This week Bruce is joined once again by Rick Solis. Rick wears many hats. He is a real estate investor, he is the appraiser for all of TNG’s hard money loans, and he occasionally trains people to appraise in TNG’s REO investing boot camps.
Rick bought his first house a week after his 20th birthday. This house was in Montclair. He sold it at the peak of the market, but then 10-31 exchanged the money from that property into another one, and eventually lost all the profit. He owed approximately $250,000 for the Montclair property in 1988, and he sold it for $450,000. He was paying for the home with the tenant, so they split the profit earning $100,000 each. In 1988, he read the Robert Allen books. Using that information, he found a realtor who helped him get a loan for this house.
The books Rick read helped him to think creatively about investment. However, Rick no longer uses creative investment techniques. Today, Rick is primarily concerned with buying properties below market. When you invest creatively, you usually owe 100 percent of what it is worth, and you do not have an equity option.
Rick and Bruce first met at a Nick Manfredi meeting in which Bruce spoke. Bruce was offering a deal on his product Selling Systems. Rick bought the book, and liked it so much that he came back and bought the rest of Bruce’s books.
Rick had a difficult time building an investment relationship with Bruce. The first time Rick asked Bruce to help him invest in a property, Rick was looking at a 5-unit property in San Bernardino. After describing the property, Bruce simply said, “No, that is not something I would be interested in.” Bruce thinks he might need to do a better job of explaining his decisions in the future. The reason why Bruce was not interested in this property was because he had previously tried buying similar properties in San Bernardino and that experience did not end well. Sometimes investors just get used to a specific niche and choose not to work with anything else.
Bruce bought a lot of 4-plexes in Moreno Valley during the 1990s. He sold these properties for $139,000, and their value peaked at $600,000. One of these properties recently opened for bid at a trustee sale for 1 dollar. This type of property has a tendency to cause a domino effect for other similar properties in the area; when one goes bad the rest usually follow. A lot of towns just tear these properties down.
Rick met Andrea at a book store in 2003. Rick told Andrea about Bruce’s boot camp, and she decided to attend it. At that time, the boot camp was pretty basic, but it told you exactly what you need to know when buying houses.
In the past, Rick advertised through the newspaper. Andrea advertised through letter campaigns. When Rick started working with Andrea, they were doing 1,000 letters per week, and they averaged 4 to 6 houses per month using this method. Their business relationship worked to their advantage, because some people do not want to work with men, and others do not want to work with women. Rick and Andrea have very different selling strategies. Rick’s selling strategy is straight forward; he looks at what you have and gives you an offer. Andrea can sell anything to anyone, even at a discounted price. Andrea’s ability to sell is more than a technique, it is a natural gift.
The longer Rick and Andrea did letter campaigns, the harder it got. When they first started they could find plenty of people with just a couple hundred, but by 2007 the lettering campaign become too expensive to pay for itself.
Most of the properties they bought were flipped in 2006. One of these properties was flipped to Bruce’s auction, and it worked very well for Rick. Unfortunately, the auctioning business did not work well for Bruce. Bruce started an auctioning business with high hopes, but discovered that it was very difficult to attract buyers. Rick tried helping Bruce by wearing TNG t-shirts and posting signs, but he was only able to get a couple people to attend his auction.
At the end of the boom, Rick got cocky because of how easy it was to buy and sell. Rick decided to 10-31 exchange into other properties in order to avoid taxes. Unfortunately, he reinvested too much and he lost a lot of the profit he gained from his California properties. Next time, Rick plans to just sell his properties, pay the taxes, and live happily with that.
Rick finds all his properties through the MLS. Sometimes agents bring deals to Rick. Lots of investors are entering the real estate business. About ¾ of the buyers are investors now. Unfortunately, many investor offers do not close. Some agents are now refusing to accept offers from investors now, because of the bad reputation investors now have for not closing.
Right now, the best-working strategy for Rick seems to be driving around and looking at properties. He does this 1 day per week, and Andrea does this 3 days per week. They both buy 3 properties per month. They hold 2/3 of them as rentals, and they intend to sell them as prices increase. After the next price increase, Rick intends to sell all of his properties and stop.
Rick and Andrea invest in the High Desert area. There are not many resale opportunities in that area, so they are primarily renting there. Many of the people in that area have bad credit, and will probably always be renters. Andrea has a sixth sense for knowing when a person is going to be a good renter. She is able to meet the potential renters, look at their application, call their employers and their landlords to see if they will be good renters for Rick and her.
Rick decided to quit investing in real estate around 2007, but Andrea continued. Andrea got great deals on six houses last year, and she was able to convince Rick to start investing again.
Business is completely different now. It is a much bigger challenge now to deal with owners and resale. Rick thinks this aspect of the business will become easier in the coming years.
Rick has been using his IRA to invest in mortgages since 2000. He began using his IRA to invest in houses since 2003.
Rick’s target rental property is less than half an acre. Properties with lots of land have a tendency to collect lots of junk. He prefers single story houses, and he is completely uninterested in rental properties with pools. Rick does not like investing in houses built before 1978, and he prefers the house’s square feet to be between 1,000 to 1,800.
In the High Desert, Rick typically gets 1 house for every 10 offers he makes. In areas near Fontana and Corona, Rick typically gets 1 house for every 50 offers. Rick does not make offers before he has seen the home and made repair estimates.
Rick likes Tony Alvarez’s business model, because Tony gets properties to cash flow. Rick does not like the buying, fixing, and selling business model right now, because it is very difficult to get to the finish line with a first time buyer, FHA loan, two appraisals and a review appraisal.
For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.