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The Most Important Thing In Passive Real Estate Investing – Who You’re Making A Bet On:

Filed under: Buy-and-Hold,California,Due Diligence,Economy,Memphis,Mindset,News,Out-of-State,Real Estate,Real Estate Development,Real Estate Investment,Retirement admin May 19, 2016@ 5:09 pm

By Jeremy Roll

Passive investments in real estate can be a fantastic way to be build wealth and, perhaps more importantly for some investors, can provide consistent cash flow over a long period of time. In fact, passive real estate investing can literally change your life. For example, passive real estate investments changed my life by providing my family and I with enough consistent cash flow to allow me to leave the corporate world more than 8 years ago. But investing passively in real estate requires that investors understand and consider hundreds of different aspects for each opportunity. While each aspect of an opportunity is important to consider, I am often asked: “What’s the single most important item to consider in a passive real estate opportunity”. And, after more than 14 years of investing in real estate passively, my answer is always the same: Who you’re making a bet on (the managers of the opportunity) is the single most important consideration. I would argue that the same holds true for startup investors, who are often drawn in by a great concept and/or idea when, in reality, the company’s founders and senior management team are even more important to consider than the concept/idea itself if you’re trying to determine the probability of a startup’s future success.

At this point I am sure some readers are saying to themselves: “But isn’t the property the most important thing to consider in a passive real estate opportunity”? While that does seem logical, and clearly the property is a vital part of any passive real estate opportunity, I would argue that the managers are still more important than the property, as you can invest in the best fully occupied property in the best location but if the managers don’t properly manage the property, tenants, and all other aspects of the investment, then ultimately it didn’t matter that it was the best property in the best location because the bank will foreclose on the property and investors will be left with nothing. And, in the end, the only thing that mattered is that investors made a bet on the wrong people.

Another great example of why the managers are the most important item to consider in a passive real estate opportunity is the possibility that some managers will go to the greatest extent possible to protect their investors’ capital, while others will do the exact opposite. In the case of the latter, making a bet on the wrong managers can lead to significant losses, especially in the event that an investor is a victim of fraud (ie. a Ponzi Scheme) and/or gross mismanagement. But perhaps you haven’t considered that making a bet on the right managers can result in positive outcomes for investors even in the most challenging of circumstances. For example, I made a passive investment in a 300+ unit student housing apartment complex many years ago that was 99%+ occupied in a fantastic location (it was, in fact, the first property located across the street from a state university campus). Given its location, I expected the property to be full year-round. Unfortunately the property experienced a highly unlikely and unpredictable challenge that resulted in the temporary reduction of its occupancy rate to 65%. Even though this challenge was temporary in that it would have resolved itself within 1 year, it happened to occur when the loan was due and needed to be refinanced. In the end the combination of the highly unlikely and unfortunate event and the very unfortunate timing of the loan refinance led to the property being foreclosed on after only several years of ownership. Under the circumstances, the manager could have easily told investors that they were all of the victims of very bad luck and timing that couldn’t have been foreseen and moved on, leaving investors with significant but completely understandable losses. But, luckily for investors, the manager felt horrible about investors’ potential losses and voluntarily (without anyone asking) decided to give investors similar ownership in another property they owned in a practically identical location (first student housing property across the street from a state university campus) in a different state. Note that they gave up their existing interest in the new property, out of their own pocket, to mitigate any potential losses for investors. Regardless of how many times I recount this story, I am still highly appreciative and impressed that the manager did this for their investors without any legal requirement to do so. This taught me a very important lesson that I continue to keep in mind every time I consider a new passive real estate opportunity: Wealthy managers can sometimes afford to fix major challenges that non-wealthy managers can’t afford to fix but only if they choose to do so. And only managers who are truly concerned about their investors’ capital would choose to do so, further highlighting the importance of making a bet on the right managers.

In closing, while it’s critical to review all aspects of a passive real estate investment, don’t forget the most important thing to consider as a passive real estate investor: Who you’re making a bet on! Good luck with all of your passive investments!


About Jeremy Roll

Jeremy has been an active real estate and business investor for over 14 years who left the corporate world in 2007 to become a full-time passive cash flow investor. He is currently an investor in more than 50 opportunities across more than $500 Million worth of real estate and business assets. As President of Roll Investment Group, Jeremy manages a group of over 950 investors in the US and Canada who seek passive/managed investments in real estate and businesses. Jeremy co-Founded public investor meetings under the name FIBI (For Investors By Investors) in 2007 with the goal of networking with, learning from, and helping other investors. FIBI is now the largest group of public investor meetings in Southern California, with 13 active monthly chapters and over 18,000 members. Jeremy is originally from Montreal, is a licensed California Real Estate Broker (for investing purposes only), has an MBA from The Wharton School, and is an Advisor for Realty Mogul, the largest online crowdfunding marketplace for real estate investors to invest in managed real estate opportunities. Jeremy has a diverse investor and fundraising network for real estate and business opportunities and has a large network of real estate and business contacts. He welcomes e-mails ( to network with or help other investors and to discuss real estate or business investments of any size.

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Avoid evictions with excellent tenant selection:

Filed under: Buy-and-Hold,California,Due Diligence,Economy,Memphis,News,Out-of-State,Property Management,Real Estate,Real Estate Development,Real Estate Investment admin @ 1:33 pm

by Mike Miller

The best way to avoid evictions is rigorous tenant screening.  You should have a predetermined strategy in place that you always follow when you screen applicants.  This will help you select good tenants and help you avoid discrimination accusations. You will also be able to avoid those awkward situations trying to explain to an applicant why you did not choose them.

I prefer to have a two sided application.  The front side contains detailed instructions on how to apply, what criteria will be used in your decision and what will automatically disqualify an applicant.  The back side is your application.  First of all, if the application is not fully completed, it will be rejected. Also, the instructions should list what types of income verification you will consider such as pay stubs, 1st page of tax return or 3 months of bank statements.  If the applicant cannot provide sufficient monthly gross income equal to 3 times the monthly rent, their application will be rejected. Prior eviction? Rejected.  FICO below 650? Rejected.  Won’t provide contact info for 2 previous landlords? Rejected.

