Real Wealth Show: Real Estate Investing Podcast

She had Mom telling her to buy real estate. He married into the real estate mentality. They both had MBAs, worked at Northern California tech companies, and ended up with two rental properties in the Bay Area. But they couldn't cash flow. In this episode, you'll hear how Sophie and Ben turned those properties into a cash flow machine by investing out-of-state, and created real wealth about 15 years earlier than they had planned. You can learn more about doing this for yourself by joining RealWealth. You'll find plenty of free educational material on our website. Our investment counselors can also refer you to experienced property teams who can help you get started in real estate. Click here to get started, it's free!

You may recall that, back in 2012, Warren Buffet said on a CNBC interview that he would buy a few hundred thousand homes if he could figure out how to manage them. Well, some companies did figure out how to do that, and 9 years later, they are transforming what has been an exclusive mom and pop industry for centuries. It's an honor to have Dallas Tanner on the Real Wealth show today. He is President and CEO of Invitation Homes and is also a member of the company's board of directors. Mr. Tanner has 20 years of experience establishing real estate platforms and, as a founder of Invitation Homes, he has been at the forefront of creating the single-family rental industry. In this episode, he shares some insight on what it's like to manage more than 80,000 homes in 16 different markets. He also talks about how landlords of all sizes are coming together with the help of the National Rental Home Council. The Council held a virtual conference last month and is planning an in-person conference for this fall. It will be held September 29th to October 1st in Washington, D.C. Founder David Howard says of the summit: "It will bring together leading executives within the single-family rental home market to discuss, through panel presentations and conversations, the future of the industry. The housing market, and single-family rental housing in particular, has been moving at full speed to accommodate a surge in demand over the past year or so. Our intent with the summit is to address the key issues emerging from this critical period of time, and by doing so, better understand where the industry is heading and how it will get there." You can get more information about the upcoming conference, when it's available, at www.rentalhomecouncil.org. For information on how you can contribute to the industry as an individual investor, please login or signup here. It's free to be a member of RealWealth and free to speak with an investment counselor who can answer any questions. www.RealWealthShow.com

If you've tried to buy real estate recently, you know you have to move quickly. But you may also be wondering how other investors are dealing with this crazy real estate market. In this episode, you'll hear from a RealWealth investor who's now working for us as an investment counselor. She's seen how the market has changed over the last few years, and knows what it's like to buy investment property in today's market. Leah Collich started building her portfolio in 2010 when it was a very different market. Demand was low, supply was high, and prices were cheap. In 2017, she became a RealWealth member and expanded her portfolio into five new markets while living overseas. She now owns over a dozen properties in Texas, Florida, Ohio and Alabama. When we invited her to share her experience on an investor panel, we were so impressed that we offered her a job. And she shares some of her inside knowledge in this interview. If you'd like to talk to Leah or one of our other investment counselors about available investment properties, you can do so for free, as a member. It's also free to join our network by clicking here to join. Links: https://www.RealWealthShow.com https://tinyurl.com/joinrealwealth Audio Transcript: [00:00:00] [music] Speaker 1: You're listening to The Real Wealth Show with Kathy Fettke, the real estate investor's resource. Kathy Fettke: What are experienced investors doing in this crazy wild real estate market? I'm Kathy Fettke and welcome to The Real Wealth Show. Who better to ask than one of RealWealth network's own investment counselors. Leah Collich began investing in real estate in 2010 when it was a very different market. Demand was low, supply was high and prices were cheap. In 2017, she became a RealWealth member and expanded her portfolio into five new markets while living overseas. She owns a dozen properties in Texas, Florida, Ohio, and Alabama. Several years ago, we invited her to be on an investor panel to share with other RealWealth members what she's doing. We were so impressed that we were lucky enough to be able to hire her as an investment counselor helping others today. She knows a lot about what's going on out there and is going to share it with us here on The Real Wealth Show. Leah, welcome back. Leah Collich: Thanks for having me. I was just saying, we either need to do this more often or I need to move less. I'm on the Eve of another relocation here very soon. [chuckles] Kathy: Oh my goodness. That's because your husband is in the military. Leah: Right. They keep us moving. We were in Boston for a quick bit and now we're headed to Texas which is our home state. Kathy: Before that in Columbia. Leah: Right. Bogota, Columbia, before that, California, we've been all over. Kathy: It sounds like maybe a good time to not be in Columbia. Sounds like a tough time there right now. Leah: Yes, it's been hard to watch. Kathy: Thank you for taking this time when you're trying to move. I know you're probably a real pro at it now. Let's just talk about that process. You are a real estate investor. You are an investment counselor at RealWealth and you just tried to buy a house in San Antonio for a primary residence since you're now going to be there. [00:02:00] He's being positioned. What would you call it, transitioned? There's a word for it. Leah: Assigned. Kathy: Assigned, yes. He's being assigned to San Antonio for about three years. What was the process like to try to buy your primary residence in San Antonio today? Leah: I have a lot more practice buying investment properties than primary. I was in a really bad way for a while because I'm so pragmatic about purchases and looking at the numbers and being very logical through things. Unfortunately, the market in San Antonio is like many places in the country, there's no room for that. [chuckles] It was stressful. I think we made offers on six different homes, all above asking all the day they came on the market waving appraisal contingencies. We were one of a dozen offers. What we eventually started looking at to make it more numerical, we started looking at what is the average annual appreciation? Let's look at every quarter in these areas, homes are going up 4%. You start looking at if we wait until the fall or the winter months when things slow down, if they slow down, if there's fewer buyers in the space, we will probably be at 4%, at least maybe 8% higher prices. We might as well come in strong with those offers now. That's what we did and we got one and feel really good about it. It was counter to so many of the rules that we do when we're buying investment property. Kathy: It's different when it's your primary but I am curious how do you know how much more to offer over asking price and what to let go of? No contingencies is really scary too. Leah: I know. I think that is the delicate dance and I think I'm a little bit messed up too because everyone talks about you can bring a California bias into these other [00:04:00] markets and everything looks cheap. You can just throw money that you don't think about. We haven't lived in Texas for over a decade. During that decade, home values have clearly gone up in Texas. We've lived in California, we're living in Boston. We've had some of that influence I think of like how high housing prices can get. I think it was trying to tamper that. It was really just after losing out on a couple of offers that we thought were strong offers to begin with that we just started getting progressively and progressively more aggressive. The irony though is that the house appraised after it. Kathy: That's amazing in itself because that's been