HOW TO AVOID THE 7 BIGGEST MISTAKES - Maverick Investor … · 2017-03-07 · “The Maverick...

HOW TO AVOID THE

7 BIGGEST MISTAKES

REAL ESTATE INVESTORS

ARE MAKING IN THE 2017 BOOM CYCLE

Phone: 725-222-0488 | Email: [email protected]

© Copyright 2017 Maverick Investor Group, LLC. All Rights Reserved.

mailto:[email protected]

Get to know us. Strategize with us about how we can help you meet your real estate investing goals. Register for a complimentary phone consultation: www.MaverickInvestorGroup.com/phoneconsult

DISCLAIMER: THE AUTHOR OF THIS REPORT IS NOT A LEGAL OR TAX PROFESSIONAL AND

THE INFORMATION HEREIN SHOULD NOT BE CONSTRUED AS LEGAL, TAX OR

OTHER FINANCIAL ADVICE. THIS REPORT IS FOR INFORMATIONAL PURPOSES

ONLY. THE AUTHOR DOES NOT ASSUME ANY RESPONSIBILITY FOR ERRORS

AND OMISSIONS. MATTHEW BOWLES AND MAVERICK INVESTOR GROUP, LLC

SPECIFICALLY DISCLAIM ANY LIABILITY RESULTING FROM THE USE OR

APPLICATION OF THE INFORMATION CONTAINED HEREIN. IT IS THE DUTY OF

ALL READERS TO CONSULT THEIR OWN LEGAL, TAX AND FINANCIAL

PROFESSIONALS REGARDING THEIR INDIVIDUAL SITUATION AND APPLICABLE

LAW BEFORE PURCHASING ANY REAL ESTATE. BUYING REAL ESTATE

INVOLVES RISK WHICH BUYER ASSUMES. ALWAYS DO YOUR OWN DUE

DILIGENCE.

http://www.maverickinvestorgroup.com/phoneconsult

Would you like to get to know us and see how we can best help you .meet your real estate investing goals? Register for a personalized phone consultation here: www.MaverickInvestorGroup.com/phoneconsult

Introduction Understanding the Seismic Shift in Today’s Residential

Investment Property Market

The next great real estate boom cycle is now thoroughly underway.

But this expansion cycle has some unique differences from previous ones, including a

“seismic shift” already underway in the residential investment property market which is

localized, fragmented and imperative for you to understand for 2 reasons:

1. It will be the primary driver for a huge transfer of wealth over the next two to three

years, and smart real estate investors that make the right plays will be able to

make (or recover) their fortunes, reduce their tax obligations dramatically, hedge

against inflation, and create substantial streams of passive income that provide

increased freedom, time and mobility, so you can take your lifestyle design to the

next level (whether that means improving your golf game, jet setting around the

world, volunteering for causes you care about or simply spending more time with

your family).

2. Investors who make the wrong decisions will lose big because the reality (that

most real estate gurus and investment property promoters won’t tell you) is that

most real estate is not a good investment. In every real estate cycle people who

don’t understand how to buy right continually lose their shirt....again and again,

like clockwork, with mistakes that are easy to avoid. Don’t be that guy (or gal)!

My name is Matt Bowles, and I have been investing in residential investment property

for over a decade, during which time I personally purchased over $4 million in

residential real estate. I have been through both boom and bust cycles, made almost



all the mistakes in the book myself, learned through

doing, and came out much stronger and wiser as a result.

I took my real life knowledge “from the trenches” (that real

estate books, tapes and gurus won’t teach you) and,

together with my business partners, used it to formulate

“The Maverick Approach” to real estate investing to help

you navigate the traps and pitfalls so you can win in the

real estate game.

In 2007 I co-founded Maverick Investor Group, which was

recently named one of the Top 50 Real Estate Opinion Makers and Market Leaders by

Personal Real Estate Investor Magazine--the leading U.S. magazine for individual real

estate investors. Maverick has presented at real estate conferences around the world,

been featured on ABC, NBC, CBS, FOX, TheStreet.com, Real Estate Wealth Magazine

and a number of other publications. My business partners and I have helped individual

real estate investors like you (not Funds or Institutions) buy over $100 million in

residential investment property across 15 states, which has enabled many of our clients

to take control of their financial future and take their lifestyle design to a whole new

level.

