Ca$hFlow

EXPRESS
No. 1 / Vol. 1 2012

Passive Income for Today & Tomorrow

Learn How to Create Stock Market Wealth Today

Investors Manifest a Cashflow Mindset

of real estate investing, trading stocks, building a strong MLM business, etc. You will not succeed. Its like trying to grow corn in a field of sand. The seeds will not germinate and youll end up with can remember my first time playnext to nothing to harvest in the fall. ing Robert Kiyosakis Cashflow How, you ask, does this relate to the board game about eight years Cashflow game? ago and how it Well, after playing started a chain the game a bunch of events that continues of times I learned to this day. What stuck the how to of with me most was not the getting out of the how to of playing the Rat Race, but I still game but the people that was not able to take I met at the event. These what I learned from were not like the normal the game and apply people in my life that Carver (left) and it to my real-life fiwould tell me I was crazy Dougthe Cashflow gameChris Hanson display to group members. nancial situation. for trying to start my own However, I realreal estate business or ized that the time I was spending with my that financial freedom was impossible new Cashflow group friends was changwithout a steady well-paying job. The ing the way I thought about money and people I met were excited about learnmy financial future. I no longer viewed ing and expanding their knowledge on the stock market as a giant rigged syshow to achieve financial freedom. They tem for losing money. I began to see the were active investors in real estate and tremendous opportunities in the sinking the stock market. They were small busireal estate market even as many people ness owners with a passion and vision I knew were losing money on deals that for creating more financial success in had gone bad. Overall, I saw for the first their lives. Overall, they had a mindset time opportunities all around me to crefor prosperity that I like to call a Cashate wealth even as the newspapers talked flow mindset. constantly of the Great Recession. A lot of people complain that Robert Today as a result of my ongoing inKiyosaki in his books and programs does volvement playing and organizing local not provide the specific details on how Cashflow events in Southern California, people should implement his strategies I have a thriving real estate investing to create financial freedom. Truth is he business. It was after speaking with one never spells out a step-by-step how to of my Cashflow friends who was a real for building long-term financial freedom. estate investor that I was encouraged to What he does teach is far more imporstart wholesaling distressed properties. It tant, and that is how to create a Cashturned out to be a great decision. More flow mindset. Kiyosaki describes it in recently, Ive begun to learn how to suchis book Cashflow Quadrant moving cessfully trade in the stock market using your mindset from the E (employee) and options. As a self-proclaimed real estate S (self-employed) side of his Cashflow zealot, I never would have dreamed of quadrant to the B (business owner) and investing in the equity markets. HowevI (investor) side of the quadrant. In layer, after playing Cashflow 202 with my mans terms, its the mental shift from Cashflow friend who is an active trader someone who seeks financial security and learning about his trading system, I at all costs to someone who can confiwas able to see the opportunity before dently and knowledgably take measured me. I now fully expect that investing in risks. This is a simplistic definition but a the markets will be a huge part of my fuvery important one to understand. Withture financial success in addition to my out the correct mindset, it really doesnt matter how much you learn the how to By Doug Carver Organizer Pasadena and Burbank Cashflow Meetup Groups

FREE

I
Yes!
By Tyrone Jackson TheWealthyInvestor.net You can be rich from owning real estate and trading stocks. Weve all heard the story of the little old lady who lived modestly and worked as a school teacher for forty years. She never earned more than $35,000 per year, owned a modest home, and shared her life with two cats. Once she died, her relatives discovered a $150,000 life insurance policy and $1.5 million in stocks that she left to the elementary schools scholarship fund. The national media loves to air these stories. It seems there are several old ladies who fit this seemly unique profile year after year. How could that be? Investing in stocks is not the worlds most challenging task. In fact, at its core, its very simple. The truth is that the stock market creates millionaires every year. Investing in stocks, with wealth in mind, is easier than you think. Invest In What You Know Wanna be a good stock market investor? Keep it simple and start with companies and products with which you are familiar. If youve ever opened a can of Coca Cola on a hot summer day and felt refreshed and invigorated, why not own the stock? Its a product you know with a story you understand. When I say a story you understand, I mean to say that you understand how the Coca Cola Corporation makes money, or to express it in Wall Street terms, you understand how the company earns revenue. The more bottles and cans of Coke that Coca Cola sells around the world each day, the larger the companys profit. Over the past ten years Coke stock (symbol KO) has risen from around $40 per share to a high of $71 $1000 invested in Coca Cola stock ten years ago would be worth $4,100 today; $10,000 invested in Coca Cola stock would be worth $41,000 today. If you spend more than $100 per year eating fast food, why not own the stock? Over the past ten years McDonalds stock (symbol MCD) has risen from a low of $15 per share to a high of $95 per share.
Continued on pg. 12

Continued on pg. 2

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Will Big Money Run

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Your wealth is in your thinking is the mantra trumpeted most
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great financial opportunity does not stay under the radar for long. The side road with less traffic gets crowded pretty soon as drivers hear about it and jump off the freeway. High yield cash flow real estate Investments may be headed for a similar fate. Retail investors have had this opportunity staring them in the face for a while, and many have taken advantage of it. Retirees or people about to retire, individuals suffering from market gyration trauma and high-net-worth individuals seeking portfolio diversification have all been adding cashflow residential real estate to their portfolio. So what changed? Like all markets this one is moving beyond the early adopter stage. And the factors that have made this a great investment opportunity are compounding. There are more distressed assets hitting the market with a larger shadow inventory waiting in the wings. Morgan Stanley just published

and-hold single-family real estate. This has caught the attention of big money: funds, institutional investors and high-net worth groups. Distributed single-family

real estate investments are quickly becoming the unapartment portfolios of these funds.

