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End Investment Fear with a New Real-Estate Solution

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.

A Couple Buying a Home and Making an Investment with Confidence

A Couple Buying a Home and Making an Investment with Confidence

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.

Upcoming Broadcasts:      

  • 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
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Wisely Putting Down Payments on Single-Family Rental Home Purchases

One House too many? There's no such thing when investing in your future! - Down Payments

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

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Setting Up an LLC With Single-Family Rental Home Purchases

Should I start an LLCIn 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.

Multi-Member LLC

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

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Recap of the March 9, 2019 ICG Real Estate 1-Day Expo

Crowd at the ICG Real Estate 1-Day ExpoOur 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 info@icgre.com 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.

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Mortgage Applications Rise as Rates Settle at Relatively Low Level

Mortgage ApplicationIn a recent article on CNBC by Diane Olick, it is reported that weekly mortgage applications have risen by 5.3%. It is quite likely driven by the low rates, which may now last longer than previously expected. In general, purchase demand is weakening in the more expensive markets due to affordability issues.

Interest rates

Homeowners’ interest rates on mortgages are now about 4.65%. Investors always have higher rates, but can still get rates in the relatively low 5’s, which historically (for investors) is one of the lowest rates in the past few decades (only higher than the mid 4’s from about a year and a half ago, but much lower than most historical rates over the past few decades).

For us, as investors in new single-family rental homes in the Sun Belt states, demand for mortgages is up, and so is the demand for housing. Yet price increases over the past year have not been sharp. This makes some large metro areas in the Sun Belt affordable and sensible to the investor.

I have said countless time how special it is to get a 30-year fixed-rate mortgage which never keeps up with the cost of living (neither the PI monthly payment nor the remaining mortgage balance). Thus, inflation constantly erodes the real value of our loan, while the tenant’s rent is paying it off. To be able to get such 30-year fixed-rate loans at today’s rate is an extra special gift (for reference, when I started buying homes in the 1980’s, rates on investor mortgages were about 14%).

Investors should buy in the Sun Belt

Investors will be well served to buy new, good homes in good metro areas in the Sun Belt, getting a 30-year fixed-rate loan if they can (FNMA only allows 10 per person or 20 for a couple where both spouses can independently qualify). Many of our investors have exceeded that threshold. However, those of you that still can get these great loans, would be wise to use them.

Reach out to our office to schedule a time with me if you would like to discuss this further at (415) 927-7504 or email info@icgre.com.

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Recap of Our September 2018 ICG Real Estate Investment 1-Day Expo

Crowd shot at ICG Real Estate 1-Day Expo

Starting the day off with hundreds in attendance!

September 8th we had our quarterly ICG 1-Day Expo. It was spectacular.

Market Teams and Lenders

The market teams from relevant U.S. metro areas were present. The property managers were there too as always. Our main brokers and some of the builders (who construct the homes) came to the event as well. What a treat!

We had lenders specializing in both the conventional 30-year fixed rate loans, for investors in all 50 states. Lenders were in attendance who can make loans to people who are over the limit to get the regular (standard loans), as well as issue loans to foreign investors for U.S. rental homes.

I conducted lengthy Q&A sessions and gave the opening keynote speech and a  couple of seminars. At the end of the day, there was a recap of the expo. During the breaks and lunch, I talked with investors, answered questions and enjoyed their company.

Expert Speakers and Hundreds in Attendance

We had a CPA talks about the new tax law and how taxes are optimized for rental home investors. There was an expert who discussed getting college grants for our kids (or grandkids), as many of us still need help (and think we earn too much to qualify). Our last expert spoke on the new structure of reverse mortgages, which has become highly regulated and different than we have previously known. It is useful to understand how all of this works as many are ready to make use of the reverse mortgage, and those of us not quite there learned a lot too.

Hundreds of people were in attendance – one of our best expos to date because it was a wonderful mix of seasoned and brand new investors. We also had many new people who had just been exposed via the PBS Special “Remote Control Retirement Riches with Adiel Gorel.” Also in attendance were veteran ICG investors. The mix was very useful, as the mere questions asked were a great source of learning for everyone. Our veteran investors love talking to people and helping them learn more about the process and to share their experience. It is like a family reunion every quarter! Many investors come to share stories that have been investing for decades – they like to reconnect. The best part is learning how their lives have evolved and to see their dreams coming true for their future.

