The modern-day picture of a successful career includes financial stability and less sleep. To secure financial freedom, one must sacrifice family, personal comforts, and mental health to the widely-accepted stressors of today’s fast-paced workforce. Sadly, the exclusion of restful sleep in our image of success does more harm than good as sleep-deprivation may also decrease life expectancy by 15%, shaving off almost 12 years from the standard life expectancy of 78 years. As we become busier with our daily goals, sleep tends to be tossed to the wayside, yet what good is wealth without health?
As an international investment corporation, we acknowledge and encourage wellness as the primary investment our members should make, starting with sleep. Affecting 30% of the American population, sleep-loss impacts our financial stability as much as economic and political shifts by crumbling our bodies from inside out. Not only does it maximize stressors, but sleep-loss has been linked to several illnesses, including a 70% drop in natural killer cells – the same cells responsible for preventing cancer. With an overwhelming amount of research begging for better sleep patterns, healthy investment options are crucial more than ever.
Close Your Eyes and Open Your Mind to the Key to Wealth.
In the face of chaotic trading floors, fluctuating markets, and complicated investment plans, it may seem hard to equate financial investments with rest. Contrary to cultural norms, long-time real-estate investor, Adiel Gorel presents flexible financial plans built with manageable low-risk solutions, such as single-family rental homes and the amazing 30-year fixed rate loan, all more conducive to improved health and wealth with minimal:
- Financial strain from rental upkeep
- Time wasted in closely monitoring multiple assets in different locations
- Sleep loss due to long work hours dedicated for far-off retirement plans
Created for inexperienced investors with little time to spare, investment strategies such as Remote-Controlled Retirement Riches can assist in creating prolific single-family home portfolios using multiple real-estate markets all with the support of tested strategies and experts.
Sleep-deprivation does not –and should not– equal success. Discover a new way to invest and rest with Adiel in our next broadcasting, August 10th, at 10:30 am on KQED Plus and create your wealth plan without sacrificing the core pillars of your health.
For more information on wellness and financial investments, visit our Membership Area to explore related podcasts and webinars designed to empower the decisions you make now and in the future.
On September 29th, 2008, the United States witnessed a financial disaster that would eventually overtake the globe. The Dow Jones Industrial Average fell 777.68 points after Congress refused the bank bailout bill. Seemingly overnight, the nation’s sense of security was swept off its feet. By 2009, 861,664 families lost their homes and foreclosing rates increased by 225% in two years. Ten years later, the effects have slowly dwindled away, but the fear persists as noted by the 23% of young prospective homeowners who see homeownership as a “bigger financial risk”, despite the market’s correction.
Eliminating real-estate investment fears, president of the International Capital Group, Adiel Gorel shares the minimum-risk/maximum-return solution: Remote Control Retirement Riches, the investment strategy designed for even the most inexperienced investor. As millions of Americans turn away from retirement plans and Social Security, find a simple solution in our upcoming broadcast discussing Single-Family Rental Homes.
Make an Investment with Confidence – not Fear
Owning multiple homes post-2008 may seem counterintuitive to financial stability. However, for the past 30 years, Gorel has developed and shared the Single-Family Rental Homes investment plan, assisting busy and inexperienced families to plan for their future without compromising the present. Explore a wealth-building strategy that has previously led to:
- Paid-Off College Tuitions
- Paid-Off Mortgages
- Paid-Off Home Renovations
- Healthcare Emergency Funds
- Investor’s Tax Benefits
Join Adiel Gorel in our upcoming broadcast, July 25 at 1:00 pm PST on KQED, to discover how to create multimillion-dollar rental single-family home portfolios using real-estate markets throughout the U.S. Learn about helpful loans and investment tips that support retirement riches regardless an investor’s age. Also, since real-estate investments involve several markets nationwide, you can implement methods at your own pace, maximizing your control over your investments while reaping benefits with minimal time constraints.
