thought the show was over based on where the economy was headed. Despite the economic downturn, we felt that the investment real estate business model was still solid. We were confident in our knowledge and knew that with a little capital, we could make it better. Our idea of making the industry better is what motivated Steve and I to collaborate and start Altura Investment Realty. Having a good grasp of the industry, we wanted to build something special. We kept asking ourselves, “Wouldn’t it be great if…?” Well, after successfully implementing new guidelines for our company, the rest is history. Since 2008, Altura has bought and sold approximately 1,500 residential properties, on and off market, with a focus on selling homes to clients who wanted to build rental portfolios and UP NOW perform “flips.” In the end, we have created a successful boutique firm selling inventory to investors all over the United States and abroad. It’s been a great run, and Altura continues to do great things.

As we continue to innovate, we find ourselves asking the same question, “Wouldn’t it be great if…?” However, this time our collective knowledge gained from running Altura allowed us to adopt the perspective of the investor. For the last several years, Steve and I have both been heavily active in building our own rental portfolio and perform several flips a year. We took note on how investors made decisions on which properties to buy and adopted best practices to build lucrative portfolios. This new perspective generated a lot of questions about the number of resources readily available to help investors make sound investment decisions. At that moment, Steve and I asked each other, “Wouldn’t it be great if…?”

This September, we will be launching an Orlando-based tech startup catering to the real estate investment space. Soon thereafter, we will be introducing the platform across other Florida markets and then nationwide. And it will be 100% free for any user.

This new company is called Kuzza. Yep, just pronounce the U and you have Kuzza, an online real estate brokerage that is data-driven, analytical, and socially engaging – and here’s why we are so excited to bring this to market:

Locating inventory can be very challenging, especially in our investor-savvy locale, Orlando. But, in order to get the best deals, one must have up-to-the minute data. If a property sits on the market for a few days, then chances are there are many others who have beat you to the punch. At Kuzza, we don’t want that happening, and that’s why have we have a direct data-feed from the Multiple Listing Service (MLS). Having this direct feed gives you access to a property as soon as it hits the market. Not the next day, but the very minute it’s listed. At the same time, Kuzza has licensed to receive the largest source of “off-market” inventory. Driving around looking for “For Sale By Owner” signs is called “Driving for Dollars.” A great technique for sure, as I have done so much of it myself, but wouldn’t it be great to have that data faster and at your fingertips? Kuzza will provide you the most current list of properties on and off market to help you build a list of prospective investments. Further, with the use of custom, saved searches, Kuzza will notify the user via email as soon as a property hits the market.

Having the tools to analyze a property and its return on investment (ROI) is as equally important to finding the deal itself. So, wouldn’t it be great if you could have access to sales comps, rental comps, and investment calculators? Yes, of course it would! At Kuzza, we are providing the tools to help you assess deals and provide multiple levels of due diligence with respect to valuations. First, we provide a Sales Comps Map with the most similar comps available matching the subject home allowing a user to know if the offer is worth the value. Second, we provide a Rental Comps Map displaying similar homes and their rental amounts in a given neighborhood. And third, Kuzza is introducing to its map feature a boundary overlay, which will allow a user to compare a property to other sales in a geographic location. The boundary overlay was customized specifically for Kuzza users. From a map view, every parcel will have specs of a home (beds, baths, and square footage), the sales price, and the month and year of that sale. Kuzza aims to turn users into their own appraisers. While everyone else wonders how much he or she should offer when it’s time to submit a contract, Kuzza users can utilize one of the online investment calculators. It doesn’t matter your strategy – rental or flip – Kuzza has a calculator for each. By giving the user sales data coupled with investment calculators, each user will be able to determine their ROI and make offers with confidence.

The real estate investment community is driven by each day’s success story. Just take a look at the investor clubs here in Orlando. They have a lot of members who meet monthly to discuss potential deals and other ways to help ensure success. Many times, members will partner on deals because they each bring a certain strength to the table. For me personally, I have often found it helpful to call or email a peer within the industry for advice. So, wouldn’t it be great to collaborate with other investors on the same platform all while researching properties? What if users had the ability to socially engage with a market’s leading lenders and vendors (including contractors)? How about joining group discussions regarding investment topics of interest to you? If you answered yes, yes, and yes, then Kuzza is definitely worth checking into.

We anticipate launching Kuzza in September 2015 to be a resource for real estate investors. The site will not be live until our official launch day, but every day prior to launch our tech startup will be working hard to fill investor needs for making better and more lucrative investments. Wouldn’t it be great if you had Kuzza at your fingertips? To learn more about our launch, and to stay updated about our new venture, visit www.kuzza.com to join our mailing list.