an issue too where people do get the winning bid but then they can't get the appraisal. Did you also do no contingency on inspection or did you--? Leah: No. Kathy: No. Oh, good. Leah: We did do an inspection contingency. That was what's crazy because we gave them an offer that I felt like was incredible and nervous about for a sick to my stomach about how much we'd offered on this home. They came back to the offer with a counteroffer wanting us to adjust our terms even so it said to us that our offer wasn't that much better than the other offers. Kathy: Wow. Leah: It was nuts but I'm thrilled to know that we have a landing place on the other end. We'll move right in when we get there. Kathy: Oh, that's great. I'm glad you get to settle in for a bit. Let's talk about what you're hearing at RealWealth. I know you're talking to investors every day about what they're trying to buy. What are you hearing from them? How hard is trying to close on a property for an investor these days? Leah: It's competitive. Deals are moving so fast that it's completely opposite than it was when I joined the network back in 2016. When I joined, every team would maybe have 10 or 12 deals available at a time, [00:06:00] you could think about the deals, you could get on a phone call and talk about it. You had time. [chuckles] Kathy: Time, yes. [chuckles] Leah: Now, we did a property showcase webinar with our Indianapolis team last week and they featured four or five properties. I heard from the team about a half-hour after the webinar, they had 50 email inquiries and 20 requests for contracts. From our members only. Kathy: For what five properties? Leah: Right. Kathy: Oh, wow. Leah: It's intense. What I've been telling everybody is you've got to get yourself positioned where you understand what you're looking for, your financing needs to be like, ready to go. Don't put an offer on a property or even talk about putting an offer on a property before you've talked with the lender to make sure that this is even possible for you. It's really just in the preparation. Then I think also managing expectations, that's been a lot of my conversations is just helping everybody understand that you might need to be a little bit patient. If you have one market that you really want to be in, you can get it. It will happen eventually but you might have to just be the squeaky wheel for a little while to get the deal that meets your criteria. Kathy: What's the case for new builds? Is it the same? Is there a waitlist for those? Leah: Some markets do have waitlists for new builds but I think there's still tremendous opportunity with the new builds because you have the ability to get something under contract today. Anybody that I talked to who wants to get something under contract, we have markets who have contracts ready to ready to sign. They're not to be delivered for another six to sometimes eight months. Kathy: Or longer maybe. Who knows, right? Leah: Or longer, yes. People who want to close on something really quick, [00:08:00] we do have a couple of teams that have partnered with regional level builders and those larger regional builders that are building for owner-occupants, they're tending not to market their inventory for sale until it's already a house, until it's got walls and maybe it's got a roof on and there may be 30 to 90 days from closing. We do have some teams that have that pretty frequently but it's competitive. You just got to be ready to move quickly. I have also noticed, I think a real sense of urgency with the investors that I'm speaking with. This has been quite a year or two years, going on two years now. I think real estate is in every headline news article out there, what's happening. I think there's a lot of people wanting to now get into the space. There's this sense of urgency. Like, "I need to get into this now before the market changes." It's an exciting place to be, that's for sure. Kathy: For all the people who bought properties for the past 18 years that RealWealth network's been around, I hope you all held onto your properties because they're worth gold today. It's amazing. I guess the question is how much longer is this going to last? We do know that, I should say in the past, it was exciting to get in contract on a new build in a rising market because chances were that the property would be worth more by the time you close on it. There's also a chance it could be worth less. That was one of the concerns I had with you when you bought that fourplex several years ago. I thought, "Well, that's kind of expensive for Florida. I wonder if you're paying too much and what if it doesn't appraise?" and our cash flow. That turned out to really work in your favor, right? I think you've just [00:10:00] closed on that in March. Leah: Yes, we contracted that property in August of 2018. It was a long time ago and then we just closed this past March and you're right. It scares me that that made you nervous back then. Maybe you should have warned me or maybe not by how it ended. [laughs] Kathy: Well, it was just an uncertain time. It was the end of 2018, the real estate was slowing down a little bit because rates were going up. Typically, in the past, the federal reserve raises rates when they want to slow down a booming economy and typically they've done that too fast. I don't know if you remember but during the Trump administration, there was a big argument between the fed and President Trump and he was like, "No, no, stop raising and lower rates," and they did. That stopped what would have been a slowdown in real estate and then the opposite happened, it happened even further with lower rates that has further fueled real estate. It really is rate-dependent. Leah: Oh, yes. I went back and reviewed our very first fee sheet on that deal just so I could refresh what lens I was looking through at that time and our lender had projected a rate of 5.625. The deal made sense fundamentally and I think that's why-- We are fundamental investors. I'm not chasing appreciation. I like it just as much as everybody else but for a deal to work, I want to see sustainability and I plan to hold it for a very long time. What the property values were doing, that wasn't the trigger to go for a deal like this. Then of course having no knowledge of what would happen over the next two years-- When we contracted that property, we knew that it was going to be a longer delivery [00:12:00] time, just the nature of that project. It's a quad development so it's got I think 30 something other quads all next to it. Someone who's driving by might think it was an apartment complex. [unintelligible 00:12:11] quad is owned by a separate investor. We knew it was going to be a long time horizon and we talked a lot about everything that could happen in that period of time. Never once did we think pandemic- Kathy: Right. Leah: -but we did play through some scenarios. There was mutual risk taken on behalf of the builder. The builder doesn't know what the market's going to do and I think- Kathy: That's right. Leah: -today is a perfect example of that. Construction costs going sky high and they've got contracts on 36 quads at one price. They could leave a lot of money on the table or they could be losing money in developments like this. Kathy: That's right. Leah: Fortunately, in the end, everything worked out in our favor. Rents were higher than they were, interest rates were lower than they were by over two percentage points. Kathy: That ended up being an incredible deal. What was their purchase price? Leah: It was mid-five, about 530. Kathy: That was the only reason I was like, well that's a big purchase. Leah: It was. Kathy: It's a four-plex. It's great but it's not our typical $100,000 or $150,000 house. That's all. I didn't think it was particularly risky, it just was bigger than some of the other things that we've done. I'm just really glad it worked in your favor. Now, what we're seeing is builders struggling to get and get appliances, to get lumber, to get roofing even. I think on our Reno project, our builder couldn't even get the tiles. They wanted the tiles for the roofs. This is unprecedented. A lot of builders are having to reprice and investors are having to pay more [00:14:00] because many of the contracts that were written allow for that, a clawback if prices are unusually-- I should say the cost of materials is really- if there's