There’s also the psychological side to tenant screening. Look for red flags.  Problem tenants often get caught up in their own lies. Talk to the applicants in person or on the phone.  Ask why they are moving, how soon do they need to move and did you get along with your last landlord.

Google the applicant. It is amazing how many people leave their Facebook profiles unlocked. The two college students applying for a unit in a quiet building say they are professionals and “don’t party”, but every picture on their facebook profiles show them with a drink in hand. Or the applicant who applies for a non-smoking unit, but has a cigarette in their hand in multiple pictures.

About Mike Miller

Realtor, Licensed Real Estate Broker and General Contractor specializing in property management with a background in real estate sales and property development.

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Flipping in Any Kind of Market:

Filed under: California,Due Diligence,Economy,Flipping,Mindset,Real Estate,Real Estate Investment,Self Direct IRA,Self directed IRA,Taxes admin March 22, 2016@ 10:56 am

by Kristi Cirtwill

In the last couple years, investors who have bought properties, fixed them up and sold them for a profit (otherwise known as “flippers” or “rehabbers”) have had a great opportunity.  Even if the project took more time than anticipated, the flipper had an appreciating market to work with.  In many cases, multiple offers would come in on the property, sometimes resulting in bids over list price.  If you were a flipper in the last couple years, you almost couldn’t go wrong!

However, as we all know, markets do change.  We have entered a period where there is stabilization in the real estate market but uncertainty in the economy.  The questions we ask ourselves are, will we see appreciation again this year?  If so, how much?  Should I still flip with the same margins? Should I scale back or go full steam ahead?  How do world markets affect my local economy?  Has the job market recovered and what is the affordability?  These are all questions that affect a flipper’s business, which is why it is important to continually be educating ourselves.

I believe that anyone can make money in real estate investing in an appreciating market.  The true investors will prove themselves in ANY kind of market.  One of the main reasons I believe flipping is one of the BEST strategies to make money in real estate is because of the quick turn around time, which means risk can be minimized.  Of course the goal is always to make money on every flip, but even if the market adjusts slightly, an experienced investor should recognize the signs and be able to finish the rehab and sell the property quickly even if it means making less money.

Here are a few flipping tips I’ve learned along the way:

  • BUY RIGHT!  It is true when they say you make your money when you buy.  Well, this is CRITICAL in this market.  When you are determining what your house will sell for after you rehab it, look at pending comparables as well as sold comps.  This will tell you where the market is trending.  Also, don’t try to adjust your purchase price based on where a realtor tells you you need to be to get the deal.  Stick with what number works for you, and stick with the formula you use to determine what to offer.
  • GET IN AND GET OUT – The rehab should be quick – i.e., 4-6 weeks max, depending on the size of the project.   The faster you can rehab, the faster you can unload your property.  If you can, get your bids in while you’re in escrow to buy so you can start the project as soon as you close.
  • DON’T OVER LEVERAGE – I will be the first one to tell you I have 100% fully financed many flips using private or hard money.  However, there has always been enough cash in the bank to make monthly overhead, lender payments and put food on my table.  Know what that amount of cash needed is for you, and don’t dip below.
  • LIST WITH A REALTOR – Budget in realtor fees and have a realtor sell the property for you.  Sometimes giving a realtor the “back end” listing serves as an incentive for them to bring you another deal.

I believe flippers can make money in any kind of market, as long as you stick to your numbers and systems.


About Kristi Cirtwill

The first house Kristi bought was a single family home with a basement apartment that needed major remodeling. Within 4 days of owning the property, she had the basement gutted. Then she called her dad and said, “Help! How do I put this back together?!” And that began her interest in the rehabbing business.

In 2006, after reading Rich Dad Poor Dad, Kristi moved from Toronto, Canada to California to start a full time “fix and flip” business. She has purchased over 125 houses and she continues to buy in Los Angeles and Orange Counties to rehab and re-sell.

Kristi currently lives in Cerritos, CA. In her spare time she enjoys the outdoors, playing her guitar, attending happy hours and taking vacations with her family in Canada.

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Is a CRM Right for Me?:

Filed under: Buy-and-Hold,California,Due Diligence,Economy,Flipping,Lead Generation,Lending,Memphis,Multifamily,Out-of-State,Real Estate,Real Estate Investment admin @ 10:47 am

By Aaron Norris

The Norris Group has grown tremendously in the past decade in both size and sophistication thanks to technology. In 2014, we upgraded Internet services, upgraded to a very tricky VOIP system, and in 2015 launched a custom-built Learning Management System (LMS) for our clients. Technology upgrades don’t always come easy. And there’s nothing worse than “upgrading” and hearing employees as you walk down the hall say, “I hate this [fill in technology solution].”

My pain, is your gain! I’ll be speaking at Long Beach FIBI sharing lots of embarrassing stories from my mistakes on impressions vs. conversions to email mistakes that shut The Norris Group down for an entire week and at great expense!

One topic I know I won’t have time to get to is how The Norris Group upgrade our Customer Relationship Management (CRM) Solution. It’s really more of an advanced topic but is important because some don’t know what it is, what it can do, and mistakes that are easy (and costly) to make.

When I first started The Norris Group 10 years ago, our customer data was in a Microsoft Access database we had thrown together with a template and some elbow grease. Less than two years into my stint here, our database became corrupt and we came dangerously close to losing 12 years’ worth of customer data. Yes, we had a backup, but the backup had also become corrupt!

