RE N E W S

May 2013

investment

FINANCIAL PLANNING FOR YOUR FAMILY

S t r e t c h Your Self Directed IRA

What is a Self Directed IRA? Building Wealth

To p R e a l E s t a t e Investing Strategies for Growing your IRA
2013 RE investment News

MAREI
Mid-America Association of Real Estate Investors
A Real Estate Community

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cover story

22 Financial Planning
For your Family
Stretch Your Self Directed IRA

10 Building Wealth

Top Real Estate Investing Strategies for Growing Your IRA

8 What is a Self Directed IRA

What are the Basic Benefits and Why Do Yu Want One!

2013 RE investment News

March Market Report

Is it a Flat Market?

April 2013

Websites
Top 5 Capturing Larger Share of Real Estate Traffic
PUBLISHER Kim Tucker

Social Media
Protect Your Company

Small Steps To New Strategies

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ADVERTISING INFORMATION 913-815-0111 info@MAREInet.com

One Day Turnover

12 Easy Steps to Rent Up Unit

RE INVESTMENT NEWS IS PUBLISHED IN ASSOCIATION WITH MID-AMERICA ASSOCIATION OF REAL ESTATE INVESTORS

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P.O. Box 8685 Prairie Village, KS 66208 www.MAREInet.com 913-815-0111

Fight Global Warming

Homeowners battle with Old A/C Maintenance
DISCLAIMER

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Dont be a Creep
When Personalization gets Creepy in Direct Mailing Pieces

38

Wholesale Real Estate

Getting Started Investing

Regular Features
18 Member Benefits at a Glance 28 KCInvest Properties for Sale 30 Monthly Meetings & Events

Mid-America Association of Real Estate of Investors and the RE Investment News does not exist to render and does not give legal, tax, economic or investment advice and disclaims all liability for the action or inaction taken or not as a result of communications from or to its members, officers, directors, employees and contractors. Each individual should consult his/her own counsel, accountant and other advisors as to legal, tax, economic, investment and related matters concerning real estate and other investments. The views and opinions expressed by authors of articles contributed to this newsletter do not necessarily reflect those of the association, the board of directors or the staff.

RE investment News 2013

Welcome to RE Investment News

The media keeps hyping everything: jobs or the lack of them, the budget or the sequester, the shadow inventory and more. But despite the media, families keep going and plugging along. Things do seem to be getting better, just at a very slow pace. Families are working to build up the nest egg and many are very cautious of the traditional savings institutions that pay minimal interest for bank CDs. And are often afraid of the stock market because of the huge losses in the past few years with mutual funds, stocks and bonds despite their rebound. Real estate is holding up as an incredible opportunity for industry insiders to buy portfolios of bank owned properties or non performing mortgages. But for the little guy and gal, there is also huge opportunity in buy and hold properties, performing and non performing notes, rental property and seller financing. Those in the know have the ability to invest their hard earned funds in real estate to generate more income. Those in the know have the ability to invest their retirement funds in real estate as well. One of the best kept secrets is the Self Directed IRA and 401k that

will allow those in the know to invest retirement funds in Real Estate and Notes as well as just about anything that one can invest money in. Hard working Americans can start retirement funds or roll retirement funds over into accounts with qualified custodians and use those funds to become the bank for other investors, buy real estate, buy mortgage notes and even invest in the stock market. In this months issue of the Investment News you will read about methods of investing in real estate as well as a focus on the Self Directed IRA strategies to create a more secure financial future for American families. At the May monthly meetings of Mid America Association of Real Estate Investors you will have the opportunity to learn first hand from experts as well as real live local investors how to utilize Self Directed IRAs to invest in Real Estate. Last, be sure to check out the MAREI Blog as Facebook page through out the month for further educational information. Then take this information, perform your due diligence and build your families wealth with a Self Directed Retirement account!

2013 RE investment News

Short Takes

March Real Estate Market Report Neither Buyers or Sellers Favored

Kansas City Regional Association of REALTORS reports that inventory is down and prices are up across the metro area. Sale Price: All counties experienced an increase in the average sale price of existing homes and new homes were up in Cass, Johnson, Miami and Platte Counties over last year. Overall both showed a 5.7 increase over March 2012. Home Sales: All counties experienced an increase in the total number of existing homes sold at 7 percent as well as new homes at 11 percent with an over all increase of 8 percent this March over 2012. Home Inventory: Existing home inventory is down by 17 percent and new homes are down by 9 percent with an overall decrease of 16 percent from March 2012. Pending Sales: Are about the same with existing homes down 2 percent and new homes up 4 percent, giving us an overall increase of 1 percent. Supply of Homes: Supply of homes is the calculated by dividing inventory by the 12 month average number of sales. A 5 to 6 months supply is a balanced market. Existing homes have a 5.3 month supply and new homes are at a 5.5 month supply with an over all 5.3 supply putting us in a balanced market favoring neither buyers or sellers. The decrease in inventory could be contributed to less bank foreclosures on the market and with less foreclosures on the market, prices are up. Read more about market data at www.KCRAR.com

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Websites
Top 5 capturing larger share of real estate traffic
1. Zillow: With 11.39% of Market & 49.9 million total visits 2. Truia: With 7.72% of Market & 33.9 million total visits 3. Realtor.com: With 6.56% of Market & 28.8 million total visits 4. Yahoo Homes: With 4.34% of Market & 19.0 million total visits 4. Homes.com: With 3.92% of Market & 17.2 million total visits Source: Experian Marketing Services

Short Takes

Social Media
Protect Your Company

Small Steps To New Strategies

The real estate industry is always changing. What worked yesterday may not work today and we may need to implement new strategies to compete.