Ron Richards, co-founder of Kuzza.

Trust Deed Investing for Turn-Key Commercial Real Estate

May 29, 2015

Guest article by: Ignite Funding

When banks are not lending, hard money lenders are. Hard money lenders fill a void in the financial market, especially for short-term funding for commercial homebuilders. Borrowers seek funding typically between $500 thousand-$5 million to purchase land, start development, and get their residential communities ready for market. Because the size of the loan is too large for a community bank and too small for a large institutional bank, plus the 6-18 month timeframes do not appeal to banks either, first trust deed investing may be a great fit for investors.

There is an abundance of borrowers seeking capital to build new communities throughout the U.S. As an investor the borrowers pay you an interest rate to use your funds – making you the bank! Integrating alternative investments into your financial portfolio diversifies you into real collateralized trust deed assets. Trust deeds are considered an alternative investment option as they are not directly correlated to Wall Street or the stock market.

There are few things to consider when seeking capital preservation in collateralized turn-key real estate offering:

Acceleration – Many hard money loans are short term, ranging from 6 to 24 months in length. This provides opportunity to try a new investment out without locking your capital into a state of illiquidity.

Control – You control all aspects of the investment choosing where to invest your money, how much you earn in interest on your money, and the type of loan being offered on a project! You can choose to invest with your self-directed IRA allowing you to unlock your retirement funds and earn greater and faster returns.

Transparency – Do your due diligence on anyone you partner with for investments. Some hard money lenders offering trust deeds release Loan Portfolio Performance Records showing results and supporting data needed to evaluate the business.

Collateralized – First trust deeds provide a first person lien position on the actual property, meaning your name, or the name of your IRA when investing with a self-directed IRA, is on the title as a collective with the other investors. This provides you extra security to take back the property should the borrower default on their loan. You have control over how to disperse of the property and regain your value.

Loan-to-Value – When investing in trust deeds ensure that the underwriting evaluates the value of the loan and asset at no more than 75% LTV. Evaluating the property at 55%-65% LTV provides immediate equity in property you are loaning your money on.

There are various options in how you can invest in trust deeds however trust deed investing with a retirement account is easier than most think, this is due to the lack of awareness of self-directed IRAs. The IRS allows investors to hold alternative investments alongside typical Wall Street investments such as stocks, bonds or mutual funds in an IRA (Individual Retirement Account). In order to do this, a qualified IRA custodian, such as NuView IRA, must be identified to hold the funds on your behalf. Once an account is opened and funded, you are ready to identify new alternative investment opportunities, such as trust deed investing. When investing in trust deeds with a self-directed IRA the investments are purchased by the IRA and all revenues return to the IRA to grow your retirement account under your direct control.


Ignite Funding offers first trust deeds to commercial home builders in the Southwest and provides the everyday investor with the ability to expand their investment strategy.

Buying Real Estate Creatively Can Be T.O.P.S.

May 15, 2015

Guest article by Augie Byllott:

I am often asked the best way to acquire investment properties. My answer is usually, “It depends…” Those of you who know me, know I have a sense of humor, but this answer is not intended to be either evasive or funny. My favorite acquisition technique is with owner financing, but that usually requires a free and clear property. How many of those free and clear properties come along with a motivated seller attached? Certainly there aren’t as many as I’d like.  Then there’s buying with cash…I’d rather save that resource for the killer deals that have to be closed quickly in exchange for a massive profit.

For houses with an existing mortgage, my favorite way is to purchase the property using the T.O.P.S. method (Taking Over Payments System) also known as “buying subject to” the existing mortgage.  The general problem with the term “subject to” is that most people just don’t understand it. T.O.P.S.is so simple a child can understand it!

It’s a great way to buy pretty houses without spending a pretty penny. Simply put, I step into the seller’s position and begin making their payments at an agreed upon date. The ownership of the property is transferred to me or my entity and the mortgage remains in the seller’s name until I, or more typically my tenant/buyer, pays it off when they obtain new financing and purchase the home.

Why is this a good deal for the seller, you ask? The first thing you have to remember is that successful investors only deal with motivated sellers! This is a good deal for the seller because I can close within a matter of days, as there’s no lengthy loan qualification and approval process.  Additionally, I can typically pay them a higher price because I don’t have any financing costs.

Why is this a good deal for the bank? In many cases, the seller is either in default or soon will be. Banks make money by taking in deposits at one rate and lending them out at a higher rate; simply, they earn a spread on their depositor’s money.