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- Call Or Visit Our Website for Upcoming Educational Training -

1 Create Stock Market Wealth 1 Have a Cashflow Mindset

contents
9

6 Cash Versus Cashflow 7 Calculate Your ROI 8 The Nested Action Cycle Investor Spotlight 10 Resource Directory 11 Inside Our Expos

2 Will Big Money Run Away? 3 Six Tips for Faster Wealth 4 Focus Versus Diversification 5 Jump Start Success

Our Goal is to Educate, Motivate & Inspire New Investors

Realty411

FOUNDER Linda Pliagas pliagas@msn.com EDITORIAL STAFF Lori Peebles Anita Cooper Andre Sanchez Brianna Bertrand COPY EDITOR Anita Cooper PHOTOGRAPHERS Sam Green John DeCindis PRODUCTION Augusto Meneses WEB DESIGN Diggs Design

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CashFlow Express is published in Santa Barbara County by Manifest Media Partners. Copyright 2007-2012. All Rights Reserved. Reproduction without permission is strictly prohibited. The opinions expressed by writers and columnists are not endorsed by the publishers and/or editorial staff. Before investing in stocks, bonds, mutual funds, gold, other securities and commodities and/or real estate, seek the advisement of a trusted financial adviser, attorney or tax consultant. Investing is risky business and may result in loss of capital. Please invest responsibly.
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So what should the retail investor do? The retail investor should take action. This is still a fragmented market that allows an investor to own one, two or three properties. They cannot do this in multifamily commercial real estate other than by investment in a fund or a REIT. But its important that investors act prudently. This means not investing in their own backyard favoring proximity over return, not investing with flyby-night property sellers who peddle high return properties and then disappear leaving the investor holding the bag. And not doing thorough due diligence on the area, the property and the provider. The HomeUnion Services team are ready to assist new investors. Finally, they should a report that suggests the U.S. is moving not buy the property from one entity and towards a rentership society with home have another entity manage their investownership declining to 59%. A recent ment. In other words, the retail investor Mortgage Bankers Association study says has to do the very things that the large that home prices may have hit bottom. funds do before they invest. This means that investors have a growing number of properties that they can buy Discover a whole new way to unleash fullycheaply and then select from a large pool managed, high-income cashflow real estate of qualified renters. It all adds up to stable investments, call (866)732-3220 or email: high yields for people investing in buy- cashflow@HomeUnionServices.com
CashFlow Mindset, pg. 1

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real estate activities. Robert Kiyosakis Cashflow 101 and 202 are great boardgames to expand your financial intelligence, but I hope you can now see they are the basis for so much more. They create a framework for building lasting relationships with people who have a Cashflow mindset. These are people who are ac-

tively pursuing financial freedom and see the world full of financial opportunity and money-making possibilities. By hanging out with these folks at your local Cashflow group, I know you to will begin to develop your own Cashflow mindset and begin to see real changes in your financial future.

CashFlow Express Page 2

publishers note

6 KEYS FOR

financial freedom
vestment. For example, if you are a first-time home buyer (or even an empty nester), be open to the idea of purchasing a duplex or other multifamily property instead of a typical single family residence. This way, you can live in one unit and rent out the other for income. As a landlord myself, I know its not easy to live near tenants, but if you screen your prospective renters correctly, it will reduce future nightmares. Be smart, let other people pay off your mortgage! You can always save money and then buy another home later, after you build a passive income stream.

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veryone yearns for abundance and financial security, it is a human desire we all share. It is a motivation ingrained in us as part of our survival mechanism. While we all have this in common, only a limited few ever actually reach true financial security. The statistics can be depressing. According to the Retirement Confidence Survey (2006), 53% of Americans have less than $25,000 in retirement savings. Plus, 30% mistakenly believe that they 2. Increase Your Formal AND Finanwill only need $250,000 or less in total cial Education. Did you know that earnretirement savings. ing a bachelors degree can increase your One of the problems in our society is income by $25,000 annually? Plus, it gets a lack of discipline in regards to saving. better: According to Census Data, earning In fact, a recent study by Harris Interac- a graduate degree will net a person antive found that 57% of households do not other $20,000 per year thats $45,000 even have a budget (2009 Financial Lit- more, year after year! Now, dont comeracy Study). plain about the high cost of education or In my 20 year plus career in journalism, how hard it is to go back to school. My I have interviewed many successful and former neighbor was her 50s, running wealthy people, from her own business and celebrities to company attending graduate CEOs. Undoubtedly, part school part-time. Its of the perk to this profesnever to late! sion was being able to Its also important unlock their secrets. Ive to keep in mind that compiled a list of imporuniversities do NOT tant guidelines, which teach people how to were followed by many get rich. So on top of of those who transformed your formal educatheir mediocre life and tion, start taking classaverage paychecks into Linda with real estate mogul & educator es about investing. Dave Lindahl (www.REmentor.com) extraordinary wealth. Financial classes are These steps are not taught at most adult easy to follow, but they will get you started schools and colleges for a nominal fee. on a disciplined path and lead you toward I have also attended real estate seminars creating a wealth-conscious mindset. for many years and have learned great tips from top mentors, such as Dave Lindahl. 1. Reduce Your Household Expenses. Living in California, we have some of 3. Be an Aggressive/Conservative Inthe highest real estate prices in the na- vestor. Although it may sound like an tion so reducing living costs can be a sac- oxymoron to be both aggressive yet conrifice. One move that I have seen many servative, it isnt. Its all about planning. real estate moguls make is that they start Continued on pg. 9 off their portfolio with a multifamily in-