As we move through this next great

expansion cycle, there are different

players in the space, different market

movers, and new factors that savvy

investors need to understand. This

report is your guide for navigating the

new real estate economy and

understanding the unique aspects of

this particular expansion cycle.

Maverick Investor Group Named

"Top 50 Real Estate Investment

Opinion Makers & Market Leaders"

by Personal Real Estate Investor

Magazine.



So, come along for the ride and I will

show you how to avoid the 7 Biggest

Mistakes that Real Estate Investors are

Making in the 2017 Boom Cycle so you

can avoid them and make the right real

estate investment decisions that can

fundamentally change your financial

future over the next 2-3 years.

Remember, as with all investing there is

never a ‘guarantee’ in real estate (and if

anybody tells you there is, you should

run in the other direction) but there are

people who consistently win in the real

estate game, and there are very specific

(and not very complicated) reasons for

that, which we will unveil in this report

and show you how to apply.

Let’s begin...

“ Maverick Investor Group has pioneered

a business model that helps individual

investors from around the U.S. and

around the world buy quality turn-key

real estate in the best real estate

markets. ”

Andrew Waite, Founding Publisher

Personal Real Estate Investor Magazine



Mistake #1 Confusing “property flipping” with “real estate investing”

Back when I lived in Los Angeles full time, I was sitting on my rooftop pool deck (which

our LA-based clients endearingly referred to as “the Maverick office” because this was

where nearly all of my in-person client

meetings were held) and i got a call

from a producer at a major TV network.

She told me they were in the early

stages of designing their next reality

TV show, and they wanted to make

something akin to ABC’s SharkTank

(where aspiring entrepreneurs pitch

potential investors) but for real estate

investing. She had heard about

Maverick Investor Group and was

wondering if we wanted to be involved,

so I told her it sounded interesting and

asked her to tell me more.

As she continued speaking, it became

clear that she didn’t want to make a

show about real estate investing....she

wanted to make (Yet Another!) show

about flipping properties. She wanted

to take a film crew around with a

couple individuals who would muck

through distressed properties, do the

“ A year and a half ago, I was a brand

new investor, and now I have my 5th

property under contract through

Maverick. Everything I’ve learned from

Maverick in the past 18 months has been

priceless. I consider Maverick to be an

essential asset in my real estate wealth

building and I can’t imagine going

forward without them.”

Ali Boone,

Aeronautical Engineer

Los Angeles, CA



acquisition, renovation, and then attempt to re-sell them.

I explained to her that real estate investors (like the investors on the SharkTank panel

she was attempting to emulate) do not spend their time mucking through distressed

properties and renovating them. There are a number of reasons for this. To begin

with, real estate investors do not “flip” properties because flipping negates almost all the

unique benefits of residential investment property.

These are the primary advantages for real estate investors that are buying and holding

residential investment property:

Owning Hard Assets.

Deeded, freehold residential

investment property is a hard

asset that you completely own

and control yourself. Serious

investors build a portfolio of

cash flowing rental properties

and keep a substantial portion

of their wealth invested there.

Flipping means you are

continually getting rid of these

assets instead of building a

portfolio of them.

Tax Advantages.

Residential investment

property is the most tax-

“ Maverick has been really great in helping

my clients make more money and keep

more money. They understand what it takes

to find really good investment properties.

Every one of my clients that has bought a

property through Maverick has come back

and bought additional properties. Even our

staff CPAs are buying through Maverick.“

Diane Kennedy, CPA

Best-Selling Author of Real Estate

Loopholes and Loopholes of the Rich



advantaged asset class in the U.S.. As long as you are buying to hold, the U.S.

government allows you to “depreciate” your rental property (the structure, not the

land) over 27.5 years and take that as a “loss” on your tax return, even if the

property has gone up in value (in addition to a number of other tax benefits).