When a loan, which is an asset, becomes delinquent, the lender’s income stream is interrupted.  When their assets become non-performing, the lender is required by the Fed to increase their reserves.  These reserves reduce the amount of capital available for new loans. So, does the bank prefer payments or would they rather foreclose and take the house back? The easy answer: with foreclosure costs running at about $40,000 per house; banks want payments, not houses!

Finally, why is it good for the investor? First, we have no funding cost.  Second, since the loan is not in our name it doesn’t appear on our credit report. Third, our creditworthiness doesn’t come into play because we are not qualifying for a new loan.  But the best reason is that “subject to” transactions offer you the broadest array of exit strategies!

Additionally, even if you have a super credit score, most lenders will limit you to a maximum of 4 loans (if you can get them) and you’ll be required to make a substantial down payment (25 – 30%).  If the loans aren’t in your name and you don’t have to qualify for them, just how many of these will you be limited to? That’s right, no limit!  I met an investor from Ohio who has over 200 properties; not a single mortgage was in his own name. That’s quite a retirement portfolio he’s built.

My preference is to be a “transaction engineer” rather than restrict my business to any one strategy, technique or area of investing.  I love finding profitable opportunities in all types of transactions from pre-foreclosures to renovation projects or owner financing, to split funding.  But a core element of my acquisitions strategy is using “T.O.P.S.” transactions and it should be a critical part of yours.

By the way, did you know that you can do T.O.P.S. transactions for buying real estate with your self-directed IRA?

Augie Byllott helps people buy and sell homes and investment properties in all price ranges without using lots of cash or credit. He is a full time real estate investor, speaker and coach with Personal Action Coaching & Training. He is also a founding member of Common Wealth Trust Services, LLC a land trust service provider.

Secrets from Banks

May 7, 2015

Guest article by Karen Finley of NPL Executives:

Does anyone recall the big bank executives going before the U.S. Senate in 2008 to explain why they needed a bailout from the American taxpayers? The headlines read: “The big banks are too big to fail,” resulting in the U.S Treasury paying over 100 billion dollars to hundreds of banks with just a fraction of them having paid the loan in full.

Did anyone ever question why the US bailed out the banks and not other industries? What made them so susceptible to the moving economic factors of 2008? After all, would they have really failed without the bailout, or was it an opportunity to maximize a storm?

If we hearken to those days, banks claimed they needed help because homeowners were no longer paying their mortgages due to massive layoffs nationwide. Therefore, banks reported deep losses…or were they really losses?

PMI may give us a clue. Private mortgage insurance is forced in play when buyers can’t afford a 20% down payment. Should the buyer foreclose on the mortgage, the lender will activate the private mortgage insurance to pay the balance of the debt owed.

So where was the loss?

The banks received the private mortgage insurance AND the US Treasury bailout. So again, where is the loss? Upon reflection, they made a mint, and most people aren’t asking any questions, or at least not the right questions.

So here’s another question, “Are you asking the right questions?” It was real estate, not the stock market that positioned the banks to receive a massive wealth transfer in 2008. Has their game plan changed? How will your wealth transfer happen? Will you rely on stocks or take a page from the bank’s playbook?

NPL Executives is a brokerage of secured, first lien positioned mortgages available for purchase by investors who wish to establish the interest rates and repayment terms. Contact NPL via email at npl@nplexecutives.com or by phone at 682-202-4459.

17 Tips for Note Investing

April 1, 2015

Guest Article by Tracy Z. Rewey:

Want the security of real estate without the hassles of the 3 T’s (tenants, toilets, and trash)? Then it’s time to consider investing in real estate notes.

Be The Bank

When you own a promissory note, you are acting like the bank. You are the one receiving the payments. If something needs fixed the owner has to do it. And like the bank, you also have the right to take the property back in the event of non-payment. You can then sell the property for cash or take back another note.

A Note Investing Example

Seller financed mortgages and trust deeds are a staple of private note investors. The note is created when the owner of the property allows the purchaser to make payments over time rather than getting a traditional bank loan. While seller financing has always been around it has seen historical increases over the past 5 years.

The deals come in all shapes and sizes so we’ll look at one example of a well-seasoned transaction involving an owner-occupied 1971 mobile home with land in Texas.

The property sold with owner financing for $32,500 with 5% down. After collecting 95 monthly payments the note seller wanted to sell the remaining payments for cash today. The payer still owed a principal balance of $8,924.50 with 9% interest payable in 25 remaining installments of $392.88 per month.

With a slow payment history, delinquent taxes, and lapsed insurance, there were few interested investors. Satisfied with the equity position against the land value alone, my self-directed retirement account made a net offer of $2,531.