After the near “Big TNG Data Crash of 2007,” it was clear we had outgrown Microsoft Access and needed a more robust solution. I dreamed of a system where on a single screen, I could see the history of a client’s interactions with us including trainings, hard money loans, and trust deed investments. I’d be able to run reports, do searches, do custom emails based on customer location, create automations and reminders, and have all data backed up offsite. My technology averse team would easily adopt the solution and be able to track emails, phone calls, and even mailers to a customer so we could work better as a team.  Did such a system exist?

I was introduced to Customer Relationship Management Systems (CRM) in an operations class during my MBA program at UC Irvine. I had heard of CRMs before but had never taken the time to learn what the acronym stood for or what CRMs actually did.

I did months of research on CRMs and sales management programs.  Did I want a program that sat on my computer, on the server, or in the cloud? Did I want something that was able to process orders (e-commerce functionality), handled marketing (e-marketing), or strictly contact management? Did the system create one more thing for our team to do or did it make our lives easier?

Looking back, I was ill-equipped to ask the correct questions. And, to be honest, the answers I was given during the process were sometimes what I wanted to hear more than the reality of what the system could actually do. Hopefully a little breakdown of each type of program will help.

Four Types of Programs that Address Contacts

Email Programs. If you’re small and just starting out, email programs like Outlook, Gmail, and Yahoo! will work fine. You can incorporate Microsoft Excel and Access or Google’s spreadsheets as needed to keep track of client information and projects. As you grow, you quickly discover you’re very limited on collaboration with your team and you’ll find yourself using numerous desperate programs that don’t talk to each other so data is duplicated. Google and Microsoft have solutions that are very inexpensive.  See Google Apps for Business and Microsoft Office 365.

Special note: The Norris Group no longer buys Microsoft software but subscribes to Microsoft Office 365 per month.  Microsoft software (Work, Excel, PowerPoint) is included so when we buy new computers, the subscription goes with it. The premium subscription also comes with unlimited data backup for emails in the cloud. We no longer manage an email server in house saving us THOUSANDS every year in IT services. The technical support is included and has been good. We also save THOUSANDS in hassle/time as Microsoft and our internal IT consultant often pointed the finger at each other when things went wrong. No one would take responsibility, and things never got fixed.

Contact Management Software (CMS). I call this “CRM Light” software. This category is going away quickly because companies like Act! have added a ton of features that go beyond what CMS used to be. CMS software is great as your team grows and you want the ability to track more data and to customize data in the system. Most solutions can be installed at a specific location as a software solution but more and more it’s going to a subscription model with online access and no data being stored at your location.

You’ll be able to track emails, phone calls, events, and write special notes at the customer level. You can set user permissions and access if you’re working in a team so that admin assistants can only add contacts but not delete them!The bottom line is that the software’s focus will be on actionable items that lead to sales and helps you track what you’ve accomplished to get the customer to convert.

Special Note: Using programs like Mailchimp and Constant Contact might be an alternative if you’re not ready to jump into CMS just yet. These email marketing programs host your data in the cloud, allows for some custom data (to some extent), allows for split testing, come loaded with mobile friendly templates, and can work with other technology solutions including e-commerce and event software. You’ll be able to keep your database clean automatically, will automatically be forced to comply with CANSPAM rules, and your data is backed up offsite and accessible from any computer with an internet connect.  However, tracking customer emails, events, and calls are done through a “notes” section and isn’t very robust.

Customer Relations Management (CRM). CRM systems take CMS to the next level by allowing for lots of integration with other programs and lots of customization. Set up is sometimes costly depending on the size of your database and the customizations you want. Your entire team will be able to track emails, phone calls, and events against a potential customer as each will have their own logins. Most exciting, programmable workflows are what make CRMs really special. This is best exampled through a few examples.

Scenario #1: Let’s say you are a property buyer that targets after out-of-state, absentee owners. From PropertyRadar, you export a list of out-of-state owners and import them into CRM. Once in CRM, you apply the workflow, “New Leads.”  You’ve set up your “New Leads” workflow to do automate the following:

  • Day 1: Create a merge letter for “We Buy Houses” to lead, your assistant prints them out and mails them.
  • Day 15: Send reminder to assistance to do research on lead online to find email, fax, or phone numbers to reach out to later. Data input in CRM.
  • Day 30: Postcard #1 to be sent to lead. Assistant merges data from CRM to print.
  • Day 40: Reminder to call or email lead from research of assistant.
  • Day 60: Postcard #2 to be sent to lead. Assistant merges data from CRM to print.
  • Day 70: Personal reminder to review imported leads. If you haven’t heard back, move to “Inactive” and no longer market to this lead.

When importing a ton of data, these workflows allow you to follow up on each lead appropriately and in a very systematic way. It keeps your database clean and allows your team to follow up however you see fit.

Scenario #2: Let’s say you’re a Realtor and just sold a house. You decide to do a targeted mailer in the property’s zip code to past clients (not prospects) that you’ve worked with prior to 2012. You do a search with these two criteria in CRM and 1) Send out a merged email letting them know you’re busy in their neighborhood with the closed sale information 2) Send a postcard with almost the exactly same message that features a picture of the house. It’s highly targeted and very specific to people you’ve worked with previously. This is far more powerful than a generic piece.

Most CRM systems have some serious integration capability but come at an extra cost and takes some time to research. You’ll want to consider upfront if you’ll be running any kind of product orders through the system as this will change who you likely go with in the end. Popular systems include SalesForce, InfusionSoft, Microsoft Dynamics CRM, SugarCRM, NetSuite, and Zoho.

Enterprise Software. Know that there’s an even bigger monster out there does EVERYTHING from order fulfillment and tracking to CRM functionality to accounting. These all-in-one beasts are expensive and used by mostly large corporation with lots of employees.  In my experience, this is a rare need in our industry.

Questions to Ask Yourself and the Service Provider

These questions apply no matter what kind of system you explore.

