Tony AlvarezVeteran Investor Mike CantuVeteran Investor Rick SolisVeteran Investor, Appraiser |
  
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This week Bruce is joined by Mike Cantu, Rick Solis and Tony Alvarez. Mike Cantu has been an investor in the Inland Empire for over 25 years. He has been a builder, rehabber and property manager. Rick Solis appraises all of The Norris Group’s loans, and he is also an investor. Tony Alvarez has been an appraiser, residential and commercial property buyer and author.
Rick meets with many of tenants in his current buying market. When you talk with tenants, and ask them what they do and don’t like about a property, it helps one understand what they are looking for. Rick will not buy any property without two bathrooms. A property without a garage is practically worthless. Small bedrooms can be deal killers as well.
For Rick’s typical 3 bedroom, 2 bathroom, 1,100 sq feet house, he typically rents for $1,000 per month. If he can squeeze an extra bedroom into the house, then he can raise rents by $100. Rick’s rent rates are $50 less than most landlords.
All of Rick’s houses are upgraded with granite counters and wood laminate floors. Those 2 items seem to attract a lot of quality tenants. Most of Rick’s desert properties do not have yards. Tony calls that “desert landscaping.”
Mike’s rental property criteria is very different from Rick’s. Mike is less concerned with house structure, and more concerned with lot location. Mike has many 2 bedroom, 1 bath houses, and some of them have served as his best rentals. Houses wear down, but dirt goes up in value. Mike is very concerned with buying houses near good school districts. People will overlook the size of their house if they can get a home in a good school district. Mike’s average rent for his 2 bedroom, 1 bath houses is $1,095. He does not lose many tenants.
Tony will not buy condos in his market. The condos in his market are too condensed, and the percentage of rentals to owner occupied properties is not good. Some time ago, Tony was able to buy 2 bedroom, 2 bath condos for $15,000. If prices go down to that level, then he will probably start buying condos again. Tony likes to buy 2 bedroom, 1 bath houses and 3 bedroom, 1 houses.
Tony buys a combination of properties. They range from lower class to upper class properties. He finds that mixing up his inventory allows him to receive a variety of benefits. The last time Tony began investing, 90% of his renters were Section 8. Now approximately 50% of his renters are Section 8.
Rick tries to avoid Section 8, because he loses a couple months of rent waiting for inspectors to come out. He has also found that Section 8 tenants are not quality tenants. Rick says he is not opposed to Section 8 tenants if they can quickly move into the property and pay rent.
Tony believes that Rick’s problems with Section 8 are due to the difference in his market. Rick’s Section 8 tenants were from San Bernardino County. Tony has found that LA County’s Section 8 is more efficient. Also, the extent to which you know the Section 8 workers makes a difference in how quickly they service you.
Mike has no Section 8 tenants. However, he is not opposed to renting to Section 8 tenants. In the past, when Mike had Section 8 tenants, he lost all of them. Almost all of them had a problem with breaking things and not fixing them. Mike will not keep tenants who will not pay for the items they destroy.
After Mike receives an application from a potential tenant, he will give a surprise visit to their house. He checks to see if they keep their properties in good shape. If he is not allowed to come into their current house, then he will reject the potential tenant.
Back in the 80s, Tony developed a good understanding of the rhetoric for how bankers and politicians communicate. You have to carefully analyze what they say to understand what they really mean. Tony believes that they want to release the inventory, but they have a control issue over how the inventory will be released. Unfortunately, bankers are not as motivated to release the inventory now, because they are receiving large sums of money from the government. Tony believes that much of the inventory will be released between now and 2012, because that is an election year. They will want to get the pain out of our memories before the next election. Americans do tend to have short term memories for economic pains, but Tony believes the damage done by this down turn was too deep.
There was a bill that was recently rejected. This bill would have squashed most of the foreclosure cases we are having right now. There probably were some foreclosures where the paper work wasn’t completely done, but if you went back through history and looked at the paper work for every foreclosure, you would probably find just as many foreclosure problems. The bottom line is that if you aren’t making your payments, then you should be foreclosed on.
Mike has noticed a difference in the kind of inventory being released during the second half of this year. They are letting go of strange, derelict inventory. Typically, when Mike looks at newly released inventory, 8 out of 10 will be worth bidding on. Recently, when Mike analyzed the new inventory for his market, only 5 of the 18 were worth bidding on.
Rick doesn’t pay much attention to what people are saying about what is coming to the market. There are too many different opinions for him to take many of them seriously. He would rather just focus on what trends are currently visible in the market.
Tony recently talked to an REO agent who was very worried by some recent news released by Fannie Mae. The news said that Fannie Mae was hiring new agents, but they had to hire a racially diverse group of agents. Also, the news said that the experienced agents would be required to train the new REO agents, or lose their job.
There is a difference between a real REO agent and an imposter. The imposters are bulk buying companies. Some of the imposter companies are named Atlantic and Pacific. If you do research on their listings, they are all owned by one holding company. These guys are buying bulk and then trying to sell at high prices. Also, many of them are buying non-performing notes, not houses. That is not a true REO agent, and the information you will get from them is not accurate.
If you are buying $150 million of notes, that inventory will not hit the market in the typical way. It won’t be an REO that will go to 20 different agents, it will just go to the one company.
As long as Mike is in real estate, he will be a student of it. He goes to 8 to 12 seminars every year. If you work hard on your job, you will get paid money, but if you work hard on yourself, you will earn a fortune. A lot of bubble riders who are still in trouble, and he wonders how much of their failure is due to their lack of education. Mike believes that his success is due to his education. He likes to have a variety of education. He doesn’t want to be limited in any aspect of his education. Mike’s favorite trainer was Jack Miller, who recently died. Bruce is in Mike’s top 4 favorite trainers alongside John Schaub and Peter Fortunato.
Tony does not feel he has taken much education. He has taken some of Mike’s seminars. He got involved in real estate because he listened to a late night infomercial. Tony’s career was all about learning through his mistakes until he met Bruce. Before Tony met Bruce, Tony was only buying REO properties. Bruce taught Tony to look into owner sellers, and how to time markets. Bruce told Tony to hold on to his properties when Tony was about to sell. When Bruce told Tony to sell, Bruce said, “Would you rather sell to a euphoric market or an uninterested market?” Tony earned $3 million from the advice Bruce gave him, so Bruce is the person he listens to the most.
Rick has been reading books and going to seminars since he was a teenager. One of the teachers he listened to when he was younger was Dave Deldado. In the last few years, Rick has stopped going to all other seminars other than Bruce’s. Bruce is in Rick’s market and he respects Bruce’s market timing. Before hearing Bruce’s seminars, Rick was only buying 1 or 2 properties per year, but now he tries to buy 1 or 2 every month.
Thank you Mike Cantu, Rick Solis and Tony Alvarez for being a part of our 200th show.
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.