Flipping properties negates just about all of these tax benefits and may also

throw you into the “real estate dealer” category, which can be especially dis-

advantageous for tax purposes.

Passive Residual

Income. Rental

properties (provided you buy

them right) produce passive

residual income (“PRI”).

Also called “positive cash

flow”, this is your gross

rental income minus all of

your fixed expenses (taxes,

insurance, property

management fee, HOA if

any, mortgage payment,

etc.), minus an estimate for

vacancy and maintenance.

It is “passive” because you

don’t have to actively work

for it, and it is “residual”

because it flows to you

every month.

“ The beauty of Maverick is that they go

out into the best markets around the

country and find investment properties

that perform. The properties come with

tenants and property management in

place already so the heavy lifting is done

for you.”

Jon Swire, Keller Williams

Top 25 Agents in the U.S. for Five

Consecutive Years; Author of There's No

Free Lunch in Real Estate



Building a base of hard assets that generate PRI is what smart real estate

investors do. Producing enough PRI to cover your living expenses so that you

don’t need to work for active income enables you to recapture your time and

design your lifestyle as you choose.

On the opposite end of the spectrum, flipping properties is “work” that (in a best

case scenario) produces “active” income, which builds nothing and ends the

minute you stop working, just like any other job. Whether you are working for

yourself or someone else, it is still a job.

Hedge Against

Inflation. When you own

residential investment

property you have one of the

only assets that provides a

built-in hedge against

inflation. Home prices rise

with inflation, as do rents

(which you have the ability to

raise each year when you

sign a new lease with your

tenants). Buying and

holding residential investment

property is one of the most

effective ways to defend your

wealth against inflation.

Needless to say, flipping

properties obviously provides

“ Maverick has built its business on

sound economic and financial principles,

and it has access to deals individual

investors would never be able to get

close to because it is bargaining with

collective buying power.”

Rob Cass, Publisher

Local Real Estate Deals Magazine



no such protection against inflation.

Still on the phone with the TV producer, I concluded for her in summary that real estate

investors make decisions and cash checks. They want passive residual income,

financial independence and the ability to recapture their time and design their lifestyle to

maximize their freedom. Flipping properties simply doesn’t provide a path for that.

She agreed that it sounded far more compelling to be a real estate investor than a

flipper. But...she said that she still needed to make a show about flipping because it

was more interesting to a TV

audience and, after all, her network

is in the business of getting TV

ratings.

And so....the property flipping shows

continue!

Which explains why the confusion

continues, particularly amongst

newer investors trying to get in the

real estate game.

I have chosen to start the 7

mistakes with this one, because this

mistake is not just expensive, but it

can often turn people off from real

estate...for life.

Even if you were ok with all the

disadvantages outlined above, and

you decided you still wanted to

“ I was looking to buy a strong cash flow

property and you found a great value

proposition for me. The best thing about

working with Maverick was the personal

attention I received. The whole

experience was tailored to my specific

needs as an investor. You listened to my

needs and responded well. The

customer service was excellent."

Bruce Warner, CPA

Garden City, UT



muck through distressed properties and work hard to make active income without any of

the benefits of holding investment property....Remember that what I have outlined

above in my description of flipping is an absolute best case scenario.

Keep in mind that property flipping comes with an incredibly high degree of downside

risk and rarely produces this best case scenario, especially for individuals who are

relatively new at it. For example, when you buy properties at foreclosure auctions, you

often cannot even get inside the property to inspect it until after you have purchased it.

This means there is an unknown level of repairs that could be substantially higher than

you estimated. It could also take you much longer to complete them, and much longer

to rent or sell than you anticipated, increasing your holding costs. These variables can

quickly eviscerate your profit margin...or make it negative.

By contrast, when you buy properties through

Maverick Investor Group, the properties are either

new or completely renovated, and you can do an

independent 3rd party home inspection as part of

your due diligence to verify everything was done

properly. There are also local property

management services available to lease and

manage your property, so you don’t have to be a

landlord.