Erase your own investments fears and start planning the future with confidence. Follow us on KQED on the dates listed below to learn more at our interactive seminar. Visit our Membership Area for more detailed information and insights into becoming a home investor without becoming a full-time real estate mogul or hired landlord.
- KQED Plus: Sat, Jul 13, 2019 — 3:00pm
- KQED 9: Thu, Jul 25, 2019 — 1:00pm
- KQED Plus: Thu, Jul 25, 2019 — 10:30pm
- KQED Plus: Fri, Jul 26, 2019 — 4:30am
- KQED Plus: Sat, Aug 10, 2019 — 10:30am
A few times a week I talk to investors planning on putting a large down payment on the purchase of a single-family rental home. The goal is to have a better “cash flow”. It may sound logical – the greater the down payment, the smaller the loan, and hence the monthly payments. However, the foundational piece of buying rental homes in the United States is the “gift” called “the 30-year fixed rate loan”. This loan sounds like a miracle to most foreigners, since neither the monthly payment nor the mortgage balance EVER keeps up with the cost of living around the world, while everything else does.
The magical 30-year fixed rate loan
The 30-year fixed-rate loan is at the heart of life transformation for investors when the homes are held for 10 years or more (preferably over 15). The loan keeps getting eroded by inflation (or CPI– the cost of living), while the home, rent, and everything else keeps requiring more dollars to buy (hence in dollars, their value goes up – even without intrinsic appreciation). The 30-year fixed rate loan starts looking quite puny after 12, 14, 16 years. It may be years before it is paid off, but since it never keeps up with the cost of living, inflation hammers the real value of the loan.
These loans are a great financial gift, with future-changing potential. Why, then, would you want to make the gift smaller? Especially at today’s low rates? The answer is, you don’t. A larger down payment will mean the magical loan will be smaller.
May be wise not to exceed 20% down payment
This is not fully utilizing the power of the fixed-rate loan, and it means the borrower has expended more of their scarcest resource: cash! Even very wealthy people, who can afford to put down a large down payment or buy for cash, choose to put down less money. They do this to leverage their cash with the 30-year fixed-rate loan.
I think that in normal cases, a 20% down payment should not be exceeded. The small additional cash flow due to having a smaller loan is insignificant at the present time. Right now, your main “cash flow” should come from your own earnings (salary). It is later in life during retirement that the rental homes can replace your income.
In cases of big 1031 exchanges, with not enough properties to identify, or in cases of not being able to get the FNMA loan anymore, then larger down payments are merited and that is a different blog post. I still think the down payments should be less, rather than more, in any circumstance. Currently, in our Membership area on our website, we have podcasts and a webinar that discuss loans and cash flow in depth. You can learn more about it at icgre.com/members
At the end of March 2019, it became known that the White House is pressuring the Fed to lower its benchmark federal-funds rate by half a percentage point, according to an article in the Wall Street Journal by Nick Timiraos and Kate Davidson. There has been no movement yet.
We now see homeowner rates for mortgages at the 4.1% range; some of the lowest in history. If the White House succeeds, the benchmark federal-funds will not translate to lower mortgage rates right away, but mortgage rates will inevitably drop. Possibly even lower than at any time during the past decade. It is a waiting game and time will tell over the coming months.
This would likely create more buyers, push prices higher in most markets, and create an upward push in strong economy cities (and even not-so-strong).
The magical 30-year fixed rate loan
Since we are aware of the uniquely special anomaly called the 30-year fixed rate loan, (we are the only country that has this type of loan) where neither the monthly PI (principal and interest) payment (not the loan balance) keep up with inflation and the super low rate will be locked for 30 years, we are fully protected.
If you qualify for the best loan, under the FNMA (Fannie Mae, officially the Federal National Mortgage Association, or FNMA is a government-sponsored enterprise (GSE)—that is, a publicly-traded company which operates under Congressional charter—that serves to stimulate homeownership and expand the liquidity of mortgage money by creating a secondary market.) guidelines this is a great time to buy where the numbers make sense. Taking action is important.