Social Media is a vast new world of communications for very little cost. Be sure to take steps to protect your company. Follow a Security Plan You dont want to release confidential or sensitive information or allow hackers to gain access to protected information. Is computers encrypted to protect your and client data. Emergency Plan Do you have a plan in place just in case you get hacked, a computer gets stolen and a list of steps that must be taken in case of a breach in data. Terms of Use / Privacy Policies Do you have policies in place that govern how your company interacts with users of the website. Remember that you need to continually update security so dont promise something that you cannot keep. Social Media Policies When hiring remember there is often information on social media that you cannot consider when hiring, so be sure you have procedures to ensure you are not basing hiring on social media data. Also companies can be held liable for comments employees make, so be sure to have policies to monitor employees. Regular Training Managers should know and understand employee privacy rights, laws against discrimination, labor laws and other laws regarding communication. Using the internet and social media should be a part of new-employee and on going training to protect the employee and the company.

Take a Course: Attend a training workshop and learn not only from the instructor but talk to your fellow students. Be sure to take notes that you can bring back to your business and implement. If you purchase a home study course be sure to open it up and work through it step by step. Action Plan: After your live course or as you work through a home study course, break it up into manageable sections. Create an implementation plan, get that section working and then move on to the next section. Test and Evaluate: What works for someone else will probably work for you. But your knowledge and experience may implement in a different way. So track success with the new strategy and make changes as needed. Analysis Paralysis: Dont let all the new ideas paralyze you into doing nothing. Select just one item and implement it, evaluate it, and make it yours. Then go back to the training and select another item to put into action.

A real decision is measured by the fact that

youve taken a new action. If theres no action, you havent truly decided.
- Tony Robins

The number of times I succeed is in direct proportion to the number of times I can fail and keep on trying.
- Tom Hopkins

2013 RE investment News

Article
What is a Self Directed IRA or Real Estate IRA? What are the Benefits?

With a self-directed IRA an investor has many more options beyond stocks, bonds and CDs allowing you to diversify your IRA portfolio. You are not limited to the narrow investment options of banks and brokerages. You can select how to grow your IRA funds, based on your own expertise, in areas such as notes, real estate, private funds or precious metals.

With a self-directed IRA you are not limited to only the offerings of the IRA custodian, you can virtually invest in just about everything, including stocks and CDs. By selecting a qualified third party administrator and opening a self directed IRA you have the ability to invest in things you know and understand: real estate, notes, apartments, options, gold, oil, stocks, bonds and more.

A real estate IRA is simply an IRA that holds real estate.

The real estate IRA is that the investor is able to invest in what they know: Real Estate and related investments.
With the wider variety of investment choices of the self directed or real estate IRA, you have the ability to combine the great tax advantages with your own expertise or the expertise of others to build your wealth more effectively than with traditional investing options. Those that understand flipping houses or holding rentals, you can leverage that knowledge. If you understand the rules of lending in your state, you can use your IRA to be a lender. If you found a solid company raising capital, you can invest in that company.

Explore your options today

Most people have their local bank or brokerage or a company selected by their employer to hold their IRA or other retirement fund. If you ask these traditional custodians about investing in real estate, more often than not they will tell you it is not an option. Why? Because they dont offer that option, they would loose your business to another custodian, so its easier to tell you know. However, IRS regulations do in fact allow IRA and 401k account holders to invest in just about anything as long as you have a qualified third party custodian and administrator holding the funds. You can start a traditional or Roth IRA or other savings account. You can roll over all or part of an existing fund with a traditional company to a self-directed custodian. To get started make a search online for Self Directed IRA Custodians and do your homework. Also through networking, ask for referrals for companies as not all self -directed custodians are created equal.

RE investment News 2013

Real Estate Investment Funds Build Your Own Bank

Get Your FREE Real Estate Partnering Report Today!
Partnering Report Download Includes:

Educational insights into how you can purchase property with a selfdirected IRA by partnering with other investors Examples of the different ways you can partner an IRA Rules of partnering A partnering case study

www.theEntrustGroup.com

SAVE THE DATE

Patrick Hagen Business Development Manager From the Entrust Group Guest Speaker at MAREIs Northland May 2nd Meeting www.MAREInet.com/KCnorth

2013 RE investment News

Top Strategies

Patrick Hagen
Business Development Manager and Self Directed IRA Expert from the Entrust Administration

Self-direction is a key component to true retirement plan diversification. I hope to use my expertise in the industry to help investors in the Mid-West understand how to diversify their retirement options and better position themselves for retirement.

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Top Strategies

There is no one-size-fits-all strategy for successfully growing your self-directed IRA with real estate investing. What will work well for you may not be the best option for someone else. The best strategy for you will depend on your own personal situation and your own knowledge of how the various strategies work. Knowledge of the various strategies will help you determine how best to move forward.