And the final (and perhaps most formidable)

challenge to flipping properties is simply the

amount of competition. There are multi-million

dollars companies that do this professionally, at

scale, in most major cities. How, exactly, are

you as an individual property flipper going to

compete with the resources of those entities?

“ Maverick is the first real estate

company I’ve worked with that really

understands small investors. All my

questions were answered completely

and their customer service was

excellent.”

Jason Crew, CEO

Houston, TX



Apparently there is a big ‘consumer’ market for the property flipping TV shows.

Apparently, there is also a big consumer market for info-products hawked by self-styled

real estate gurus about how to get rich quick flipping properties. If you are someone

who finds this alluring, I would encourage you to think hard about whether it is a sound

financial decision for you to put your time and money into a property flipping endeavor.

Based on the amount of investor-failures I have seen so far this year, for most people it

is not.

If on the other hand, you are interested in real estate investing, either because you are

a newbie looking to get into the game or because you are a seasoned investor looking

to expand your existing portfolio, I would like to make you a special offer:

I would like to offer you a free 30 minute phone consultation

where we can get to know you, understand your financial goals

and real estate investing preferences, and then answer any

questions you may have and strategize about how Maverick can

support you in meeting your personal real estate investing goals.

Schedule your free consult with us, custom tailored to your

personal needs and goals here:

www.maverickinvestorgroup.com/phoneconsult




Mistake #2 Buying real-estate-backed securities instead of deeded, freehold real property

This is similar to Mistake #1 but the special interest groups trying to steer you in this

direction are different.

Whereas Reality TV shows, infomercial gurus, and local real estate investment clubs

(whose primary business model is to help

real estate gurus hawk their info-products

to would-be real estate investors) are the

primary culprits trying to convince you that

“flipping properties” is the way to riches...

Financial advisors/planners and the

mega-financial-institutions where they

work are behind the big money advertising

campaigns to convince you that you

should surrender your money entirely to

them (under the guise of “retirement

planning” or “building a nest egg” or

whatever the marketing term of the month

is) and allow them to invest it into paper

assets on your behalf, and that this is the

“responsible” way to go.

Like the infomercial gurus, these financial

planners are also trying to convince you to

“ Working with Maverick is different

than working with other real estate

companies because I don't feel

pressured.

You guys are easy to work with and

your customer service is excellent. I

would definitely buy real estate from

Maverick again because I trust you

guys and trust is a big deal.”

Sarah Luu, Real Estate Broker

Sunnyvale, CA



give them your money, but these folks use more of a “long-term responsible investing”

discourse as opposed to the “get-rich-quick-so-you-can-buy-flashy-cars-like-me”

discourse of the infomercial gurus.

It is important to distinguish between the two though, because they target different

groups of people.

If you hear language about getting rich and about being able to buy real estate with no

money and no credit, guess who that is targeting? Obviously people who are not rich

and who have no money and no credit. The “nest egg” discourse of “give us all your

money if you want to call yourself a responsible human being who plans for retirement”

is targeted more towards people who actually have money to invest.

And while your financial planner may offer

you the opportunity to invest in a Real

Estate Investment Trust (REIT), or buy

stock in publicly traded home building

companies as a way of taking advantage

of the real estate boom, remember these

are securitized paper assets that do not

provide any of the benefits of owning

residential investment property discussed

in Section 1 above.

Q: Do you want to know why 99% of

financial advisors are not going to

recommend that you buy deeded, freehold

investment property?

“ I would definitely buy real estate

from Maverick again. They thoroughly

research their offerings...only

selecting a property or project that fits

their rigid criteria for investment. Plus

they follow up and are extremely

responsive.”

Richard Hall, Real Estate Broker

Austin, TX



A: Because (s)he doesn’t make a commission on it (and it reduces the amount of your

money they will have under management).

Mistake #3 Buying Commercial Real Estate instead of Residential Investment Property

Now that we have established

the importance of buying

deeded, freehold investment

property that you own and

control (and now that you

understand who is trying to

deter you from doing so and

why), the next question is:

What kind of investment

property should you buy?