  1. Is my data backed up on location or in the cloud? Is it safe? What’s the process to get it back if something happens?
  2. Do I have a succession plan? If an employee leaves, do I retain customer history?
  3. What are my needs at this time? In the future as I grow?
  4. What features do it need/want? Do I need the ability to process orders though the system (e-commerce capability)?
  5. Will it save me time and money? How much time? How much am I willing to pay for that time saved?
  6. Will my team use it? (You’d be surprised how stuck team members can get in the “old ways.”)
  7. Who will train and get the product launched?
  8. Who will manage it?
  9. What are the upfront costs and ongoing costs?
  10. If I build customization, if it breaks, who is responsible for the fix? (Really wish I would have had this question before I started)
  11. What does support look like and who will help and how quickly? Is that extra or comes with the subscription?
  12. Do I want in-the-cloud service so it’s backed up off site or do I want a program in house?
  13. Do upgrades come automatically
  14. Will the program require upgrades to my computers or Internet service?
  15. Are there lots of integration with other 3rd party app providers that increase functionality?
  16. Is there a more simple solutions for my needs?

Be very careful to know exactly what you’re expecting, get advice from someone who has already gone through the process, and get everything in writing! Take the time to do a marketing and technology audit before you move into buying any tool.  If I’s not saving you time, money, or preferably both, you’re doing it wrong.

About Aaron Norris

Aaron is Vice President of The Norris Group. His role at The Norris Group includes investor relations, business development, community outreach, marketing, public relations, and special events. Aaron has been in the real estate field for over a decade having worked in the construction design industry before joining The Norris Group in 2005.

Aaron hosts the weekly award-winning Real Estate Headline Roundup Vlog as well as produces The Norris Group’s award-winning radio show and podcast. He’s also the creator and of The Norris Group’s series, “I Survived Real Estate,” which has raised over $520,000 for charity since its inception in 2008. Aaron serves on several local nonprofit and professional association boards and is actively involved in the community in efforts like Give BIG Riverside County (founding team member). In total, Aaron has been directly involved in raising over $1 million for charity since 2008 with initiatives like Give BIG Riverside County.

Aaron has an MBA from UC Irvine with a focus in marketing communications. He’s an Accredited Public Relations professional (APR) and also holds his Certified Specialist in Planned Giving (CPSG) designation.

He’s part of the Webby-nominated The Cocktail Party Statement podcast which dissects business and marketing books to their core message for listeners.

Aaron has been teaching nationally on web technology and trends for small business, nonprofits and marketing professionals for the past 5 years at colleges, professional associations, and conferences.

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Filed under: Buy-and-Hold,California,Economy,Memphis,Out-of-State,Real Estate,Real Estate Development,Real Estate Investment,Retirement,Self Direct IRA,Self directed IRA admin February 12, 2016@ 6:05 pm

by Mathew Owens

Running across multiple business owners and real estate flippers there is one common challenge that continues to come up, CASHFLOW.  Cash flow is the lifeblood of businesses and having enough of it can create a nearly impenetrable wall for stable long-term growth in a company or individuals life.  Likewise, not having enough cash flow can create instability and susceptibility to economic fluctuations that you have no control over.  Of course there are things out of all of our control but working towards building your moat to cover all of your personal and business expenses can put you in a very safe position.  The key to doing this is working toward purchasing assets that make you money month after month passively.  Many people feel helpless or unsure how to get started developing a cash flow stream.  There are a number of reasons for this, which stems mostly from a lack of knowledge about what resources are available and how to operate these types of investments.  Education is key to being able to create these income streams.  Here are a few key things you can do to expedite your cash flow stream.

LEVERAGE – Learn how to use leverage in your life.  You can buy assets with leverage. Using other peoples money to buy or flip properties, invest in promissory notes, hold properties for rental income, buy businesses or other assets that create monthly income can be a great way to increase your cash flow.    In order to use other people’s money it’s extremely important to learn how to protect their money first.  Learn how to secure their money with collateral and teach them how they are protected.   Get advice from your attorney and learn how to structure your investors funds in a way to protect them and you will have investors coming to you once you can teach them.  You can also pay others to help you make money, which is another form of leverage.  As long as it’s a win-win for both parties, having others help you will get you to your cash flow goals much faster.

EDUCATION – Most people who have achieved financial freedom through cash flow are constantly learning.  There are millions of ways to develop cash flow streams.  You just have to be a little creative, have some drive, develop a plan and take action.  Reading and taking classes on different strategies for investing can expedite your cash flow.  I took a weekend class on seller financing and completely changed the way I was able to sell properties and learned how to invest in notes by doing so as well.  Yes I got extra help, but it gave me enough knowledge to create another income stream out of it.  You do not need to buy the $15k bootcamp or book and tape set in order to get this education.  Going to real estate investment clubs, meetups, taking weekend classes and reading books and online can streamline this process.

DEVELOPING A PLAN – How much money do you need to cover all of your monthly expenses and create financial freedom?  What ways can you increase your income and decrease your expenses to achieve this?  When do you want to hit your cash flow goals? What assets are you going to focus on to develop these cash flow streams?  How do you plan on learning about these assets, how to operate them and how do you maintain them?  What is your 30 day, 90 day, 1 year, 5 year plan and goals?  These are all part of your plan and if outlined and put in place you will get to your cash flow goals much faster than you ever thought possible.