a big variance from what was originally expected. Builders do have the right to raise prices because they can't finish the project if they can't afford to complete it. Investors are finding out that they're paying more for the finished products than they thought. What are you seeing? Are people okay with it? [chuckles] I know it's a surprise. Leah: I think it's come as a surprise to many. Though I don't feel like anybody wasn't aware of what construction was experiencing right now. Everybody is hearing about the surge in the cost of lumber and other materials. I think people understand it and that's what I love about the investors that we work with. I feel like we work with very pragmatic people who understand that we're not pitching some get-rich-quick scheme. This is about a free market, that's what makes this work. Our builders are subject to the free market just like we are as investors. I think most people seem to be very understanding of the fact that I can't ask a builder to take a loss on a property. This is the irony is that while some of our builders were having trouble making money on these deals as these costs have gone up, they were closing these properties and the investors were getting appraisals back with $40,000 of instant equity. I don't want to say that's not fair but it really is problematic. Builders will go out of business doing that and we as investors, we need the inventory. Kathy: We need builders to be building, that's right. Leah: I think most people have been really able to look at the bigger picture. The good news is that rents have also gone up, a lot of them still are closing with some equity, and most of the builders who did have to come back and adjust pricing, they were willing to split the difference with the investor. They know, [00:16:00] "Hey, on the retail market, I could sell this for way more. I'll split the difference with you so that this is fair, so there's still some potentially some meat on the bone for you." By and large, no one likes to hear that they're going to have to cough up a little bit more money but I think the fundamentals are still there and it still makes sense. Kathy: Rents are going up as well, right? The cash flows aren't necessarily much worse or worse at all. Leah: I have noticed the cash flows are a little thinner just in looking enterprise-level all the performance. The cash flow is a little bit thinner now, certainly than it was two years ago but that's always the case especially in these growth markets. What makes it a growth market is why there's a lot of new construction there. There's a housing shortage. Kathy: It takes a long time to get the properties up and running and when you've got an area growing so quickly and not enough supply and builders struggling to even get the materials that they need, you're going to see prices go up, and then, of course, cash flows tend to go down. We're seeing more and more people flocking to real estate because of the fear that that's going to continue. If you listen to my last interview, Logan was pretty sure it's going to continue for a while. This is not over yet. Leah: Yes, he said like a 4 million house deficit that our nation has. My situation being a perfect example, it took two and a half years to build that quadplex. The supply isn't created overnight and I was thinking about-- I love macroeconomics and that's why I love real estate but I was thinking about just the construction cost. If we didn't have this surging demand that we do, think about how many builders-- That is ultimately what's creating this hike in the prices, but there's also some supply chain issues. [00:18:00] Under different circumstances, there would be nobody building to help offset this challenge that we have. We just don't have enough housing in this country. Kathy: Even though we didn't have as many births, I thought there'd be a baby boom this past year. It turns out I think people were maybe afraid to have babies with so much uncertainty. There was less than expected but our population is still growing. Again, it's not as easy as people think to get new supply online. It can take-- For example, in Little Lane, in Carson City Nevada, we bought land a couple of years ago, and then COVID hit. Our team literally couldn't even get an appointment with the city planners because the offices were shut down. That delayed that project by about nine months and it's an area that's in desperate need of housing. On the one hand, the area really needs it but the builders can't build it. They literally could not even get the appointment, get the approvals to go. Leah: We've seen that in Florida too. The city offices are backlogged with permitting, they're all working from home so they're slower to respond. I have another new build under contract in southwest Florida and it was getting delayed, delayed, delayed, and we were going, what is the reason? Help us just understand where it's at and the builder came back to us and said that the subcontractors that they used to clear the lots were so backlogged for just clearing that they were on a three-month waitlist to have guys to come and knock down trees so that they could even start [chuckles] to build. At every turn, it seems like. Kathy: That's right. All right. What advice are you giving to investors and what are you seeing? Are you seeing mostly first-time real estate investors that call or is it repeat buyers? Leah: I'm glad you mentioned that because I was just thinking about that in my last response. [00:20:00] I have noticed a lot of 1031 buyers because it's such a great time to sell property. [chuckles] Clearly, hearing my story about selling or buying a primary, you have buyers who are lining up to waive contingencies and give you cash. It's a great time to sell and so the number of 1031 exchange buyers exchanging out of California, getting top dollar, and offers same day, I have noticed that increase significantly. Those are hard investors to help too because they don't just need one property. They're not just trying to get into the game, they're selling a $1.5 million home and in LA and they need a portfolio of homes. They need four or five homes or six homes. That is definitely exciting and I shared a success story with some of our colleagues last week that we had a 1031 exchange buyer this exact scenario. She sold a $1.4 million home in Southern California. Through our network and through our providers, she bought eight homes in Florida and even new construction in Charlotte, rehabs in Florida. She took her cash flow. That $1.4 million home in LA, cash flow for her about $800 a month, she had some small loans on it. Now, this portfolio of eight homes cash flows $6400 a month for her. Kathy: Wow. Leah: She really got to experience the power of want a great seller's market in California but then this repositioning in these more stable markets still high growth arguably but where there's fundamentals and where there's really great cash flow. Kathy: That's incredible. I'm so proud of you and our teams for being able to complete that exchange because it's not that easy to find the replacement property. I'd be kind of scared to sell something today and hope I can find something [00:22:00] in 45 days but you're seeing that our teams are able to get it done still? Leah: Yes. No, they are. I think her success is due in part-- I mean a lot to her grit. She was just very persistent in her approach but we also started having this conversation about her exchange well in advance of her putting the property in California on the market. It was a scary time to be prolonging a sale. We were in an election year, there was a lot of uncertainty at the end of 2020, and kind of preparing for this. She was wondering, "Am I making a mistake by waiting to list this property until I have this 1031 plan at least lightly ironed out?" but I think that is what is contributing to a lot of people's success is just knowing that the market is raging to sell. Let's work over here on the after scenario, on the replacement properties, and try to get that plan and at least those relationships with the teams really well established so that it's feasible. It is. We've seen lots of people be able to successfully do it. Kathy: Yes, we've got-- I don't know if it would appeal to a lot of people but we do have lots in our Park City project. I think we've got five of them that can be sold to 