N E W S

F o r S e l f D i r e c t i n g

from Chris McClatchey

N E W S L E T T E R F O RM I D - A M E R I C A A S S O C I A T I O N O FR E A L E S T A T E I N V E S T O R S

SEPTEMBER 2016

Legislative UpdateCalendar of EventsMarket UpdateBusiness Directory

from Jeff Watson

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basic health and safety items. If a unit fails,the landlord will be required to resolve anydeficiencies and have the unit reinspected.

Any landlord with a unit that has alreadybeen inspected in the past 12 months for anyreason may submit that inspection report.

The proposed program would begin inJanuary 2017 with 2-year initial roll out withhalf the units inspected each year until allhave been inspected, then they would needto have them reinspected to renew theirbusiness license every 2 years.

Other metro cities are watching how this isimplementing and considering this programfor their city.

You can read the full proposed ordinaceat http://agendas.indepmo.org/AttachmentViewer.ashxAttachmentID=17650&ItemID=9117

LEGISLATIVE UPDATE SEPTEMBER 2016

"Rental Ready"Proposed forIndependenceMissouri

Currently in Independence Missouri andmany other metro cities, interior inspectionsare complaint-driven. After being on thecampaign trail, council members JohnPerkins and tom Van Camp heard manycitizen concerns about rental conditions. They decided to do something about it.

The solutionis "Rental Ready." Thisproposed program would require rental unitsto be inspected once every two years by aqualified inspector from organizations suchas teh American Society of Home Inspectorsor National Association of Home Inspectorsor one with similar qualifications.

The qualified inspectors would be requiredto submit the approved inspection forms tothe City showing that the unit passed the

C A L L T OA C T I O N

On Tuesday September 6th, 2016 -Landlords from Independence alongwith Phillip Thatcher and StephenSummers of Landlords of EasternJackson County will be meeting inthe parking lot at City Hall about5:30 to coordinate their effortbefore attending the City CouncilMeeting on this subject at 6:00.

Contact: Landlords-of-EJC.com

R E I N V E S TM EN T N EWS | 3

REAL ESTATE 101THE L.O.A.N. PRINCIPLE

By Chris McClatchey

One of the hardest things aboutgetting started in real estate isgetting started. There is somuch information to absorb. Thereare so many “experts” ready to teachyou their method. There are so manydifferent types of deals and so manyways to structure them. Sometimesthere is so much information, it feelsas if you are trying to take a drink ofwater from a fire hose. Don’t worry.It does get easier. It gets easier onceyou understand one thing. In order tounderstand what that one thingis, ask yourself this question : “Whatdo you want real estate to do foryou?” Start with what you wantand that will lead you to the nichethat works for you.

4 | MAR E I .ORG

the wrong kind of leads is adistraction. An example of thiscomes from the type of investingthat I do. I am a long-term holdinvestor. Meaning, I buy propertiesfor their cash flow. I also specialize increative financing and sellerfinancing. So the leads I want togenerate have a set of specificcriteria. In other words, I excludeforeclosures, short sales andREOs. Why? Because, those leadsrequire all cash to purchase andtherefore are outside of my portfolioobjectives. Remember, only generate.

Once you have decided your “goal”for real estate, then it’s time to put a“plan” in place. That plan is what I callthe L.O.A.N. Principle. If you do thesefour things, you will be successful.Don’t get caught up in all of thedistractions. Don’t get caught up inanything that takes your focus off ofthese four things. If you do, then youwill get side tracked. If you keep yourfocus and do these four things, thesky’s the limit.

L = Leads: But not just any Leads. Theleads you generate have to beconsistent with the types of deals youwant to do. They have to be leadsthat get you closer to your portfolioobjective. In other words, generating

and fine tune. Yes, you can read

books to learn some of these

techniques, however, I believe the best

way to learn negotiation skills is

to put them into action. The way we

learn what to say in different situations

is by making offers and communicating

with the sellers and real estate agents.

Action is by far the most effective way

to learn. Remember, sellers will tell you

what is important to them by their

counter-offers. They tell you by the

items they are changing. So use this

information to get the deal you want,

while at the same time addressing what

is importation to them.

get themselves into bad deals. The areawhere most investors get themselves intotrouble is in the analysis stage. Most newinvestors underestimate expenses andoverestimate income. Don’t make thismistake. Make sure you know how toanalyze the deal. Just as important is tomake sure you are analyzing it according toyour portfolio objective. Meaning, does thisdeal accomplish what you want it toaccomplish? Does this deal get you closer toyour goals? If so, do the deal. If it feels likeyou are stretching the numbers to make itwork, stop. Don’t do the deal. Rememberthis, sometimes the best deals are the oneswe don’t do.