TOP REAL ESTATE INVESTING STRATEGIES FOR GROWING YOUR SELF DIRECTED IRA
With the repeated extreme ups and downs of the stock market, more and more investors are turning to self-directed IRA options for their retirement accounts. Many of these investors know that the opportunities for investing in real estate are phenomenal right now, however each one is going to have a different set of goals with their IRA and different tolerances to risk when it comes to investing. Some folks are looking to build their IRA with the purchase and rental of residential properties. Others want the cash flow income, but not the issues of being a landlord. Others want to build their funds quickly and there are options for all of theses strategies. Lets take a look at some of the top strategies to build wealth in your Self Directed IRA. Note we are going to shorten this to SDIRA Real Estate Fund For the investor who already has a substantial amount of money in the SDIRA and wants to earn a return on investment with out the hands on work, there is a Real Estate Fund. These funds range from a large Real Estate Investing Trust (REIT) or a small private placement, that allow the investor to pool

Building Wealth

Real estate with out a self directed IRA is just Real Estate. Combine the two and you have MEGA Real Estate, do not overlook the power of this wealth building tool."

Thomas Travers
Real Estate Investor and Real Estate Broker Entrepreneur About Houses, LLC

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Top Strategies

funds with other investors into a diversified portfolio of real estate activities manages by the Fund. These Funds offer a variety of returns based on the strategy and risk, some examples include funds to buy and hold properties for cash flow and long term appreciation, others offer hard money lending to other investors for higher returns in the short term, others might invest in tax deeds or trust deeds. The more diversified the fund is into a variety of activities, the potentials for good returns with out a huge risk. Other funds might focus more on one particular area for higher returns, but could have a potentially higher risk. Private Lending Another strategy for the investor

who wants to earn the returns with out the time commitment of chasing down deals is the option of becoming a private lender. The private lender options can range from short term hard money loans to investors with higher turn over and higher rates to the long term notes. By becoming the bank, the SDIRA can earn points and interest while the borrower goes out and puts the deals together. So for example if there are two investors Bob and Jack at the local Real Estate Investor Association who find each other and note that both Bob and Jack have SDIRAs and both are successful rehab investors with different models. Bob buys small houses to renovate, rent and resell. Bob needs $20,000 to $30,000 to put his deals together and Jacks SDIRA can lend the funds for a few points up front and 10% interest. Conversely Jack bought a house and renovated it with $90,000 of his own cash. He then sold the house with a seller financed loan $120,000. Jack got $20,000 in down payment and received a $100,000 loan that is to pay back over 30 years at 6% in-

terest. With the $20,000 cash he got as a down payment, he still has $70,000 of his own money tied up in the house and if he waits will make a substantial return through the payments he receives every month. But Jack wants to go buy and renovate another house, and needs that $70,000. So he goes to Bob and sells Bobs SDIRA his $100,000, 30 year, 6% interest note for $80,000. So if we add up the numbers Jacks initial investment was $80,000, he got $20,000 down and another $70,000 for selling the note to Bobs IRA, leaving him a profit of $10,000 and money to go invest again. Jacks IRA has a long term cash flow of 30 years coming in at 6% interest, which is actually a bit better yield if you consider he purchased the $100,000 note at a discount. If we compare these Jack with the short term loan has a higher return, but his IRA will have more transaction fees and down time if he keeps doing short term loans to Bob. Bobs IRA is going to have the lower rate of return, but it will not have down time or transaction fees.

Joseph dela Pasion

Real Estate Investor Genesis Realty Solutions

The more you know about self direction and your IRA the more you are truly self directing Quote Warren Buffett ..

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Top Strategies

Buy and Hold Since we are discussing real estate investing in a self directed IRA, the most obvious way to invest is through buying real estate to hold as a short or long term investment and renting or selling with seller financing for cash flow. This can be done with several different strategies as well. Most investors simply have the SDIRA purchase with all cash. Other investors leverage their IRA funds with the use of a non-recourse loan from a bank that specializes in this form of loan, or from another SDIRA fund. It is important to note that when a SDIRA obtains a loan it must be non -recourse meaning that the only thing securing the loan is the property and if the SDIRA defaults on the loan, the only thing the lender can go after is the property, the SDIRA cannot be sued for performance. Another option in the Buy and Hold model which is a bit more advanced is to have the SDIRA purchase a percentage of the property and partner with another IRA or person or entity. Lastly some investors choose to do

To get a few more ideas of how real live investors have utilized a Self Directed IRA, join us at the May South MAREI meeting on the 14th, where real live investors from Mid-America Association of Real Estate Investors will be sharing a case study of one of the deals that utilized a Self Directed IRA. See details at www.MAREInet.com/KCSouth
the buy and hold model with Notes and Deeds of Trust or Mortgages most commonly known as buying Notes. Options For the investor who wants to grow a small SDIRA quickly the real estate option is an excellent strategy. So lets go back to Investor Bob. Remember he bought a long term hold note for $90,000 and in this example he still has $3,000 left in the IRA. Bob finds a really good buy on a single family house and his IRA pays the property owner $100 for the option to purchase the home for $40,000. Then Bob goes out and tells Jack about the house and Bob agrees to purchase it for $50,000. Bobs IRA can sell Jack his $40,000 option for $10,000 or Bobs IRA can go ahead and purchase the property for $40,000 and then resell it to Jack for $50,000. They could also assign the contract for a fee, the bottom line is that through his real estate expertise Bob invested $100 of his IRA money in a deal and earned $10,000 back in a fairly short time. Any strategy that the wholesale investor employees could be utilized by a SDIRA to wholesale for quick cash build up. The good news is that with real estate investing and the Self-Directed IRA there are strategies to help every investor Build Wealth. It is important to remember that before taking on any real estate investment opportunity, to make sure to protect your SDIRA by completing your due diligence and consulting with professionals.