1031 buyers but they don't cash flow. I think they're going to see some pretty incredible appreciation because you could barely get anything permitted in Park City. Have you come across anybody who just needs an exchange to get something soon, we do have lots available. I believe what people can do is they can 1031 into the lot, finish the exchange, and then get a construction loan on that lot and build and create a rental which is another thing that we didn't really see coming. A lot of people who own homes and in vacation areas, they maybe have a second home or investment property [00:24:00] in a vacation area. They moved there during 2020 because all of a sudden they could. They could leave the big cities and go live in Park City. They found out that it wasn't just a great place to ski, there's also beautiful summers and beautiful springs and there's fishing and there's biking and hiking and stuff in the summer. Many of those rentals are now owner-occupied in these vacation areas. The demand for rentals is enormous. It is an opportunity for somebody who doesn't necessarily need the cash flow right now, they've got an exchange, they need to buy something right now, we do have those lots available. Leah: Yes, every time you mention that Park City's project, Kathy, my phone rings with people interested to know about it. I do appreciate that and that has been another I think key to being really successful and honestly, a great plug for the network and just being connected to where the flow of these opportunities is passing through. We've had several situations where we learn about a particular opportunity that could work last minute. Two weeks ago, I had a- in an internal meeting, I learned about a brand new construction duplex that was going to work with an exchange timeline. I immediately went, "I know the perfect buyer." Got on the phone, called them and he contracted it the same day. It's being connected to kind of where these opportunities pass through is I think extremely-- It's the way that it works now. [chuckles] Kathy: That's great, Leah, that you're able to connect the dots there. That's- Leah: It's fun. Kathy: -awesome. I had said to Nick, I don't know if he told you this but I said we need to- for people who are in that situation, we need to get a text system going. [chuckles] It's like if you know you're in the middle of an exchange and we know there's some property available, we can text you right away. Again, it sells so fast, I think so quickly. All right. Well, is there any last advice that you would give to our [00:26:00] listeners? Leah: Yes. My biggest advice for people is always like you can analyze this thing to death. The idea of real estate and what market and what property, you can analyze it to death and many people do. I myself I'm guilty of it, but I think the sense of urgency, you should not hastily buy things but really realize like what these fundamentals are and why they work. Then look at the demographic shift, look at what's happening in the market and see that there's opportunity and the opportunities now. I think the tendency for a lot of people is to kind of wonder, are we about to come up to a cliff and it's going to drop off and property values are just going to plummet and everything about the timing is wrong? As you know and as so many of your guests have said on the show, that's not what we think is happening. It's a good time to be doing this. I think the action part of your process, the emphasis should definitely be there. Kathy: That's great. Love that. How close are you to your goals and what are your goals? What's your endgame? [chuckles] Leah: You and Rich would be mad at me for saying this, but I feel like our goalposts are moving a little bit just because you enjoy this. [laughs] Kathy: That the way it goes, they're always moving. Leah: We got into it with this idea of financial freedom. Okay, let's focus first on my income and get the cash flow to a place where it can replace your income. Then we'll start working on my husband's income so that it aligns with his military retirement but now we're just having so much fun. This was clearly before I came to join the RealWealth team too. Our goal right now, I think in the short term is to max out those Fannie-Freddie loans. We're getting close [00:28:00] to that. I've kind of been in the penalty box if you will with getting loans because I did have a career shift and changing industries. I've had two years of timeout. [chuckles] Kathy: Right. Leah: Meanwhile, we've been focusing on my husband's loan slots and getting those maxed out. He's almost there. Then I'm in the go spot again so now, it's just max out my 10. Our goal is to have tapped Fannie Freddie for all it's worth by the end of our time in Texas. Three years, that's the short-term goal. [chuckles] Kathy: I love it. I love that it's clear. Wonderful. Well, I have no doubt you'll get there. Leah: Yes. [chuckles] Kathy: All right, Leah, thank you so much for coming back on The Real Wealth Show. Thank you for all you do for our many many members at RealWealth and all that great investment counseling that you give them. [chuckles] Leah: You bet, we'll talk soon. Kathy: Thank you for joining me here on The Real Wealth Show. If you'd like to find out about the markets today where you can still get cash flow, where you can still find properties, where there's a great potential for appreciation, just go to realwealthshow.com and click on the invest tab. You'll see a whole dropdown of I think 15 different cities and all the data on those cities along with teams in those areas that can help you find that property. Again, that's realwealthshow.com. [music] Speaker 1: The views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com. [00:29:48] [END OF AUDIO]

She had an exciting career as an engineer who traveled the world to meet with top executives at important companies. But after the birth of her two children, she wanted more time to raise a family. It didn't take her long to accomplish her goals. She applied her project management skills to a real estate investing plan. In two years, she had a $4 million portfolio that has now grown to $5 million. She calls it her supercharged BRRRR strategy which stands for buy, renovate, rent, refinance, and repeat. Palak Shah is the founder and owner of Open Spaces Capital. She's also co-author of a book, The Only Woman in the Room, along with several other women in real estate, including Kathy Fettke. In this episode, you'll hear how she accomplished her task with two babies under her arms, and how she also helps other women get past their initial fear of the first deal. To learn how you can find and purchase income properties out of state where cash flow is much better than in high cost states, schedule a meeting with one of our experienced investment counselors. You need to be a Real Wealth member but it's free and easy to join here! Links: https://tinyurl.com/joinrealwealth www.RealWealthShow.com https://www.openspacescapital.com/

Real estate prices have are rising so fast in some areas, they've increased by double digits in just the past few months! Sellers are getting multiple offers and buyers are battling it out with bidding wars. Is the housing market setting itself up for a massive housing crash? This episode might surprise you because you're about to find out why the housing market is expected to continue on a very different track from 2020 through 2024. You'll also get a better understanding for why the housing market recovery has outpaced the overall economic recovery. Our guest is HousingWire Lead Analyst, Logan Mohtashami. He's also a financial writer who's frequently quoted by BankRate.com and Bloomberg financial. Now retired, he was a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1987. He's known as "the chart guy" and the "housing guru" by people in the industry, and has earned respect for his astute analysis of economic data and years of direct lending experience. It allows him to present a unique, informed and unbiased perspective on the financial markets. Become a member of RealWealth today to find out how you can invest in single-family or 2-4 unit multi-family rental properties in markets around the country, including desirable sunbelt states like Florida, Georgia, and Texas. Membership is 100% free and signing up takes less than five minutes. Click here to join!