The seller, tired of the headaches and in need of cash, accepted the offer. The Note and Deed of Trust were endorsed and assigned to the Retirement Account Administrator for the benefit of (FBO) the individual retirement account.

By investing $2,531 for the right to receive the remaining payments the self-directed IRA was able to yield a return of over 180%.

The note eventually paid in full, however, if the buyer had stopped making payments the retirement account could have foreclosed and resold the property.

Tips for Investing In Real Estate Notes

After 25 years of buying and selling seller financed notes there have been both wins and losses. If you are just getting started these are my 17 tips for new note investors:

1. Learn From Others – There is no reason to reinvent the wheel. Learn and network with other investors to find the opportunity and minimize the risk.

2. Refer a Deal First – Before investing your own funds get some hands-on experience. Start by referring a deal to another note buyer and earn a referral fee. Once you understand the process then consider note investing for your own portfolio or with retirement funds.

3. Discover The Why – Get direct with the note holder to find out why the note is being sold. Does the seller need the money for another investment? Are their financial challenges? Is there a certain sum that will solve the seller’s needs or wants? Understanding the why will provide insights valuable to both deal structuring and due diligence.

4. Always Talk to The Payer – Go beyond the basic estoppel and actually talk to the person making the payments each month. You will be surprised the things you will learn. They might be in the process of refinancing (think early payoff), just lost their job (better rethink that ITV), or stopped making payments a year ago (funny the seller didn’t mention that). Better to know the good and the bad before writing that check.

5. Verify Everything – Some sellers lie. Sometimes it’s on purpose, sometimes it’s by omission, and other times they just don’t know the facts themselves. Make it a practice to verify everything.

6. Embrace The Boring – Due diligence can seem tedious and mundane. So can brushing and flossing every day. But we do it anyways. Why? Because it is essential to good health and preventing bad breath. Establish a checklist and follow routine due diligence procedures to ensure a healthy investment (and to avoid the deals that stink)!

7. Plan for The Worse – If the note stops paying you get to take the property back. Of course it takes time and money to initiate foreclosure and there is inevitably some fix-up or back taxes. There are no TARP funds for private investors. Be sure to keep the Investment-to-Value (ITV) at a level that allows you to get out whole at the end of the day.

8. Partials Are Your Friend – You don’t need to buy all the payments remaining on a note. Partial note purchases can be both the safest and most profitable transactions.

9. Master The Time Value of Money – Learn how to run a financial calculator. Understand the 5 keys to cash flow calculations and how to structure deals to increase yield and ROI.

10. Encourage Early Payoffs – When you buy notes at a discount an early payoff can mean increased yields. Take a solid 10% return and turn it into a 20% return by incentivizing the payer. We’ve used discounted payoffs, lower interest rates, and even a TV to encourage the payer to accelerate the amortization.

11. Originals Count – Get the original promissory note. Have the original note endorsed at closing and keep it in a safe place. If the seller is not the original note holder be sure there are endorsements that follow the chain of title. You will want this if you ever need to enforce your lien position or prove holder in due course status.

12. Seek Professional Help – Get title insurance and use the closing services of an attorney or qualified escrow agent. Seek advice from competent legal, tax, and financial advisors.

13. Use Solid Servicing Procedures – Track the payments each month including interest and principal applications. Act quickly to start collection efforts when payments are missed. Check to be sure real estate taxes and property insurance are paid when due. Use the services of a servicing professional whenever possible. It’s easy to get busy and let too much time pass before taking action.

14. Understand When Laws Apply – There are laws that may or may not apply to note transactions. It can depend on how the note was created, the state, and/or the number transacted each year. Do your homework on the Dodd Frank Act, Safe Act, RESPA, Fair Credit Act, SEC, and others to determine whether or not they apply and how to comply when necessary.

15. Spread The Risk – It is better to buy five notes for $50,000 each than one for $250,000. In addition to spreading the risk among several deals, smaller balance notes often provide greater opportunities for increased yields.

16. Know When To Fold – Once upon a time I bought a mortgage note without proof of property insurance on the collateral. It had been in place then lapsed the day of closing. Rather than pull funds or delay closing we finalized the deal. The house burned down over the weekend. While “Burn to Learn” makes for an entertaining story I should have played that hand differently.

17. Be Creative – To find value where others overlook you need to get a little creative. You can buy a 4% face rate note and still yield double digits. The seller that won’t take a discount might consider a split funding or 50/50 partial. Realize that most seller financed notes fall outside of some conventional lender’s strict guidelines. You will need to think outside the box to minimize risk, secure a good return, and still create a win-win situation with the seller.