People with a substantial net

worth are often confused about

whether to buy residential or

commercial real estate. And

while I have absolutely nothing

against commercial real estate

in principle, during this current

“ Most property providers are transactional

sales companies that operate in one market

and try to convince people to buy in their

market at all times, but the reality is that the

best real estate markets change over time.

Maverick was able to completely turn this

around and develop a model that puts the

investor first instead of the market or the

property. Maverick starts by understanding

the personal financial goals of each client

and then helps them develop a real estate

investing strategy that enables them to

diversify across markets as they build their

portfolio over time."

Robert Rakowski, Associate Publisher

Personal Real Estate Investor Magazine



boom cycle....there is a big difference.

Historically, well capitalized investors who could afford it, would often choose to invest

in commercial real estate, figuring the capitalization rate (and overall return on

investment) should be better if you are putting more money into a larger asset that

should be more scalable and less cumbersome to manage. Hence the more efficient

thing to do, according to the historical assumption, would be to buy an apartment

building or an office or retail complex instead of a bunch of single-family homes.

Not So Today! And this is a mistake you definitely want to avoid.

Starting in 2007, we witnessed a cataclysmic real estate market crash which, when all

was said and done, resulted in a dramatic “over-correction” of the residential property

market. What emerged out of that over-correction was an extraordinary value

proposition (what Wall Street calls a “market inefficiency”) enabling individual real estate

investors like you to purchase fully-renovated single family homes for less than the

builder replacement cost. At the same time, rental demand began increasing as more

and more homeowners were displaced through the foreclosure process and thrust into

the rental market. Now, overlay those general trends with select markets that are

experiencing both job growth and population growth, and you have a perfect storm that

provides the potential for residential real estate investors to win big…if you know where

to buy.

For the first time ever, Wall Street and some of the largest private equity funds who

typically buy either no real estate or exclusively commercial real estate, decided to jump

into the single family rental property space and start buying up homes because the

opportunity was just so much better than other asset classes (including distinct

advantages over commercial real estate).

In addition to understanding the comparative value proposition that makes residential

investment property more advantageous than buying commercial property right now in



terms of home price trends....it is also imperative to understand how much more

compelling the rental demand is for residential property and what the long term rental

trends look like as well.

U.S. Census Bureau Reports Number of U.S. Renters is

Increasing

The U.S. Census Bureau recently reported that home ownership has dropped to 65%.

That means that the percentage of

people renting their homes rose to 35%,

the highest percentage of renters since

the mid-1990s. This is very significant

for owners of rental properties because it

means the demand for your asset (rental

property) is increasing. In fact, this same

report from the US Census Bureau

reports that the vacancy rate for rental

properties across the US is the lowest it

has been in over a decade and

continuing to trend downward.1

To really understand rental demand,

including likely future trends, it is

important to dig a little deeper and get to

the economic drivers that are

contributing to these statistics.

“ The best thing about Maverick is

that you guys are creative thinkers

and problem solvers - always willing

to go the extra mile to make the

deal work. You guys are always

available. You walked me through a

lot of the basic stuff. I really

appreciated it and am looking

forward to the next deal.”

Farlan Dowell, Sales Manager

San Francisco, CA



Former Homeowners Want to Live in a Single Family Home, Not

an Apartment

One of the effects of the foreclosure crisis is that it displaced a huge number of

American families who have steady, good paying jobs. They have entered the rental

market and have to remain there for quite some time. They cannot buy another home

because their credit took a major hit and they cannot get a bank loan so they need to

rent. Because they used to be homeowners, they want to live in a single family home,

not an apartment. So there is a large and continually growing rental market for single

family homes. This trend will likely benefit owners of single family rental properties

more so than owners of apartment complexes.