Many are not aware that they can purchase up to 10 homes with this type of loan. Married couples (if they qualify separately) can purchase 20. This is already a great time to lock these rates in with the magical 30-year fixed rate loan. If the White House succeeds in lowering rates, the terms will become more attractive.
In my experience, I have seen people look back and lament over not making use of these great circumstances to build a solid portfolio for their future. I hope you are not one of them.
This summer in our Membership area we will have a couple of podcasts where I will talk about this solo and in interviews with experts. I will also be talking about the 30-year fixed rate loan in detail in my show produced for public television called “Remote Control Retirement Riches with Adiel Gorel” that will be airing over the next several days across the country. Take a look at our website here for details and to check for showtimes in your area.
Here is a recent video on the show currently posted on my YouTube channel: https://youtu.be/8eiUYcsOPiQ
In a podcast I recorded recently, I gave my take on the question I get asked almost daily: “Before I start buying investment homes, should I create an LLC?” I begin by stating that this is a legal question and should be posed to a lawyer.
The 30-Year Fixed Rate Loan
As a non-lawyer, I point out some issues: We talk about the benefits of getting the fixed-rate 30-year loans. These loans are referred to as “FNMA loans” ( since they follow the FNMA – Federal National Mortgage Association guidelines). The FNMA loans will not be given to a new LLC. They will be given to an individual with income, a credit score, etc. Thus if you create a new LLC and buy the property in the name of the LLC, you will likely be giving up on one of the most powerful pillars of single-family rental investments: the 30-year fixed-rate loan.
Also, again, speaking as a non-lawyer (always fact check with a lawyer), an LLC has protective qualities only if it adheres to being a completely separate entity from you. It needs its own bank account, checks, (checkbook) books (bookkeeping or software like Quickbooks), etc. If there is a shortage in the LLC, you cannot just transfer money to it. That would be commingling funds and may destroy any protective qualities the LLC might have had.
In addition, lawyers have been telling me that court cases indicate more and more that for meaningful protection, you need to have a multi-member LLC and not just a single member one.
A single-member LLC is liked because it is a “pass-through” entity. That means the financials of the LLC flow through to the owner’s taxes and no separate tax return is needed for the LLC. However, a multi-member LLC needs its own separate tax return, K-1’s issued to the various members (and who is that other member, by the way?). That means more costly accounting fees and time spent.
In addition, some states require (besides a tax return), a yearly fee. California, for example, charges $800 per year per LLC.
I also mention that when you buy a home for $180,000 and put 20% down, you have a loan of $144,000. If a lawyer considered suing you and looked at this home, it would be unattractive – since the lawyer may not be a real estate professional, and he or she would assume that selling a $180,000 that has a $144,000 loan on it, will yield virtually no money after commissions, expenses, and perhaps selling quickly (it is not always an ideal time to sell). Thus the very existence of the mortgage is already a good protective measure.
Knowledgeable lawyers I know recommend using insurance as the first line of defense. Get good liability insurance on the home, and get umbrella insurance to cover up to your entire net worth.
Recently, I interviewed one of the best lawyers I have met on this subject, Brett Lytle, partner at McDowall Cotter out of the San Francisco Bay Area. Brett is also one of our expert guest speakers at our quarterly Expo once or twice a year. The podcast interview can be found in the Member’s area on our website: www.icgre.com/members
In a Fortune Magazine article by Chris Morris, published in February, it is reported that in January 2019, there was more inventory available and houses sat on the market about a week longer than in January 2018.
As of January, there was an available inventory of 1.59 million homes overall, versus 1.53 million in December 2018. Of course, the article is lacking by treating the entire country as one monolithic real estate market. Needless to say, there are hundreds of markets, and they don’t always perform in lockstep.
Nevertheless, there is a subtle shift, even in mentality, that is more favorable to buyers as opposed to sellers, who until recently reigned supreme. Since we are primarily buyers (and then we hold for the long term), a buyer’s market is a positive for us.