Tracy Z. Rewey is the author of How to Calculate Cash Flows and co-owner of Diversified Investment Services, Inc. She has handled millions of dollars in owner-financed real estate notes and alternative cash flow purchases since 1988, becoming a well-known industry expert. Visit www.noteinvestor.com to receive a free eBook on the 5 Ways to Cash In on Notes.

Obama Backs Stricter Advisor Rules

March 3, 2015

Article by NuView president Glen Mather, in response to this Wall Street Journal article:

With a considerable push from the current administration, the Department of Labor (who has oversight over IRAs and 401(k) rules) is creating new rules for financial advisors that provide services for retirement plans and participants. As a separate initiative, the SEC is devising new fiduciary standards, which has introduced a great deal of uncertainty in the world of financial advisors.

The agencies seemed to have a particular concern about advisors who recommend rolling their client’s funds from a 401(k) plan to an IRA to make particular investments. Should these advisors be held to the higher standard of “fiduciary,” which under the current definition would mean getting to know the client and their personal financial situations at a far deeper level, as their recommendations must be in the best interest of the client?

Most legislative and administrative changes, drafted with the best possible intentions, lead to unintentional consequences. In this case, since most advisors who spend a significant amount of time with their clients charge a fee for their services, most would elect not to serve the client with smaller account balances, as they would either be unprofitable to the advisor, or expensive to the retirement account holder.

Perhaps a further result of tightening the advisor rules will be that the employee leaving their 401(k) plan will be forced to make decisions on their own – or in other words, self-direct their decisions.

In either case, making an informed decision is a key component.  What is a bit tragic is that there are so many 401(k) and IRA holders who simply choose not to inform themselves about choices they have. There will be no one, including your financial advisor, who has a greater stake in your retirement plan. With a self-directed IRA, you serve as your own fiduciary – and thus you never have to worry about not knowing your own financial situation. You educate yourself about the choices and make the best decision on your investments, and your IRA administrator will move the funds as directed.

For the 75 million IRA and 401k plan participants, perhaps these new initiatives will be positive ones. The fact is, the self-directed IRA holders have figured this out for themselves long ago.

What is your Retirement Number?

February 20, 2015

Guest Article by Paul McGarigal:

When asked, “What is your number?” many people have no idea what you are talking about. The number, of course, is the amount you will need to retire. Let’s take a look at how to figure out your retirement number.

If you now live on $7,500 a month gross combined income, that’s a $90,000 per year family income. Sounds like a lot to most people, yet this income amount puts you in the top 15 percent of all families in the United States. If each person in a retiring couple receives about $1,500 a month from Social Security, then that’s only $3,000 a month toward the $7,500. Where will the other $4,500 a month come from?

Here’s one scenario: If you manage to save $300,000 in your IRA/401K by the time you retire at a 5 percent annual return (of which there may not be too many offering that return) that would be $15,000 a year or $1,250 per month, which is not enough. But how about $1,200,000 at 5 percent? That’s $60,000 a year, or $5,000 a month, which when added to your $3,000 Social Security benefit will put you closer to what you need to live the same as you did when you worked.

So if $1,200,000 is your retirement number, how are you going to get that amount in the years you have left to work? Let’s say you are 40 years old and will work 25 more years. The math is easy. $1,200,000 divided by 25 is $48,000. This is the amount needed each year to add up to $1,200,000 over 25 years.

How are you going to get $48,000 a year, you ask? Real estate. You can purchase a home for 3.5 percent – 25 percent down, depending on its use. Then, with the help of a real estate professional, you can learn how to have tenants pay your mortgage for the next 15 – 25 years, while you receive tremendous income tax advantages. This may be the only way you will ever come close to saving or accumulating a $1,200,000 nest egg for retirement.

Just three houses at $250,000 each now will double in value over the next 25 years, assuming only a 2.9 percent average rate of appreciation. So, $250,000 multiplied by three is $750,000 and multiplied by two is $1,500,000. Selling them at age 65 would fund your nest egg and help you enjoy 20 to 40 years of retirement.

Of course, this is the short version of a much more complex formula that will be different for each couple. But hopefully you are at least thinking about your retirement number and now see how real estate and a knowledgeable real estate agent can help you get closer to reaching your goal.

Paul McGarigal has been in the top 1 percent of all Realtors in Central Florida every year for the past two decades. He is also very involved in his community and volunteers with youth sports and the YMCA, among many other non-profits. This article was also featured in the April 2013 edition of  Central Florida Lifestyle

It All Starts With Saving

February 3, 2015

Article by NuView president, Glen Mather:

We generally become the summation of our habits, the outgrowth of our discipline, and the energy of our ambitions.