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CashFlow Express Page 3

A CPA/Investors Analysis
By Mathew Owens, CPA www.ocgproperties.com

Focus vs. Diversification

ost of what h a s been drilled into our heads about investing in mutual funds, CDs paying down our mortgage and diversifying is nothing but smoke and mirrors. The financial services companies like Fidelity, Charles Schwab and financial planners are the ones making all of the money. The problem is that most people have very little financial education in order to invest for retirement properly so they hand over their money to someone they HOPE will have the right knowledge base to safely increase their wealth. The problem is that these investment types are HUGELY RISKY. These types of asset classes, paper assets, do not allow the investor control. Then during market crashes, all most investors can do is watch helplessly as their wealth gets whipped out along with their financial security. If you have more control over your assets then you are not affected as much by market crashes. For example, if you invest in assets like real estate that produce cash flow through rental income after all of your expenses are covered, if the real estate market and stock market crash you are still in great shape. While everything is crashing you are still receiving your rents and do not need to sell the asset. In-

vesting in non-paper assets (i.e. not mutual funds or CDs) allows you to use leverage as well, which increases your wealth by making your money work harder for you. Most financial planners will tell you that using leverage increases risk. That is not always the case if you have the right financial knowledge to control the investment and enable safety controls on your leverage use. They will also tell you that real estate is a risky investment. The reason for that is that financial planners typically lack the financial knowledge about how to control real estate and make it profitable. Most financial planners put people into paper assets where the investor does not have control and therefore it is hugely risky to use leverage. In real estate investments the value of the property should not be based on the opinion of an appraiser but on the income that it produces through rents. The value of the rental real estate is dependent on jobs, salaries, demographics, local industry, and supply and demand of affordable housing. In a housing crash, the demand for rental units often goes up, which means rents increase causing the value of your property to increase. You can control rental real estate and which geographic areas you invest in unlike paper assets that allow no control. Financial intelligence is the key to increasing

your control over your investments. Its extremely important to continue to increase your financial intelligence in order to protect yourself. Unfortunately, financial intelligence is not taught in schools because such a large portion of the population, including teachers and politicians, do not have a very high financial IQ. When financial advisors say that an increase in returns means an increase in risk, they are right when speaking about the paper assets they recommend to investors that they make major commissions on BEFORE showing performance. They are wrong when speaking for all assets. Financial advisors are simply salespeople. Most people invest in paper assets such as

Diversification is not required if a person knows what they are doing. So if diversification is a protection against ignorance then when you diversify whos ignorance are you protecting yourself from? Your ignorance and your financial advisors ignorance? Focus, not diversification, is the key to more sophisticated leverage, higher returns, and lower risk. The point I am trying to make is that if you increase your financial intelligence about specific asset classes, like real estate, you will learn how to control your own financial security and wealth creation, instead of relying on some financial advisor who probably does not know what they are doing. Look at the massive

Most financial advisors recommend diversification but they do not really diversify.
savings, stocks, bonds, mutual funds and index funds because they do not want to take responsibility and control over their financial well being. All they want is to turn their money over to an investment advisor who hopefully does a good job. Out of sight, out of mind. If people want more control, the first thing they need to do is increase their financial intelligence and, hopefully increase their financial controls and leverage ratios. Most financial advisors recommend diversification but they do not really diversify. First they only invest your money in one asset class, paper assets. Second, mutual funds are already diversified investments which are invested in a pool of good and bad stocks which does not increase the value or decrease the risk of the investments. Professional investors DO NOT diversify. Warren Buffett put it perfectly when he said, Diversification is a protection against ignorance. wealth transfer that just occurred when the market crashed while bailing out the banks (i.e. the top 1% wealthy individuals increased their wealth while the middle class and poor decreased in wealth). This happened because most people do not have the financial intelligence to protect themselves. Starting to get financially educated is the key to wealth creation. So get to the bookstore and start reading. Take classes on financial intelligence and ways to increase wealth. It is key to your success and preserving your wealth so that financial predators (i.e. the government, financial advisors, and large mutual fund peddling companies) do not take all of your wealth away by investing it in asset classes that do not allow you any controls over those investments. To contact Mathew Owens, please see OCG Properties advertisement below.

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CashFlow Express Page 4

Jump Start a New Year of Success

By Geraldine Barry Founder of SJREI and REI Voice

Cash vs. Cashflow, pg. 6

ts a New Year time to reevaluate, improve and refine our daily habits and actions for success. Small, incremental changes can reap big rewards in terms of productivity and business opportunities. As a planner myself, I understand the significance of establishing goals to create new outcomes. If we can break those down into smaller more manageable components we can achieve results more quickly. Here are some things to consider as you plan for another year: If you dont like things in your life you have the power to change them by simply changing yourself things dont change, but you can! Any little modification can make a difference an introduction of something new, an exercise routine, a daily reading schedule, journaling, or simply bonding with your family.

tic but now as I grow and learn to navigate this game called life, I have come to embrace this gift that I have been blessed with every day. How do I do that? I start my day with a prayer of gratitude naming the things that I am grateful for my family, my warm cozy home, my friends, a hot cup of tea, a great book, quiet time to think, process or write, my warm SJREI business community. By appreciating these things, and so many other seemingly trivial things I am happier, more content and I realize that what I appreciate grows more secure, and becomes more defined in my life. Try it I think you will like it too.