Sometimes the real estate industry grabs you quickly, and sometimes it grabs you over time. For one California woman, it began with a job in the mortgage industry and slowly grew into much more than that. Joanne Mendoza was a mortgage lender in the 90's and 2000's. At some point she began working more with both buyers and lenders and started putting the real estate pieces together. She's now a real estate broker helping people find properties, and is also building an out-of-state portfolio of rental properties for herself. In this episode, she talks about the ups and downs of her real estate journey, how she's funding her deals, where she's investing, and how it is giving her financial freedom. Joanne has also published a new book called: "The Power of Real Estate Investing for Women: A Step-by-Step Guide to Investing, Buying, and Selling Real Estate." You'll find it on Amazon. To learn more about how you can find and purchase income properties, schedule a free consultation with one of our experienced investment counselors. You need to be a Real Wealth member but it's free to join and easy to sign up at: join.realwealth.com

The printing of trillions of dollars seems to be the new normal. But is it? And does it have to be paid back, and if so, how and by whom? And if it can't be repaid, then what? These are some of the questions nobody really wants to answer, except one guy, who's been asking this question for over a decade when quantitative easing became the way to avoid recessions. Peter Schiff is an economist, financial broker/dealer, author, frequent guest on national news, and host of the Peter Schiff Show Podcast. He is the Chief Economist & Global Strategist of Euro Pacific Capital, Chairman of SchiffGold, and Founder of Euro Pacific Asset Management and Euro Pacific Bank. And he's here with us in this episode. If you'd like to hear more about Kathy's thoughts on the housing market and where it's heading in 2021, watch her recent webinar at: www.realwealthshow.com/2021 Click here to join the network for free Link: https://europacificfunds.com/

It's a story of romance and financial freedom. Rachael Visconte and Patrick Julian both worked in the entertainment industry and met each other on-the-job in Los Angeles. When the pandemic hit, the feverish pace of their work world suddenly turned into a more tranquil work-from-home scenario. They had time to slow down and reflect on what they wanted out of life. It was during that time that they decided to build a real estate portfolio to secure their financial future. With the help of RealWealth and lots of their own investigating, they bought their first investment property last summer and there's no stopping them now. In this episode, they join both Kathy and Rich to talk about their goals for financial freedom, and their future plans to become parents as Rachael and Patrick Julian. For more information, go to: www.RealWealthShow.com Click here to join the network for free

Many investors work their way up from single-family rentals to larger multi-families, but in today's episode, you'll hear from someone who's taking the opposite approach. Richard Woolley launched his personal investing career with the purchase of two triplexes but decided that single-family homes were the way to go. Richard has a Bachelor of Science in Construction Management and has worked as VP of Preconstruction for a New York multi-family developer. Among his projects are a 40-story building in New York City and a 30-story building in nearby Westchester. He's now building a portfolio of single-family rentals and has some inspiring advice for new investors. www.RealWealthShow.com Click here to join the network for free

Building a portfolio of rental properties can be your ticket to financial freedom. But it also exposes you to risks and the need for asset protection. One way to do this is by transferring your investment properties into an LLC, or another kind of legal entity, like a land trust. That topic inspires many questions among new investors including where they should set up their LLCs. In this episode, we hear from tax and asset protection attorney, Clint Coons, who will answer that question and many more with easy to understand explanations. Among the topics he'll cover are the where, the why, and the how you might want to set up your LLC along with the difference between LLCs and other entities. You can schedule a free session with someone at Clint's firm or watch the replay of a recent webinar by Clint on our website. You need to be a Real Wealth member to access the webinar replay inside our investor portal, but joining is easy and free at www.realwealthshow.com. Audio Transcript: [music] [00:00:00] Announcer: You're listening to The Real Wealth Show with Kathy Fettke, the real estate investors resource. Kathy Fettke: A common question we get from our Real Wealth members is where should I set up my LLC for the best asset protection? Well, it's not that simple. I'm Kathy Fettke. Welcome to The Real Wealth Show. Today's guest is full of information on how to protect your assets from lawsuits. I learned so much from this interview, and I'm so glad I don't have to figure this stuff out on my own. We've got an expert here to do that for us. Clint, welcome back to The Real Wealth Show. Clint Coons: Thanks for having me. Kathy: I got an email recently from somebody saying is it illegal to have an entity in another state from where you live? Thinking that you're tricking the IRS into thinking that you live in that state if you have an entity there. What's your response to that? Clint: That's incorrect. Obviously, you can set up a business entity wherever you want. If you're going to own real estate in another state, take, for example, Florida, then you're legally required to have an LLC set up there or registered to do business there. For example, if you lived in California, and you had property in Florida, you take your California LLC, and you would register it in Florida to conduct business. It is doing business there. It doesn't matter where you sit, where you live, and where the entity is located. In the eyes of the IRS, it all flows back to you, and you're going to pay taxes on that money, regardless. They don't care where it's set up. Kathy: What you don't want to do is say open up a Nevada LLC, and say you live there when you really live in California or something like that. That would not be okay. Clint: That's a different strategy. That is basically tax avoidance where people will-- This was [00:02:00] really popular back in the early 2000s. There'll be a lot of advertising, "Hey, set up an entity in tax-free Nevada and pay zero tax." People would do that with the thinking that if they had an entity there, they wouldn't be subject to federal income tax or state income tax on their business that is derived from a particular state. What we found back in those times that you'd have a lot of Californians would set up Nevada entities, run an active business through their Nevada entity that's actually taking place in California and try to avoid all California state tax. Some people even think that they didn't have to pay federal tax. Those people ended up wearing orange jumpsuits out of them or else having a lot of fines when they were caught. Kathy: You don't want to lie about where you live. In our case, our business is in all kinds of states, but we live in California. No matter what, we got to pay California tax unless we moved. In that case, if we moved, you have to live at least more than six months of the year somewhere else. Is that right? Clint: Yes. If you wanted to change your domicile out of a particular state to a different state, then you would have to establish residency, and that would typically require that you register to vote there, you get a driver's license in that state, and more importantly, the way they track it as well as on utility bills. They would look at your utility bills that are in your name, and they would determine whether or not you actually reside in that property for six months if they wanted to be aggressive. I've seen this happen before with individuals who claim residency in Nevada when in reality, they were not residents there and the home state would request their utility bills for that time, the six months they said they lived there. They would find there was no water usage, no electricity usage. They're like, "You weren't really living there. You were just stating you are." That can get you in trouble. What you have to do is put your mother-in-law or somebody in your property during that time. Kathy: [00:04:00] I don't know if it's true, but I've heard that they can even see where your phone is. These days your phone can tell you where you are. I don't know if they go that far. Clint: No. It's one of the things that-- People go to so much trouble trying to avoid state taxes. I just don't think the stress is worth it at the end of the day. Pay your taxes, if you don't want to live in that state then move and just visit it every once in a while, or set up a secondary home. Kathy: Exactly. That's the thing is you can live somewhere else and just visit a lot, travel a lot. Anyway, let's explain, I know I've used the word entity and for some of our listeners, they might not really understand what that