People All Came Together for the Quarterly ICG 1-Day Expo

The market teams were available in an airy, spacious and enjoyable space all day, to answer any questions and interact with investors new and old. They brought property offering for us to examine.

The day was highly enjoyable! People were from all over the San Francisco Bay Area, and many flew in from other states to attend the event, which was near the San Francisco Airport.

Many of the attendees have already registered to attend the next Quarterly ICG 1-Day Expo on Saturday, December 1,  2018.  We will have a brilliant attorney to discuss Asset Protection, LLCs and other structures, and the correct way to implement it while avoiding common mistakes.  We will also have an expert on credit optimization, so that we can qualify for the best rates possible, using special procedures that will be outlined.  We are still evaluating several exciting experts to choose the third speaker.

In addition to the most relevant market teams, updates and so on, there will be a NEW MARKET introduced on December 1st.

Everyone reading this blog can register for free, just contact us at info@icgre.com and in the subject line write: “Read your blog, please sign me up for free on December 1st!” You can register up to three guests (also for free).

Looking forward to seeing you!

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Making It Happen: Becoming a Solid Single-Family Rental Home Investor

Retired couple enjoying retirement with the help from an Investor

Life Happens in Real-Time Not on Paper

Many would-be rental home investors waste years before getting started.  Some of the reasons for that are:  too busy, fear of the unknown, the all-too-known paralysis of over-analysis, and lack of information.  Conversely, the notion that they might never have enough information or money, and need to spend more time researching and studying before they act.  Exacerbating this phenomenon, many new investors make what we call “rookie” mistakes when they finally do get going.

Cash flow 

The most typical rookie mistake is believing that low-quality homes in bad areas in lesser cities will provide better “cash flow” (foreigners like to call it “yield”). While cash flow may appear to be better ON PAPER for such lesser properties, life doesn’t happen on paper. In real life, these bad properties usually end up wasting even more years of the investor’s time (and also the investor’s money).

Get started on the right foot

There are ways to get started fast (and correctly). They are:  buy the right type of property (s), get the right (type) of financing, and use the proper management. Using these simple steps, the new investor can get off to a good start regardless of how much time or knowledge they have.

Remote Control Retirement Riches 

On my Public Television special titled “Remote Control Retirement Riches with Adiel Gorel”, which will be airing through the weekend and into early September on Public Television stations across the country (KQED-TV in the San Francisco Bay Area, for example) this coming weekend, August 24th and 25th, I cover these points. Of course, I cover many other important related topics as well.

In the package I have created for the people who pledge to help Public Television, I have included two newly-written books, an extensive video course complete with motion graphics, three booklets, a quiz, and a newsletter. The package also comes with the DVD of the show, as many may miss the showtimes.

One of the booklets I have written Is called “Making it Happen”. It targets the exact barriers preventing an investor from getting started correctly.  This booklet also contains a self-quiz defining your readiness.

This booklet, coupled with all the other extensive information, and the PBS Special itself, which hits the important points, should get anyone up an running in no time. I will also happily support any investor, as we have already changed the lives of thousands, and I believe in continuing to change lives for the better.

For a partial list of the Public Television stations’ showtimes, please click here.

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Where to Buy Rental Homes in the United States

