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Posts Tagged ‘rentals’

By Bruce Norris .

Tony Alvarez, the REOMentor, Joins Bruce Norris on the Real Estate Radio Show #314

Friday, January 25th, 2013

Tony-Alvarez


Tony Alvarez

REOMentor and Owner of Evergreen Properties

(Full Bio)

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Bruce Norris is joined this week by Tony Alvarez. Tony is the owner of Evergreen Properties. He buys and sells, buys and holds, manages his own properties, and has become one of the most sought after speakers and trainers.

Bruce asked what part of his schedule is now taken up with training and teaching or speaking in front of clubs. Tony said he has actually not been doing a lot of this because there was a moment in time when he realized he became a bit of a distraction. He was not focusing on his core business. He took some time off and reevaluated how his time should be spent. He refocused it on his own acquisitions and revamping his own management. A lot of things go sideways when you put your attention no something else, and teaching takes a lot of your focus and attention. There is also the follow-up. You teach a class, and there are students who come back and want more. Tony is the type who does the teaching and feels obligated to stick with them and explain everything to the last minute detail. Right now about 0% of time is being dedicated to teaching and 100% to acquisition. Their acquisition shifted into high gear now.

The year 2012 was split between training and gradually getting back to buying properties. Bruce wondered what Tony’s deal source was in 2012. He said it was primarily real estate agents. Going back to when Bruce spoke and showed a diagram displaying what was happening to the deals, he showed 40% of the transactions were falling apart. In Tony’s area it was more than 50% of the deals. Tony zeroed in on this and designed a whole marketing program to go after agents. It was not so much deals, but rather agents and asking them to consider Tony’s group. That marketing campaign included detailing a specific property they had pending and reminding them it was pending. There could potentially be a pending property that would fall apart over the course of 12 months. By the end, these agents were completely frustrated, especially in Tony’s area where the commission checks were not big bucks.

Tony even added a special Christmas advertising where he tells people he can save their Christmas money. If a deal falls apart, they will close it by the end of the year. He did it with humor, so a lot of the agents were responding and are still responding. He received a call on Thursday from Sabrina, his acquisition person, who told him to check his computer. He was told to punch in an address in Google. He typed in the address, and sure enough it popped up on Google. Sabrina told him to click on the house, and he saw a house built in the 1950s that was perfectly restored. He looked at, and before he could even get the words out Sabrina told him it was owned by the city. He asked her why she told him to look at it. Typically a house that has a market value of $100,000 will be listed for $165 or $170,000. The agent called Sabrina telling her the city had been sitting on it for over a year, and someone had just broken into the back and caused damage. They were looking to sell the house that very day. Tony asked what they had to do, and she told him they were going to drop it to $65,000 and want somebody to buy it that day. Tony did not want to pay $65,000 for the house, so she said they would have the agent make an offer and asked him if he was on board with it. He said he was, and she said she had already made the offer.

This is the kind of situation they are getting a lot of today. They are getting calls from an agent where something shifts, and the next thing he will do is have someone contact the city and ask what else they have. Tony focuses his attention on getting leads from agents, specifically the deals that fall apart, and that has been enough.
Bruce wondered if the REO agent has translated their abilities to the short sale world. Tony said they have, and in particular one guy will identify himself in the office as the REO guy. All his understaff became REO specialists at one time, and now their card says “Short Sale Specialist.” Tony no longer looks at the source of whether it is an REO. He calls himself the REO Mentor, but he never really looked at it as REO. He always looked at the agent. He wants the person who understands him, understands what he is trying to accomplish, and then makes the deal happen. He wants someone who can help him accomplish that close.

Usually the agent who ends up helping Tony is a repetitive source for a long time. Tony wants them to have these niches and wants them to be the REO, short sale, or probate agent to where they always have those motivated sellers who are not after your only home in the world for a sale house. Rather they should have these niches of as-is properties that would make perfect sense to get out of in time. Tony identified long ago that there is a very small group of agents that handle all of these stress situations, and in markets such as Riverside you have agents who do mostly probate, although some of them do it all across the board depending on the time of the market. Some of them specialize in one more than the other, but they also know each other.

Oddly enough people think there is a lot of competition between them. The real pros who have been around for a long time did not experience that feeling, even when they are starving. Instead, what they do is try to cooperate more. This year Tony received calls from a couple agents who said someone recommended him, so the agent called him in case he had something to sell. These are some of the agents who are representing some of the larger equity funds. Now they are looking to bulk buy, and they are looking with tenants. Tony wasted their time as long as he could and sold them nothing.

Tony has no complaints in the acquisitions part; he still swears by his relationships with agents. Bruce was actually the one who introduced Tony to marketing at a certain point in the real estate cycle, including going after deals absent the owners. In his career, these were the most profitable deals besides commercial, and they came directly from an owner/seller. Tony said they are structuring things now; and since they are a really small office with not a lot of people, he is trying to figure out how to not bring things into his office as much. The people who work with Tony are his girlfriend Dana, who handles all the bookkeeping, and Sabrina, who manages all the properties they have. She is also learning and helping Tony with acquisitions; and when she had called Tony earlier regarding the property she had two court dates to appear.

In one court case, Tony’s group actually sued a tenant in small claims for a back-rent. Another case involved an eviction. Tony said this has been his highest eviction year in probably two decades. Half of the two evictions he had this year was a Section 8-10. They had a problem with Section 8 and were going back and forth. Section 8 was trying to drop their portion and try to get them to pay more. Since the tenant was not paying them, Tony said they were seriously holding her feet to the fire on her end of the deal.

Regarding hedge fund buyers, Bruce wondered how they have affected the rent market in Lancaster. Tony said he thinks they have an over-abundance of rentals right now. Thankfully, they do a terrible job of managing their real estate, so you see several houses for rent in which the houses are actually terrible. Tony would love to record the people who come into his office to rent from them because they tell him they love the house, even though it’s older than the house they are in currently. They have seen a lot of older homes, but the condition is unbelievably atrocious. They are not managing that said really well since they probably have so much inventory. However, this has affected their rents, especially in Orange County. He has not seen any articles about rental increases in the Antelope Valley since 2008. If anything, it has declined.

Part of it involves the pricing structure and a 3 ¼% interest rate, which would certainly make ownership a lot cheaper than rent. Tony said the typical rent that they were getting about $1195-$1200 for is now renting for about $995. Section 8 has reflected this as well, although Tony would say it has been more dicey. Less than 15% of Tony’s inventory is Section 8 rentals, but he did this because he got concerned after he saw that they were getting letters saying they were reducing rents for Section 8. This goes back about two years. Tony immediately thought that maybe their budgets are cutting back or they are looking to do some things toward the future. They then pulled themselves back to get away from this. If they are going to have to charge lower rent, he started thinking in terms of qualifying the tenants a little bit more hard. You have to be careful since you cannot discriminate when renting to different people, especially regarding their sources of income.

Bruce asked what has happened to the supply of homes as far as month’s supply. Tony said the last time he checked they were at about a month and a half. Bruce asked if this inventory has changed in type, if it has gone away from REO to short sale. Tony said it has and that REOs are the smallest piece. They probably still have ten times as many REOs as everybody else does, but you are also talking about 12 as opposed to 1200. The short sales have definitely increased and are still increasing, and this is definitely the dominant part of the market. They have seen some standard sales, but the short sales rule.

Bruce asked Tony if when he drives through neighborhoods now it is still really obvious there was a problem where you have constant vacancies and see that the neighborhood has a vacancy problem. Tony said they do see a lot of vacant homes in the area, although this is not typical in all neighborhoods specifically in the Antelope Valley. Going back about two years ago, it was the newer things that were more vacant. Nowadays it has dropped to more of the older houses. These are homes that are not for rent or sale; they are just there. Tony noticed these since he is always writing down addresses, following up, and seeing who owns them. The number of rentals is definitely a marked increase, and you see these sings everywhere.

With a month and a half supply of inventory, Bruce asked Tony if he has started noticing any price aggression. Tony said there has been price increases, but it is not consistent. It really depends on some markets, for example in the Antelope Valley, and what is going on that month. It is very inconsistent. You may have very few, if any listings; or you may have a lot of attention for these couple listings. The next month you may have the same street where the price was $105,000 for a house that would typically be priced at $100,000. A couple months before they may have been in the 90s, and now all of a sudden there are four or five houses for sale. These houses are all short sales and are all within a couple blocks of each other, and you see these prices start to constrict. Across the board we have seen some increase in pricing, although not very much, because of this situation. As soon as the house goes up for sale in the neighborhood and closes escrow, you seen an increase in listings within a month. They are not necessarily at prices they will be able to sell at, so you know things like this are silly. Tony thinks agents are out there marketing to the owners, telling them what they sold and how they can do the same for them.

Bruce asked what prototype house Tony had in 200-2006. He wondered if it was the same inventory he just rebought. He also wondered what the homes are worth at the peak of the price in 2007 compared to the peak the prior years. Tony said at the end of the last market, he was reminded by Bruce that too many people were fighting each other over inventory stuff and to keep an eye on newer tracts as well as look to the market as a source of inventory. This was difficult for Tony because he had never bought new homes. However, at the end of the market he went out and bought some 2,00o square foot brand new homes, and the developer was dying to sell them out so he could go take care of another tract. Tony did not quite understand the reasons behind it, but the developer was explaining how he needed to sell these out first before he could get the financing he needed on the other properties.