is. What am I talking about when I say entities? Clint: You're talking about a limited liability company, land trust, corporation. It's just something that is formed under state law or not that is used for a specific purpose. We talk about real estate a lot. We're looking at a title-holding entity, something that is going to hold your real estate for a few different purposes. One, it's typically in the asset protection. If anything happens with the property, you're not going to be personally liable. If you get sued individually, your property would be removed from that potential claim. That's per our judgment that would be entered against you. Then there's tax motivations as well that you're looking to control how your tax returns look from the real estate when it hits your 1040. There's lots of reasons why we focus on using entities for real estate investors. Kathy: Most investors, most real estate investors use LLCs. Why is that versus anything else, an S Corp, or a C Corp, or something like that? Clint: It really comes down to the tax benefits the LLC offers an individual who's a passive real estate investor. You want to have flexibility number one in order to move property [00:06:00] in and out and not be hit with a transfer tax, or basically, actually, income tax is what can happen when you have a C or an S Corp. Take the example of I have three properties in an S Corporation, and I decided that I want to pull two of them out and move them to a different company. Those properties have appreciated in value over the last 10 years, and there's $400,000 in gain there. Just by deeding that property out to myself, I'll have to pay tax on that built-in gain even though I didn't sell it. An LLC, you don't have that concern, because you're typically going to set them up to be either disregarded, which means the IRS just looks through it and you're considered to be the owner, or a partnership, which, again, it looks through, and you're going to pay the taxes on the income and you put that income on your 1040. It's treated a lot different than an S or a C Corp from being able to move assets in and out and not having to recognize tax on that built-in gain. That's why they tend to gravitate towards an LLC versus a Corp and more importantly, the asset protection. They're easy to set up. It doesn't require a lot of maintenance from you or as a corporation, you got to have these annual meetings, possibly even quarterly meetings. LLC, set it up, forget it, set a bank account, collect your rents inside of there, and you're off to the races. Kathy: Do the S Corp, C Corp, and LLC has the same asset protection? Clint: When you talk about S and C Corp, what you're really referring to is federal taxation unless you're thinking about the actual form of a corporation. From a tax standpoint, an LLC can be treated as a C or an S Corp. From the physical attributes of the entity, if I were to say set up an entity in Texas, and I chose to set up a traditional Corporation Inc versus a limited liability company, for surely that if something were to happen with the asset [00:08:00] held inside of there, let's say I had an LLC and a corporation, I put a property into each of them, if my Corporation was sued, I'm protected as a shareholder. If my LLC is sued, I'm protected as the member of the LLC. That's the distinction between the two. Owners in LLC are members, owners in corporations are shareholders. What's different is when you yourself, let's say you're driving down the street and you clip somebody that's on a bicycle, and the bicyclist sues you individually and they obtain a judgment against you for $300,000 for dental work and face reconstruction. What can they take in that judgment? What can they do with it? They can levy on any assets you hold in your own name. If you held that rental real estate in your own name, then they would just record the judgment in the county where the property is located. It just sits there; it grows its 10% rate of interest. When you sell, they get paid or you refinance, they get paid. If you didn't have any property in your own name, and all you had was a Texas LLC and a Texas Corporation, they have some other ways to recover against you. On your shares of your corporation, they can levy on them and take them because shares are not protected from creditors, whereas the LLC is a different animal. They could not levy on your LLC membership interest and take it from you and thereby owning your property like they couldn't with a corp. All they can do is put a charging order, which means that they're not entitled to anything unless you want to give them something. It's because of that outside protection that makes the LLC such a unique and favorite entity amongst a lot of real estate investors. Kathy: Wow. After all these years, I've never really heard it put that way, or maybe I have when you were teaching and I wasn't paying attention. Clint: Or maybe I didn't put it as succinctly when I was teaching. Kathy: Maybe. Let's say I buy some properties in Florida. What would be the best state to [00:10:00] hold the LLC in? Clint: Well, it really depends. What happens when you're buying properties, you have to look at the state itself and determine what is the best structure for that investment. You bring up Florida. It might be that if I was setting up a structure for a Florida investor, I would choose to use land trust rather than LLCs because land trusts in Florida provide protection from what we refer to as inside creditors, meaning your tenants. If something happens with the property and you have a Florida land trust, they can't sue you as the owner of the trust. They can only sue the trust. Now where the trust doesn't protect you is that if you get sued individually, they can take the trust and the property from you. For a Florida investor, I'm probably going to recommend if you have debt on the property, because now you've got to worry about doc stamps in Florida. Hey, let's set up some Florida land trust, transfer the property and it's exempt from the doc stamp in Florida. Then we got these Florida land trust there then have the Florida land trust owned by a separate LLC, maybe a Delaware series, LLC, and create separate cells for each of the land trust. If you do get sued, they can't take your land trust from you. If you were to flip that structure say look at Tennessee, then it's going to be different. Then I'm going to use a series LLC, in Tennessee when you're owning each of the cells, because they're, they have a franchise tax that you have to be aware of. You have to apply for the fonts exemption, it's set up in a very specific manner, so you don't run into a problem like a client I've started working with where a CPA structured them, and he was paying $45,000 a year in taxes that he didn't have to pay because the CPA, this client is from Florida didn't understand the way taxes worked in Tennessee. By just creating the structure, you can really screw it up for someone. It would depend on where you're owning the property, what type of structure we're going to use and that's why people get confused many times. They think, my buddy set up an LLC. [00:12:00] [inaudible 00:12:01] It depends. If you're in California, I might use a Wyoming statutory trust to avoid the franchise tax there and it'll be at 10 properties. I can save $8,000 a year. Again, it depends. Kathy: Don't try to do this on your own. Clint: Well, you could. You probably pay more in the long run. I always tell people, when somebody starts working with an attorney or even with Anderson, they see the entity set up as a cost and they don't look at it as an investment. I tell them, this is an investment into your property. You're protecting it. You're making sure it's set up the right way so you're not going to run into these problems down the road. If you get caught up on cost, you're going to be tripping over yourself and three years down the road when you're involved in that lawsuit and you're looking back and saying, "Wow, I wish I would have invested the $1,500 because now I'm staring down a judgment of $600,000 and I'm going to lose everything." That's when it comes back into perspective for a lot of individuals. Kathy: Now, at what point do you need that kind of Bulletproof proof type of asset protection? Let's just say you're buying your first property. You don't have a lot of savings in the bank or equity in your home. You don't make a lot of money. How much do you need at that point? Clint: You see, this is where I tend to disagree with a lot of professionals, when it comes to asset protection. Take two individuals, you and me. I have worked hard, saved up my down payment. Now, I have my first house. I have about $25,000 in equity in this property and I have a personal residence that has maybe $50,000 in equity and I got some money in savings. You on the other hand have a hundred properties. Most people are going to look at us and they're going to say, you need more protection than me because you have more to lose. [00:14:00] Granted, there's some truth to that. You have 100 properties, I only have one. I tend to look at it as follows. When it comes to protecting my assets, the new investor needs asset protection more than the experienced investor. It's counter-intuitive for so many people when I say