Thoughts from the desk of Bob Repass…
1982! – How many of you remember the year 1982? Check out some of these facts, In 1982…
- Interest Rates at year-end per the Federal Reserve stood at 11.50%
- Average Cost of New Home $82,200
- Median Price of an Existing Home $67,800
- Average Income $21,050
- Average Monthly Rent $320
- Cost of a Gallon of Gas 91 cents
Also in 1982, Ronal Reagan was our President, Disney’s Epcot Center opened, The Vietnam Veterans Memorial was dedicated, the movie E.T. was released and Michael Jackson’s “Thriller” was the Number 1 album. So why all this talk about 1982? Well two other significant events took place that year when on July 17th Eddie Speed married Martha Shoemake and on August 7th when I married Angie Bass.
That’s right both Eddie and I have recently celebrated our 33rd wedding anniversaries to our beautiful wives, Martha and Angie. A lot of you know Martha and Angie and I’m sure I don’t have to tell you but without these strong women supporting and encouraging us over the years neither Eddie nor I would be where we are today. So I just wanted to take this opportunity to recognize them and thank them for all they do for us!
The Trading Corner
Building Wealth with Cash Flow
By Martha Speed
Many of you know I grew up in a Real Estate Investment Family. Over the years we owned hundreds of rental units from mobile homes to nice apartments and houses. Being family owned the kids got to share in the joy of being Landlords. Yes, we had jobs, I learned to take apart stoves & refrigerators, clean them to look like new and put them back together again, as well as pulling them out and cleaning under and behind them. Yuck! My Dad didn’t expect us to work for nothing and paid us for our time but those were some of the worst summer days I remember. Of course, I remember the good as well and enjoyed many lazy summer days on the beach, riding my bike to swimming lessons, Grandma’s and cooking out at the camp ground.
In Those days, my Mom & Dad believed wealth building was primarily achieved by owning rental property. The rent paid off the debt and you ended up with these wonderful properties that produced what my Dad and husband love to refer to as “Mail Box Money” to be used for retirement. Rentals allowed you to borrow the money, pay off the debt and build a cash flow for the future.
When I was in high school my Dad semi-retired from his traditional job with the fire department. His intent to take it easy and work part-time didn’t last long. Truth be told he was driving my Mom crazy. It wasn’t that he didn’t want to fish all day but he had been introduced to another type of cash flow, buying real estate notes and guess what, there were no tenants & toilets attached!
This new investment strategy sky rocketed immediately as he and his partner perfected the art of buying notes and then selling a partial interest to recoup their investment. Keeping the back end of the note or the residual interest gave them the same cash flow strategy for retirement in addition to up front profit!
Not only was a new business formed but as most of you know a family business evolved. I’ve followed the same cycle of investing in fix and flips, rentals and notes. I’ve kept a few rental properties for the tax advantages they offer, but my #1 goal has been How Not to Manage them. I can buy and manage 20 times more Notes than rental properties which allows me to generate more cash flow with less headaches! In addition, I’ve diversified our portfolio by buying Notes for short term cash flow and other Notes for the residual interest.
I think you would agree, All of us would rather be the Bank than the Landlord. We want to build “cash flow” for retirement as passively as possible, especially if you’re like me and you’re past the big Five-0! We’re not looking for a second career, we’re looking for a win-win like all other Private Money Investors and Buying Notes offers exactly that. Taking advantage of the current market with Passive Dollars, Buying Passive Investments, managed by a third party.
It’s not easy to formulate a plan, get these passive investments purchased and find ways to grow you’re Note business or your retirement accounts. It takes time, energy and sometimes brainstorming with others. Many of the women from NoteSchool have asked about having a women’s only event to help them move forward with their Note investing and it’s scheduled!
On October 1-4, 2015, I’ll be hosting the first Women’s Retreat & Master Mind at the Note Recovery Center in Spanish Fort, TX! This is your opportunity to get to know other women in the Note business on a personal level and form a trusted group of business peers helping each other achieve aspirations, visions & goals! Save The Date and Watch for an email for the upcoming webinar to announce all the details and registration! Enrollment will be Limited!