Increasing Student Loan Debt

Is Causing Generation Y to

Remain Renters Until Much

Later in Life

Looking forward at the next generation of

potential homebuyers who did not get

tripped up in the last housing downturn,

there are additional factors keeping them

as renters until much later in their lives

than the previous generation. In

general they are putting off marriage and

family formation until later, but one

crucial economic factor is the exorbitant

amount of college debt today’s students

are incurring as tuition rates continue to

“ I'm a conservative real estate investor

and prior to working with Maverick I

had never considered investing outside

of my local area. But Maverick helped

me buy out-of-state properties that had

a better net return and better capital

appreciation potential. What I like best

about Maverick is their follow through

and their immediate response to my

questions. I have closed on 3 Maverick

properties in the last 5 months and I

am now working with them to buy my

next one."

Paul Keele, Electrical Contractor

Reno, Nevada



skyrocket. Hundreds of thousands of dollars in non-dischargeable debt that cannot go

away even with a bankruptcy is keeping Generation Y as renters for much longer than

prior generations.

Reuters recently reported that “More than 40 percent of 25-year-olds now have student

debt, and 35 percent of twentysomethings are more than 90 days delinquent on loans

that are being repaid.”2 By contrast, ABC noted that under 25% of Baby Boomers had

college loan debt. And not only do more students have debt today but the amount of

debt is getting much larger as tuition rates skyrocket.3 A recent bi-partisan poll reports

that 73% of today’s young adults say they owe more in student debt than they can

manage.4

So, whether it is because they cannot afford a down payment, or because they cannot

get a mortgage due to delinquent student loan payments, these economic factors are

increasing the number of renters in the U.S. and shaping trends for years to come.

If the U.S. is able to get the student loan

situation under control and Gen Y starts

increasing their home-buying power, great,

you will have more demand by people who

want to buy your property when you are

ready to exit. If the student loan problem

continues and more people are driven to

remain renters, you will be providing a

valuable service by offering a quality rental

property to help meet the increased rental

demand.

In any case, residential investment property

is what provides the greatest value to today’s

“What I like best about working

with Maverick is that they take

the time to answer all my

questions and explain all the

details that I need to know.

They are very different from

other real estate companies and

I really trust and respect them.”

Tony Ton

Real Estate Investor

Staten Island, NY



renters and what is currently providing the greatest returns to real estate investors.

Portfolio Diversification

By purchasing multiple single-family homes instead of one apartment complex (or other

commercial building--office, retail, industrial, etc.), you are able to diversify

geographically. It allows you to build a diversified portfolio of cash flowing residential

investment properties over time and across markets, which also helps to mitigate your

downside risk in the event that one property or market does not perform as well as you

projected.

Retail Exit Strategy

Commercial properties--such as apartment complexes--are owned exclusively by

investors. That means that when you are ready to sell, you need to sell to another

investor who, like you, will be looking to get a great deal and want a discount on the

property.

Single family homes, however, are also in

demand by primary homeowners that want to

live in them. And those are “retail buyers.”

By selling your property to an end-user, you

have more upside potential between what you

bought it for and what you are able to sell it for

on the retail market when you are ready to

exit.

Segmented Liquidation Strategy

“The property I bought through

Maverick is one of my greatest

cash flow properties, it performs

even better than I expected. Plus

Maverick is very easy to work

with and has excellent customer

service so I would definitely buy

real estate from them again.”

Dr. Brad Baver

Real Estate Investor

Fort Mohave, AZ



Finally, when you have a large piece of commercial real estate, you only have two

choices: Sell or Continue to Hold. If you have a portfolio of residential investment

property made up of numerous single family homes across many markets, then you can

engage in a “segmented liquidation strategy”, meaning you can sell some properties

while continuing to hold others, either because you need the money or because it is the

optimal point in the property cycle to do so. It gives you more flexibility and freedom to

control your financial future and strategically maximize your gains.

Maverick Investor Group helps you do exactly this--we assist our clients in building a

portfolio of residential investment property over time and across markets for maximum

control, profit and lifestyle benefits.