yourself, this is a process it does not happen over-night. Lastly, live in the moment whatever you are doing give it 100% of your attention. Walking the dog, having tea with a friend, working, talking to your children be present, enjoy that moment. Your family and friends will love you for this level of attention very few people can truly do this. Be wary of electronics they can be thieves of our time, and our spirit...the things that renew you are not material they are love, companionship, friendship, family, community, giving back. Be brave, do whatever it takes to accomplish new results Make 2012 your best year yet! Geraldine Barry is founder and president of SJREI Association the premier educational and networking association for real estate investors in the Bay area. Under Geraldines leadership SJREI has grown from a half-dozen investors to a vibrant three chapter organization with over 400 investors attending monthly meetings. In addition to leading SJREI, Geraldine is the frequent host of the radio program, Going Beyond Real Estate, a regular guest on the nationally broadcasted NTDTV, publisher of award winning publication REI Voice Magazine, and producer of the annual Bay Area Real Estate Expo. Geraldine resides in Silicon Valley, and is the proud mother of Colin and Claire, her two children. Contact Geraldine Barry at: sjrei.geraldine@gmail.com

ating $10,000 of monthly cashflow? If you get nothing from this article, please get this. First, if you ever expect to create wealth and experience any sort of financial independence while youre still young enough to enjoy it, youll need to adopt, embrace and implement a residual mindset. Second, dont get stopped in your pursuit of residual income by confusing the value of cash and cashflow. Making the transition from accumulator to residual-incomer and creating wealth can also take some time, but by maintaing a focus on cashflow, the time it takes will be nothing in the remote vicinity of the 40 year traditional alternative. Matt Theriault is an author, entrepreneur and host of the fastest growing real estate investing podcast on iTunes. Visit www. EpicProfessionals.com for more information and to retrieve his free real estate investing course How to Do Deals - No Money Required.

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There are people who drag us down nay sayers if you will. Remove those people from your life. If they are your family members, show them a new way to be by mirroring for them your great new attitude. My Dad shared with me How you present yourself to the world (he ran a company, and had a family of makes a difference, how you look, how six daughters, two sons and a wife!) that you speak, how you interact with others, sometimes he survived by psychologiwho you interact with, what you read, cally absenting himself from negative what you spend your time doing. What situations. iscover the lowest-risk, highest-quality residential investment properties in the How do do that? Tune them is your message to the world? Using sophisticated methodology,youbest investment properties areout, I am here, country. the capitulate, get away from secure the ready to take on a new challenge an experienced investor and rehabbed beautifully to situations, carefully selected by and I want to change the best tenants. With competent property management, and instant cashdont propel world in a positive people and attitudes that ow, your you forward. investment pays worry-free dividends from day one. Remember to be gentle as way... it is your choice. I have always been incredibly optimis- you work on this and have patience with

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iscover the lowest-risk, highest-quality residential investment properties in the country. Using sophisticated methodology, the best investment properties are carefully selected by an experienced investor and rehabbed beautifully to secure the www.realty411guide.com | Vol. 4 No. 1 2011 best tenants. With competent property management, and instant cash ow, your investment pays worry-free dividends from day one.

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ost of America was raised in a household where the road to wealth and success was paved with the ideology of going to school, getting good grades, getting a good job, investing 10% of your income, maxing out the 401(k), cutting up credit cards and clipping coupons. If this is you, STOP IT! That system is broken. Its this traditional road to success that could potentially be the

to travel. For if someday doesnt arrive, its not like you can go back and try again. Youre essentially at the end of lifes road once you discover if it worked for you or not. And what if it doesnt? Then what?! There is a road less traveled that deserves your consideration. Additionally, you might want to know that its faster and easier, as well. Ill prove it to you. The alternative road exists within a residual mindset. The group that chooses this road lives life quite differently. They

are just squeaking by and only 1% of the population actually reaches the age of 65 wealthy. A residual mindset is what this wealthy 1% has in common. It has been said that success leaves clues. In this context, however, success is leaving evidence, isnt it? As more and more studies and research are conducted, the concept of residual income and its wealth-creating power are becoming more common knowledge by the day. That being the case, one has to

flow when youve got $30,000 of cash staring you in the face? I agree, theres nothing sexy about $300, it has little value today. It might buy you a pair of designer jeans or a fancy dinner and a bottle of wine. However, $300 of cashflow to the residual-incomer has tremendous value. You see, as Im writing this article, the financial institution ING is advertising a 1% interest rate on their money market account. I choose to use ING as an example because its just about the most gener-

How to Create Wealth: Cash vs. Cashflow

By Matt Theriault, EpicRealEstateInvesting.com and www.REICcashflow.com demise of society as we know it, if not the entire country itself. Its no secret that the current economy is a trying one for most. However, for some, its the most profitable and successful economy theyve ever experienced, or will ever experience again. Why are some succeeding today while most are not? What road are they traveling? What are they doing differently? I could draw your attention to a number of differences between the two groups actions, yet what ultimately separates the two is little more than mindset. Those traveling that antiquated traditional road to success possess an accumulation mindset. This group wakes up every day and goes to work for their money. Their focus, whether consciously or subconsciously, is placed on exchanging time for dollars with the hopes at some point in their life their income will rise, and their investments will perform, to a level that someday they will have accumulated enough to retire. Sure, this mindset has worked for some, but its failing the vast majority of our population. The reason being is that this vast majority doesnt start accumulating (i.e. saving, investing) early enough or possess the discipline to follow through to the end. Accumulation takes time, a lot of time. This entire approach to creating wealth is based on a principle called someday. Unfortunately, someday never seems to arrive. And for the few of which someday does arrive, its a 40 to 50 year journey. Contrary to the safe label this road to wealth has been given, its a risky road wonder why more people dont apply this knowledge once it has been learned. Its simple, actually. People looking to make the transition from accumulator to residual incomer confuse cash and cashflow. Within the real estate investing arena, this confusion can be clearly illustrated, and heres how... One, among many, of the attractive attributes real estate investing possesses is that it can produce two types of income. Real estate can produce large amounts of cash through short term strategies like fix-and-flip and wholesaling. Real estate can also produce smaller amounts of monthly cashflow through longer term strategies like buy-and-hold and lease optioning. The accumulator looking to transition to residual-incomer will frequently, if not always, choose a $30,000 fix-and-flip cash pay out over a $300 a month buy-and-hold cashflow. Although they have the greatest intentions of becoming a residual-incomer, their accumulation mindset is so ingrained that they cant resist the big cash pay outs real estate offers. Its their mindset that prevents them from recognizing the true value of $300 of monthly cashflow. And because the accumulator tragically confuses $300 of cash with $300 of cashflow, they continue to exchange time for dollars always in search of that next flip and never take that first step toward becoming a residualincomer. Can you blame them, though? Its easy to get caught up in the moment, right? Whats so appealing about $300 of cashous savings account available today to the average consumer. So Ill ask you, How much cash would you need to deposit into that ING account to generate $300 of monthly cashflow?