Tony ended up buying four one-story, four-bedroom, 2 bathroom homes for $237,000. He ended up selling these upside of $350,000, and the prices were just crazy. He also rented the houses out for the two-year period and made a killing on the rents. He mostly rented them to engineers. A $350K house in that neighborhood today would be about $200,000 tops, past the 50% point. Those houses did not go down in that neighborhood lower than $165-$167. However, this is really not his prototype inventory for his rental. The rental is more 3-1 or 3-2. He owns a lot of properties that were built in the 1950s, the 3-1s being less than $1100 square feet. He also owns some 4-bedroom, 2-bathroom homes that are about 1200 square feet. He also owns some properties that are from the 1980s, with tile roofs. However, this is a smaller part of his inventory.

When Tony sold his inventory it was around $250-$300,000. He can’t even believe most of the houses he sold, especially when he is buying them back. He bought some of them back that he sold for $280-$290,000 at a prices of $45-$60 grand. Now they are probably not even half of the former value. Someone just made him an offer an a 1100 square foot house for $125,000 for which he paid only $60 grand in 2008. He did not buy it from him.

Bruce asked if anyone was still building anything out here. Tony said they are not and the city is the only one that actually even tried to develop some lots that were not finished. This has been a disaster. Bruce thinks there is a really healthy price increase for most areas, but Tony’s area really has not taken off yet. When Tony and Bruce met, one of the things that was a stark difference was that Tony was about to exit his inventory while Bruce was looking at his set of charts and had not even started to build yet being 9 miles away. We are almost in that same situation where it doesn’t pencil to build, so it sure isn’t time to sell either. This is going to go aggressively up before these people start creating building lots.

Tony said he was considering selling this year. Sometimes he will wake up in the morning, and the last thing he wants to do is buy another house. He was enjoying himself at home drinking pretend coffee when the phone rings, and it’s Sabrina asking him to buy another house. How good of a negotiator does this make him that he would have to have it at 65%. She told him she was going into the city after she got out of court, and Tony told her to have at it. He couldn’t even get worked up about the thought of going down and talking to them about it, even though he is friends with them.

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.

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Coldwell Banker Pioneer Owner Lance Martin Joins Bruce Norris on the Real Estate Radio Show #278

Friday, May 18th, 2012

Lance-Martin


Lance Martin

Owner of Coldwell Banker Pioneer Real Estate


(Full Bio)

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This week Bruce Norris joined by Lance Martin. Lance is broker/owner of Coldwell Banker Pioneer Real Estate. He began his career in real estate at 19 and has mostly been involved with the REO side of the business for over twenty years.

Lance received his license in 1986 and began selling full-time in 1987. It was not until 1992-1993 that he became involved in the REO side. What is interesting is that whenever you start your career, in your first few years there is some assumption that this is how it always is. If you got in in ’86-’87, in the next few years things got progressively better for everyone who bought something. Many people ask when the market will return to normal, but Lance said in the 25 years he has worked in the business he does not think he has ever been in a normal market. From about ’88-’91 the market was on fire. Prices were accelerating, and real estate was easy so to speak. Things then slowed down; and in the mid-90s we worked a lot with REOs, which no one said was normal. We had some recovery we had in early 2000/2001, then things caught on fire from 2002 onwards. Lance did not think this was normal, and the last five years were certainly not normal. Lance said he has pretty much given up on a normal market. Bruce said you would pretty much have to live in Oklahoma for a normal market since California bounces between extremes.

Lance’s family has been in the business forever, and he used to have conversations with his grandmother that there was a certain sense of predictability in real estate that ended right around the time Lance got into the business. From ’74-’80 prices in California tripled and separated themselves from the national average for the first time. In ’74 the median price in California was $3 grand from the national number. For whatever reason, we separated ourselves from the rest of the world and became more of a speculative market rather than simply living in it and being satisfied. These kinds of things do change. Most likely when you have people buy homes now they are probably in it for the long haul with the idea that they are going to live in it and enjoy it. Lance said the mindset has changed to a degree, and there are a certain number of investors in the marketplace right now where it would not surprise Lance if in the next few years the pendulum swings and everyone forgets the lessons that we saw in 2006 and beyond.

If you ask somebody why they are buying a new house to live in 2005, it would have been to make money more often than not, even if they were living in it. In 2012, they would be more hesitant and want to stay where they are. They will end up making money on it, it’s just a matter of time.

Bruce wondered when the REO business peaked this cycle for Lance. Lance said we have been in a long cycle, but for Coldwell they started in about early 2006. For most people, if they were not paying attention, they may have thought the market was still hot because the market for the most part did not really peak median-price wise until June 2006. He said they started seeing inventory in early 2006, and from a sheer volume standpoint it peaked in 2008. You can map the peak out, and the top of the peak from the day they passed the first foreclosure moratorium in September 2008. Ever since then we have been drifting away a little bit. We still had fairly decent levels of inventory through 2009, and 2010 was not really exciting even though we were still doing quite a bit. Lance believes 2011 was a mirror of 2010. Lance is still puzzled as to what to make of this year. Lance thought four to five months ago we were going to see some decent numbers as far as new assignments and foreclosures going through the system. The first four and a half months not only did not prove this, it proved it wrong because we have seen the exact opposite. It has been very slow as far as new assignments and properties going through the system. Percentage-wise from the peak in 2008, Lance’s inventory levels now are about 15-20% of where he was in 2008.

It is a little hard to map out a business plan when you are probably being told to get ramped up for volume. This is often something Lance is told on the lender side. Prior to the robo-signing scandal, Lance sat in a meeting in September or October 2010 and was told to get ready and that it was coming. It was 2010 when the robo-signing scandal came upon us, and this certainly put a lid on things. This is now in the past with settlements and attorney generals getting together, which is one of the reasons Lance thought we were going to see more inventory this year. However, so far and for whatever reason, whether it is Fannie and Freddie, bulk sales or balance sheet management, we still have not seen it. The first quarter, for all intents and purposes, was a write-off for Lance since there was so few new properties hitting the marketplace. It might as well have been zero.

When Lance talks to the sources that he receives inventory from, they are in the position where they are probably not in the front line as far as making decisions. Bruce wondered if they themselves were surprised by the lack of inventory. Lance said he would think so because you would have to be because a lot of the asset management companies are in the same position as himself and others like him on the street. They have to gear up their staff, and field inspectors. Lance ran a couple numbers before coming on the radio show; and from Bakersfield down to about the California/Mexico border there are over 50,000 properties with notices of sales filed and another 38,900 properties with notices of defaults filed. There are also 11,552 properties filed in REO inventory in one form or another, whether they are on the market, in a rental program, or are being evicted. If you get 11,000 in inventory that are already foreclosed on and another 88,000 that currently have a notice of sale or default, then that means there are eight times as many properties that are behind those.

In Lance’s opinion, they are all going to transfer in one form or another, whether they go short sale or ultimately end up as an REO. Just given the number of properties that are in the pipeline right now, there are eight times more. However, those numbers have not changed. You talk about trying to make a business plan, and those numbers have been fairly consistent now for several years. You now just sit back and watch those numbers continuously turn, and what comes out on the other side is such a small percentage that it is real difficult to make a new business plan.

Bruce wondered what affect loan modifications have had on the REO business and if Lance is now seeing round 2. In other words, the loan mod was taken care but the payment was not made. Bruce wondered if Lance has seen foreclosures stem from this. Lance said he has and has managed a fairly significant amount of properties throughout the Inland Empire. Therefore, he has a pretty good sample of landlords to pull from. He can share a dozen stories from the last six months from their landlords who, for whatever reason, whether they bought the property wrong or refinanced with cash over the years, are upside down and have attempted to do loan mods, some being successful and others not so much. However, Lance believes the frustration level is high, and we will probably see a whole lot of people completely giving up not only on the loan mods, Lance has had clients who are absolute candidates for short sales. Lance knows he can get them approved and get a short sale done. Their frustration level at the process is so high that they have given up on this too. Lance said he may be wrong, but he is convinced they are going to see at some point these properties being forced into the REO segment on unless the people are able to stay in the properties forever.

Bruce wondered if Lance is noticing any of his businesses being affected by the large purchaser who is coming in to stock up rentals in the Inland Empire. Lance said not yet, but it is literally the number one priority he has just from a standpoint of what he is keeping his eye on and lobbying against as a realtor and someone who owns offices in the Inland Empire or California. Lance said the bulk sale initiative coupled with the rental restriction at least as it relates to Southern California has to be the worst idea that has come down the pipeline since the first foreclosure moratorium. There has not always been agreement on what level of properties should be allowed to come through the system, and managing the number of properties might be smart. Lance has usually taken the position to just let things go, let the chips fall where they may, and if things collapse then so be it. Lance really thinks the bulk sale and rental program is awful.

The FHFA is currently the regulator who is overseeing Fannie, Freddie, and HUD. They have a pile of programs out in which they are bundling up properties throughout the country and pulling these properties from what they are describing as the hardest-hit areas. There are two additional criteria which Lance said does not make sense to him. In addition to the hardest hit areas, other criterion includes areas with high inventory levels and areas with low buyer demand. Lance said neither of these pertains to them. With two of those three criteria not fitting Southern California, this pilot program decided to target at least a piece of Southern California, specifically the Los Angeles and Riverside markets.