N = Negotiate: Negotiation is a technique.There is an art to it. Don’t worry, it isn’tsomething we are born with. It is a learnedtechnique. It is something we can develop

R E I N V E S TM EN T N EWS | 5

leads that help you attain your goals.

O = Offers: Make offers, make offers, makeoffers. That is what most “experts” will tellyou. And while I agree that you have to makeoffers, I adhere to the principle of only makingoffers on properties that meet my goals. Inother words, I make offers that get me closerto my objectives. I make offers on propertiesthat I want in my portfolio. The offers youmake can either get you closer to your goalsor they can take you off track. A few timesduring my investment career I attempted todo deals that were outside of my objective. Ilost a lot of money. Make offers, make offers,make offers, but only on deals that makesense for you.

A = Analyze: As a Coach, I believe it is my jobto not only teach how to do deals the rightway, it is also my job to make sure they don’t

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Saturday, September 17th 8pm to 5mHoliday Inn, Overland Park : Lunch IncludedEarly Registration Pricing: Member Price $49

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WithChrisMcClatchey

GETTING STARTED

Hosted by Brian & Michelle WinberryWednesday Mornings at 9 amLucky Brewgrill5401 Johnson Drive, Mission

Chis McClatchey has developed a systematic approach to

investing which involves his "Power of Zero" and his L.OAN

Process. He is going to teach both at the September 13th MAREI

Meeting. !Be sure to RSVP Online and join us at the Holiday Inn

at 8787 Reeder Road from 6pm to 9pm. FREE for Members and

1st Time Guests. All others pay $25 at the door or $15 when they

pre-regsiter at MAREI.org.

THE L.O.A.N. PROCESS& THE POWER OF ZERO

MEETING

WINVESTORS

FROM OTHER GROUPS >

There are many different opportunities to growwealth not only with your Self Directed IRA, butalso with a 401k, a Health Savings Account as wellas Coverdale Education Savings Accounts.

We are devoting the month of October to learningmore about investments we can use to grow theseaccounts.

Please mark your clanedar for Tuesday October 11thand Saturday October 22nd. We may add a fewmore webinar events, so watch the calendar ofevents.

BUILDING WEALTH WITH YOUR IRA

MARE I .ORG /CA L ENDAR

THE CALENDAR

Real Estate investing is supposed to lead to extra cash, provide you with extra

time and create massive amounts of wealth, so you can be free from the

financial pressures of everyday life. . . .The challenge is you don’t have any

leads…. you’re not doing any deals… and you’re frustrated with all of the

competition from other investors. There is a Better Way and Chris

McClatchey will be teaching it at the TERMS workshop on Saturday

September 17th. See full day workshop info on page 5.

TERMS WITH CHRIS

WORKSHOP

See full day workshop

page 5

OCTOBER

Hosted by Jim & Beth Kasper1st Saturday of the MonthNetworking Coffee / Denny's9001 Shawnee Mission Pkwy, Mission

1ST SATURDAYS

Hosted by Crossroads InvestmentLending & JD AsbellWhite Board Discussion7759 Shawnee Mission Pkwy, OPKS

1ST TUESDAYS

Landlord Inc of KCK3rd Tuesday of the MonthLoan Star Steak House1501 Village West, KCK

LANDLORDS

Jackson County REI GroupLast Wednesday of the Month4 West Monroe StreetBuckner, Missouri

JACKSON CO REI

Regarding Home Depot Rebates: "I got mine in too. A little over a thousand on a gift card and a little over2500 in a rebate check." Note the $1000 was from the MAREI member 2% Rebate!

MARKET UPDTATE june 2016

4,186homes sold

4.0% Increase over 2015

57average days on

market16.2% Decrease from 2015

97.7% of asking price1.7% Increase over 2015

$16k$16,822 average

sale priceincrease fromsame time lastyear (7.9%)

3,909pending sales9.4% Increase over 2015

8,582houses for sale27.8% decrease2.8 month supply

average: $228,951median: $192,000

Sales and prices have been going up in most areas, while the number of homes for sale andtotal months' supply of inventory have been going down. Meanwhile, many sellers have beengetting a higher percentage of their asking price, and supply continues to struggle to meetdemand. The message may be repetitive, but it is largely positive.

The national unemployment rate recently dropped 0.3 percent to 4.7 percent, but some statesfelt more of a pinch in their own figures. Similarly, the low inventory situation is showing signs ofstrain in markets where there are few homes for purchase. With an interest rate increase still inthe cards this year, combined with the American political landscape and global economicevents, a cooldown could occur by winter. Presently, however, summery growth prevails asmany locales are reaching near-record prices not seen in more than a decade.