It is interesting to note, and one of the reasons I am posting this blog based on an article several weeks old is that while in January 2019 sales were flat, in February 2019 sales surged up, but then dropped only slightly. This is likely to continue to lower rates and sellers having to adjust expectations. Overall, we can see that while there is a shift towards buyers in many markets, the market is still hovering near a relatively stable point. With the low-interest rates and more friendly sellers, this becomes a positive for the investor.
We like to buy brand-new homes. Clearly, the sellers for us are builders. Some builders don’t want to sell to investors. Our market teams successfully convince the builders that it pays to work with our investors, as they get good volume from us. As the mood changes, these very builders may become more receptive to working with buyers, and perhaps even offer more incentives.
As we head into spring, there is a saying, “…spring is in the air.” And that is not the only thing being felt in the air. There seems to be a persistent notion that the “real estate market” has been going up for too long and is due for a correction. People also point out that the last big recession started in 2008, and perhaps the “cycle” is indicating that the new one may be upon us.
Of course, there really is no “real estate market” in the United States. There is the Phoenix market, the Dallas market, the Kansas City market, and the markets in every other metro area, such as Los Angeles, San Francisco, and so on. Not every local real estate market behaves in the same way others.
All markets do not experience a boom
Even during the major boom of 2004 to 2006, not all markets went through the boom. Some entire states “sat out” that of that one. Similarly during the big recession, between 2008 and 2011, not all markets tanked. In fact, most of the markets that tanked were the ones which had boomed before.
Some states did not move down very much, even during the recession. This is an important point. If the San Francisco Bay Area (for example) does go down and corrects for its fast rise over the past few years, it is not “an automatic” that affordable markets like the Sun Belt states, (like the markets in which we invest) will do the same.
During past recessions, the rentals actually were better than usual. The reason is likely that if a tenant had been saving up to buy their own home, during a recession they are likely to shelve those plans till better times. Thus, even more, people rent than during stable conditions. Even if a downturn hits, the investor would likely benefit by just sitting and doing nothing, letting the loan balance pay down and get eroded by inflation, while enjoying lower vacancies.
How the Dodd-Frank bill helps
In addition, measures taken by congress after the last recession, like the Dodd-Frank bill, have mitigated the unbridled risk in lending that existed prior to the 2008 recession. My belief is if and when a downturn occurs, its magnitude is likely to be lesser than the last time.
One of the riskiest things, ironically, is that people delay buying solid investment homes, especially with today’s fantastic interest rates. I have met people from my past who never got started because there was always a recession around the corner, or a boom, or some other news item. Some of these people can be quite regretful 14 years later, realizing they could have changed their financial future but didn’t.
We will discuss this and many other issues at our 1-Day Expo on May 18th. I will also address this topic during our first webinar tomorrow–our official launch of the Members area on our website! Learn all about it and get on board at icgre.com/MEMBERS. Join us and stay informed!
Our ICG 1-Day REAL ESTATE Expo took place on Saturday, March 9th. It was a huge success; thank you to everyone who joined us. Throughout the day, we had 750+ attendees, with over 550 people in the main room at the same time. Great energy! Some of the attendees were KQED donors, who purchased the Remote Control Retirement Riches with Adiel Gorel Master Package. The donors received two tickets as part of their donation to KQED. It was an honor to have KQED members at the event, and what a thrill to explore our tried and true method with so many new folks. There was a good mix of investors: brand new investors, very experienced investors, and everything in between.
Market teams, property managers and expert guest speakers
The questions from the audience at the ICG Real Estate 1-Day Expo were excellent and I enjoyed answering all of them. I had the main market teams present, and some of the property managers within our national infrastructure there as well. Scott Webster from All Western Mortgage described regular FNMA (Fannie Mae) 30-year fixed-rate loans (some at just under 5%, which, for investors, is a low rate). He also described loans available to people who can’t get the FNMA loans, by virtue of owning more than the FNMA limit. He also outlined loans available to foreign investors. The attendees enjoyed the three expert guest speakers: CPA Joshua Cooper talked about the Opportunity Zone and other tax issues. Joyce Feldman talked about using insurance as the first and probably most important line of defense, and Lucian Ioja talked about optimizing real estate investing in the larger context of financial planning.