There is somewhere in the neighborhood of 500 properties that they decided to put into this bulk sale program. These are then going out to large institutional investors, being packaged up, and are being offered to people who have those types of funds, who would not be your typical ma and pa investor. Coupled with this, they are restricting what those purchasers can do with those properties at the purchase. There may be other restrictions, but one of the restrictions that is a big deal is they have to lock those properties into rental stock anywhere from three to seven years. They pull them out of the market, and certain investors are for the most part going to be locked out. To be selfish, realtors and offices like the ones Lance is at will be locked out. It is a really poor plan to help the local economy. If they are locking these transitions into rental stock, obviously they would be buying these properties at what you think would be something less than $.50 on the dollar. Their ability to rent those properties at something less than market seems apparent, and now Lance and Bruce will be potentially competing with the rental stock in the Inland Empire that was purchased at a discount and very well may be able to rent for a percentage or so less. Lance said he has been following this since last September, and he hated then and hates it now. Now the program is in place and is moving forward.

Lance read a letter written by FHFA Director Edward DeMarco, and the letter said there were two objectives to the rental program. The first was to look for alternative approaches to retail dispositions; in other words finding a different way to sell it. For the most part this cuts Coldwell Bank out and anybody in the transactional business as well as the small investor. The other objective of the program is to assess the investor interest, which you have to figure is pretty large if you are going to be able to purchase these properties at $.40-$.50 on the dollar. In regards of if there will be a bidding process, Lance said the first property has gone through the system, and Lance really wants to see what has gone on behind the scenes. From what Lance understood, there was a bidding process in play where you had to meet certain criteria to bid. They are now going through their due diligence, and Lance believes this first round of properties is in the process and within 60 days of either the final disposition of those properties or at least a bid being awarded to one of the investor purchases.

Bruce said what he has seen as a trustee sale buyer is Wall Street now has backed several companies in the local area to the tune of 100s of millions of dollars, and they are just buying them for very close to full value for cash. They are keeping the properties, and the goal is to get to 10,000 properties nationally. To Bruce this is the bigger threat. Lance is talking about bulking out 500 properties in the area, while Bruce would say they are buying 500 properties a week just on a one-off basis. If you have a stock of houses, you have probably been approached and then willing to buy them. Lance said he does not have as much of a problem with this, although it may put a damper on those of us sitting down at the poorhouse steps looking for those good opportunities. However, if they are buying them in that process and they are willing to pay market value and buy them on a one-off basis, then they can choose to do what they want with them. They choose to hold them for a year or turn around and try to immediately flip.

Lance said he does not really like the bulk sale thing in general, but if that is what it is going to take to move the inventory through the process, then so be it. For Lance, the part that is just the killer is the rental restriction because it is literally locking those properties up in the market for that period of time. This could mean it will be that much longer for our market to recover. We have been in an artificial marketplace, whether you are a buyer, seller, or somebody in the business of transacting real estate, since September of 2008. We are now coming up on the four-year anniversary of the foreclosure tsunami, which never came. This was when Lance started expanding his offices. He looked at the numbers in 2008, and he started to expand his footprint figuring that it made good business sense. Frankly, however, the policy makers were not looking at his business plan. What made sense in the past that all of a sudden did not happen.

Bruce wondered if lenders more commonly taking the property back and then renting it to the former occupant owner. Lance said this goes hand-in-hand with the question asked earlier about how it relates to the rental side. He tied this rental program more to the bulk sale. Starting about 2 ½ to 3 years ago, in every occupied property that goes through Fannie the owners are being offered a rental agreement. Point blank there are no questions asked. About 10-20% of those occupants are taking these rental agreements. Now, for the last few years some of those properties that have been in the system for a year have come back into the marketplace to be resold, and the system worked as it was planned. A few of those properties have actually been sold with tenants in them, and these have been good opportunities for some of the investors. They basically bought a property prepackaged with the tenant that had been there for years. Lance’s fear now is many of those properties that have been in that rental program that have already been foreclosed on, are already in the system, and have already been rented out; these properties are guaranteed to be pulled out of the stock and sold in a bulk sale program.

Bruce wondered how lenders are dealing with evictions now. Lance said not too much has changed. If they are not willing to accept cash for keys or are in a rental program and not paying their rent, they could move a little quicker as far as the process is concerned but are generally following the law and moving fairly quickly. There are some stories of evictions that have gone on for 2 ½ years, but those are the exceptions.

Right now the percentage of Lance’s business that is REO is closer to 20%, while two years ago it was 90%. The only part of the business he feels he can truly control right now is the property management business, of which he is still a big fan. From the standpoint of his agents, he sees that the focus this year is short sales. You still have a seller that still has the ability to make some decision on what to do with the property, and banks do appear to be more willing to push those short sales through. They are still taking way too long, but generally speaking we are seeing more transactional short sale business out there.

As far as the normal sellers with equity, Lance this market is small in his business but is increasing. Right now this market is about 15% of his business. Most of those equity sellers don’t have a lot of equity, and it has been exciting because they have seen some sellers enter the market recently that were buyers two years ago who bought it right. For the most part, in our market values have been flat for the last two years, and they are seeing equity sellers. This number should drift up ever so slowly granted 10 or 15% equity sellers is not anywhere close to normal. However, it is better than it has been in the past.

Tune in next week as Bruce continues his interview with Lance Martin of Coldwell Banker Pioneer Real Estate.

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.

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271-TNGRadio – Bill Shipp 3-31-12

Friday, March 30th, 2012

Bill-Shipp

Bill Shipp

California Investor


(Full Bio)

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This week Bruce Norris is joined once again by Bill Shipp. Bill has been one of the largest wholesale buyers of real estate in Riverside for many years. He has a unique system that can even be done from a distance, which he proves every day by living and working in Utah.

In their last interview, Bruce and Bill talked about how he had one loan-remaining rental.  He wondered why rentals were not as exciting to him and how that one survived. Bill said the one reason the rental survived was his mom lived in it. He bought it back in ’92 in Sun City, and he always kept it thinking his mom may need to move back into the house. However, she wanted to live down in Laguna Niguel, so he pays rent for her down there, which is about the exact same rent he gets from the house in Sun City. He always had in the back of his mind that just in case his mom does not want to live in Laguna Niguel and needs a house, then Bill would not need to buy one for her. He has always had this little house that generates enough income that pays for her rent wherever she seems to go. This is the only reason he has this rental. Sun City is actually an age-restricted city, so Bruce learned not to sell here during a downturn.

Bill also mentioned he does not worry about competition, even though he does have it. Bruce said every time something hits the MLS he would say that some systems would teach that all you need to do is pay attention to the MLS. It is not that he has an absence of competition; he just does not care if it is there, and he seems to be able to beat them at the same game they’re trying to do. Bruce wondered what Bill would do to prevent the competitors from buying the properties. Bruce said it is not anything he can do or can’t do because everyone is probably doing the same thing. Most of them are cash offers where you show your proof of funds. It also depends on that particular day how much you want to make or not make. Bill just bid on a house last week that had 29 offers on it, and it came out at about $75 or $80,000 under market. He actually bid $7,000 over list price, and he did not get it. People could have bid $20,000 over and still made $20,000 on it. At the time he did not step up to the plate and say he was willing to make $20 grand versus $35 or $40.

In the business of real estate, every morning when you wake up you have no clue if you’re going to make a dollar or not. If he wakes up, his agents call him, and he has not looked at a single house in several months, then he relies upon the agents to do the work. They will call him with a deal, sometimes one he does not have any time in. If they call him in the morning and he is going to make $20 or $30 grand, that is great. If he doesn’t, then that is okay. His last offer was on December 12 since he had been gone for two months, and he has not seen the offer that he made on that house. He has only seen one house since December.

He is dedicated to doing what he does; it is just that in this type of market you cannot get crazy over losing deals or overbidding it because tomorrow there will be another list. There is another list every day, and it was this way before Bruce and Bill were ever in the business. It is always there, and there is always competition. It is always going up or down, or it is staying the same. It is always something, and it doesn’t change. It’s just whether you want to play the game or not and how much you want to make or not. Bill used to flip houses in the ‘80s to make $5 grand. Bruce also did a lot himself that made $5 or $7,000, and this was okay. At the time they were only worth $60 grand. It is when you touch them for $250,000 and make $5 grand that it hurts. But then again, you still made something; it’s just sometimes not as much as you want.

Bruce wondered when Bill is making these offers if there are factors such as speed that determine how long he will take to close it. Bill said this used to mean something, but now there is so much competition. Some people put five days, others ten, others send in the entire cashier’s check for the whole amount. This is something Bruce does. Bill is not showing anything different than the next person. The only thing he might show is if the agent happens to know who he is, has done a deal with him in the past, and offers the same deals. Whether they are going to lean it toward him or the next guy, or if they call the asset manager and tell him they have done a deal with Bill before and don’t know the other person, then he might get the deal or he might not. But this is really the only thing he has to offer that Bruce or anyone else does if they are the same since the time closing does not really count anymore. Putting the time in really does not make a difference except if you are buying a house that might be going to trustee sale.

In the old days when you had three days to close escrow, time was very important versus the next person since you had to be able to perform. However, time now does not make a difference. Bill’s favorite entity to buy something in is an LLC. These require a filing fee when you do volume. Bill said he does not want to leave the 303% on the table if it is not an LLC. If you are flipping 20 houses at $200,000 each, then that is $4 million at 3 1/3%. Once it’s at $130,000, you’re letting the state have it for a while.

Bruce wondered if Bill has ever done anything that was subject to a loan.  In this case he would have taken over a loan that  he would later  get a grant deed on but leave the loan in place. Bill said he did this in the 90s when he was buying the houses that were closer to trustee sale since there was no time to get a loan. This was why he would take it subject to. However, he had a letter that he would have the people sign telling them he was making a profit on their house.  He would then sell the home within a certain amount of time and would not let anybody take the loan subject to. He would never sell a house subject to on his promise to someone that he bought their house subject to. He told the people the loan would be out of their name when he sells them the house. Bruce thinks in the next few years there will be a niche for people buying subject to and keeping them as rentals.