Ever hear anyone say, when challenged about their attitudes and habits, “I’m sorry, but that’s just the way I am?” I’m certain that they don’t mean to convey that they are unwilling to evolve or change, even in a positive way, but those statements reinforce the sense that they feel content with their current situation no matter how negative it may be.

When is it too late? Only when you can no longer effect change. As long as a conscious effort can be exerted, you still have time.

Last month, I read a wonderful book called Cash Flow Diary by J Massey. When I met Massey, I saw him speak in front of hundreds of investors, and later I invited him to speak at our annual Planning for Prosperity conference in Orlando. I had a very unusual response to his book on real estate investing – I started flossing regularly.

I was struck by Massey’s assertion that he had come to the realization that there were a few tasks that he routinely did every day, and if he had to perform them, why not do each well? His thought was, “I’m already at the sink, just brushed my teeth – flossing will only take about 2 more minutes.” He then purposed to make it a habit, and after 30 days flossing became routine, so much so that he referenced it in his book.

If Massey could do it, so could I, and it’s true… I just returned from my annual dental check-up and received high marks from my hygienist that my gums were the best ever. Who knew that it would be so easy to establish such a sensible habit?

Most of our negative habits are formed, not by thinking, but by the absence of thought. I have little doubt that most people’s attitude about money is formed the same way. Do you see the extra dollar in your pocket as a measurement of what you can consume, or how much more you can invest?

My friend Greg tells me that he drives an older model truck, despite his ability to afford something new, because for the price of a $40,000 truck he can buy a run-down property that he can rehab and rent for $600 per month. Greg, instead of purchasing an asset that quickly depreciates, is purchasing a type of an annuity with an income stream of about $5,000 per year after expenses, and Greg gets a bigger kick out of his balance sheet than what is parked in his garage.

Unfortunately, most Americans do not share Greg’s values. According to a recent survey by the Federal Reserve, about 1/3 of non-retired US Households have no retirement savings or pension. Among those aged 55-64, more than half said they expect to work “as long as possible” rather than work full time to a set date and stop working. (Federal Reserve Report on the Economic Well-Being of US Households, Aug 7, 2014)

Why is such a large portion of our citizenry unable to prepare for retirement? For a small number of households, it may be due to dire economic hardship. However, for most the habit of saving was probably never established in the first place.

I can see it with our clients – there are those who have been faithful savers as well as those who waited way too long to start with retirement age rapidly approaching.

Just think of savings like flossing. It is far more valuable if you start young, yet any day you start will produce results immediately and will accrue long-term benefits once it is established as a habit. So rather than setting a large savings objective, just start with a percentage of your earnings, and as your earnings improve just increase the percentage. Then teach your children and grandchildren to do the same.  Better yet, when those savings are in a self-directed retirement plan you avoid the tax bite – and that’s an idea to sink your teeth into.

Demographics and Scarcity Converge: The Boomers Move South

Guest Article by Michael Cobb:

If you had a time machine and could see the future, would you be able to make better decisions? Would you be a better investor? They seems like silly questions, but we would make better decisions if we knew the future, wouldn’t we? If we could see what was going to happen, we would develop products and services that everyone wants and needs, and then of course, we’d do very well for ourselves.

While we can’t go forward in time for a sneak peek, we can spot emerging trends. When the macro-demographics line up behind that trend, get ready. There is going to be a lot of money to be made by somebody. Why not you?

I was among those fortunate enough to be a part of the early computer wave of the late 1980’s and early 90’s. Now the truth be told, it wasn’t foresight that put me there…just plain luck. But there I was, and it was a great time to be in the computer business.

The major reason the tech sector performed so well when it did was the combination of two factors. The Baby Boomers moved into management positions in industry at the same time that the personal computer became a product mature enough to be of significant useful value for individuals and corporations. It was a powerful convergence of two factors that lead to the great adoption of PC’s and their massive widespread use. It also helped that the Baby Boomers generally rebelled against centralized authority.   Remember the Apple commercial railing against Big Brother?

The success of the PC and the fortunes made is a great example of the convergence of demographics and scarcity. More people wanted PC’s more than were available for a significant period of years. It produced huge opportunities for investors and entrepreneurs. Profits from computer and software sales were enormous because initially scarcity reigned. Consumers demanded a product and production facilities were not in place to produce the quantities demanded.

Over a period of about 10-12 years, the scarcity element waned because thousands of factories were built to supply the components needed to assemble the millions of PCs required each year. Prices and profits fell. The number of players in the market also constricted substantially leaving only the companies that produced a high quality product.