New offering on our website
Many new investors joined our QUICK LIST, to whom we send property sheets when we get them from the various markets. Those who joined the list will also receive event invitations and updates, throughout the year. (You can also join us, by texting QUICKLIST to 57838, or by emailing firstname.lastname@example.org and request to be added.)
I also introduced the NEW Members Area on our website. The Members Area will be an exciting treasure trove of information, offered in two tiers. It will be fully populated with podcasts, FAQ’s, and other useful information. It is a work in progress right now that we are truly excited about. There will also be webinars on specific subjects offered, as well as special one-on-one “Connect for Success” meetings with Adiel Gorel. We enabled people to join the membership area at a special discounted rate, as an “early member” which is good until April 10th only.
If you were not able to attend the ICG Real Estate 1-Day Expo you can still take advantage of our early member discount. Just use the code MARCHEXPO at checkout to receive 20% off, only available until April 10th. Also, for our early members (at either level), you will be able to attend two LIVE webinars that I will be recording before the “official” May 1st launch.
Everyone’s “membership clock” will only begin to tick on May 1st. Thus, by taking advantage of this discount you are getting a “backstage pass” as we get all our content loaded, and your payment will cover the time starting May 1, 2019. We are excited to have you join us, and will be working diligently to provide useful content to help you secure a strong financial future.
Next Expo May 18th
Many of the attendees from the March 9th Expo registered for the next 1-Day Expo, on Saturday, May 18th. We will have a new market available, three expert guest speakers, and of course loads of Q & A. You can register now for the May Expo here.
A classic question I get when talking to a would-be real estate investor is: “Shouldn’t we buy a home to live in first before buying investment homes?”
The answer is – it depends on where you live.
When considering owning your own residence, there are various layers of reasoning. Some are logic and numbers-based. Some are emotional, traditional and familial.
Owning your own home can be associated with safety, security, having “arrived”, satisfying family members’ aspirations, the stability of having a (hopefully) permanent place to live, and so on.
Of course, everyone has a different set of emotional considerations when it comes to owning a home. These vary from person to person and, needless to say, are hard to quantify.
In this post, I will address the logical, numbers-based approach to the question of whether to buy your own home as your first real estate move, or rent and buy investment homes instead.
The numbers tell the story when considering buying a home
If you are considering buying your own home, the price of the home matters, the rent required to rent that same home matters, the local property taxes matter, the mortgage interest rates matter, dwelling insurance rates matter, and even the new 2018 tax law weighs in.
If you live in a market where property taxes are relatively low (say, between 1 and 1.7 percent of the home price per year), and insurance rates are reasonable, then if you are considering buying a home under about $400,000, that should be a “no-brainer” as your first step. Between $400,000 and $500,000 would still be a reasonable range to consider buying the home. In such a market, once you step up to the $500,000 range and above, the math may well start to turn as you climb higher in price, in favor of renting a home in the area in which you live. Following that, owning rental homes in more optimal markets makes sense.
Watch out for high property tax and high insurance rates
In markets where the property taxes are high (like in Texas and Oregon), and insurance rates are high (Texas again, for example), the “no-brainer” number may shrink to $300,000 or so, while the range above which you may consider renting your own home while buying affordable investment homes in other markets, will likely be $400,000 or above. This is because with high expenses for property tax and insurance, (which as a homeowner you would be paying) the overall numbers and logic “turn the corner” faster.
Certainly, in expensive areas like the San Francisco Bay Area, Los Angeles, San Diego, New York City and others such markets, it is usually far more logical to be a renter, while owning rental properties in affordable markets, where rents are actually quite high as a percentage of the home purchase prices.
Our next quarterly expo is December 1st near San Francisco Airport. Email us at email@example.com and add “Read your blog post” in the subject line and come as my guest. We will get back to you with registration information. Learn more about the event at icgre.com/events.