In California, some prices have escalated pretty excitingly. If you had kept everything you bought in 2000 and sold it in 2005, it would not have been a bad number. However, if you were buying them all in 2005, it would have been a bad number. If he had bought them all in 19890 or 1990, it would have been a bad number. There is always bad numbers, but what is important is knowing when to buy. When people talk about rentals, the blanket statement is that you should buy rentals. Whenever people advise others to buy, there are a lot of people who really shouldn’t buy rentals. If you have a group of 50 people and you say rentals are a really good thing, but one of the people is 70 years old, he probably should be buying a bunch of rentals. However, if you’re new in the business of flipping houses, then you shouldn’t buy rentals.

If you have $30-$40,000 to work with, you buy a rental, and hear that you can receive a 14% cash-on-cash return if you buy rentals right now, Bill can show you that by using that $30-$40,000 to flip a house, you are going to make 200-300% a year return. If you borrow money from Bruce Norris, buy a house with $25-$30,000 down and are making $25,000 a house in the 101 day turn Bill averages, you are making a 100% return on your investment. If you do that 2-3 times a year and that $25,000 is now $75,000, then you can maybe talk about buying a rental. However, you should not talk about buying a rental when you save your first $30,000. If the market does turn or you have a roof or certain cash flows, you are out of the flipping business because you have used your $30,000 on a rental. In short, there are certain times you should buy rentals and other times you shouldn’t.

One of the things that Bill has avoided but also has a bent towards is teaching people what he knows. Bruce wondered if this is ever going to come about, which Bill said people have asked him before. A few years ago Bill even wanted to work with Bruce because he loved teaching people. He loves teaching people how to flip houses or even just talking about it. But he also enjoys something even better than this. For him, he feels more rewarded when he teaches people how to be a good investor; not just in real estate but also in planning for the things you should or should not do with the money that you have. The reason Bill is able to do what he does now is not 100% real estate. Money can work as hard as you can, and if you are really good with your money it can work better than you do. It really depends on what you put it in.

Bruce said the goal of most people is paying off a fleet of rentals or having trust deeds. The money is producing other things. Most people who are in the buy/sell business have a full-time job. You have to ask yourself what position you are at in your life. If you do have a full-time job, are flipping a couple houses a year, and you have some extra money to create passive income, rentals are a great thing to do. Most people who are in the buy/sell business have a full-time job doing this kind of work. The business has been very easy for Bill, even though it is not easy for most people. This is why people with a lot of experience are shaking their heads saying it is an interesting twist to what they have found personally to be much more difficult. So Bruce thinks it would be interesting if Bill threw his hat into the education arena, but it is not easy to create the document.

Bill also works with things other than real estate, one of them being stock trades. He stock trades every day and tries to do trust deeds. However, he actually does not recommend stock-trading. There are a lot of people going to take classes on how to do options and trade stocks. The best people in the world get paid millions of dollars a year to even get a 12% return. For example, if you work for a Vanguard firm, are a money manager, and have a 12% return for 10 years, you are literally making millions of dollars in bonuses. So if you think you are going to be beating 12% and are going to beat people all over the world who are spending 100% of their life trading, you may not have as good a chance. Bill is a flipper, so he really should not be dabbling in trading stocks and think he can beat the guys who do this all day and night long. It is a tough game, but he has been doing it off and on for 25 years. It is not something he just started, but rather something he has trained. He has his Series 7 license and had sold stocks to people as well as mutual funds and life insurance policies. It was part of his planning and studying; he did not just wake up one day and start training.

Bruce also traded stocks, and he said it was a good way to learn about himself. It taught him he had no business being here in the first place because he was an amateur who got in a lucky stretch. This happened to people in real estate also. When Bruce was speaking in front of audiences, especially in 2003-2005, he asked the people how many of them had been around for fifteen years and told them that sometimes real estate does not work the way that it was at the time. Both Bruce and Bill had an experience in the early 90s that taught them to be aware of 2006 before it happened. This is probably going to have some lingering good effects for people who went through hard times now. They will respect the debt and the leverage. They will realize things will not always work out well.

There is something to be learned even when you are trading stocks as well as real estate. They say you never lose money by taking a profit, but this is incorrect in the world of stock trading. For example, if you are trading and you see that you have made $500-$1,000 on a trade and sell it, you think you have made money. The problem is that people do not sell their losers. Your $500-$1,000 winners could be totally offset by a $5,000 loss that you are afraid to sell since now you have to admit that you lost on it. You sit and wait for it to become a winner, and it becomes another $5,000 loss. It is the same thing with real estate. When you have a house that is a loser, you get rid of it. If somebody makes an offer that seems a little low that has been for sale for four months, you should take the offer and run since the first one is usually the best. When you have losers, you have to get rid of them because it could be a lot worse. One loss could be better than ten wins in the stock market. In real estate, if you have a loss, you just get out of it because it is not going to get better.

Bruce read a book from the 1800s about emotional cycles of investing. The first emotion of a downturn is denial. The admission is that they made a mistake, which people have a very hard time doing no matter what the investment is. You then go through the whole cycle until you capitulate and lose a fortune. The book was called The ABCs of Investing, and the person who contributed to it was named Charles Dow, the same man who came up with the Dow Theory. He said you can tell wherever you are in a cycle by taking the temperature of the emotion of the people that are participating. When they are euphoric, you sell to them. When they are fearful, you buy from them. It is that simple. This is why a lot of people are trying to become stock traders because the euphoria is up 30-40%. It has possibly even doubled in the last four years, and that is euphoria and something they should have been thinking about in 2009. Then you would have to really be a contrarian, facing what people thought was a catastrophe and thinking they will be okay.

This is real estate in 2012. Real estate this year has just come off of pretty scary, stretchy years. You have 4% interest rates and not a lot of volume of normal buyers. Bruce wondered what Bill’s favorite price range to buy in is and if there is a limit. For Bill, he does not like his selling price to be over $225. This way your carrying costs and commissions are lower. This is what has been great about the 50% knockoff on the price. When he sold houses in 2006 and 2007, you paid $24,000 in commission and now pay $12,000. Your profits are even better just because of the commissions. With your carrying costs, back then whatever the interest rate was you could get a few points lower now, your holding cost will also be lower. Things have been profitable, and last year was Bill’s best year ever. A lot of it had to do with he did not have to pay twice as much in commissions or in holding costs. This really helped the profit bottom-line.

The buyer changes overtime too. In 2012 you have different buyers than you had in 2005. With the ’05 buyer, you come to their door and they are interested. In 2012, this is not the case. Now they are pickier. Nowadays, a real buyer means they have to prove income, prove they have good credit. You do have a lot better buyers now, even if you look at the credit going through FHA, which is a lot stronger than it was in prior years. Bill said he has not had fallout since buyers have done their research and found the house they wanted. With the amount of houses for sale, buyers are pickier. If they have chosen your house, it is usually because they really want it.

What is interesting about this market is when you are selling; if you look in the MLS there really is an absence of inventory that is available today. You have a lot of short sales. If you go through a journey with your wife and go through a typical short sale, it is a maybe for some months. If after all this time you get a no answer, it is really doubtful you will sign up for another one. The conclusion would be that they cannot keep doing this. There is inventory that comes from people like Bruce and Bill, and there is still not a big pile of normal sellers putting their inventory out at this price. There are some, but it is still not the dominate thing. The REOs are pretty restricted too as there are not a lot of these. You pretty much have to be in the short sale business now.

When we are presenting inventory for sale, we think about this before we even buy it if we look at what is going to be our competition and find out there is not a lot. This is one of those things you may not worry about, but Bruce does because he looks at what might occur and how much inventory should be here that is not. There is an artificial level of inventory that is in the MLS that could be a lot higher. Bill does not worry as much because of the short term and he is not dealing with the volume that Bruce is. If you have 30-50 houses going at a time, which Bill does not, and you see your holding time get longer and longer, you should definitely worry about it. Bill has found his holding time is still very doable less than four months. They are in the same range, but if something happens with a lot of houses, that is worse than just the few. If you just have 3-5 in the system, you make your adjustments and prices and let it go. But for some people who may have the 40 or 50, their spreads may be a little lower than a person who only has three or four. This is the only way you could do volume. Bill has bigger spreads and more room to move in case something traumatic happens.

The age of the properties is usually in the 70s. The model is different, and in this particular stretch when we are buying at trustee sales, we are really concentrating on inventory that is newer than 2000. We just happen to live in a county that was blessed with a lot of builders building things. It is very common to find half of the daily trustee sales were built after 2000. It is in demand areas, but the margins are tight. Bill does not do the trustee sales and does not think he has ever had a house that was built after 2000. What is also interesting is the rehabbing business. The reason why it has been profitable is because the rehab business is less than it was before since in the uptick of ’05, ’06, and ’07 a lot of people were taking credit lines out, putting their new roofs on, or doing kitchens and bathrooms. Bill thinks in the last four years he has only had to do one roof. Back in the late 90s when he was buying the ‘60s and ‘70s houses, people did not have a lot of equity buildup where they were pulling out seconds and doing the new roofs. It seemed like he had to do a new roof for every house he did back then, and now he doesn’t.

Bruce remembered a stretch he bought where it seemed like every house he bought had the faucets coming straight out from the wall. He bought four in a row where it was all the same thing. He had to redo the plumbing and everything. The oldest house Bill ever fixed was from 1878 where he had to put in the pressure water. This was a house he started that ended up disintegrating. He had to get rid of this property and ended up flipping it instead. He bought two adobes and did not fix either one of them. This was a property one of his coworkers found when they were knocking on doors, and Bill wondered why they were showing him the property. However, it was a great deal and he did not want her to be discouraged, so he bought it. Bill also bought another property in the Rubidoux area where it did not have any permits on it. He bought his 3 bedroom, 2 bathroom house, and when he was done it was a 2 and 1. He lost a lot of square footage and money.