There are a number of asset types you can invest in or income streams to develop that can push you to financial freedom.  Here is a quick list of ideas to get started on:

  • Investing in rental real estate – single family and multifamily
  • Flipping real estate
  • Investing in performing and non-performing notes
  • Investing in syndicated investments
  • Selling on amazon, E-bay and other online sites
  • Private lending & transactional funding
  • Starting a business
  • Investing in other types of real estate

For more info, attend the free online webinar on February 24, 2016. RSVP here:


OCG Properties, LLC
W: 424-757-4680


About Matthew Owens
Mathew is the founder of OCG Properties, a company that specializes in equity and cash flowing real estate investments. He graduated from UC Santa Barbara with a bachelors degree in economics with an emphasis in accounting, earning his CPA license while performing audit and taxation engagements at various CPA firms, and worked primarily on large real estate clients. He currently specializes in value add cash flowing residential and multifamily real estate investments having purchased and renovated over 450+ properties. Mathew works with investors in multiple ways to acquire real estate in high cash flow markets around the country. He also helps investors develop various cash flow streams through syndications run by professional operators, promissory notes and other real estate related assets. Many of his clients benefit from his knowledge of real estate taxation and due diligence, legal and investment structuring, and long term investment planning and analysis.
• BA in Economics w/ Emphasis in Accounting from UC Santa Barbara
• Certified Public Accountant, 2002
• Bought, renovated and sold or held over 450+ properties Currently buying 5+ single family rental properties per month
• Purchasing an apartment building per quarter
• Raised over $25 million in private investors capital
• Currently own over 150 units in Memphis, TN & Atlanta GA Property management 7+ years experience
• Investments • Syndicated investments • Performing and non-performing Notes • Single family, multifamily properties flipping & holding • Private lending
• 10+ years experience taxation and auditing
• 8+ years full time real estate experience
• FIBI Long Beach Real Estate Investment Club Founder, 2009, 1638 members
• FIBI South Bay Real Estate Investment Club Founder, 2012, 1518 members



Filed under: Asset Protection,Buy-and-Hold,California,Due Diligence,Economy,Flipping,Memphis,News,Out-of-State,Real Estate,Real Estate Development,Real Estate Investment,Retirement,Self Direct IRA,Self directed IRA,Taxes admin January 27, 2016@ 4:29 pm

by Mathew Owens

One of the main questions investors ask me when starting off investing is what entity should they setup when investing. Many investors have already setup an entity because some attorney said they needed it or they heard about it in a class as a good asset protection method. However, there are a ton of factors to consider whenever you are deciding on which legal and tax structure you should put in place. Here is my top 10 list of factors to consider when putting your structure together that not all attorneys or CPA’s will tell you.

    Many investors go setup an entity before they even have a property or investment in place. This can be a huge waste of time and money given that I have seen many investors setup entities they intend on using for investments but do not actual invest for years and have to do tax returns and pay LLC fees that could have been saved. My advice, wait until you have a property to even begin looking at your legal structure and even then a secondary legal entity may not be the answer.
    There is a constant trade-off when looking at using insurance to protect your assets versus an entity like an LLC or S-Corporation coupled with insurance. Typically just having insurance in place can save you an extra $1,000 – $1,500+ per year instead of having an entity, but then you also have some additional risks like if the insurance company doesn’t pay or you have exclusions in your policy that are not covered. If you do go the insurance route, understanding those exclusions and how good your insurance company is at paying out claims is really important. With the entity structure, as long as you are not breaking the corporate veil and doing everything by the book, it can give you liability protection above and beyond insurance that keeps the liability inside the entity and makes it much more difficult for lawsuits to get at your personal assets.
    When determining if you should setup an entity in the first place you should know and understand what assets are you trying to protect that a renter could go after. Do you own a home, have stocks, cash in bank accounts, cars, etc? If so you may want to consider putting your rental property in an entity for liability protection. The more you own, the bigger the risk that someone could come after you and make you a target. On the other hand if you do not have a lot of assets and your only asset is your rental property you may benefit from the savings by not forming an entity more than the liability protection. Also, if you’re net worth is greater than the liability insurance limits you may want to get an umbrella policy in place as well as a cover all. Again take a look at your exclusions in the insurance policy as well.
    The type of income you make is very important for tax purposes. Flipping and holding can have different tax consequences and should be looked at very differently when determining the right entity to invest in. When holding real estate many attorneys recommend using an LLC (or a Land Trust with an LLC) for liability protection, which is great for tax purposes as well because they are considered flow through entities which flow right onto your personal tax return without any federal or state tax consequences other than state LLC fees. When flipping, depending upon your volume, you may choose an LLC or S-Corporation structure. It really depends if you are classified as a dealer or not. Typically investors that flip a lot can get classified as a dealer, meaning the income then turns into active ordinary income instead of long term or short term capital gains income. Ordinary income comes with payroll taxes at 15% of your salary. Most of the time it makes sense to setup an S-Corporation to save on payroll taxes IF you are making enough money to warrant the entity setup and annual expenses due to the minimum salary requirements in S-Corporations. Bottom line, unless you are making over $40,000 a year net, after all of your expenses, your payroll tax savings is minor and may not make sense to setup an S-Corporation at all. This point should be discussed with your CPA and your attorney so that your team is on the same page.
    Many investors start off forming an entity in the state they live in which may not always be the best choice. You want to understand the laws in the state your property is in along with the laws in the state you live in. Many investors choose to do business in completely different states like Delaware that has good privacy laws that hide owner’s information much better than other states. States like Tennessee have no state income taxes but have franchise and excise taxes which you can get around completely by forming an LLC in that state that qualifies for an exemption from those taxes when its 95% family owned. If you live in California, their stance is that you owe them their $800 Franchise Tax Fee because you are managing the entity from California, even if the property is in another state. Keep in mind if you have property in an LLC located in different states you should be registered in that state so you are valid entity in that state.

I hope this gives a little insight as to some of the key factors to consider when forming entities for real estate investments. Please consult your individual attorney for advice on this topic as every situation is different and the information above is a much higher level discussion.

If you are interested in learning more we are having a Bruch and Learn class on Tax and Legal Strategies for real estate investors on Saturday, January 30th in Tustin from 9am – 11:30am. Here is the link if you are interested in attending.