As a real estate investor, CPA, and former banker, I have found that investing in real estate through self directed ROTH IRA's is the best way to earn tax free income for retirement. I have personally used self directed IRA's to purchase multiple properties.

Brett Gossen
Real Estate Professional Residential, Commercial and Distressed Assets

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For Landlords

One DAY Turnover

Twelve Easy Steps
From MR Landlord.com Many of you veterans out there may already know all of this, but just in case I wanted to share "the system" that has me 3 for 3 of my last vacancies at a one day turn over. Step 1: Communication with current residents. Make sure you get that 30 day notice of intent to renew or move. I contact them 45 days out from expiration of current lease. If I hear nothing by 30 days out, then we're on for another month. Repeat this step at middle of next month. Get their desire in writing, signed, and dated! Step 2: Start advertising. I get my Craigslist & Postlets ad up around the first of the month. Renew the post every 2 days or as often as allowed. Step 3: Communicate my bonus program to the current residents. $100 if they bring me a qualified prospect who signs a lease (and pays!). $50 if I get someone on my own prior to their move out to pre-lease, and as a thank you for them keeping the place nice enough to show and being accommodating to repeat showings. Yeah, my lease says they have to do it anyway for free BUT this encourages compliance and they say nice things about me to the prospect too! Step 4: Get a "anytime is fine" showing agreement with residents. Basically, anytime between X and Y times it's okay for me to show the rental with 30 minutes notice ahead of time. Or get them to agree to show it for you when they're home. Saves gas, saves time, and it's less stress. Step 5: Repair List. While doing showings, make the handyman provide a fix-it list for repairs as soon as the old residents are done moving out. Step 6: One week out, line up your cleaning / maintenance / carpet-scrubbing crew(s). Coordinate so they aren't stepping on each other to get it done the day resident moves out, if possible. If all else fails and its a fairly clean turnover, you can probably leave the maintenance for last unless there's a major issue that affects habitability. The cleaning gal shows up in the morning, carpet scrubbers finish up in the evening. The next day everything is dry and ready for new resident. Step 7: Fax copy of lease (or email the lease as an attachment) to resident 3 days prior to signing to ensure they have ample time to review and ask questions. Remind them that you need the rent and deposit in certified funds (no personal checks, thank you) when you meet to sign the lease. No money, no keys, no signing anything. Step 8: Utilities Day prior to lease begins. Make sure utilities are switched over effective the first day of the lease. Call the power company or ask the resident to show you a receipt as proof of service. Step 9: Walk Through Day lease begins. Do walk through with residents. Note deficiencies and write down everything you agree to fix / repair / upgrade on a list that says: "Only these items will be fixed / repaired / upgraded. RESIDENT agrees landlord has not promised, verbally or in writing, to any other repairs, fixes or upgrades that are not listed. Premises are accepted in "as is" condition, unless otherwise noted on this sheet." Step 10a: Get money, sign lease. Give resident a run down of rules and procedures for maintenance requests and emergency contact information. Show them where the circuit breaker box is, water shut off, etc. Give each resident a copy of your business card with phone number and email address. Step 10b: Hand over keys. (this is last for a reason, folks!) Step 11: Deposit money in your bank. Step 12: Go enjoy a cold beverage of your choice in celebration. Ah, another turn over complete! Of course there will be some turn-overs that are more complex: eviction, slobs, damages, etc. This is meant as a basic blue print for an otherwise successful tenancy that is coming to a close. Add or subtract steps that you feel make the process smoother.
"Management tips provided by landlords on MrLandlord.com. To receive a free Rental Owner newsletter, call 1-800-950-2250 or visit our nationwide Q&A Forum, LandlordingAdvice.com, where you can ask landlording questions and seek the advice of other rental owners 24 hours a day."

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Industry Services

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Contractors Corner

Fight Global Warming

Homeowners battle with Old A/C Maintenance
From Discover Heating and Air Properly working A/Cs do not leak any refrigerant at all, so if a system needs refrigerant there is a leak somewhere. But as HVAC units age, leaks happen. Simply dumping more FREON, or R -22, into a slowly leaking system every season used to be the choice of many property managers and homeowners. A couple hundred dollars to re -charge and make it through the year was a better choice than a couple thousand dollars to replace the A/C. That R -22 cost has now quadrupled. Heres why: There are two major types of refrigerants used in home air conditioning systems: R-22 and R-410a. The government banned the manufacture of systems that use R-22 in January 2010. However, R-22 is still commonly used to charge existing air conditioners. Since this regulation occurred several years ago, the number of old R -22 systems has decreased as systems have been replaced and old units have failed. This has therefore led to a decreased production of R-22 by manufacturers. Naturally, the price has skyrocketed for R -22 replacement refrigerant. Its like trying to buy leaded gasoline now, 30+ years after its regulation. The price of R-22 doubled in 2012 and has redoubled in 2013. Now, the cost to re-charge and repair a leaking system is near most replacement costs of a new R-410a system. Due to the higher pressures needed to be effective, 410a cannot be used in R-22 systems. Essentially, economics drives environmental conservation. The government couldnt force homeowners to replace their A/C units when it was determined that R-22 (which has chlorine in it) was depleting the ozone layer. Instead, they regulated it at the source knowing that supply and demand would lead to an economically driven better environment.