Bruce said he had a similar experience. They did not lose money, but they had a box the city said was 1500 square feet because they took a picture from the air. 400 feet of it was not permitted when they got into it.

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.

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270-TNGRadio – Bill Shipp 3-24-12

Friday, March 23rd, 2012

Bill-Shipp

Bill Shipp

California Investor


(Full Bio)

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This week Bruce Norris is joined by Bill Shipp. Bill has been one of the largest wholesale buyers of real estate in Riverside for many years. He has a unique system that can even be done from a distance, which he proves every day by living in another state.

Bruce interviewed Bill on the show last year, and he was one of the bigger hits. On the show there were a lot of knowledgeable investors who were very enthralled with his system. When you can impress the people who work every day in the field, then that is pretty good. Bill has been buying real estate full-time since 1986, but he has been dabbling in it since the early ‘70s. He bought a five-unit apartment in Long beach as a rental, and he found it he could sell it and make more money than if he had kept it as a rental. Before that, the first property he ever bought was a little lot in Quail Valley outside of Canyon Lake, which he bought from a family member. He had it for a few years when he saw he could sell it and make more money than what he paid for it.

Bruce wondered why there was a gap between the ‘70s and 1986. Bill said during this time he had gone to work for the corporate world where he worked for U.S. Suzuki for about six years. He worked his way up to be distribution manager. He then quit this and went to work for a logistics company down in Long Beach, which was millions of square feet of warehouse and inventory. He was in charge of distribution and trucking. It was at this time his friend told him about real estate. This was in 1986. He took vacation for a week and used this time to attend a real estate boot camp with a gentleman named Alla Peter. He was very heavy into buying the VA repose and the HUD repose back when the VAs were up to 7% commission. At this time you could buy them as an investor with 10% down. After the commission and after buying them, you are in it for a whole 3%. This was what started him in the rental business, which he bought quite a few. At his peak he had 42 rentals; now he has one.

It took him a long time to sell rentals in the 90s when it was really hurting everybody, so he did not like rentals in the 90s. He went through the boot camp for a week, and he was convinced to quit the corporate world. He was not even making six figures at this time, but he was responsible for a lot of people and inventory. He really did not know what the status of his job would be as he could be fired any day, or the company could be bought out and transferred. With the real estate, he really liked the idea of being his own boss and having all the inventory in Southern California that he could get a hold of. Inventory cost was nothing until you owned it.

Bruce wondered if anyone in Bill’s tight circle looked at his decision and wondered if he had made the wrong decision. Bill said yes that indeed people were thinking this, especially the people he worked for. He literally went through the boot camp, went back into his company, and gave his two-week notice. He quit and started selling.

Bruce said it is always interesting to him when people get into the business because it gives them a certain bend on the way you think things work. 1986-1989 was a heck of a run. If you touched a property, it would be tough to make a mistake. The prices were quickly escalating, and interest rates were not reasonable although they were more reasonable than in ’80 and ’81. At this time they were 8%. When Bruce got into the business in 1981, he refinanced his house at 17 ½%. This tainted how he looked at real estate because it was not something where you could cash flow. You had to touch it and let it go. There was no way to finance things like this and make it work.

In 1986 when Bill was getting a 7% commission and only having to put 10% down, he was able to buy a lot of houses. The same thing happened from 2005-2007 when everybody thought the answer was to buy rentals or flip. Back in 1986, people were buying houses, and money was pretty available. This was what Bill did, and he was very excited about it. He was seeing his net worth go up and was having some positive cash flow off of it. Then, when 1990 hit, he had a negative cash flow, and his houses were down $30,000 a house, he lost about $1 million. Fortunately, he had friends who thought this was still a good time to buy. They went in50% as partners with him to take care of his houses, and this was able to keep him alive. They infused him with some liquidity, which helped with the negative cash flow since now instead of the $300-$400 a month; he was down to $150 a month.

This impresses Bruce because this is creative. Not many people would ask how they would extricate themselves and still have properties. Bill Shipp found a way to do this. He probably found money partners who did not exactly have the same skills and used them. Bill found good things. The people who helped Bill out were his corporate friends, people who were accountants of financial planners who say you should buy real estate now since it is down. It was an easy win-win for them. Bill now had good money behind him. His other option was to walk from them, which a lot of people at that time did. Bill didn’t and was glad because he has a great credit score to this day where he can go out and get financing anytime he wants. If he had let them go, he probably still would have received financing but would have been charged a lot.

Bill did hard money loans when he first started flipping. It was back in 1988 and 1989 when he was into full-time flipping. He paid 13% and 3 to 5 points, maybe even 15%; which is still normal. At the time he thought he was high, but it worked. If you have access to money and the profit is there, then it really doesn’t matter what your interest rate is or your points. It is when you look at it and you’re done with it; if you have made money on it, it’s okay.

When he started in 1986, the name Bill Shipp was not the household name that it is now. When he first started in real estate, he went to work for an office in Riverside since this was where the houses were. At the time he was living down in Newport Beach and commuting out to Riverside. He thought he needed to move to Riverside, which he did. He started in real estate by selling to investors. He sold houses to some of his corporate friends, who were buy and hold people rather than buy and sell. He had flipped a couple houses before; then he saw the money they were making and said he was not going to work with clients anymore and started buying full-time for himself. His name got out when he was in Riverside as an agent. He was buying the HUD and VA repose as well as talked to different agents. He started talking to the agents who if they found something, he would buy from them and let them represent him. This was where he started. He started really promoting himself by actually going into real estate offices and giving talks to them.

Bruce said he remembered sending a flyer back in the ‘90s when he was buying a fair amount of properties; he had calculated how much agents had made on commission. It was not an organized plot, but rather had just happened. He decided he needed to do the same kind of thing and sent out a flyer which said how much realtors had made the previous year, and it was ridiculous. It was around $300,000 on his transactions, and he wanted to do more of this. Therefore, 1200 of these flyers went into everybody’s slot. He got no phone calls from any of this. What was interesting about all this was this was not necessarily where realtors were excited to go with their time to work with investors. This may have been because they had an experience with a particular investor who did not do what they said they were going to do. Or the managers of the offices said they should not work with investors. When Bill was an agent, his whole career was only with investors. He never worked with a homeowner. How you get started sometimes really colors what you think is wise to do.

One thing about investors is a multiple transaction is possible with each one of them. On the other hand, if somebody buys a house and we don’t see them until five years from now, then that is a big difference. Also, once a real estate agent has worked with a successful investor, they will probably not work with a regular customer. He does not want to deal with them, but rather with someone who makes decisions immediately and makes them for different reasons. You don’t have to look at a house and wish it had a nine-foot ceiling; you just want to know if the numbers make sense. When an agent is working with Bill, he does not have to go get all his family members to look at the property. A decision is made, they like it, and they will not have to have an open house. This was the way Bill created his business by working with real estate agents and passing out the flyers. He then followed up with meetings and talked to the real estate agents in their office meetings and would find one agent out of the forty-fifty there who was interested in talking to him. You can then show them your history, and this gets them excited. You then go into training them.

Bill has trained every agent that he has worked with on how to work with an investor. They already know how to work with a customer as a homeowner, but they don’t know how to work with an investor. Bruce wondered what the difference was between the two between agents who deal with the investors and those who don’t. Bill said for one there really isn’t any emotion, especially for him. He spends more time buying a hat for himself than a house, so there is really not much emotion to it. A lot of the agents probably would not even walk in some of the houses that Bruce and Bill buy. A typical agent who is out there doing their farms, working in a nice neighborhood, dealing with the family, listing the house, and doing their flyers would be afraid to walk in certain houses. It takes a special person to look at a type of house and be able to figure the numbers out with the investor and tell them whether it’s good or not.

Since Bill does his kind of work from a distance in Park City, Bruce wondered if this puts a dent in his buying ability. However, he said his best buying year was 2010 when he was living in Park City full-time. Most people are absolutely enthralled with this because they are trying to do their work really well locally, and Bill is doing the work from a distance with a team. Bill works with the team and is really specific about his areas. He had a call at a house in San Bernardino, and he said it was really not his area because he has to ask a lot of questions such as what it is worth and how the neighborhood is. He does not want to spend the time to do this, and he cannot do it from Park City. He has agents in Park City who he plays tennis with who want him to flip in Salt Lake. He responded saying he has no clue about Salt Lake because when they tell him about a house on the street, he has no idea what the value is or what it is going to cost to fix it. However, when an agent calls and tells him about a house in Riverside, he knows exactly what the value is going to be and how much it is going to cost since he has been dealing with the same contractor for ten years.

Somebody hearing the story may think he is really delegating a lot, but the truth is you really have an awful lot of personal knowledge that gets you 90% there before you have to rely on someone on your team to fill in the gap. With the team and agent that Bill works with, when he calls and tells him a house is worth $185,000, he knows that it is worth $185,000. He never will deal with an agent or somebody who says they think they could get around $190-$200. As soon as they start talking like that, you really need to sit them down and say you don’t need this spread and show them what you think you can sell it for. If you are making $20,000 on a house and they tell you the spread is $10,000, then that is 50% of your profit. You cannot do this. Bill said most of his sales prices are literally within a few thousand of what he thought. It is not $10, $20, or $30,000 off. What is so important about that is this is a competitive market, so your spread cannot be that big because you would have somebody else competitively bidding against you that knew exactly what it was worth and would have a tighter bid than yours. Either this or your profit would disappear completely, which gets old pretty fast.