I’m excited to host this event and look forward to seeing you there!
Where is the entire Inventory?
By Eddie Speed
If you are a real estate investor and still aren’t convinced that you need to modify your approach to buying discounted assets, perhaps this will change your mind:
According to CoreLogic, 6.4 percent of home sales were REO (real estate-owned) transactions in May 2015, the lowest share for REO since October 2007, while 3.5 percent were short sales, totaling 9.9 percent.
With the latest decline, the distressed sales share has fallen about 70 percent from their peak experienced in January 2009, when distressed sales made up 32.4 percent of all residential home sales. During that peak month, REO sales accounted for 27.9 percent of all home sales, according to CoreLogic.
Bottom line is that short sales are pretty much a blip on the radar screen. REO’s are continuing to shrink in supply. This small supply makes good buys very difficult. If you can’t find a good deal, you take too much risk for a low profit margin.
The supply in today’s real estate market is in defaulted notes.
The Top Ten With…
There are many people behind the scenes that drive the engine to make our companies successful. In our continuous Top Ten series, this month we turn the spotlight on one of these people so you can get to know them better. This month the spotlight is on a key member of our Trade Desk team and a Titanium Mentor Student as well, Tim Siebelink.
How long have you been with Colonial Funding Group/NoteSchool: 5 Years?
What is your role at Colonial Funding Group/NoteSchool: Trade Desk assisting other NoteSchool Mentor students through the purchasing and closing processes?
Favorite Color: Wolfpack Red
Favorite Food: Filet Mignon
Favorite TV Show: Fox News — really does not watch much TV
Favorite Movie of all-time: The Hangover
Last Book You Read: Blackwater, The Rise of the World’s Most Powerful Mercenary Army
Favorite Sports Team(s): Carolina Hurricane
The 3 people you would like to have dinner with (dead or alive): My Dad Passed away 23 years ago, would just like to catch up. My Wife Michelle, (Always better when she pays!! ) One of the founding fathers of the U.S., like George Washington. What had to be going through their minds on forming a new country and just beating the British. That would be a phenomenal conversation.
What do you like best about working at Colonial Funding Group/NoteSchool: Working on the trade desk I get to see new mentoring students who have never purchased a note before purchase their first asset, work with them through the process and I get to see the ah-ha moment when they understand how easy it is and better yet, when it really hits home on how powerful notes can be for building their long term wealth.
Capital Markets Update
by Ryan Parson
In our last newsletter, we talked about the erosions to capital and yield brought on by factors like taxes and inflation. Of course, there are other significant erosions that can take place in your portfolio if you aren’t on top of them and actively identifying them when they’re happening. It’s necessary to do this as a regular practice so that you can catch them and make corrections at the appropriate time.
In addressing the question of erosion brought on by taxes and inflation last month, we showed that the typical investment that by all appearances earns you 8%, actually earns you slightly less than 3%. I suggested that very few of my clients, if any, would be happy with that as the “real rate of return.”
This month I want to demonstrate what might occur if you were to look at an opportunity that could earn you a 15% return. We’ll apply the same formula for tax and inflation erosions as we did last month with the hypothetical investment that offers an 8% return.
The net effect going from 8% to 15% for an investment that not quite doubles your gross return is that it almost triples your net return.
You might be thinking, “Great, Ryan, but to get a 15% return, how much risk am I actually going to have to take on?”
The answer to that excellent question is that higher returns without unacceptably high risk are found primarily in the alternative investment space. Whether it’s precious metals, real estate, owning businesses or gas and oil (to name a few), you need to identify private equity investments. These types of alternatives all have the ability to bring you appropriate risk-adjusted returns, after the typical erosions that affect us as investors. It’s been my experience that investments in private equities can net you a much more predictable return, which will result in a truly meaningful value within your overall portfolio.
So, where are you seeking private equity investments in today’s market?
Quote of the Month
“Each time we post a photo, make a comment or take action online, we contribute to our digital footprint & personal brand.”
– Amy Jo Martian, CEO Digital Royalty