that. They're like, "No, Kathy has so much more to risk than you Clint. You don't need protection there." The way I like to explain it as follows. I've got one or two properties. I'm going to tell you to set up one LLC per property. Whereas Kathy, I might tell you to put 5 properties per LLC, or maybe you want to do 10 properties per LLC. The reason why is that if something happens to me and I'm involved in a lawsuit and I have these two properties that I've saved for the last five years to get into those properties so they're going to produce cashflow for me in the future, is going to be my retirement. One lawsuit, what does it do to me? Wipes me out. Now I've lost everything. All the work and effort I've put in the last five years, I have zero cashflow coming in. Assume those two properties generated a combined income of $15,000 each on an annual basis. I just lost $30,000. You on the other hand, you set up your LLC where you put 10 properties per LLC so you have 10 limited liability companies, each generating the same amount of money. Each generating 150 K a year. Well, you lose one LLC with 10 properties, you just lost 150 grand, but you have nine of the other property still producing income for you. Yes, it sucks, but your lifestyle is not changing. You're still going to Hawaii. You're still doing the things that you like to do because that one lawsuit didn't wipe you out. Whereas the new investor that's worked so hard to finally get some purchasing power, finally grasp the concept of rental real estate. What it can do for you, they're back at square one or worse yet, they're behind because they have a judgment that's been recorded against them and they have to pay off before they're ever going to be [00:16:00] able to qualify for another loan. [unintelligible 00:16:04] with my own investing. I was more concerned about asset protection when I had 50 properties. Now that I have close to 200 properties, I do things differently because I don't have the same issues any longer. I can afford to lose 10 properties. It would suck, but it's not going to change my investing or my lifestyle at all. Maybe it's one less case of wine I buy on a monthly basis, but it ain't that bad. For the new investors, I would say, think of it in those terms. Kathy: Well, that's one of the reasons I love to listen to your advice is that you are a real estate investor yourself. You own a lot of properties. You talk a lot about asset protection and tell people you own properties so they know, that you probably have a high net worth and so you've got to be extra protected and you're a tax attorney. Is that right? Yes and a CPA? Clint: No. I have a personality [unintelligible 00:17:02]. Kathy: [laughs] Okay. What kind of personality would you need for that? Clint: In my experience, getting on something like this would probably take a Xanax or two to calm my nerves down and then you would have to drag all the information out of me. I like to talk too much. That's what I'm getting at. Kathy: All right. What are some of the typical questions that people ask at your live events and now I guess Zoom events? Clint: Everybody gets concerned when you set up an entity, for example, an LLC, that if they transfer their property into the LLC, that it's going to accelerate their mortgage and they can't do it because of the nuance sale clause. That's probably the number one question I receive. Vigil investors is pushback to putting properties into entities and so they forgo asset protection because there's this myth that if [00:18:00] you transfer real estate into an LLC, you've got a lender in the back room who's going to catch it and say, "Oh, you move property. You got to pay that mortgage off or we're going to foreclose." The reality is is that most people who perpetuate this myth or continue to perpetuate, it used to be concerned probably 15 years ago is that you have to look at the loans out there. Most investors are working with a broker to obtain a loan to buy a piece of property and those are always going to be, or 90% of the time, I would say, they're Freddie Fannie conforming loans. They're writing them so they can sell them to [unintelligible 00:18:34], that's what we mean by conforming. They're going through all the guidelines that [unintelligible 00:18:39] put out as if they were writing the loan themselves, underwriting. Now, when you use one of those types of products, you're allowed to transfer title into an LLC and it will not violate the due on sale clause. You can look at their servicing manuals. Both of them have it stated in there, black and white, as long as the member of the LLC is still the borrower or as long as the manager of the LLC is still the borrower, you're good to go. This notion that you can't transfer real estate into a limited liability company for fear that the lender is going to accelerate is just nonsense. On top of that, the only time it actually really comes up as if it was a personal residence, then you have to season it for a year before you can move it in so you have to live in it for a year, treat as your personal residence, because that was a different type of loan, but most people don't know the questions to ask and so they make these assumptions because of a lot of misinformation that permeates the internet, unfortunately. They don't put the right types of protection in place. Kathy: If you've lived in your primary for over a year you could transfer your primary into an LLC? Clint: No. Which probably it is because it's been bought up by them. You can transfer in after one year. That's the one exception you got to see. [00:20:00] The only other types of exceptions you're going to have is if you buy A property and then you're looking to do a cash-out refi. Then you have a six-month seasoning requirement on that before you can do a cash-out refi. Which is different than just doing a straight-up refi. I mean I always talk, not always. I've told people when I first got started investing I think it was maybe I had put down $5,000 for my first property. This was in Memphis. I funded it with a hard money loan where they did it not only the purchase but the rehab. They gave me all the money for it. Then after I bought it it was anticipated that there would be X amount of equity in there so I could go in and do a refi on that property, convert it into traditional loan, and cash out the underlying hard money lender. It took me three months and I got into this property. It was about $105,000 property at the time for a little under $5,000 if I recall. I did a few of those that way where I would use hard money to pay for the property and the rehab and then I would go in because I knew would have enough equity in the property afterwards to cash it out with the traditional loan. Those you don't have a seasoning requirement because I wasn't taking any cash out. If you understand how the way lending work there's a lot of opportunities for people. Kathy: Absolutely. Are you seeing those opportunities today with the [unintelligible 00:21:26] properties out there? Clint: I don't look for those anymore. Everything I do now is I buy for cash because we're at a point now in the things that we do in the markets that we're in. They're more low-income housing so I'm picking up homes for $15,000 and I'm putting in maybe 10-15 grand and then it's producing 500 bucks a month on average, $600 a month. Those types of deals you're not getting a loan on. Kathy: You're still finding those? Clint: Yes, more than I can handle. Kathy: Wow, good for you. Clint: I can't tell you where are though. Kathy: No. [00:22:00] I was going to say-- Clint: I can tell you that. We build up a pretty big network in this area. It's in North Carolina, we'll give you that. Those types of deals a problem that you're going to-- I think you could still find those deals that I was just referring to because the market is appreciating. When I started buying those deals in Tennessee that was back in 2005. You had a strong market. What worked for me is that you had appreciation. You knew when you got done with this rehab, you were typically going to have 20%-30% equity in that property. That's what allowed me to do that. When you're in those types of market, in that type of real estate market, I think you can still do those deals. They're still out there if you can find them. Kathy: That's great. Yes, if you can find them. All right. A common question we get and that we've discussed on this show is the single-member LLC and if that still offers the same kind of protection? Clint: It depends on the state. Everything comes down to state law. In some states such as Florida, they do not provide protection for single-member limited liability companies. When you say protection, it has nothing to do with the LLC being sued. If you have a tenant in the property and the tenant is injured and they sue, the LLC is going to protect you. This notion that if it's a single-member LLC it doesn't offer asset protection. Only pertains to this what we call a charging order that is if you're sued individually, they can take your limited liability company from you. A place like Colorado or as I used Florida, they do not protect the LLC from your personal creditors whereas if you flipped it, you put it in Texas and you're one owner in a limited liability