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Industry Services

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Marketing Strategies

Dont be a Creep
When Personalization gets Creepy.
From Click2Mail

At Click2Mail, we believe that personalizing your mail is more than just a nice touch it's a smart marketing strategy. WithMailing Online Classic, you can easily personalize your mail with information from your mailing list, integrating a customer name, salutation, account number, balance due, appointment date, or other details into your direct mail. When done right, personalization can increase the impact of your mail piece. But when is personalization too much? Can you go too far and turn off your customers in prospects with a piece of mail that seems creepy rather than customized? In short, yes. The Power of Personalization Personalization is rampant in the world of online marketing, where there's a wealth of data on customers that can be used to customize everything from the ads they see on Facebook to the deals they're offered on their favorite shopping sites. But personalization isn't just for the digital marketer. Whether it's online or in print, sending messages that are designed specifically for a certain customer can be a great strategy that boosts response rates. For example:

A dentist sends biannual postcards reminding people that it's time to schedule a cleaning. A non-profit organization sends appeal letters to former donors that note the amount of money the person had given in the past. A plumber mails a Welcome to the Neighborhood flyer to new residents in the areas where he does business (he makes sure to include the recipient's name in the address space). An insurance agent sends out postcards inviting people to come in to discuss their insurance needs. Imagery on the postcards is tailored to the recipients (families with kids received cards with pictures of families, for example, while younger married couples without children received a different card).

What do all these personalized direct mail campaigns have in common? They all either used information that the recipient could reasonably expect the sender to have, or they were personalized in a subtle, non-invasive way. The dentist's patients expect his office to keep track of when they need to come in for a cleaning, and they probably appreciate receiving a friendly reminder. The insurance agent, on the other hand, personalized his mail in a less obvious way, so that the recipient may not have even realized that it was designed specifically for them. These businesses understood how to use the information they had about customers in a way that didn't seem like they were stalking the recipient. Personalization gets creepy when the recipient can't figure out how (or why) you know something about them. If you're contacting someone for the first time, and you send a piece of mail that indicates you know how many kids they have (or their ages), that they suffer from a particular health problem, or some other piece of private information they haven't shared with you, it may rub people the wrong way. Rather than considering your great offer, they're thinking about whether they can trust you. Now, that doesn't mean that you can't use customer information to target your mailing, but simply that you need to be careful about how you go about personalizing your direct mail. When personalizing direct mail, it's also critical that the information you have on recipients is current. Sometimes, making an assumption about what a particular type of customer wants can backfire if the recipient feels that they're being stereotyped. Get the personalization wrong, and you can permanently alienate an otherwise loyal customer. (To avoid that, use Click2Mail's Mailing List Services to get a high-quality, reliable mailing list.) Like any direct mail technique, you need to have a smart approach when it comes to personalization. Go too far, and you may not get the results you want. But used wisely, personalization is a powerful way to help your mailing resonate with recipients. Do you have questions about adding personalization to your direct mail campaign? Our customer support team is always happy to help you out so that you can create the most effective direct mail campaign for you. Drop us a line at support@click2mail.com or give us a call at 866665-2787. We're here Mon-Fri, 9AM to 8PM Eastern Time, and we're always eager to answer your questions.

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Industry Services

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RE investment News 2013

COVER STORY

I f you will not need all of the assets in your I RA to cover your retirement years you may want to consider stretching your I RA. This is a strategy that will extend the life of your I RA, allowing the assets to grow tax deferred or tax free in the case of the Roth over a period much longer than your life. This stretchability of your I RA makes it a very important tool when estate planning.

FINANCIAL PLANNING FOR YOUR FAMILY

Stretch a Roth IRA for Generations o f Ta x F r e e I n c o m e
What is a Multi Generational IRA or the Stretch or Beneficiary IRA A technique using distribution rules to extend the tax-deferred or tax free status of IRA assets across multiple generations through the rules pertaining to an inherited IRA. What are the rules? Traditional IRA With a traditional IRA, distributions must begin no later than April 1 of the year following the year the IRA owner reaches 70 . If the IRA owner dies and the spouse is a beneficiary, the spouse can inherit the traditional IRA and roll the balance into their own traditional IRA and then name a new beneficiary or just keep the original IRA in place and treat it as if it is her own. The spouse can make contributions to the inherited IRA and allow it to keep accumulating and not take any distributions until reaching 70 , when the required minimum distributions (RMD) must be taken. Or the spouse could convert the inherited traditional IRA into a Roth IRA, pay the taxes and eliminate the need to ever take distributions. If a non-spouse inherits the RMD kicks in immediately based on the age of the person inheriting. So for example consider Bob, who leaves a $100,000 IRA to his granddaughter who is 21 when Bob dies at 69. The granddaughter must start receiving RMDs the year after Bobs death and stretch those out over her lifetime. So the granddaughters first required distribution a year later at age 22 is the $100,00 balance (or what ever the new balance at this current year later) divided by her remaining life expectancy of 68 years (based on a life expectancy of 90 years from the IRS table less her current age of 22), or $1515.15. Or they can take larger distributions or the whole lump sum. Note that because this is a traditional IRA, the beneficiary will be taxed for the distributions. Roth IRA