$360,000!
An ING money market account balance of $360,000 would have to be maintained to generate $300 of monthly cashflow. In summary, $300 of cash is worth $300 of cash, but $300 of monthly cashflow is worth $360,000 of cash sitting in the most generous savings account available today. Do you get the difference now? And heres more... Which is a longer, not to mention more more difficult, road to travel? Accumulating $360,000 of cash? Or, creating $300 a month of cashflow? You know your situation, skills and resources better than I do, but creating $300 a month of cashflow not only sounds faster and easier, it is do-able. Its realistic, as opposed to the traditional-get-rich-slow program that has the country by the balls. Alright, alright... I can hear it now. No, $300 of cashflow isnt going to make a dramatic difference in your lifestyle. So what would? $5,000 a month? $10,000 a month? By performing the same math with todays interest rates, you would need to accumulate and deposit $12,000,000 of cash into that ING account to create $10,000 a month of cashflow. Again, which is a longer more difficult road? Accumulating $12,000,000 of cash? Or, creContinued on pg. 5

wake up every day with a focus of creating or managing systems to work for their money as opposed to they themselves working for their money. Their focus is placed on creating residual income, whether through a business system or their money earning money itself. They know that once their residual income exceeds their expenses, the accumulation of assets and the creation of wealth will essentially happen automatically whether they get up and go to work or not; And it doesnt take 40 years for wealth to be created in this manner, either... far from it. Contrary to the risky label this road to wealth is commonly given, it is the road that gives you the greatest shot at creating wealth. Maybe this is news to you, maybe its something youve known for a while or maybe its just plain and simple common sense. Regardless of where you stand, one would be hard-pressed to formulate a solid argument against it. The writing is on the wall. Depending on which source you reference, the traditional road is failing 90-95% of the country, 4%

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Calculate Your ROI Return On Investment

tenant in place. If you did not have a leased tenant in place, you would consider this calculation as if it were part of a pro forma. You would have to consider things like Vacancy Rates, Rent Bumps, and Tax Consequences and deduct them from your Gross Rental Income. Here is what this calculation looks like: Gross Rental Rate + $12,000 Taxes - $1,000 Insurance - $500 Property Management - $1600 Maintenance Reserve - $360 Net Operating Income = $8,540 Thats it. Simple right? When you hear talk about Cashflow, it is your NOI that we are talking about. So, we have identified our Gross Rental Rate. and our Net Operating income or Cashflow. Lets go ahead and calculate our actual ROI for the year assuming that the pur$8540 / $85,000 = .1005

written by

eturn on investment. Thats the whole point right? Being able to accurately determine what your dollar is producing is a critical step. Not just after youve made your investment, but it is also a critical step in making decisions on future investments. For instance, accurately predicting the return on an all-cash purchase, versus one that is financed can produce very stark results. Lets take a look at a typical incomeproducing residential property. The first step is to identify all the variables we are working with. In this example, we are calculating a rate of return over the course of one year. Net Operating Income (NOI) Every month, you get a happy rent check in the mail. This is your Gross Rental Income. Now, lets take a look at the cost of your investment. For most properties, these are pretty standard and easy to identify. For this example we will assume the basics: Insurance, taxes, property management, and a maintenance reserve. We will also assume that the property has a leased

chase price for this home was $85,000. There are two different ways we can go here. Assuming we paid cash for the property, the ROI calculation would look like this:

Net Operating Income = $3,953.48 So, thats a big difference right? You bet. Lets take a look at the difference in your actual ROI. Remember, your Cash Flow is calculated against the dollar amount you have invested. In this case your total out-of pocket investment is your down payment of $21,250. $3,953.48 / $21,250 = .1860 So you can see that by financing this particular property, you are actually receiving an ROI of 18.6%. The Value of Your Time Remember those thoughts you had earlier about reducing things like maintenance reserves or eliminating property management? As you can see, calculating your ROI is a simple and powerful tool that you can use to make decisions on potential investments. But there is something missing from this equation the value of your time. For some reason, we have the tendency to consider our own time as some infinite
Continued on pg. 10

So using these assumptions, we have an ROI of 10%. You might be thinking to yourself: Wow, what if I managed the property myself, or eliminated the maintenance reserve. These are great observations, but well talk about that later. Financing vs. All-Cash Purchase Lets assume you financed this property. Again, well use some typical numbers to illustrate. After your 25% down payment ($21,250), you leave behind an amount of $63,750 that is financed at 6% for 30 years. Here is what your calculation would look like: Gross Rental Rate + $12,000 Taxes - $1,000 Insurance - $500 Property Management - $1600 Maintenance Reserve - $360 Principle and Interest - $4,586.52

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An Innovative Approach About Leonardo Management, Inc. to Property Operations H Leonardo Management & the Nested Action Cycle
By Daniel Cunningham President, Leonardo Management, Inc.