Interestingly, the names of these companies are largely the same as the ones who entered the market first, IBM, Dell, HP, Toshiba, Apple, and Microsoft. Those that arrive first, and perform well, stake a strong claim in the most fertile territory, and reward customers and shareholders alike for the long term.

A huge convergence of demographics and scarcity is happening again. This time it is in preparation to serve Baby Boomers as they retire and age.  There are numerous sectors like health care poised to do well, but much of that future success has already been priced into the market. In order to really profit from this convergence, one must look under different rocks as my friend Steve Sjuggerud says.  Find opportunities others are overlooking. That is where the real pay dirt is.

One such opportunity is under our noses right now. We all know that the real estate sector has been hammered over the past 5 years and rightly so. In many parts of the world, price gains were fueled by a speculative bubble. The true consumer demand wasn’t there to feed the ultimate usefulness of the product and prices tumbled in response. It was a bloodbath for many, but the strong survived. The companies in business right now are those that stayed true to the consumer and produced a product that people wanted to own and use.

Products People Want – Sun City South-of-the-Border

The most successful retirement community brand in North America is Sun City. The developer, Del Webb, wanted to provide real community to active senior adults, and then let the retiree decide what part of the United States made the most sense for them. They developed communities in the deserts of Arizona, along the coasts of Florida and California, in Texas and the Mid-West, and the piedmonts of the East Coast. Del Webb knew how to build the services and amenities that everyone wanted and then offered clients the option to choose what type of climate and environment suited their needs and wants best. Their success has been unparalleled in the industry.

It is now possible to advance the Sun City concept one step further and create a menu of attractive lifestyle options to serve the millions now searching for retirement homes in Latin America. This is an already large market and it continues growing quickly. However, once outside of North America, a new set of considerations becomes critical.

Today’s consumers largely take for granted the basic comforts of reliable electricity, excellent water pressure, high-speed bandwidth for internet, access to top notch medical care, and quality construction.  In Latin America, many developers fail to provide even these basic services. They are often little more than a collection of barren lots with limited infrastructure. Most have few or no homes or residential product in place. The major reason that so few projects achieve this lever of product is that it requires that significant resources be invested up front. These “ghost towns” are likely to remain just that.

Boomer retirees want life, activities, neighbors, and community, something that the majority of these projects, sadly, cannot offer. Only a few developers deliver the excellent infrastructure and amenities needed for a high quality of life experience that North Americans have come to expect. A “Sun City of Latin America” would provide high quality products in a variety of climates like a home along the Pacific or Caribbean coasts, in the cool tropical mountains, or in the arid, high deserts of South America. Investors and companies who can provide such a product are likely to do very well.

The Demographics

The Baby Boomers represent more than 84,000,000 individuals in the United States and 9,000,000 in Canada. Over the last 60 years almost everything that was popular with the baby boomers became a huge commercial success. They have produced a disproportionate impact on the economy at each stage of their lives and companies that placed themselves in the path of this “age wave” did very well. This wave of opportunity continues right now as they enter the age of retirement.

Today 500,000 U.S. retirees receive Social Security checks overseas. These are people who were born before 1946 and are not part of the huge demographic bubble about to hit the market. The Baby Boomers proper, people born 1946 to 1964 are just now entering retirement and many will be relocating and building warm-weather, retirement and second homes in Latin America.

With a half a million already retired outside the US, the projected demographic data is even more powerful. Several large surveys map the nature of emigration attitudes in North America. The Zogby Company surveyed 103,000 Americans and discovered that 18% of the respondents representing more than 26,000,000 Americans have a desire to move or own property outside the United States. 4,500,000 listed Latin America as their first choice.

TD Waterhouse recently surveyed Canadian Baby Boomers. 45% of the respondents plan to spend one month or more outside Canada in retirement. With 9.3 million Canadian Baby Boomers this equates to over 4 million retirees who will be renting or owning property outside Canada in their golden years.

The bottom line is that Baby Boomer retirement will largely drive this market over the next 20 years. The trend is in its infancy. As many more retirees look to the tropics for affordable, yet enhanced retirement lifestyles, phenomenal growth in these in these already large numbers is likely.

Why Latin America? 

The region of Latin America is growing by leaps and bounds. Proactive policies on the part of the countries themselves have become instrumental in attracting foreigners, and hence their capital, to the region. More than 1,000,000 North Americans reside in Mexico part or full time, 40,000 Americans have homes in Costa Rica, and 20,000 call Panama home part of all of the year. Each country in the region has its own attractions and incentives that draw tourists and permanent residents alike, and they are all competing to provide excellent retirement packages.