2013 RE investment News

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COVER STORY

The Roth IRA can be inherited much the same way as the traditional IRA, but the distributions will be TAX FREE! The original Roth IRA owner is never forced to take distributions once the reach 59 and and they can keep making contributions after tax and the IRA can keep earning based on investment tax free. Also unique is that because the contributions are made after tax, any contributions (not profits) made can be withdrawn at any time before age 59 1/2. So the big question is do you want a tax deferred Traditional IRA or a Tax FREE Roth IRA? WHEN SHOULD YOU USE A "STRETCH" IRA? The experts tell us if you do not need all the assets in your IRA to cover expenses during retirement, you should or would probably stretch the IRA over to an heir. As a totally legal tax reduction strategy, you may want to consider helping older family members establish sev24 24RE RE investment News 2013 investment News 2013

eral small Roth IRAs, with a different beneficiary named, for each account. So lets take an example of Bob from earlier. Bob and his father Joe are Real Estate Investors. Bob has a wife, a married son, and two grandchildren. Joe still works with Bob in the real estate business and drives around checking on rental properties for which Bob pays Joe an income of about $10,000 a year. Because Joe has the income, Bob is able to gift Joe with $3,000 and help Joe establish 6 Roth IRAs with $500 in each, one that names Bob as heir, one that names Bob Wife as heir, one for Bobs Son as heir, one for his Daughter In Law as heir and one each for each of the grandchildren. Bob and Joe are fairly set with the rental income they both receive from their rental properties, they dont really need much extra income to live on, but like every other real estate investor out there, they cant pass up a good deal. They take the time to

wholesale a house from time to time and to do a rehab flip or two each year as well. So for the next five years instead of earning the income from their wholesales, Bob and Joe direct these transactions within the 6 Self Directed Roth IRAs they have set up for the benefit of all the family members. On average they earn $8,000 a wholesale and complete about 1 a month so they are able to do 2 transactions per IRA each year earning $16,000 for each IRA. At the end of 5 years each Self Directed Roth IRA now have a balance of $80,000. Plus being the landlords that they are, they have invested the $80,000 in each of the IRAs to buy and hold 2 Rental properties each with $700 a month in rental income coming in adding even more income into the IRA. At the end of 5 years Joe passes away and the 6 IRAs are now inherited by each of the family members. Each of the family members are required to take RMD based on their own life expectancy all tax free. At

COVER STORY

the same time Bob and his Son Jack who are also investing in real estate can continue to direct the IRAs to do real estate transactions. So lets say Jack goes out and finds an awesome real estate deal that he knows should profit him about $40,000. He must decide if he should to this transaction with his own money or directed the Inherited Self Directed IRA to do the transaction. Jack looks at his own personal tax bracket and sees that he would have to pay about of that $40,000 out in federal and state income taxes. However if the ISDIRA were to complete the transaction and that he could take $20,000 out as a tax free distribution and leave $20,000 in the ISDIRA for future distribution or he could take the entire $40,000 out as a tax free distribution. Interesting so far? Lets take a look at one of the Grandchildren in this example. At the time of Grandpa Joes death, Granddaughter Susie is 8 and until she reaches age 18 and goes off to college, she

does not have a lot of expenses. So each year she receives a RMD based on her life expectancy and the balance of the ISDIRA at the time that she and her parents put away for a college fund. At the same time Grandpa Bob and Dad Jack keep investing Susies ISDIRA. At age 18 Susie goes off to college and uses the college fund they have set up for living expense and they wholesale four houses a year within the SDIRA and take the profit as tax free distributions to pay the college tuition and books Back to the question becomes when should you use a stretch or beneficiary IRA? How about whenever you can? What about other family? So you may say, great, I know real estate and my Dad would go for this. But I have brothers and sisters? One strategy would be to set up the Self Directed IRA for Grandma or Grandpa at a bank or other traditional company that has very low fees to maintain and just keep the $500 balances

for everyone. Then when it comes time to inherit there is not a whole heck of a lot of money sitting there to be inherited and thats when you convert them to Self-Directed and start investing them in real estate and taking distributions tax free. Please take a bit of time to do a bit more research on this. We would suggest starting on the internet with a search for Inherited IRA, Beneficiary IRA and Stretch IRA.

Some of the resources we found include:

Stretch IRA Strategy Merrill Lynch How To Stretch Out An IRA Forbes.com How to Stretch a Roth IRA to Last More Than 150 Years