ne of the interesting things about managing multi-family apartments is that two similar apartment communities, in close proximity, can have such vastly different levels of success even though the product might be quite comparable. Vacancies and rentals can vary greatly among similar product types within the same market. One property can appear well-kept and welcoming; the other, completely uninviting. Staff at one property may convert a greater number of tours into leases than the other. What makes the difference in a well-run, highly occupied property isnt luck, and most of the time it isnt even related to the physical property itself. The most significant factor, responsible for at least 90% of the success in this business, is the local staff running operations. Behind every successful property is a manager who is passionate about the job and, even more important, is thorough and consistent in the day-to-day managementa manager who really sweats the details. And therein lies the problem. There are a LOT of details involved in running any apartment building, and trying to sweat all of them can cause burnout in even the best managers. You see, an apartment building is a self-contained, (hopefully) self-sustaining business, and a complicated one at that. It has income and expenses, labor costs and marketing plans, budgets versus projections, and even human resources and legal matters that must be dealt with. Often the lions share of coordinating all this falls to a lone property manager. There are a bazillion moving parts, hundreds of levers to manipulate

to maximize profit, and dozens of distinct roles a manager must play throughout the week to get it all done. On any given day, a manager may act as psychiatrist, counselor, contractor, lifeguard, janitor, police officer, accountant, salesperson, IT technician, gardener, cheerleader, marketing rep, and lawyer, just to name a few. Im getting tired just writing about it all and, frankly, its more than some people can handle if they arent able to prioritize. Its tremendously difficult to keep focused on whats most important when there are so many demands on ones time. And when an individual property can be worth tens of millions of dollars with revenues of several million dollars a year, losing focus for even just a short time can have serious financial ramifications. I learned all this the hard way. I had been an asset manager most of my career most notably director of asset management for AIMCO, one of the largest owners of apartment buildings in the United States. So when the developer for whom I worked in 2007 asked me to start an inhouse property management company for them, I figured it would be a piece of cake. I couldnt have been more wrong. The year we took over property management for the 1,300 units owned by that developer turned out to be one of the most challenging of my career. My prior high-level asset management experience had imprinted a hands-off instinct, which left too many details to the on-site staff, and the wheels started to come off the cart. For every process that lacked a solid, welldocumented procedure in place, the managers would quickly default to whatever habits they had developed under a pre-

eadquartered in Santa Monica, Calif., Leonardo Management was established in 2008 by veteran real estate executive Daniel Cunningham and has grown quickly to provide third party management services to commercial office, retail and multifamily clients throughout California, Arizona, Colorado and New Mexico. Leonardos customer service and leasing was recently ranked #1 in the entire country by Ellis Partners in Mystery Shopping and by utilizing its proprietary software, which automates on-site operations. Leonardo also offers a one-two punch in operations and leasing, which adds unprecedented value to their clients. Representatives can be reached at: info@leonardomgmt.com or at 213-674-4140

vious company or whatever process was easiest for them. Even when we did have a defined process, I found that if we didnt constantly audit compliance with the procedure, invariably it would be neglected in practice. We adopted a very reactive mode of management, whereby we would get one problem under control just as the next one would arise, with no opportunity to plan and get ahead of the game. That was when I invented the Nested Action Cycle (the NAC) approach to property management. I mapped out every daily, weekly, monthly and annual task that needed to be done and worked out a system to track them so that wed never drop any balls on the operations side ever again. The shorter cycles nested within the longer cycles, ultimately producing a clockworklike conductor of management activity that covered the gamut of everything a manager needs to think about to efficiently and effectively operate an apartment community. By dialing the NAC to todays date, the nested action cycles would instantly produce all of the tasks a manager should be doing on that date. The NAC was difficult to formulate, but amazingly straightforward in its application. Taken as a whole it actually provides an entire years worth of explicit day-by-day activities that, when followed in a regular, disciplined fashion, without question will result in a meticulously managed property that will enjoy higher occupancy, lower expenses, and better resident satisfaction than neighboring competitors, with the end result being a more profitable business. The NAC gave us such an advantage in operating these properties that I was inspired to buy that management company from the developer and establish a pure third-party management company of my own, which would be based on the principals established by the NAC. That be-

came Leonardo Management and we started using the tag line The Science of Property Management to recognize this new, methodical way of approaching operations. But then we took things once step further. Once the NAC was formulated and in use by the property managers within Leonardo, we then used the same approach to develop a software platform which we called the Leonardo Intelligent Property Management System (IPM). Now all our managers have to do is log into IPM every morning and it tells them exactly what they need to be doing that day, that week, and that month. Like a friendly electronic Regional Manager looking over their shoulder offering guidance, IPM never takes a vacation, never gets distracted with other issues at other properties, and never, ever forgets what needs to be done. It sweats all those details I mentioned earlier and so now we can manage more properties with fewer regional staff and still make sure balls never get dropped. Owners can log in any time to see what action items are complete and when they were done. It provides unprecedented transparency and our clients love it. Weve had lots of requests to license the Leonardo IPM and were taking an honest look at that possibility. But until that time comes, Leonardo Management benefits by having a real and proprietary value proposition to offer property owners a way to do things better. You can read more about us and Leonardo IPM at www.leonardomgmt.com. Wed be pleased to offer a demo to any interested property owner. To receive a free demo, please contact Leonardo Management at 213.674.4140 or email info@leonardomgmt.com

Your asset deserves a first-rate Property Manager!

Leonardo Management provides commercial office, retail and multi-family management services in AZ, CA, CO, NM and NV. Log on to www.leornardomgmt.com for a free consultation and management fee quote.