OCG Properties, LLC
W: 424-757-4680

About Matthew Owens
Mathew is the founder of OCG Properties, a company that specializes in equity and cash flowing real estate investments. He graduated from UC Santa Barbara with a bachelors degree in economics with an emphasis in accounting, earning his CPA license while performing audit and taxation engagements at various CPA firms, and worked primarily on large real estate clients. He currently specializes in value add cash flowing residential and multifamily real estate investments having purchased and renovated over 450+ properties. Mathew works with investors in multiple ways to acquire real estate in high cash flow markets around the country. He also helps investors develop various cash flow streams through syndications run by professional operators, promissory notes and other real estate related assets. Many of his clients benefit from his knowledge of real estate taxation and due diligence, legal and investment structuring, and long term investment planning and analysis.
• BA in Economics w/ Emphasis in Accounting from UC Santa Barbara
• Certified Public Accountant, 2002
• Bought, renovated and sold or held over 450+ properties Currently buying 5+ single family rental properties per month
• Purchasing an apartment building per quarter
• Raised over $25 million in private investors capital
• Currently own over 150 units in Memphis, TN & Atlanta GA Property management 7+ years experience
• Investments • Syndicated investments • Performing and non-performing Notes • Single family, multifamily properties flipping & holding • Private lending
• 10+ years experience taxation and auditing
• 8+ years full time real estate experience
• FIBI Long Beach Real Estate Investment Club Founder, 2009, 1638 members
• FIBI South Bay Real Estate Investment Club Founder, 2012, 1518 members


The Top Six (Mostly) Legal Issues to Consider Before Purchasing Investment Real Estate:

Filed under: Asset Protection,California,Due Diligence,Economy,Flipping,Memphis,News,Out-of-State,Real Estate,Real Estate Investment,Taxes,Trust admin January 25, 2016@ 12:04 pm

by Peter Fischer

As a transactional real estate attorney (and an investor myself), I’m often surprised at the confusion, misunderstanding and lack of comprehension there is among real estate investors (even those who are seasoned, experienced, and even successful) regarding certain basic legal considerations which are a must for consideration prior to any real estate investment (for our purposes here, meaning prior to purchasing an investment property, but really also prior to making an investment in a syndication, purchasing a note, and virtually any real estate investment).

As such, below I’ve set forth the basics and bare minimums to consider before your next investment:

1. Not exactly a legal consideration, but will inform so many of your other decisions – what are your investment objectives? What type of property (or other asset) are you purchasing? Is this an investment for a short-term hold? Is this going to affect your retirement? Are you trying to build up a lump sum gain (or loss for that matter) for a specific purpose? How much risk can you tolerate and how much can you afford to lose? How does this investment fit in with the rest of your portfolio and otherwise with your financial position? How active (or passive) will you be in this investment?

2. Once you consider the questions set forth in part 1 above, you are really ready to start thinking about how to legally structure your investment. Your first consideration will be how do you want to hold your investment? Are you investing on your own or with partners? What does your insurance package look like? What other steps have you taken (or will you take) regarding controlling liability and dealing with taxes (more on this later, but could direct your whole strategy)? Your decisions to form an LLC, a corporation, hold title in your own name, or the name of trust (and so many other choices) will all stem from the answers to these questions.

3. Once you decide on which entity to use, you’ll need to consider which state to form that entity in, as well as how the entity will operate, how it will be controlled and who will own it. This could be simple (especially if you are on your own), or it could become very complex if you have multiple partners, some investing money and some investing time and services, if you want profits and losses distributed in a certain (and non pro rata way) and the like.

4. As a follow up to part 3 above, if you have partners and/or investors involved in your investment, there are a whole host of additional considerations. For starters, you must understand the difference (and there is a BIG difference) between a “partner” and an “investor”. Are you doing a joint-venture (where two or more people will make decisions and have control), or are you simply raising money from passive investors? The difference between having a partner or co-venturer and dealing with investors is not just semantics, and could one of the most important points you’ll learn from the upcoming seminar, but for now, just remember that if you are raising money from third parties (with no control over decisions ), your investment involves not just real estate law, but also securities law.

5. As such, be very (very) careful and thorough when selecting counsel, and hire earlier, much earlier than you think you need to. Find an attorney you like and trust early and make sure that attorney is experienced in both real estate law and securities laws (if that’s part of your investment). Ask prospective any attorney about his or her specific experience with the specific deal-types that you are investing in. Looking at a multifamily TIC syndication structure? Find an attorney who isn’t just well versed in residential purchases. Additionally, make sure (if the attorney is going to be representing more than one person in your deal) to flesh out any conflicts of interest at the outset, and understand who is being represented, who has the authority to direct the attorney, and the like.

6. Finally, I always advise my clients (if they haven’t already) to make the right connections to fill out the rest of their team. It is imperative to get quality tax advice from the outset. Find a great and knowledgeable CPA (perhaps even before you talk to me, although I work with several fantastic ones and often make introductions). Furthermore, it’s a great idea to have a relationship with a trust and estates attorney who can give you estate planning advice from day one. Like they say, the only certainties in life are death and taxes, and (in addition to a great attorney), if you find the right professionals their advice will be like gold (and help you make and save your gold).

RSVP for Tax and Legal Strategies for Real Estate Investing here:


Attorney, Enenstein Ribakoff Lavina & Pham
Phone: (310) 899-2070
Fax: (310) 496-1930
Peter Fischer is a partner, and a member of the Firm’s corporate and real estate groups, as well as the head of the Firm’s entertainment practice. Peter’s practice includes a wide range of general business, corporate, real estate and, other commercial law matters.


Peter regularly acts as general and strategic counsel to privately held middle-market and emerging growth companies. Peter is integral in assisting with corporate formation and structuring needs, negotiating stock and asset acquisitions, structuring and documenting a wide range of financial transactions (including private placements, senior and subordinated loan agreements, leveraged buyouts and restructurings). He also routinely represents clients in connection with a diverse range of entertainment, media and intellectual property matters, including complex production, distribution and financing transactions, capital raising transactions for production and other entertainment companies.