We have discussed, in a previous article, why investing in Single Family Homes is a superior investment, especially for the busy professional (which most of us are).
We discussed the benefits of buying single-family homes using the unique 30-year fixed rate financing available ONLY in the United States (foreigners are amazed that we can get loans where nothing keeps up with inflation for as long as 30 years, meaning inflation keeps eroding the real value of our debt while the tenant is gradually paying it off for us). The 30-year fixed-rate mortgage is only available on 1-4 residential units, making single-family home rental investments even more attractive.
We also discussed how owning a portfolio of single-family rental homes can change everyone’s financial future. It can facilitate sending your kids to a great university, it can retire you sooner and more powerfully, and overall it can create a financial safety net for your future.
Single-family homes are easier to manage than other property and are usually occupied by families with kids, who go to local schools and serve as an anchor of stability to keep the family renting for a longer time. Single Family Homes are also possibly the most liquid real estate since when you put it up for sale your potential buyer pool is essentially everyone in the marketplace. It is still considered the “American Dream”, a dream which is attainable in many markets in the United States.
Where should we buy our single-family home rentals? To begin with, we can focus on large metropolitan areas. Large metropolitan areas are usually comprised of a number of cities (for example the Phoenix metro area includes cities such as Chandler, Mesa, Gilbert, Scottsdale, Avondale, Peoria, Glendale, and others). A large metropolitan area usually has good economic and employment diversity and a large pool of industries and employers. This is likely to create employment opportunities and economic stability. A large metro area also is likely to have a diversity of education, culture, culinary and many other facets of life, which can be attractive to a larger pool of residents and create a stable place in which to live.
Next, it is always instructive to study the demographic trends in the United States. Even before we had the World Wide Web and search engines to facilitate research, demographic information was available through multiple sources, including the US Census. It is evident that as far as overall demographic movements, the Sun Belt States are the states which usually experience net growth in population on an ongoing basis (those states in the sunny, southern part of the US, such as Nevada, Arizona, Texas, Oklahoma, Utah, Colorado, Florida, and other southern states.) Not all Sunbelt states keep growing on a net basis, but many of the big ones do, and that would be one criterion on which to base our geographic choice.
We will continue on “Where to Buy Rental Homes” in part 2 of 4 of this article. We will also discuss these subjects and much more during our ICG Quarterly 1-Day Expo on Saturday, December 2nd, 2017 near SFO. We will have experts discuss Asset Protection, Tax planning for year-end, 1031 Exchanges, special loans for investors (including foreign investors and investors who own over 10 properties), and a lot more. To register, please email us at info@icgre.com and mention this blog. You can attend for free with a guest.
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A Real Life Real Estate Investor Story

As you know we always preach the gospel of buying single-family homes, renting them, financing them with 30-year fixed-rate loans and then just holding them long term. We have discussed the benefits of having a 30-year loan which never keeps up with the cost of living (while everything else does!) Thus your loan gets constantly eroded by inflation (and don’t let anyone tell you the United States will have no or negative inflation in the face of the massive fixed debt it is on the hook for), while the tenant makes the payments for you (of course the RENT does change with inflation which makes it all the sweeter).

In the past month, I got a call from a financial planner handling the affairs of one of my investors. He had purchased nine single-family homes in Phoenix in the mid-’90s. It turns out he did not even live in the United States anymore, hence the financial planner handling his affairs in the U.S. They decided it was time to sell the homes in light of the 2012-2015 run-up in values that Phoenix has experienced in the aftermath of the recession.

Needless to say, his mortgages, while still not completely paid off (they are 30-year loans after all), are essentially as good as paid off after over 20 years. They never kept up with the cost of living and the principal payments whittled them down pretty low – very funny numbers considering the 20+ year inflation which the loan never kept up with.

A few quick CMAs (Comparative Market Analysis) by one of our Phoenix brokers revealed that after selling the nine homes, the investor would NET (after-sales expenses and closing), about $1.7M. Considering he bought the homes for an average of $80K each and using 10% down payments (those were the financing terms back in the mid ’90s), his overall return on investment is not only staggering, but the $1.7M is a real, tangible, powerful enhancement for the rest of his life (he is now in his mid 60’s).

As much as this is a satisfying long term result, I know the investor could have easily bought way more than nine homes. Loans were plentiful back then (no up-to-10 limits) and he had the capacity to easily buy three times as many homes. Nevertheless, even with this investment, he has created a powerful effect on his financial future. Alternatively, he could have just kept the homes and have the net rent from all nine homes contribute to his retirement income.

During our next 1-Day Expo (tomorrow near SFO – see www.icgre.com for details and if you mention this blog entry, you are invited at no cost – just email us at info@icgre.com with the attendees’ names), we will discuss new loans available to investors who own over 10 homes as well. Loans are now also available to foreigners again, and of course, if you own less than 10 homes there are conventional investor loans available to you from most banks.
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