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6 Keys for Financial Freedom, pg. 3

The amount of risk you take with your money should be related to your age. The younger you are, the more risk you can handle. But, dont be foolish: One should never invest in something they do not fully understand. If stocks interest you, start learning about the market. Learn how to decipher financial statements. If real estate is your game, start attending REIAs (Real Estate Investment Associations). Also, dont get greedy! Ive known investors so desperate for that 20% return that they gave their money to unscrupulous companies only to never see their principal again! Guard your principle, settle for less interest if need be. If the money is lost, it can take years to rebuild. 4. Dont Follow the Crowd. Most Americans are broke, why on Earth would you follow their bad habits? Trying to keep up with your neighbors can destroy your chances of financial freedom. Also be mindful of competition between family members. For example, some families love to outdo each other in their travels. Its non-stop cruises, trips to Hawaii, and weekends in Las Vegas. But guess what? Theyre BROKE! Some people who know me may make fun of my frugality. They can jest all they want because Ill be laughing all the way to the bank! Many wealthy people are odd and eccentric, I used to think that money made them like that, but now I realize that they just dont care about what others think. It was probably this defiant attitude that helped make them rich in the first place. 5. Saving is Sexy, Its Fun to Be Frugal. If saving is a deplorable chore, you wont

do it. If clipping coupons and wearing offthe-rack clothes is beneath you, then you need to change the attitude. Start making a game out of saving and being frugal. See how much money you can put away in the cookie jar each week. Before you spend a dime, consciously think about the action you are taking. Figure out if there is a better way to get what you need at a lower cost. Can you buy it second hand? Does someone else you know need the same thing? Can you barter an item or service in exchange for what it is you need? Hold on to your pennies because they can accumulate into a fortune. 6. Step it Up a Notch. Lets get one thing straight, the 4-hour work week is a complete myth. The reality is: Success doesnt come easy. If it did, everyone would have a few million dollars in their bank account. The wealthy people I know who were not born with a silver spoon toiled endless hours to get where they are. Sometimes they worked two jobs just to be able to pay off college debt or save enough money for a down payment on a home. Others returned to school and juggled employment and family obligations for many years. If you are not happy with your lot in life and you feel you deserve better, dont just wish it to be so and wait. TAKE ACTION. Dont be lazy, dont make excuses, and dont feel sorry for yourself. Stay positive, keep focused and you will see abundance before you know it. I hope these ideas will inspire and light your path towards financial freedom. I welcome your comments, please contact me at: pliagas@aol.com or 310.499.9545

Investor Spotlight
MARCK B. de LAUTOUR, MBA
Marck de Latour is a native New Zealander currently living in the Kansas City area. He graduated from the University of Missouri, Kansas City with an MBA in International Business Management. For the past 10 years, he has been a full-time real estate investor, specializing in the pre-foreclosure market in the Kansas City area. Marck currently owns over 90 properties, all acquired using techniques that he developed into a program, which he created to help others. He has a thorough understanding of all phases of the foreclosure process, from pre-foreclosure negotiations, acquisition, courthouse foreclosure auctions, rehab, leasing and property management. Be sure to give Marck a ring to learn how easy it is to start your cashflow portfolio.

Marck de Lautour SBD Housing Solutions www.sbdhousing.com Ph: (816) 994-9401

DAN HOLZER - JVD ASSET MANAGEMENT

Dan Holzer is the chief investment officer of JVD Asset Management located in San Diego. JVD is one of the top 10 purchasers of first trust deeds at foreclosure auctions in San Diego County. In fact, they have purchased well over $25 million in distressed real estate. What is the secret to their success? We have developed our own proprietary software to select profitable homes with a 94% accuracy, says Holzer. Past returns for investors ranged from 10% to 20% ROI. If investing in California distressed properties is of interest to you, be sure to contact Dan with JVD Asset Management.

JVD Asset Management, LLC www.jvdassetmanagement.com Ph: (619) 794-1004

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Resource Directory

Invest Arizona, pg. 7

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property management? Is the cost of your time competitive with that of a property management company? How many hours can you devote to marketing your rental property? How many hours can you devote to showing your property? How many hours can you devote to screening tenants? How many hours can you devote to managing maintenance and repairs? Can you do all this and still ensure the property is leased starting on day one of the investment period? Lets look at the same ROI calculation (paid for in cash) but add some reasonable assumptions based on you managing the property vs. your property management firm. We will assume you spent a total of twenty-five hours marketing, showing, pro-

cessing rental applications and leasing your property alone. Lets also assume, you werent quite able to get the property leased in month one, so you only have eleven months of rental income. Here is what your ROI calculation (accounting for your time) might look like: Gross Rental Rate + $11,000 Taxes - $1,000 Insurance - $500 Self-Managed - $1,575 Maintenance Reserve - $360 Net Operating Income = $7,565 Your ROI $7,565 / $85000 = .089 or 8.9%. Again, this example is only meant to illustrate what your investment returns might look like

if you viewed the value of your time the same way you view your cash out of pocket. You have spent almost as much in time getting the property leased as your property management company would have billed you for the entire year. To some, this is not only an acceptable expense, but an essential one. Some may not have the time to devote to being actively involved in their investments. It isnt the point of this article to judge, only to emphasize how critical it is that you properly evaluate your ROI. Only then will you be able to accurately determine your investments real worth. Deborah Gordon is a Real Estate Investment Specialist at Invest Arizona.

When banks say NO, I say YES!

Dawn Rickabaugh, Broker, Owner Financing Consultant

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nvest Arizona lifting a finger. is a turnkey Invest Arizona passive cashwas founded by flow real estate inJohn Badura, who vestment company. has been investing They buy quality, millions of dollars CEO John Badura (right) distressed single- with Rick Stannard. in residential and family assets, comcommercial real plete tenant-appropriate reno- estate for well over a decade. vations with a strong focus on After persistent requests from the major systems, such as: family, friends, colleagues 1) Roofing 2) HVAC and business associates, Ba3) Plumbing 4) Electrical dura created Invest Arizona to Invest Arizona then markets provide a truly turn-key soluand leases the homes to thor- tion to passive cashflow real oughly screened tenants, and estate investing. Today their professionally manage these team consists of seasoned real homes with their in-house li- estate veterans specializing in censed property management acquisitions, rehabilitations, company. Invest Arizona then marketing, financing, leassells these rental homes to in- ing, property management, vestment partners, allowing and dispositions. Their motto them to enjoy positive cash- states, We Take Care Everyflow and great returns from thing. Contact them and they day one passively, without will prove it.