company and you're sued individually and they get a judgment against you, in the example that I used earlier, they couldn't take it there because Texas law prohibits a creditor from taking [00:24:00] a single member's interest in a limited liability company. Kathy: Wow. Again, don't try this on your own unless you've spent-- How many years have you been studying this? [laughter] Clint: Oh my gosh, you're going to make me feel old now. I got to back into it. It's probably 25 years. Kathy: It's just amazing how every state is different. If you owned properties in Texas, would you want to just get a Texas LLC? Clint: If I had properties in Texas, which I do, I have a bunch in Houston, I would use a texas series limited liability company and I would set up a separate sale for each of those properties. The reason I would do this is that for each sale that you set up it's treated like a separate limited liability company, but you don't have to file it. You escape all of the additional filing fees and legal costs associated with setting up multiple LLCs and you get the same baked-in protection for those deals. That's the structure I would recommend for a texas investor that's buying single-family homes. Again, it's also going to be based on how you're buying. If you're buying onesies and twosies, yes, that's the way it's going to work, but if you're buying in bulk and you're using may be institutional financing then it's going to be a different structure on how you're going to go about putting that one together. Kathy: It sounds there isn't really one answer to my next question which is how many properties should you have in one LLC? [laughs] Clint: It depends on-- All right. I always look to the finance inside of it. If you're dealing with an institutional lender and you're going to be packaging up, say it's a 10 pack or 20 pack of properties, you're looking at one limited liability company for all those. They're not going to allow you to separate them out. Many times what I'll do is I'll start in Delaware and then I'll foreign file it in the state where the property is being acquired because those [00:26:00] types of lenders prefer Delaware LLCs. They think that they have more protection for the lender from a fiduciary standpoint. If you're not and you're just a new investor, you're buying single-family homes here and there. If it was in Texas I would set up one Texas LLC. If you want anonymity I might have a second Wyoming LLC to own that Texas LLC so people don't associate the company back to you. Then I would just create sales for each of my properties. I would recommend when you're starting out I would do one property per LLC because if something goes wrong like we were talking about and you took the approach, I'm going to save a little money because of the cost. I'm going to put four properties in one LLC. That's fine. The likelihood of being sued is probably pretty small but if you're the one that gets sued, you'll be the next story at my future event when you call me up and say, "Man, I wish I would have followed your advice. I lost all four of my properties and I'm having to start over. My income just dropped by $37,000 a year because of that mistake." Focus on the cash flow as well. It's not only about equity which a lot of people-- I used to make that mistake when I first started practicing and buying property. I would focus on the equity, not on the cash flow. For many of us, we buy for cash. Kathy: Which again leads to my next question. We've had Real Wealth Network almost 18 years now, speaking of aging and feeling it. I don't know if I've heard of one of our members. We have 54,000 now. I don't think I've heard of one single lawsuit. Which is great news and yet, here I live in California where we have fires and it's very strange how the fires jump from house to house. The house that we own, the fire seem to just jump over it. It's been there [00:28:00] 100 years and it's never burned but the house next to it does. We still have fire insurance and it's expensive in California. It's just an interesting question of the chances of getting sued are pretty small but you don't want to be that one especially with the more properties you have I guess the more your chances increase. Clint: Correct. All right. I've never been sued on my properties. I use the same protection I tell my clients they should set up. I've had some scares. I had a tree fall through a house during a wind storm and narrowly missed the occupant right through the master bedroom. Had it been another four feet one way it would have killed the individual. That could have been a horrendous lawsuit. It potentially happens. I run into people all the time who have stories where they've lost everything and they're 55 years old and they're starting over. The reason why I set up LLCs is for the same reason you buy fire insurance although your houses never burn because that one time there's no going back. You can't put that hose back in the barn at that point and there's nothing we can do for you. The other benefit of using the limited liability companies and structuring the right way which transcends just asset protection is the fact that real estate investing is a business. I tell individuals LLCs can help you do more if you understand that and you set them up the right way so your tax returns appeal to lenders, underwriters. A lot of people don't understand that other side of it, the ability to borrow that you can really massage a tax return so it is more appealing to an underwriter when they're going through and they're trying to determine whether or not you qualify for this loan. I see a lot of investors they'll have their properties, they'll show up in their 10-40 scheduling page one and then they get up to this point where they're struggling [00:30:00] with their debt to income ratios and trying to close on that next deal. They're having difficulty. They're looking at the lender and they're seeing what the lender is doing like, "This is BS. I make more money than you're giving me credit for." Again, because they're Freddie, Mannie typically conforming loans they have to put you through an underwriting procedure that limits how much of your rental income they can count. If you change your tax return and you use entities in a different manner, you can get 100% of them. It's amazing. All you have to do is put the information in a different box on your return because the entities allow you to do this and it then gives credit for 100% of your income. Kathy: Once again. Clint: I just found that from working with underwriters. We used to have our own mortgage business I set up back in 2002. It was just little tricks you started learning from doing it. Kathy: Oh, I didn't realize that. How hard is it to get a loan? Let's say you own 10 properties within an LLC, how difficult is it to get commercial financing for that? Clint: I don't think it's going to be difficult if you can find the right lender. We have clients that do it all the time so you're going to cross-collateralize all those assets at that point in time. The best thing to do in those situations is work with a community bank and get them to take that loan on. Then, when you close one of the conversations you should have is I would rather not have 10 assets in one entity. I'd like to spread those out amongst other LLCs even though you cross-collateralize them all. You'll find that a community lender many times is going to be open to that. I just did one for a client that has a bunch of property in Maine. He was refinancing 15 properties that were formerly in one LLC. Now, we've broken them up and the lender accepted it on the refi even though we cross-collateralized. [00:32:00] It's good. The thing is too when you're negotiating those types of loans you want to make sure that you always seek the ability to substitute assets because if you're going down that road you'll find in many of the loan docs that the lender will require as you sell properties to pay back down the loan. You want to write a substitution which gives you the ability then to escrow the funds, to take those funds and use them to acquire replacement property without having to pay the loan off. That's just an aside. I went down a little rabbit hole there but if you're going to do it you should at least know that. That's an option you should be looking for that in the loan docs. Write a substitution. Kathy: There are so many more questions I have but I know that you do ongoing education that's very in-depth and you also have consultants. I believe if people just click the link in the show notes they can get a free consultation. Is that right? Clint: Yes, we'll definitely set up a free strategy session for them. Look at their individual situation and then because they come through Real Network we have some special offers for you as well. Kathy: Okay, great. Again, that link will be in our show notes. All right, Clint. Well, thank you so much for being with us here today on The Real Wealth Show. Wishing you a happy 2021. Clint: Thank you. Likewise. Kathy: Thank you for joining me here on The Real Wealth Show. You can go to realwealthshow.com for more information. Announcer: The views and opinions expressed in this Podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com. [00:33:51] [END OF AUDIO]