Bill hears all the time about competition, and he has never worried about it. He has also talked about in the past what people think about the future, about what Fannie Mae or Freddie Mac is going to do, or about Greece. He really does not care. Also, when an agent tells him to hold onto something for a year it should be worth $20,000 more, he really doesn’t care what a year is. His whole time in 2010 was 89 days, so he cared what was happening in the next 90 days. In 2011 he was a little nervous since it went up to about 104 days. It really doesn’t matter six months to a year from now; he just wants to know what the price is today.

Bruce wondered if Bill is typically buying something at this point that is owned by a lender, which Bill said he is. Short sales are not a big part of it as he has only bought two or three short sales in his whole career. There are some short sales when there were not a lot of lender-owned things, such as ’85-’89. Bruce wondered if it was privately owned, to which Bill said privately owned was when he used to have some ladies who worked for him who were like bird dogs who followed the notices of defaults and trusteed sales. This was more in the early ‘90s. The late ‘80s were VA and HUD repos. There were a lot especially from ’87-’89, even at the strength of the market. It was at this time people were paying a 7% commission trying to get rid of them. Bill bought his first VA repo in 1986 at the time when Bruce was running ads in the newspaper saying he bought houses. Bill said he never did anything like running an ad or hanging flyers on a telephone pole, although Bruce said by doing this you can understand trends better because your calls change. Bruce was doing very well between ’86 and ’90, then all of a sudden the calls tripled when no one had equity. Bruce was almost in the counseling business. He owed $130,000 when it was only worth $95,000, so he had to figure out what to do.

When Bill worked in the corporate world in a management position, he really delegated a lot. He used this in his real estate business for going out and knocking on doors. This was something he did about two or three times. He then trained other people to do it, and he had a couple people who all they did was knock on doors. These people would set up the appointments, tell Bill what the people owed, and then have the people fill out a form so Bill knew if they had a first or second trust deed. Bill had done his comps on the properties, figured out what they were worth, then went in and tried to put a deal together. He did not really knock on the doors himself but rather had a team that broke the ice. When dealing with VAs, this other method was fairly successful. The VAs died up around ’89, and this was when he started a new system. He was not going to try to keep doing the same thing if there wasn’t any.

Prior to 2006, there were very few REOs, and Bill was buying out of the MLS. Bill said he has always bought out of the MLS as this has always been there. There are some really good deals here; there are just some people who don’t get it yet. For example, Bill had just come from a long vacation; and while he was gone he told his contractor he was going to be gone and was going to let him buy his deals while he was gone. He bought four while Bill was gone, and one of them was in a great neighborhood in Riverside. He bought a house for $70,000 under market value out of the MLS.

This was at the time when there were no REOs, the market was going up drastically every month, and people were saying there was no way you could buy great deals out of the MLS. However, you can always do two errors by agents. This particular error was about 400 square feet on the square footage of the house. They turned in their BPO, and it was 400 square feet off and priced accordingly. This was the case of a typical builder who had a bonus room that could have been finished or not finished. A lot of times it got finished and was never caught in the building permits and updated with the MLS. This was an example of a great deal just because of input error. When the prices were drastically going up starting in 2003, the errors were made by opinion of value by the real estate agent. Therefore, houses were listed way under what they should have been. This was at the time he was buying houses when they were going up $10,000 a month. Therefore, there are always different reasons why you can always buy in the MLS.

Part of the situation is you know this is true and the agent knows it’s true. There is an expectation that things are going to work, and it comes across to whoever has the listing. If there is expectation that an offer is a stupid one and you are embarrassed to present it, this comes across too. Some people just do not want to submit because they get embarrassed. Even nowadays the property is not owned by a person, but by a bank. One of the things with the cycle is you are usually not dealing with a human being who has a loss at stake, but rather it is a lender. In one example, Bruce had a listing that he gave to someone named Dave Cooley who used to be a bog realtor in Grand Terrace. He had an offer from an investment company; but what he did not realize was within about a week of him getting this listing; Bruce had the chance to buy a big 5-bedroom house for $76 grand. If he sold this house and one other house he owned, he could pay in cash. However, he needed to do it quickly. Dave had an offer from a big company, but he was embarrassed to tell Bruce about it. It took him three days to finally apologize for the offer. Bruce told him he would not only take that offer, but would like the same offer on his residence and would do both of them. Dave almost fell off his chair, but he did not realize Bruce’s circumstances had changed. He had a profit motive to say yes to two discounted deals.

Ben Gay III has a great sales book, but one of the questions he asks is if you would own one and would do the process yourself. Bruce said there are times when he would say yes. He would say yes to the offers he is making that are simple and all cash as opposed to doing what normally has to be done to sell a house. One thing that is not a secret to people like Bruce and Bill is they go through the sales process and know it is not a fun journey to go through the normal retail sale. The reason why you did these was because it was opportunity. On one side you are willing to give up $10-$15,000 because you are making $50,000 on the other side. You cannot be stubborn about the $10 grand. What seemed like a big discount was really a big profit center.

Tune in next week for the second part of Bruce’s interview with Bill Shipp.

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.

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248-TNG Radio – I Survived Real Estate 2011 10-22-11

Friday, October 21st, 2011

I Survived Real Estate 2011

I Survived Real Estate 2011


(Full Bio)

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On October 14, 2011, The Norris Group returned with its award-winning event I Survived Real Estate. An expert line-up of industry specialists joined Bruce Norris to discuss current industry regulation, head-scratching legislation, and the opportunities emerging for savvy real estate professionals. 100% of the proceeds support the Orange County Affiliate of Susan G. Komen for the Cure. This event would not have been possible without the generous help of the following platinum sponsors: ForeclosureRadar and Sean O’Toole, Housing Wire, the San Diego Creative Real Estate Investors Association and President Bill Tan, Investors Workshops with President Shawn Watkins and Angel Bronsgeest, Invest Club for Women and Iris Veneracion and Bobbie Alexander, San Jose Real Estate Investors Association and Geraldine Berry, Real Wealth Networks, Frye Wyles, MVT Productions, and White House Catering. The event video can be found on isurvived2011.com.

I Survived Real Estate started just four years ago. For those who had been there for a long time, it has gone by fast. It started with a simple formula, a conversation, and a cause. The last four years in real estate have been particularly difficult. Many who attended the live event would be considered survivors. Long gone are the days of condo hotel investing in Las Vegas, a realtor in every household, stated income loans, and 10% price increases every month. True professionals working in the environment today stay on top of trends, challenges, and all different facets that makes up the market. The event featured six special guests from all over the nation. Some have or soon will be representing their national organizations in Congress trying to influence change. The conversations on stage covered what we should expect in 2012 and how our businesses might change. 100% of the proceeds went to Susan G. Komen for the Cure, and this year alone they raised close to $80,000. The walkers alone raised $15,000. On September 30 several people walked in a breast cancer walk, and some joined the walk to earn a seat at I Survived Real Estate 2011. Over 50 people participated in the walk.

Rebecca Hultquist thanked the Norris family and everyone at the event for their support over the past three years. Over all the years they have raised over $250,000 for women in need in the Orange County area and other surrounding areas. Rebecca recently had a friend who was diagnosed, and because she was under the age of 40 was able to have a mammogram through the funds that Komen offered her. In turn, these funds came from the supporters of I Survived Real Estate, and with their donations they became advocates, volunteering and becoming a part of the movement. Rebecca herself is breast cancer survivor, which she first had when she was 33. She was a wife and a mom with three daughters, and if it wasn’t for a life-saving mammogram that she had that year, she would not be here today. It was stage 2 invasive breast cancer, through which she endured chemotherapy radiation and surgery. Through this, she became involved with Susan G. Komen for the cure. 75% of the funds raised stay in the area to help women in need through treatment and clinical mammograms. Women can get the treatment they need. Early detection was what saved Rebecca’s life and what will save the lives of the future women. Through the science being funded, we look forward to a day when our daughters, children, and granddaughters live in a world without breast cancer.

Aaron talked about his mother, Marsha Norris, who passed away last January after a 17 year brave fight against cancer. The first three years of I Survived Real Estate were launched with a radio show between Marsha and Bruce, and each of the past events really showed her spirit, her stubbornness, her unwillingness to give up, and her faith.

Bruce took a moment to talk about his wife Marsha. She started every day by doing two things. She said prayers for everyone in her family every day, and she took time to think of all the things that were blessings in her life. The one thing you could not mistake about her was that she was thankful for the smallest things. If you took her out for coffee, you never failed to hear her say thank you. Marsha was an amazing blend of stubborn determination and kindness. She had an iron will when it came to some things, and one of those things was dealing with breast cancer. She decided early on that breast cancer was not going to rule her life and that she was going to put it in a little corner and tell it to stay there. There were times she was afraid and was hurting, but that was dominated by her wanting to go on cruises and live a life. If you know somebody who has cancer, it’s a choice on how to handle it. Marsha handled it with such grace and dignity that it was amazing. The people in the audience put a smile on her face constantly during her 17-year journey with cancer. She received cards, calls, flowers, and she felt everyone’s love when she came to meetings.