Real Estate

Peter also represents clients in transactional real estate matters, including acquisition, syndication, fund formation, development, leasing, construction, and other financings. He has represented developers, investors, borrowers, and lenders in all product types, including multi-family, senior care, retail, industrial, medical office and residential.

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8 Warning Signs You May be Giving Too Much Money to Uncle Sam:

Filed under: Buy-and-Hold,California,Flipping,Memphis,Out-of-State,Real Estate,Real Estate Development,Real Estate Investment,Retirement,Self Direct IRA,Self directed IRA,Taxes admin January 6, 2016@ 6:09 pm

by AMANDA Y. HAN, CPA, Keystone CPA


As CPAs and  real estate investors, we often speak at local REIAs and other venues to educate investors on tax saving strategies. After we do our teaching sessions, we often get to meet people and learn about their investing experience and their tax related questions. What we noticed over the years is that a lot of people wonder whether or not they are overpaying in their taxes or if there is something they should be doing differently to save more taxes.

To be honest, it is very hard, if not impossible, for us to give an in-depth diagnosis and develop tax strategies for someone we just met a few minutes ago. Tax planning is a process that includes reviewing old returns and more importantly understanding the financial profile of an investor, their business, family dynamics, and investment goals.

Although we generally cannot tell someone we just met whether or no they are paying too much taxes, we have identified a few warning signs that may indicate where opportunities may exist.  Here are a few of the ones we thought we would share with you here:


  1. Recordkeeping:

Bad Sign: No stable record keeping system in place. Words to live by are “What gets measured gets managed”. It is super important to know how your real estate business is operating each month. If you track your expenses, you can easily see where legitimate tax deductions can be taken advantage of. Accurate and timely financial records keep your cash flow in the green which is essential to your wealth building. It is also the very foundation of effective tax planning. If you don’t have good bookkeeping in place, you may be losing out on some legitimate tax write-offs.


  1. Communication:

Bad Sign: Plan on paying higher taxes if you are not meeting or communicating with your tax advisor throughout the year. Any of us who plan on reducing our taxes need to consider proactive planning year-round. If you are waiting until April 15th to think about reducing your taxes, you may be in for a big surprise. Frequent communication with your tax advisor provides you with tax planning opportunities. Maximizing your tax deductions is done throughout the year with effective  tax planning.  Be sure to make this a part of your business and real estate operational system.


  1. Knowledge

Bad Sign: Each year you explain your real estate transactions to your tax preparer because they don’t recall or understand what exactly it is that you do.  Real estate is a specialized area and there are specific strategies that can significantly benefit you as an investor. Real estate related tax strategies may be very different from tax strategies for restaurant owners. Make sure your tax advisor is well versed in the tax saving opportunities in your industry.


  1. Compensation

Bad Sign: Not planning on how to extract money from your business tax efficiently. There are many ways to extract profits out of your business so let’s look at the good and the bad. For C Corporations, you can save thousands of dollars a year in taxes by simply paying yourself a higher salary. For S Corporations you can save thousands by doing the opposite and paying yourself the least amount possible. There are other great ways to extract profits from your business “Tax Free”. If you haven’t planned on “how” to extract those profits, you can easily be overpaying in taxes.


  1. Retirement Planning

Bad Sign: You are not currently taking advantage of tax deferred and/or tax free opportunities of retirement planning. Ask yourself: Am I significantly reducing my taxes using retirement vehicles? You will be surprised at the many different types of retirement accounts available to business owners and real estate investors. Not only do retirement accounts help you plan for when you retire but they also help you to reduce your current tax liability at the same time. If you pay taxes to the IRS and are not using retirement accounts you are more than likely to be overpaying in taxes.


  1. Fringe Benefits:

Bad Sign: Ever heard of the term “fringe benefits”? Tons of tax-free fringe benefits are available where your business takes a tax deduction for perks they provide to you as the business owner (and it’s not taxable to you). There are dozens of these amazing techniques including company cars, gifts, and Medical Savings Account to name a few. If you do not take advantage of tax free fringe benefits as part of your business planning, you may be overpaying your taxes.


  1. Personal and Business Deductions:

Bad Sign: Not knowing what items you can shift legally from your personal expense bucket into legitimate business deductions. Nowadays, it has become almost impossible for us to distinguish between personal vs. business items. Many of us use our personal cellphone, cars, iPads and laptops for business. All of these personal items that you use day in and day out for your business may be legitimate tax deductions if tracked correctly. If you don’t know how to shift personal items into business deductions, you may be overpaying your taxes.


  1. Tax Savings Plan:

Bad Sign: No tax savings plan in place to make sure you are protected from the IRS. While incorporating all of these strategies above, you should be asking yourself is “What is my tax savings plan?” If you don’t know the answer, then it may be safe to say you probably don’t have one. No overall plan on “how” you will save taxes is one of the most common mistakes costing Americans to overpay taxes year after year.


About AMANDA Y. HAN, CPA, Keystone CPA

Director of Business Development of Keystone CPA

Office: (877) 975-0975


Amanda has over 18 years of experience as a CPA  with special emphasis in real estate, self-directed investing, and individual tax planning. Amanda has extensive “Big Four” public accounting experience in the Lead Tax Group servicing clients in the  real estate industry. She provided tax consulting and tax compliance for companies engaged in land development, residential development, medical facilities, and conglomerate shopping malls. Subsequent to her work at Deloitte, Amanda served in the Corporate Tax Department for an international Fortune 500 Company in the high tech industry and was responsible for quarterly provisions and various aspects of SEC reporting. Amanda has numerous years of experience in working with international companies in terms of federal and multi-state tax planning as well as audit representation and resolution.

Amanda is a frequent contributor and educator to some of the nation’s top investment companies and is a leading expert on retirement investing.  Amanda’s cutting-edge tax strategies have been featured in prominent publications including TIME Magazine Online, Bigger, Realtor Magazine, and, a Dunn & Bradstreet Company. She is certified by the CA State Board of Accountancy and is a member of the prestigious American Institute of Certified Public Accountants (AICPA) practicing in all 50 U.S. States.