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inside our expos & mixers

Above: LAPD cop turned real estate mogul Mike Barker with REO Bailout.

Left: Premier Equity joins us from Alabama and Mississippi; Above: David Dziedzic from Arizonas Housing Angels; Right: Chris Clothier and Mo Woods from MemphisInvest.com with publisher Linda Pliagas.

Above: Sam Tunnel (right) with HSM Investment Group, Inc. joined our event from Kansas City, MO.

Kathy Fettke (right) with RealWealthNetwork.com with Lori Hinrichs from TrueWholesaleHouses.com; Above: Kaaren Hall with uDirect IRA Services; Right: Leonardo Management Team.

Above photo (right): Sylvia Saldivar Valdez representing Black Belt Investors. Above photo (left): Anthony Patrick and Richard Edrosolin with WhiteRock Capital.

Above photos (left): Karen and Stan Baggett with Emerge Investments, LLC; (right) The HomeUnion Services team had a great vendor booth.

Your asset deserves a first-rat Property Manager!

Leonardo Management provides commercial office, Left to right: Team Gerchick showcased deals from Arizona; Tom Wilson (wearing a tie), an investor/broker, likes the Dallas market; Matt Theriault from Epic Professionand multi-family management services in AZ, CA, CO als and his assistant, gave away books; Ace Capital Group spoke on land banking; NV. Log on to www.leonardomgmt.com for a f and Cassandra Harris from the Royal Medals Group taught guests about investing in gold.

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www.realty411guide.com | Vol. 4 No. 1 2011

Vol. 1 No. 4 2011

411
A Resource Guide for Investors

Sam Sadat
The Master of Motivation Speaks

Welcome to Sams RE Club

at the Beverly Hills Country Club

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Make 2012 the Year of SUCCESS!

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Create Stock Market Wealth, pg. 1

Each one of these companies also pays dividends to shareholders. Whats a dividend? A dividend is your piece of the companys profits distributed on a quarterly basis. So, for example, Coke currently pays .41 per share every three months to its shareholders. If you currently own one hundred shares of KO, you would receive a check in the amount of $41 in your mail box every thirteen weeks. If you owned one thousand shares of KO, you would receive a check for $410 every quarter in your mail box. Imagine for a moment you owned five thousand shares of Coca Cola stock. That being the case, your quarterly dividend check would be $2,050 per quarter. Thats

the planet. Best of all, you never have to leave home or step foot in a corporate board room to collect your share of the companys profits. Reinvesting Your Stock Dividends Many investors choose to reinvest their dividends back into the companys stock. Dividend reinvesting is a fast and popular way of building wealthy over time. Question: How fast could you build wealth if instead of waiting for Coca Cola

stock to rise, you strategically build a position? Building a position means that you purchase additional shares when the stock increases five dollars above your last purchase point. At the Wealthy Investor program, I teach this technique to self-directed investors who trade stocks from home. Building positions on long term dividend paying stock allows anyone with an open mind to change their life financially. Growth Stocks In Todays World

over $8,000 per year in passive dividend income. This kind of passive income results from being a shareholder in one of the largest multi-national corporations on

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TAKING THE RISK OUT OF REMOTE INVESTING

Now lets take a look at two growth stocks. Whats a growth stock? In the Wealthy Investor program we refer to a growth stock as any stock that is not a member of the Dow Jones Industrial Average. That would include a stock like Google. In the past ten years Googles stock price has gone from $100 to over $600 per share. A $1,000 investment would be worth over $6,000 today. Not bad. Another growth stock that has soared over is Amazon. com. Over the past ten years, as on-line shopping has become more of a main stay, Amazon. com (symbol AMZN) has made shareholders rich. The stock price has gone from a low of $20 to a high of over $200 $1,000 invested ten years ago would be worth $9,000 today. That means a $10,000 investment ten years ago would be worth $100,000 today. Those who have a financial education and understood the power of investing in e-commerce have benefited greatly. Heres how: A $100,000 investment in Amazon.com ten years ago would be worth $1,000,000 today. So whats the moral of the story? Anyone can create wealth in the stock market just by paying attention to the products and services they see around them every day. Id like to think theres sweet old lady in all of Now theres a way to remotely invest in single-family cash ow homes for high us who deserves to be rich from income positive cash ow. HomeUnions unique Investment Marketplace provides investing in stocks.

transparent visual access to the best national cash ow Real Estate Investment Opportunities.

HomeUnion platform brings together a supply chain of Certied Property Providers. The Property Providers sell fully tenanted properties to investors and stay on as Property Managers. Several homes come with rent guarantees and maintenance warranties. HomeUnion provides post-purchase market intelligence, portfolio analysis, and management oversight to the investor. Try HomeUnions unique Investment Platform and discover a whole new way to unleash Fully Managed High Income Cash Flow Real Estate Investments.

More to Come

Call (866)732-3220

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HomeUnion Services 2 Park Plaza, Ste 770 Irvine CA 92614
HomeUnion Services (CA DRE Lic# 01526904) operates investment property market places for traditional and IRA based property investing. The company is not a Financial Services, Legal or Tax Advisor Company. For any such services please seek help from appropriate professionals.

When Hollywood actors and Silicon Valley executives want to increase their wealth, they turn to Tyrone Jackson. Hes the founder and creator of the Wealthy Investor program. Each month, Mr. Jackson teaches beginners and seasoned stock market investors how to produce monthly income ranging from $5,000 to $30,000. Hes also the creator of The Wealthy Investors Guide to Stock Market audio CD series. Visit www. TheWealthyInvestor.net for details. A frequent radio and TV guest, Mr. Jackson has been seen on CNNFN and NBCs The Other Half. Send us your feedback on this months column. Wed love to hear from you. Please email feedback@the wealthyinvestor.net