This year’s I Survived Real Estate was the most important meeting they had, as there is a lot at stake for not only investors but collectively as well. Sometimes as investors we think of ourselves as the lone Mohican, but all of a sudden there is legislation that really deals with the entire industry, how it affects how people buy property, and how much down payment they have to have. We have a common enemy with everyone in the industry. On the other side of things, there is a lot going on in the world that Bruce never thought he would have to think about as a real estate investor. All of a sudden, Bruce found himself staying up late at night watching Europe to see if Greek is going to default. The goal at the event was to bat it around with people at the top of the industry. We had to have a lot of respect for the journey it took to have the positions the speakers had. It’s a lifetime commitment to get to where they are in the industry. They have dedicated themselves and therefore we have a lot more in common than not.

During the presentation, Bruce showed a property that The Norris Group had bought that sold at the peak of the market for $436,000 in Moreno Valley earlier. About two and a half years later, The Norris Group bought it for $64,000. They put $35,000 into it, and they rented it out for $1,400 a month. The property was much nicer when they fixed it up, and Bruce said this was exactly how they fixed their rentals. One of the things Bruce wanted people to realize is sometimes there is just an assumption that when you have rentals, then you are a slumlord. Not true. The reason The Norris Group does what they do with rentals is because they do not have any competition because no one is going to put granite into rentals unless they think like The Norris Group. The way they think is they are going to get the best tenant, the most applicants, the least amount of people to move out, and fix everything nice right now since labor is on sale right now.

Sometimes cities are worried about there being too big a percentage of rentals, but there were most likely a lot of people at the event who fix the houses the same way. One of the problems is someone bought the house across the street for $436,000, and they still owe this same amount. This house may be worth $150,000 or $170,000, but where the problem lies is we have a very large percentage of people who are upside down. In California, we have about 30% of the people who are upside down with another 4-5% who are very close. This is a big problem, and some of the cities are a lot worse. In one particular city, Hesperia, people owed twice as much as the house was worth on 9,000+ households; while 5,793 owe 120%-200%. If you add the entire negative up, you have 76.9% of the people in Hesperia who are not going anywhere; they cannot move up or out. This is a problem when 76% of your city is stationary and cannot go anywhere. This is an extreme example, but the whole state has problems.

One of the things that is occurring is we are having a decent volume in sales in California. This is a historic look at volume in the brown line. In 2010 there were about 500,000 sales, and in 2011 there were similar sales. The difference is the mix of sales. You look at the mix of sales released by the California Association of Realtors for August of 2011, and you see that you have about 43-44% of all sales either being short sales or REOs. If you think about a short sale or REO, the person that leaves that closing has damaged credit. They are not buying another house, so you have just lost 43% of your former owners to non-ownership status, which has never happened in the past. This is the average for the state of California. If you go to areas such as Riverside, it’s 65% combination of short sales and REOs. For every 1,000 sales, 650 buyers no longer emerge as an owner-occupant. They have to be sold to an investor, or you have to have new people migrate into the area.

In Riverside, we have about 15% unemployment, so the likelihood of them showing up is not as good as it once was. This is the dilemma because we have some dominoes to solve, so one of the things we have to ask is how we fix unemployment. In our area, you don’t fix unemployment without fixing construction; and you can’t fix construction until you have a price per square foot that makes a builder a profit. Unfortunately, we are a tad away from this. We have to figure out how to move a lot of properties to another group of people. CAR also released data showing a portion of sellers planning to repurchase, and it showed about 37% of people when they close escrow are saying they will buy another property right away. You have the damage group, but you also have the people who are mentally beat up. This could include people who just closed escrow who used to have a $400,000 house that closed for $190,000. These are the people who do not want to participate in another one right away. You have this lag effect that goes on when you are not too excited about real estate. Consequently, what is going on is the cash sales have exploded. You have people buying properties, but the problem is when we buy properties for cash we eventually run out of the cash. Therefore, we have to shove the same property in a better condition on the market. Instead of it being able to back up the truck with the REOs and unloading a lot of them, you are constantly competing with very nice inventory that is coming back around. If we can get financing, we would not have to do this.

33% of loans in foreclosure have not made a payment in over two years. 41% of the people have not made their payments in a year or more. People stay in foreclosure for a long time. There was a news article in the Riverside Press where a family being interviewed said they were actually pretty delighted about how their lifestyle had changed since they stopped making their house payments. They believed life was so much better: they had extra money for the business, went on a vacation, and bought a barbeque. The problem is eventually this inventory might show up, and this is the ball of inventory that is turning behind the scenes; 90 days late all the way through properties already foreclosed is 4 million properties. This is about 8% of the entire inventory in the country. If you think this is over with, it’s not. The question is why we are letting this happen and why this is the best strategy that is going on right now.

One of the things that is happening right now, and this is important for everyone in the industry, is there is trying to be a retooling of our minds toward ownership of homes. On the recent cover of Time Magazine, the title was “Rethinking Home Ownership: Why Owning a Home May No Longer Make Economic Sense.” They could have said anything else but that. You have half-priced real estate and interest rates at 4%. This is economically a bad idea. People need to call up their landlords and see if they can get a 30-year fixed rental rate. This is not going to happen. It’s not economically infeasible; it’s actually the smartest thing you could possibly do. However, what is interesting is we have decided that, media-wise, we are going to say that we have had it wrong the whole time about owning a home since it has damaged so many people recently.

Bruce was married when he was 17, and he did not catch on to work very well at the time. He was fired 5 times very quickly because he did not know how to disagree with an owner. The first time he came home with cash, Marsha was really happy, but after that she knew it was severance pay. When they were 21, they had a chance to buy a home in Mira Loma, and he had rectified his problems with working. They bought a house, and they did not know what they were doing at the time. The toilets flushed the wrong way, the windows did not work. The Sunday morning they fixed Sunday dinner, they had a swamp cooler that coughed dirt all over their dinner when they started it up, so they had to eat out. However, the next day Bruce got to mow his own grass for the first time. This was the first day he felt like a man.

To find out more, tune in next week for I Survived Real Estate 2011, part 2. The Norris Group would like to thank their gold sponsors for the event: Adrenaline Athletics, Coldwell Banker Pioneer Real Estate, Conaway and Conaway, Delmae Properties, Elite Auctions, Inland Empire Investors Forum, Inland Valley Association of Realtors, Keller Williams of Corona, Keystone CPA, Kucan & Clark Partners, LLC, Las Brisas Escrow, Leivas Associates, Mike Cantu, Northern California Real Estate Investors Association, Northern San Diego Real Estate Investors Association, Pacific Sunrise Mortgage, Personal Real Estate Magazine, Raven Paul and Company, Realty 411 Magazine, Rick and LeaAnne Rossiter, Southwest Riverside County Board of Realtors, Starz Photography, uDirect IRA, Wilson Investment Properties, Tony Alvarez, Tri-Emerald Financial Group, and Westin South Coast Plaza. Visit isurvived2011.com for more details.

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.

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239-TNG Radio – Rick Solis and Andrea Esplin 8-20-11

Friday, August 19th, 2011

Rick Solis

Appraiser/Investor

(Full Bio)

Andrea-Esplin

Andrea Esplin

Appraiser/Investor

(Full Bio)

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This week Bruce is joined once again by Rick Solis and Andrea Esplin, both investors in Southern California.

Rick first noticed when things went from an up market to a flat market to a free dive in the summer of 2006. It was getting harder sell, there were less offers, and the excitement was beginning to fall off. He noticed the free dive in 2008 when things got really bad. Bruce said prices were dropping about 3-4% a month. You could buy things 30% below market value, and only 10 months later all your equity was gone. We were not in the buy and hold, but sometimes you almost got there because it was tough to sell, so it was a scary time. For business at the time, Rick and Andrea bought two rental houses in 2008. Although Andrea wanted to buy a lot, Rick was not buying as much because he saw what was coming, and in 2009 he sat out the whole year and didn’t want any part of the market. In 2009 Andrea was buying from all REO inventories, so it completely changed from where she was chasing the deal before with absentee mailers. Now she was building relationships with agents. She wants to build relationships to where she can have repeat business. She quit going to lunch with her investors and started going with realtors. This is the advantage of being around for a few cycles in that you realize the skill set you know how to do, in her case meeting with people, really does not play a part in the current cycle as much as it does building a relationship that is repetitive. It’s almost like having an account where you call on a store that you own where you have a product, and you would be able to only show up once in a while and take an order. This is what this cycle, this quadrant 2, is like. You are building relationships that have legs, which is very different from a one-call closing skill like in 2003 and 2004 that you would need. You want long-term relationships. For people who are in this business for the first time now, the assumption is that this is how it works.

The Norris Group just had a boot camp where two people were doing short sales. However, the word short sale was not even understood for a decade at a time in California. They have a business model that is working perfectly until it doesn’t work, and then it will be nonexistent for a long time. This is what is tricky about what The Norris Group does. You really have to have different skill sets for whatever phase you’re in at the time. Rick said it seems a lot of the investors are good at one thing and not the rest, so people like those in short sales are only in it for a few years. Either they have to change or find a new job because short sales are going away at some point. It’s like saying you’re really good at attending HUD auctions, but the last one they had was back in 1997. Even trustee sales are going to be very slim. In 5 or 6 years from now, there will not be as much trustee sale business. It will be interesting since the Norris Group does this now, the margins are very tight. The quantity of people interested in it is very big, but Bruce said they used to fund people, who were doing it before, and their margins were good but there were fewer people and fewer properties. Therefore, the ratio actually turned out to be fine. What has changed, especially in the REO business, is the accessed information is so much easier and quicker to come up with an intelligent decision that they have people walking in to a business that don’t know very much that become close to 80% capable inside of two months. This is hard to compete with. Even for the ones that leave, there is a whole new wave showing up that only needs two months of training and are then pros. It doesn’t mean they are coming to accurate conclusions, but they think they are. It wouldn’t be hard to do an appraisal if you think just pushing a button and getting an opinion off of a site like Zillow that’s accurate. Oddly enough, the flatter the market is, the more accurate Zillow is. Bruce just pulled ten recent sales because he wanted to see, and it was only 1 out of 10 properties that were wrong by 10%. Most of them were within 2%. In a flat market, even the assessed values are pretty tight. It gives somebody a false sense that they know what they’re doing, especially if this is all they have seen and they think Zillow is correct all the time, whereas a few years ago it was not even remotely correct.

