Lock, Load and Hold

“Lock, Load and Hold,” says Bill Spain of The Prudential Partners Companies. “If this market teaches anything, it is that real estate assets are for a long term hold not trading.”

There are a number well-documented failures of real estate investment companies both here in the US and around the world: Cay Clubs and Mile High Capital in the US, Inside Track (UK) and Blue Chip in Australia and New Zealand. There are useful lessons to be gained.

Each one of these companies had a model that followed a "get rich" pitch disguised as education that concluded by recommending the buyer quickly “invest and trade” in properties that were typically their properties or properties where they earned extra commissions. Borrow heavily on existing home equity and consolidate investments in properties or instruments suggested by them.

This Edu-Sell model that “slams” the unsuspecting into over-priced real estate is counter to good investing as it discourages consumer due diligence. It’s a used car sales model.

These investors were motivated to do the right thing but by the wrong people often with questionable product and bogus valuations.

Most real estate investment success stories are long term holds that progressively build wealth over time. It is no accident that the Invaluable Investor Study found that younger adults buying their first homes out of college were doing so with the recurring use and investment goals of long term ownership.

BLUE CHIPS, INSIDER TRACKS AND ELITE INNER CIRCLES
Beware the investor club that is designed appeal to investor vanity and elitism. “You are special,” (as in, “specially targeted to be fleeced.”)

One of the most visible investment promoters was Cay Clubs lead by the “sales god of hard sell,” Ricky Stokes. Stokes presented himself as a larger than life character with an attentive entourage and “too much of everything.”

The sales strategy usual begins with a seminar pitching the possibilities of “wild wealth with little work.” Then there is the hard close. As a follower of these events I am dumb-founded by how so many people are willing to give serious money to people they do not know and have even less knowledge about their investment credentials.

A newer real estate investment phenomenon being imported to the US designed to keep these deals from legal scrutiny. Membership of this “exclusive club” means the club member agrees to certain conditions and property offers, they are assumed to accept on face value.

These shams almost all require valuations exceed the market as that is how the inflated and often undisclosed commissions, questionable discounts and give backs occur. If a traditional lender is involved and these not disclosed, this is almost surely bank fraud so keep an eye out for “the black Suburbans and perp jewelry!”

HEAVY RETURNS? LIGHT REGULATION!
The bigger lesson is if consumers are to take advantage of the real returns in the relatively lightly regulated world of third party real estate investment, there needs to be accepted standards of fiduciary behavior and practice. Until this happens significant portions of the real estate investment business will remain the Wild West, open to opportunists with bogus insider clubs, slick presentations and shoddy or downright fraudulent execution.

The latest gimmick is “the free deposit money” otherwise known as “a loan” that is unsurprisingly priced into the total cost of the property. Cash back at closing is illegal in most states if there is a loan involved and possibly a shonky valuation, so any refund, disclosed or not, maybe a violation of Federal banking laws.

INVESTMENT QUALIFICATION RULES
If investment property does not meet very simple success rules like:
1. Walk in equity?
2. Positive Cashflow?
3. And a predictable exist strategy, it may not be for you.

Miss one of these answers and the question becomes, is the recommended investment designed for you or the promoter? Good real estate investment management advisors know these rules and adhere to them.

One “line in the sand” for Personal Real Estate Investor Magazine when it comes to real estate investment advisors is that the companies that sell/promote these opportunities have a direct hand and in managing the properties they recommend an investor buy. In this way the sales representations cannot get out ahead of the property management reality.

EXPECTATIONS MET?
Having watched and done business with real estate investment promoters for the last four years, there are a number of characteristics publishers see that translate into meeting customer expectations.
1. How do they answer their phone emails and inquiries?
2. Who answers the phone and do they treat the caller as a valuable customer or prospect.
(Publisher’s Note: When a publisher calls a company it is normally because we are interested in the company for one of two things: We want to sell advertising or include the company in editorial. The publisher of a magazine has a modicum of authority and may direct editorial strategy. We can decide to write about anyone we wish. Most sophisticated companies understand this and have conscious media outreach campaigns to magazines that cover their interest and win a publisher’s attention as often ink follows. Few in the real estate investment business understand this so as a generalization a call from the press is handled clumsily, even though it may mean “free ink.” By extension it is easy to assume a call from a dissatisfied customer with little or no leverage will be handled equally dismissively? In 20 years of publishing this has proven as an almost absolute rule.)
3. Who sets sales expectations
4. Are investment property sales expectations tied to property management reality?
Our line in the sand separating investment promoters from investment managers is becoming an interest in long term client investment viability. Less than this is “fire (sell) and forget.”

Who Meets the Model?
Personal Real Estate Investor Magazine began in Arizona and is now distributed nationally so we are looking to identify property managers that are allied with this sales and service model as this most closely resembles the full service brokerage model of Wall St. We believe there is a new generation of property managers that are evolving to serve successful do-it-yourself and hands off investors.

Spain of Provident Partners says, “this is for the long term and depends on a pyramid of trust built from the day a client buys their first house in college to when clients are reallocating 401K money into real estate. Today there are two classes of clients, those who got into real estate for the right reasons and planned for the long term and those who jumped in because it was “fashionable.” We help these clients with counseling and restructuring where we can to save those dreams of security,” says Spain. The result of a happy client is a repeat client that will do business with us for years.”

Our sample of companies that we know and like who specialize in one of the hottest markets, even with current economics, are:

Bennett Property Management
Brewer Caldwell
GoRenter.com
Keith Blue Investments
Provident Partners
RESOURCES

1. Investor Sales Management

GoInvestor.com – GoRenter.com
GoInvestor.com
(602)512-8300

International Capital Group
www.ICGRE.com
415-927-7504

Foundations Investment Group
www.figpotential.com
760-969-6770 CA – 602-343-7416 AZ



These companies begin with a client focus and then arrange transaction that meets the client investment goals.

2. Investor focus real estate companies

Brewer Caldwell Property Management
www.brewercaldwell.com
Phoenix & Tucson -480-834-9200

Genesis Financial & Real Estate Services
www.genfinre.com
480-775-9100

Keith Blue
www.keithblue.com
480-753-4435

Provident Partners
www.providentpartnerscompanies.com
480-314-1414

Pruven Real Estate & Investment
www.pruven.org
623-694-0529