Latin America is in the middle of a successful transformation with real GDP increasing at a rate of over 5% per annum through 2008. While the period 2009 – 2010 slowed, the region is already rebounding economically and GDP growth for 2011 was over 6%. Growth in conjunction with improving economies and regional stability drives the improvement of infrastructure, economic situation, and position in the global marketplace. These, in turn, make the region more viable economically, while at the same time improving quality of life, safety, and marketability of the countries therein.

But perhaps the most important reasons retirees are looking at Latin America are the “soft” factors like proximity to the US, Canada, family, and friends. Flying north to south limits the time zones crossed to two or three making travel and communications back home simple and easy. Safety, stability, and services are important base lines, but convenience is perhaps just as, or more important in the end for consumer satisfaction.

Financial Factors and Emigration

Ernst & Young produced a study in July of 2008 that predicted 60% of US retirees would need to cut back on spending in retirement or face the prospects of outliving their nest eggs. What would you cut back, food, medicine, heat? Imagine living your life every day wondering if you were going to outlive your funds.  It’s a scary proposition.

In addition, the U.S. Commerce Department reports that Baby Boomers are now saving almost nothing. Although the recent economic shocks are changing that trend, for most Boomers, there is simply not enough time to accumulate what was not saved or lost in the markets in 2008. Even today, almost half of U.S. Boomer retirees (48%) expect to count on Social Security during retirement and 15% expect to rely on it for most or all of their retirement needs.

This is a dire situation for many. Where can they do that and have a high quality of life in North America? The ability to enjoy the kind that they’ve always dreamed of is simply not feasible in the United States on the limited funds and Social Security payments they posses. More retirees will look elsewhere, many to Latin America, looking for ways to cut costs in retirement. Wonderfully they will also discover that they can enjoy a higher quality of life on a budget that they can afford.

Capitalizing on a Crisis of Supply

When one examines the supply of high quality home sites in the region, one quickly sees the impending shortage. If one considers the amount of residential product with world-class infrastructure and amenities, the shortage is magnified immensely. Knowing why there is a shortage of supply is critical to understanding why investment in the region makes so much sense.

Most developers in the region sell a speculative type of product. It has also been called “cut and run.”  This literally means that a developer buys a large tract of land, adds the minimum infrastructure like dirt roads and electric poles, then sells the lots to speculation buyers. Large expenses like water and sewage treatment are often offloaded onto the consumer, who must drill wells and build septic systems if they decide to build a home. In many cases soils are heavy clay which won’t perk, and water tables are located deep underground. In addition to the obvious environmental issues, this ends up costing buyers much more than their share of a centralized system.

A 2009 developer survey by Christopher Kelsey & David Norden clearly points to the growing consumer demand for products with high levels of infrastructure, amenities, and “reality.”  Prior to the real estate and economic crisis in 2008, most consumers were willing to “bet on the come” and buy pre-construction and speculative product. Today their attitudes are very different.

When surveyed again in 2011, developers agree by an overwhelming 94% that consumer’s expectations for clarity and commitment from the developer for the delivery of promised amenities will be greater. 92% agree that consumers will want to see the infrastructure and amenities complete before purchase. 85% see an increased trend by consumers to purchase completed homes and condominiums rather than vacant lots and pre-sales opportunities.

Consumers who are now retiring want and need something different as the Norden survey and other research data suggests. Retirement overseas is already happening with more than 500,000 receiving Social Security checks outside the United States. If the Ernst and Young State of Retirees report is accurate, then we will see this trend grow even faster as more people search for ways to lower their cost of living without giving up the important quality of life issues.

The Sun City of Latin America

The Baby Boomers are about to enter their next stage of life with more time and more money than any other demographic group of people in history, this even after the 2008 meltdown in the financial markets. As a result of longer life expectancies, these consumers know that they will have many more years of life after retiring than the majority of their predecessors ever did or do. With this time, they want to travel, continue working, and even start new careers. They want infrastructure, amenities, activities, neighbors and community. They are willing to pay a premium to get it.

Latin America offers exceptional and diverse climates with a high quality of life at an affordable price.  Our company, ECI Development is already serving this market and is, right now positioned to capture an even larger segment as it grows and expands.

You may want to look at what we are doing and how you can participate. Visit our website and be in touch. The opportunities are dramatic and timely. We don’t often get the chance to spot the trend this early with vehicles in place to ride the wave. Seize the moment. You’ll be glad you did.


Michael Cobb

Chairman and CEO

ECI Development