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Your Prosperity Mindset: Are You Leaving Money on the Table?:

Filed under: California,Economy,Memphis,Mindset,Personal Development,Real Estate,Real Estate Investment admin December 21, 2015@ 6:27 pm

by Lisa Reid

How often have you heard people say they want to make more money? Probably a lot!  It is a common topic of conversation – especially when we are out networking and talking to business professionals.

How often have you heard people say they want to investigate the thinking that got them the results they currently have?  Probably …. never (or at least very rarely)! It is often easier to blame external circumstances (e.g., the economy, lack of good leads, not enough time, no support) for our current situation rather than look at where we played a part in our own reality.

It is critical that we investigate our own THOUGHTS and FEELINGS when it comes to our business and prosperity.  How can we have a prosperity mindset if we don’t even know what we are thinking and feeling?  In our culture it is popular to look at our ACTIONS and start making a list of “to-do” items when we set our goals.  Yes, action is critical, BUT so are our thoughts and feelings.

Let’s put it into play….

What type of prosperity would you like to see in your life by the end of this year?  Go ahead and jot it down or make a mental note of your answer.

Now, what actions would you need to take to make that goal a reality?  Feel free to jot those actions down too or make more mental notes.

Ok…so what feelings would you need to have to take those actions?Excited?  Confident? Enthusiastic? Do you know what feelings you have about it currently? Time to get honest with yourself and contemplate this question.  Understanding this step and diving deep will get you closer and closer to your ideal prosperity.

And what thoughts would you need to generate those feelings?  Most people have a hard time with this one – we are so “in our own stuff” that we can’t imagine another way to think about our goal.  So I’m going to give you some examples to get the juices flowing.  “I am so excited about launching my new product!” “My confidence is through the roof when I think about what I’m going to achieve!” “I can already see the balance in my bank account rising.”

When you are stuck, you can go back to this formula and start investigating why you are not getting the results you want.  The more you understand your thoughts and feelings regarding prosperity, the less money you will leave on the table.

When we continue to do the same thing over and expect different results….well, you know the rest of the story.  So today you can use the above questions and shake it up.  Each time you go through this process, you are increasing your awareness muscle.  The more awareness you have of YOU, the more opportunities will be revealed and the more you will SEE the money on the table right in front of your eyes.

When you are ready for a 6-pack (think “awareness abs of steel”) – go to where we specialize uncovering the limited beliefs that are standing in the way of the results you desire.


About Lisa Reid

Leisa Reid is a presenter with Productive Learning, a boutique personal growth company founded in 1992. She trains over 100 groups a year as a guest speaker throughout Southern California. After 20+ years of Management, sales and Executive Leadership, Leisa dedicated her life to assisting others invest in their personal development. Why? because she personally experienced the powerful results as a client of Productive Learning. She loved the company so much she joined them in the pursuit of living an extraordinary life.

Leisa gives back to the community through her love of collaborating with others and speaking. For example, in 2013 she founded the OC Speakers Network, an organiation that supports others who wish to share their expertise through the speaking platform.

In today’s presentation, “Creating a Winning Mindset – When Positive Thinking Isn’t Enough,” Leisa will be giving you an experience of what of a Productive Learning workshop is like – an interactive experience where you learn something about yourself, your thinking and a glimpse into what could be holding you back from the very thing you deeply desire.

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Entitlements, Environment and Economics?:

Filed under: California,Due Diligence,Economy,Memphis,Multifamily,News,Out-of-State,Politics,Real Estate,Real Estate Development,Real Estate Investment admin @ 11:31 am

by Larry J. Kosmont


The path  to development success is  strewn with obstacles beyond the typical challenges of financing, construction and leasing. Especially when it come to transactions that require public agency approvals, where a project can live or die based on zoning decisions and California Environmental Quality (“CEQA”) documentation, not to overlook the unpredictable and often combative landscape of community/neighborhood interaction  and local political leaders, some of whom have been  known to wilt at the sight of testy audience on a Tuesday night. Larry Kosmont will discuss political and policy trends that affect development and property investment, and will focus on a number of key south bay projects that he has had a hand in guiding and financing.

California real estate development has always been a risky proposition, and now more than ever.  Today the average project must have a strategy for zoning approvals and CEQA analysis. Larger projects in particular must conduct  a review that is mandated by the California Environmental Quality Act (CEQA), which means independent analysis by experts on the impacts of a project. Potential impacts  ranging from  height, density and visual impact are evaluated, as well as air and water quality impacts and of course traffic and circulation. For some projects this process can take 18 to 24 months and cost in excess of 1 million dollars!

However the point of CEQA review and other public hearings related to development project applications is to provide neighborhoods, community representatives and local leaders a basis from which to make decisions on important development projects. And in many cases these projects not only  yield environmental implications, but also represent economic development opportunities for a community, which means the capacity to enable private investment that can create local jobs and taxes. Given the broad considerations of real estate projects on communities, its not surprising that major properties in the south bay, such as the Manhattan Village mall, South Bay Galleria, AES property, and the Waterfront  all capture a good amount of local media coverage as they  wind their way through the public approval process. It’s a good time to pay attention since change is in the air for many of our local communities, and quality of life can be significantly impacted by these projects.


By Larry J. Kosmont

Mr. Larry J. Kosmont, CRE®, is the President and CEO of Kosmont Companies, which he founded in 1986. Kosmont Companies is an industry leader in public/private real estate transactions, economic development and public finance. In 1990, he founded Kosmont Realty Corporation, a company which sources private financing for public projects, P3 initiatives, infrastructure funding and economic development. Mr. Kosmont is also Managing Partner of Renaissance Community Fund, which has invested in and develops mixed use, residential and commercial projects throughout California, and a Principal of California Golden Fund, an approved EB-5 Regional Center.

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