2013 RE RE investment investment News News 25 25 2013

Wholesale

Wholesale Real Estate

Get Started Investing
I want to get into this real estate investing. Where should I start? This is a question that I often receive and while many factors should go into where you personally start like time and money, I quite often recommend getting your start in this business by learning how to wholesale properties. It does not take a bunch of money to wholesale a house and all the tasks needed in wholesaling should be learned in just about any other type of residential real estate investing. What is Wholesale Real Estate Investing? The Wholesale Real Estate Investor identifies a highly motivated seller, who needs to sell quickly or a property that has some sort of problem that makes it harder to sell, usually in need of repairs. The Wholesaler then constructs some sort of negotiated purchase of the property at a discount or favorable financing terms, then writes that up in a contract or purchase out right with the intention of quickly reselling to another real estate investor at wholesale prices. Where do I start? 1. Learn Your Market: A very wise Real Estate Investor I know said that any new real estate investor should take the time to look at a minimum of 100 properties BEFORE they ever make a single offer. This is very good advice and where I always tell the new investor to start, looking at houses and learning a market. You will want to learn things like where are the rental markets, where are the retail markets and where are the local investors buying houses. You will want to focus your efforts on areas where the cash investors are buying houses and where houses are actually available. For example if all the cash investor buyers in your market are looking for houses that retail in the $50,000 to $120,000 market, you would not want to waste your efforts in an area where homes retail for $30,000. Likewise if you are focusing your efforts on an area where not many homes are sold and when a house does come on the market it sells very quickly, the sellers in that area might not be highly motivated to take your below market offer. 2. Build Your Buyers List: If you talk to a business consultant about starting a business, they will tell you to complete a market analysis and find out if there is anyone out there interested in your product. Building a buyers list is your market analysis. You KNOW that real estate investors and landlords buy houses, thats a given, but what kind of houses do they want to buy, where do they want to buy and how much do they want to spend. 2.Dont get all hung up on building a huge list, you just need 4 or 5 quality cash buyers. So one or two trips to the local Real Estate Investment Group could help you find those buyers and then figure out what it is they are looking for and go find it for them. 3. Implement a Marketing Plan: Figure out what you are going to do to generate leads. Are you going to drive around and locate vacant houses and hang door knockers. Are you going to put signs on your cards and in high traffic areas. Are you going to post ads in online classifieds. Are you going to send direct mail. Are you going to target people who can refer you leads. Figure out one way to generate leads, implement it and then add in 2 or 3 other lead generation techniques. 3. Qualify Leads: Have a good form to collect much information from the seller about the deal as possible. You are more interested in the why they are selling than the details about the house. The details about the house are things you do need to know to crunch numbers, but you really need to know the sellers story to find out if it is a deal. 4. Due Diligence: This is going to mean doing research and learning two things: the value of the home and what it needs in repairs. Then crunch the rough numbers. Remember if the numbers do not work it is not a deal. Dont get emotionally caught up in the price, just because you want to help this or that person, if you cant make the numbers work, move on to the next deal. 5. Contract: Until you get the seller to sign a contract, you dont have anything to work with. If they are really motivated they are going to keep calling buyers until they get their house sold. So if you dont get the motivated seller tied up in

26

RE investment News 2013

Wholesale

a contract, the next person that comes to their home might beat you to the contract. You may want to work directly with your buyers list at first to get very comfortable with what they are looking for in a property. That way you will be putting together deals that your buyers are going to want to purchase. If you are not sure of numbers and putting a contract together, you may want to have one of your key buyers from your list to walk you through a few deals and show you want they are doing so you can understand how to do it. 7. Get Paid: You need to understand how you get paid. It may be that you write an option on the property and sell the option. Or you might write a purchase contract with a few clauses you can use to get out of the contract that you could then assign to your end buyer for a fee. Other investors who have either a little more funding available or who have negotiated a transaction with a large profit may want to actually pur-

chase the property and the resell. 8. Follow Up: For the seller leads that are not a deal right now today, you want to implement a follow up plan to call them in 30, 60, 90 and 120 days to see if their motivation has changed. It may be that you are the first low offer that they have received and they are not ready for that low of a price, but the 4th person who makes the same offer gets the deal. So you want to be the first person and the follow up so you are the 2nd offer, the 3rd offer and keep trying. 9. Qualify the leads. There may be a few leads that just are not a good fit for your investing model, so you may want to refer those leads to a real estate agent to list or to another investor whose investing model matches the deal. As you get more practiced you will want to find a way to monetize as many leads as you can by purchase now, referring out to agents and other investors and then following up with the non-motivated people on down the

road. 10. Grow Your Business: As you do a few deals, review what you do and what you have learned. Possibly get a friend who is also know in the business, to practice with and to hold each other accountable. Go over deals and see where you can improve. Also as you put profits in your pockets, reinvest these funds in things like marketing materials, technology and support so you can generate and evaluate more leads faster to do more deals. 11. Do it Again: Keep that marketing going. Many people in all kinds of businesses market for business then when they get a transaction they stop marketing as the do their transaction. Then they have to restart their marketing all over. The goal here is to find a balance of continual marketing that brings in a consistent, steady stream of leads. The steadier your lead stream the more consistent you are going to be at getting deals and making money.

Houses & Seller Financed Notes

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2013 RE investment News 27

Properties

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3015 Indiana Ave Kansas City, MO

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4 bed 1.5 bath

Livable 4 bdrm 1.5 bath home in Kansas City, MO, should rent for $850 a month

3128 Waverly Ave Kansas City, KS

$23,000

2 bed 1 bath

Freshly RehabbedBargain Home, Everythings New. Proposed Rent $650 a month

6736 South Benton Kansas City, MO

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4522 Forest Ave Kansas City, MO

$10,000

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4035 Paseo Blvd Kansas City, MO

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1415 N 27th St Kansas City, KS

$12,500

2 bed 1 bath

Cheap Home in Kansas City KS with 2 bdrm, Minor Repairs Needed. CheapMUST SELL

28 28 RE investment News 2013 RE investment News 2013

MAREI
Mid-America Association of Real Estate Investors

Market Your Properties

Members can Market Investment Properties Through the MAREI website

Property Listings: log in and post properties on the MAREI property listing page with complete details, photos, contact information and links to your website. E-Updates: properties listed in the property listing pages are included in our bi-weekly e-update emails that go out to over 3500 local investors. Newsletter: properties listed in the property listing pages are included in this newsletter once a month. This newsletter goes out via email to 3500 local investors and to our various social media outlets. Member Forums: members receive an email of all posts through the forum. Log in and post a classified for your property in the member forums Benefit included in all Membership Plans - Join Today!