The type of inventory that Rick and Andrea are buying and holding is different from the buy/sell inventory in that the buy/sell inventory can include much bigger houses, houses with pools, two story houses, or nicer areas. This is absolutely necessary because this is what the retail buyer really wants. Because of the interest rates, if he is going to buy he is going to be able to afford the inventory that he wants. If Rick and Andrea tried to sell inventory they have in Victorville they’re renting, even if the price per month would be nothing, they said it would be a challenge.

There is a huge difference between buyers with the two properties Andrea has in Anaheim and Rialto. The Anaheim property is a single-family house that Rick flipped to her. The house originally was a mess and needed a lot of money to fix, and this is what has changed as far as what they sell and one of the reasons The Norris Group shifted to the trustee sale inventory. 75% of what they have is newer than 2000 and bigger than 2000 square feet, and this is really the sweet spot for the retail buyer. This would not make a good rental. For most of their rentals, they have less than $100,000 tied up in the rehab and the purchase price. If you’re over $100,000 and you’re getting hard money financing, it’s hard to make that pencil out. You have to end up with the farther out and older things. You’re not going to get a lot of Ontario, Upland, or Rancho Cucamonga rental houses right now unless you’re putting a lot of money down or you can be one of the very few people in the United States that can get an investor loan from a bank. Bruce thinks a lot of this is going to change; and he got a sense of this when he was back in Washington. They’re trying to figure out how to make it palatable to whoever they have to make happy. However, it has probably dawned on them that they’re not going to fix anything by selling things one at a time to owner occupants. Rick said he is positioning himself to take advantage of that when the financing becomes available. In Victorville, for example, one of the charts Bruce has shows that 76% of the people are over encumbered from either 10% to over 100%, which means that they’re either stationary, going to be in REO, or they’re going to be short sale. If you go up and look at how many percentages of the transactions are REO or short sale, it’s probably 80%. This means that 80% or more of the time, a buyer does not emerge from the sale of that property. Those people are going to buy. You have an extra family looking for a rental or to move in with themselves, but they don’t produce a buyer. This means that at a ratio of 4 to 1 you have to have another occupant buyer move in to their Victorville property. This is not going to happen.

In their Victorville property, the aforementioned situation is perfect for rentals, and they are getting the best renters they can. The tenants are people who just lost their house, and they think very much like a homeowner, which means they are used to taking care of things themselves. A lot of the tenants they have come in contact with are solid, hard-working, blue collar families that don’t make a huge amount of money but make a good living and can get by. They also happen to end up in a first-time buyer situation where they’re paying $400,000 for a house that’s worth about $125,000. Everybody would walk from that situation. You’re paying three times your mortgage than for what you can rent the house next door. You can understand the rationale between to know when you can’t continue to doing it forever.

Both Andrea and Rick manage the properties, although Andrea does about 80% of the property management. Rick said he doesn’t really enjoy the 20% that he does, so he is really looking forward to buying rentals. Also, when you have the thought of creative financing, you never get rid of anybody. You’re buying with a wrap, you’re selling with a wrap, and everybody is still with you. One guy who worked out in the desert used to have a $100 spread on 100 houses. This was his $10 grand a month. This would be perfect if everybody pays. He was showing Bruce this, and Bruce was thinking that if 10% of the people would pay him, he’s gone. Bruce likes the spread and buying at a discount, but he also likes being by himself and having a great life. This he said is cleaner.

Andrea and Rick were more aggressive with their purchases in 2010, but not so much in 2011. Rick misread the market and thought that with the way things were taking off that demand was coming back because of the government stimulus. He really thought the government was going to keep rolling this out, so he thought they had bottomed, making the houses cheaper and there being plenty of inventories. At the time he wanted to load up on as many as he could at that point. Once he noticed that property values were dropping, inventory levels were shrinking, and every investor and their brother was entering the market, he started losing motivation. When he notices we are bottoming again and can get good financing, then he said he is in with both of his feet. But it’s not clear how long this is going to be.

Rick and Andrea usually draw the same conclusions and are on the same page with a lot of things. All the rentals they have gotten have been from forming relationships, although now most of their inventory would be down as well as far as the REO agent themselves. They have one in particular they know will call them on a weekly basis. They’re calling now with things that don’t make sense, but they’re desperate. When Rick is appraising, he usually gets a sense of areas that are either going up or declining in different price bands or different counties. If you’re selling something over $500,000, in almost every market where you have something like this the market just seems like it’s gone. Even the really good areas like Glendora, Upland, or Claremont seem to have so little demand for the product that it’s tough. Rick doesn’t really see any areas that are going up in value, although he is mostly in the Inland Empire. He doesn’t really know about areas like Orange County or West LA County. Rick said it seems like things are gradually declining in most areas. The listings are usually higher than the sold that closed a couple months ago, and it seems like they’re dropping on average about ½% a month. Sellers are also kicking in a lot of closing costs, which translates into another 3% you’re paying out that you weren’t a year ago. Andrea has not had any appraisal issues when she was selling the property, but she doesn’t really try to squeeze it for everything. She wants it to be well-priced from the get go. She put $100,000 into her Anaheim property for repairs alone, something she knew about going in as it was a big rehab. Right now it’s listed at $485 for its resale price.

Rick believes rents right now are pretty stable. You can usually get a good tenant within a month. There are a lot of landlords that are renting to lower quality tenants and getting higher rent, but overall they have a lot more evictions, vacancies and problems that it balances out to the landlords that are pricing them at market rents. Rents are only down about 5-10% over the last 3 years. Andrea and Rick usually put their rents a little lower than market, and they try to fix their rentals as best they can, even a lot better than some landlords do. Rick sees a lot of landlords that do terrible work from missing screens to broken appliances and heaters that don’t work. These are usually the landlords who end up with the problem tenants. Rick and Andrea try to fix everything so everything is working. They want to attract the best people they can attract. The Norris Group did the same with a lot of the rentals they had in Moreno Valley. This was an area that got hit like Victorville, so you would have a fair amount of people looking at it, but you would have only one house that had repairs The Norris Group did, so it was kind of easy to pick the best one. They have not had challenges of kicking people out or with people who have missed paying their rent. One of Bruce’s thoughts was when he resold the house, he would not have to do a major rehab again because things like the granite were still going to be there.

Similar to Mike Cantu, who was on the show a couple weeks ago, Andrea finds her reading time very important to her and something non-negotiable. In addition, she also works out on a regular basis. It not only keeps her in shape and a time for her to be alone, but it is also the time she comes up with good ideas. She can decompress and think clearly. Bruce does something similar. He will have his headset on during his workout because he uses this time to think. It’s a good diffuser for him. Andrea will keep a notebook with her during her workout because she will think of things that she knows will immediately go away. It’s amazing that the ideas don’t stick around, and these are usually the best ideas.

Rick doesn’t really have anything non-negotiable. He has to have 7 hours of sleep a night, which is really the only thing non-negotiable for him. Although, he said he has offered to sell this to people. If they need a rush appraisal and are willing to pay a couple thousand dollars, he will give up a night’s sleep. When he was younger and more motivated he did read a lot, so this was non-negotiable for him back in the day.

When asked about Rick’s best quality, Andrea said he is a really great guy and has good integrity. They have been through good times, and it is easy to go through good times because of his integrity. They started out with nothing, and they had a lot to overcome. It is during moments like this you really find out the kind of person with whom you’re working. He always had her back, and they would figure things out together. It is very important to know who you’re working with especially during the tough times. Bruce has often talked to people who assumed something was in place, and he would then ask them if they had been through tough times together. He and Mike were at lunch, and Mike told Bruce he had seen a lot of people’s character change in the last couple years. Bruce replied he didn’t see the change, he saw the change revealed. This is what shows up when bad times hit.

Andrea’s quality is she will never give up. She will fight to the end to get to the finish line. A lot of the time Rick will look for the quickest and easiest solution, but Andrea will look for the best solution. No matter how bad things are, she will get to the finish line, and it usually works out a lot better than the way Rick would have gone.

Rick read a book by Dan Kennedy called My Unfinished Business, which told the story of his life, all the business he had done and how he carried out the business. He told about his failures and how he would get back up again. Reading is something you get into the habit of doing, and it becomes hard not to do it. Andrea’s bed is full of books, while Bruce has about five he’s reading all right now. What is interesting is all of his books are wrapped together. There is not one real estate book amongst them, but they are all connected tissue. One of them is about how people get to be great, and you find out you don’t have to be the most gifted person in the room. You can be the person who finds out they can try harder, work harder, and end up with the best reputation. He enjoys reading these books because he can relate to them as most people can. Most people have average skills and often ask themselves how they can become excellent. Bruce has talked with someone who has been a karate master for 40 years, and he told him the people who were the best students were not the ones who came in already gifted in karate and could do 70% of what he was going to end up doing naturally. These people very rarely have the character to take it to the level of somebody who has to struggle with every piece of it and finally emerge. This is usually how it is with investing. Starting out not having much is probably the best favor in the world because then you’re not putting too much emphasis on the things.

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.

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