For further detail see http://www.kcrar.com/statistics

Self Directed IRAArticle from Jeff Watson& National REIA's RE Journal

During a recent speaking engagement infront of a large REIA in a Midwestern state, Iasked the audience how many of them hadset up a self-directed retirement account. Approximately 85% of the room raised theirhands. After the presentation, I discussed thefact with a friend of mine who has been doingself-directed investing since the late 1970s. He made the comment that when thatquestions was asked just ten years ago, onlyfive to ten hands would be raised in a room ofover a hundred people. Clearly theawareness of self-directed investing isgrowing.

With that in mind I would like to share withyou over the course of two articles what I

consider to be the top ten recommendations forself-directed retirement account investors.

1. If you do not understand the deal, do not do it!

This is one of the fundamental rules in all types ofinvesting, whether inside or outside a retirementaccount. Understanding the deal means morethan just being able to say you understand it. Itmeans being able to explain it in a way that makesthe complex sound simple. You should be able toexplain the deal to an 8-year-old child. When aperson is able to explain something complex in away that even an 8-year-old child canunderstand, then you know they trulyunderstand what they are doing. I have seen toomany investors who made investments with aself-directed retirement

8 | MAR E I .ORG

account and later regretted it because theperson with whom they invested or towhom they lent money was far moresophisticated than they were, and they feltlike they had been taken advantage of. Askme how I know!

Allow me to give you an example of a simpleexplanation. I am going to loan $50,000from my retirement account to Fred. Fredis going to use that money and other moneyto buy a house, fix it up, and resell it. My loato Fred will be secured by a mortgageagainst the house he is buying and fixing. There, in three simple sentences you canexplain a deal that many people could takeparagraphs to cover.

INVESTING

Department of Labor.

5. Remember that it is a retirement account,and you need to treat it as such by doinglonger-term, cash-flow-producing deals.

Many times an investor gets trapped in what Icall “yield disease.” They are looking for a highrate of return and are willing to do short-termdeals (such as hard money lending) in order toachieve those rates of return. While 3 pointsand 15% might sound impressive for a 6-monthperiod of time, that deal pales in comparison toan investment that may last for four yearsconsistently earning a 12% rate of return. Sincethe goal is to amass a good-sized retirementaccount, you need to work toward that goal. My suggestion is that you do it by focusing onlonger-term deals. Consistency is important,because slow and steady wins the race.

Another benefit of doing longer term deals isthat it is much easier to do the necessary duediligence and underwriting for one longer-termdeal that for a series of shorter-term deals. There are fewer demands on your time andfewer opportunities to make mistakes.

The remaining five recommendations for self-directed retirement accountholders will beavailable in next month’s publication.

We all think we understand the rules; butwhen we are in a hurry and get into a dealwith a lot of moving parts, we often don’t takethe time to analyze the transaction in light ofall the prohibited transaction rules,particularly rules regarding not providing aservice to your account, as well as direct andindirect benefit rules. Many retirementaccount investors are unable to distinguishbetween what they believe is a service and/or managing their investment, let aloneexplain whether they are using theirretirement account in a way that eitherdirectly or indirectly benefits them now or inthe near future.

It is prudent to at do at least an annual reviewof the rules regarding prohibited transactionsand disqualified persons so you can keepcurrent as to what you can do with your self-directed retirement account investments. There are many good resources fromcustodians, administrators and trustees,lawyers, and even some reasonably-pricedbooks on the internet. These will give you abasic understanding of most of the rules forprohibited transactions and investments, anddisqualified persons. If you are a fact junkielike I am, or if you suffer from chronicinsomnia, you may want to take the time tocarefully read26 U.S.C. 4975, as well as thePlan Asset Rules promulgated by the

R E I N V E S TM EN T N EWS | 9

2. Always fund your accounts every year.

Many real estate investors are struggling withongoing monthly cash-flow needs, and theyforget to discipline themselves to set up anautomatic or systematic program for fundingtheir retirement accounts, whether they areRoth IRAs, 401(k)s, HSAs or CESAs. Pick thetwo or three accounts that really matter to youand determine what your monthly budgetneeds to have to be in order to be able to putapproximately $6,000 per year into thoseaccounts. At a minimum, you should be fundingapproximately $6,000 into your IRA< yourspouse’s IRA, and your HAS. If you do not fundyour accounts, you will have very little to workwith for investing purposes. The discipline ofconsistently funding your accounts creates the“seed” you will plant it.

3. Know the things in which you cannot invest.

The list of things in which you cannot invest witha self-directed retirement account is verysimple: collectibles, shares of sub-Scorporations, and life insurance contracts. Onceyou understand what you cannot invest in, itmeans everything else is possible. The sametheory also applies to the next rule.

4. Know the prohibited transaction rules, orhire someone who does.

SELF DIRECT

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1 0 | MAR E I .ORG

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R E I N V E S TM EN T N EWS | 1 1

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