2013 RE investment News 2013 RE investment News 29 29

Events

Monthly Meetings
Theres not a better investment in yourself that you could make!
At our monthly meetings we host guest speakers, panels and roundtable discussions with industry experts providing insightful and current information for attendees. MAREI meetings are an essential tool for building a comprehensive team for real estate professionals. MAREI works to keep its members up -to-date with the latest information on the real estate industry. MAREI has built relationships with members and the community at large who provide our members with information they need to be successful in todays world. We are the place to go for the information you need from the novice to the experienced Real Estate Investor. Monthly meetings are the best place to connect and build relationships with like -minded people and learn a thing or two along the way.

MAREI MEMBERSHIP MEETINGS HELD AT: Northland

(1st Thursday of the Month) North Kansas City Community Center 1999 Iron Street North Kansas City, MO (816) 300-0433 MAREInet.com/KCNorth

Southland
(2nd Tuesday of the Month) Career Education Systems/ In Mall 8600 Ward Parkway, Ste 2080 Kansas City, MO (816) 444-7277 MAREInet.com/KCSouth
More Education & Networking Opportunities MAREInet.com/Calendar

Upcoming Dates
May 2nd Meeting: Self Directed IRAs: Get all your Self Directed IRA Questions answered with Expert Patrick
Hagen with the Entrust Group. Plus Haves and Wants and Networking!

May 14th Meeting: IRA Case Studies: Real live actual deals completed by real live MAREI members. Find out
how to utilize your Self Directed IRA in your Investing Business. Plus Networking

May 31st to Jun 2nd Bootcamp: Big Money from Bad Debt. 3 Day Bootcamp in St Louis with Eddie Speed
and NoteSchool on profiting from non -performing loans.
Guest Pass is available for first time attendees to MAREI. If you have attended before, explore membership options or pay guest fee.

MAREI
30

Mid-America Association of Real Estate Investors

GUEST PASS
A Real Estate Community

Name: ______________________________ Date: _______________________________ Email: _______________________________ Source: ______________________________ For first time guest to visit meeting.

RE investment News 2013

LET US HELP KEEP PROPERTIES MARKETABLE

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Finishing Touch Builder Support Program

Comprehensive Program for your Home Buyers: Welcome Kits, Discount Cards, and Model Home Programs.

EXCLUSIVE MEMBER DISCOUNT

MAREI as a member of National REIA is able to bring our members the exclusive Sherwin William Discount Card that offers unbeatable savings on paint, applicators, floorcovering, paint sundries, wall covering, spray equipment, and even window treatments! Members look for your discount card in your members Benefit Package or download from the Members Discount Section of the MAREI Member Library.

ASK SHERWIN WILLIAMS Find out more about all these products and services offered by Sherwin Williams plus their Chip It Online Color Matcher, ColorSnap Studio for iPad and their Paint Pro Alerts by Text at www.Sherwin-Williams.com .

I nvestment News

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2013 RE investment News 31

I n c r e a s e Yo u r P r o f i t a b i l i t y

Join Mid-America Association of Real Estate Investors

Members receive a complimentary e-subscription to RE Investment News. Become a Part of a Local, State and National Network that Supports YOUR Industry!
MAREI MEMBERSHIP AUTOMATICALLY GIVES YOU NATIONAL REIA MEMBERSHIP MAREI is the local Chapter of National Real Estate Investors Association (National REIA), a federation of local associations through out the United States representing 40,000 members across the U.S. LEGISLATIVE MONITORING & ADVOCACY MAREI monitors and promotes the enactment and enforcement of local, state and federal laws and regulations beneficial to the real estate industry. Support and create local and national advocacy initiatives and grass roots mobilization. EDUCATIONAL SEMINAR AND COURSES MAREI offers all National REIA Programs locally. Professional Housing Provider Designation National REIA University MAREI also offers local training events 2 Monthly Meetings a Month Weekend Workshops and Full Day Seminars Partnering with National Education Events locally and across the country. MAREI WEBSITE MAREI maintains a website that includes our event calendar, service provider list, government affairs updates, articles of interest and member properties for sale. All members are able to interact through our website with member forums. MAREI SOCIAL MEDIA MAREI maintains active social media spaces on Facebook, LinkedIn and Google+ for the benefit of members to interact with each other and the public at large. Build your circle of influence by interacting on our social media pages.
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NETWORKING & BUSINESS BUILDING MAREI holds a variety of events that enable members to interact with other industry professionals, develop contact and gain knowledge that helps them grow their business. MAREIs calendar also includes a variety of events held by members and outside groups that are open to the general public. NATIONAL REIA BENEFITS INCLUDE National Cruise: Network and learn about new techniques on the National REIA annual cruise. Industry Resources: Brining member benefits to the national buying power of our local associations. I went to the MAREI meeting and was very impressed with the quality of people I met, as well as the content that was presented. Thank you for putting that on, and I look forward to next months meeting! Joe McDonald, Real Estate Investor The main reason for joining was to meet with other Real Estate Investors in the Kansas City area. Not only have we done that but we have also received access to services from other MAREI members, among them rehab insurance and a general contractor. Tami and Kerry Hardinger, RE Investors I cant afford to let my membership expire! It pays for itself. I think you have really done a good thing creating MAREI. It is a very important tool. Scott Shore, Real Estate Investor / Contractor

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