The most investor-advantaged markets change over time, and Maverick studies local

market trends very closely. If you would like to discuss what we feel are today’s most

investor-advantaged markets, and how you can own turnkey rental property in them

(new or fully-renovated properties with local property management services available to

lease and manage the properties) regardless of where you live, I would like to offer you

an introductory phone consultation customized specifically for you:

I would like to offer you a free 30 minute phone consultation where we can

get to know you, understand your financial goals and real estate investing

preferences, and then strategize with you about how Maverick can support

you in meeting your personal real estate investing goals.

To schedule this free consult with us, custom tailored to your personal

needs and goals, just Register Here:





Mistake #4 Sitting on the Sidelines and Hesitating to Buy Property

Given the historical moment that the real estate market is currently in, this mistake could

be the most expensive one you ever make. Let’s take a brief look back over the past

few years to see how this mistake has impacted people...

In 2010, we helped many of our Maverick clients buy turnkey property the Phoenix,

Arizona market and they did fantastic. That was the time to buy. Those who didn’t

buy missed out.

We started getting our clients into Atlanta, GA well before the big funds even arrived

(over a year before the article above was published). Since early 2011 Maverick

Colony, Blackstone, Waypoint Real Estate Group LLC and American Homes 4

Rent have converged on Atlanta in search of low-priced properties to buy and

rent out, after helping drive prices up 34 percent in Phoenix from a year ago.



clients were buying in Atlanta. Once the funds got there, things just went through the

roof....and our clients who bought have been sitting back and riding the wave.

The Case-Shiller data for April 2013 showed that Atlanta home prices were up 20.8%

from a year earlier, marking the largest annual increase in Atlanta home prices since the

Case-Shiller Index began tracking it in 1992!5

Home prices are going up fast and you too can buy in the path of growth and benefit

from this momentum. But things are moving fast, so there is no more time to be sitting

on the sidelines.....or you will miss the whole boom cycle. Each day you do not buy

you are missing out on the gains our other clients are making

In the 4th quarter of 2012,

Maverick started helping our

clients buy in the Chicago

market. Here is the home

price appreciation graph since

our clients got in the market.

The Green Circle is when our

clients entered the market:

According to the S&P Case-

Shiller Home Price Index,

Chicago home prices

increased 10.3% in the 3-

month period of May-June-

July 2013 alone.7 That was

the fastest home price

increase of any market in the

country tracked by the index



during that time period. We have many clients who bought multiple Chicago properties

in 2013 through Maverick and absolutely crushed it.

In 2014 we helped our clients get into the Dallas-Forth-Worth market in Texas. At the

time DFW lead the country in both job growth and population growth for large metro

areas and, in addition to massive rental demand, DFW home prices jumped 10% in a

year and continued to rise through 2015.

In 2015 we helped our clients buy heavily in Philadelphia, PA, and over the course of

2016 the Philly market saw a 13% rise in home prices in a single year. 8

And home

prices continue to rise in 2017.

There is still substantial upside potential in many markets in 2017, but you need to know

which market to buy in, and what point in the property cycle to buy. Many of the most

advantageous real estate markets over the last 5 years are no longer the most

advantageous markets to continue buying in today because prices have gone up faster

than rents and there has been a process of “yield compression”. If you bought at the

right time and locked in your price, you are golden. But continuing to buy as prices rise

without proportional increase in rents means your returns are being diminished, and it

will soon become less advantageous to keep buying there and more advantageous to

buy in another market. This is exactly what Maverick helps our clients do....but in order

to take advantage of the opportunity you need to get off the sidelines and get in the

game.



Mistake #5 Speculating

When I started investing in real estate in the 2004 boom cycle, it looked a lot like today.

Home prices were shooting up, and it felt like you couldn’t lose no matter what you

bought. As a brand new investor, I didn’t have a company like Maverick to guide me,

so I read a bunch of books, listened to some self-styled “experts” and assumed that as

long as I bought in what appeared to be a growing market, not much else really

mattered since I would surely profit off capital gains at the end of the day even if the

cash flow was negative...

Let’s just say that when the boom cycle ended, that theory didn’t pan out so well.

Some call it “speculating”, some call it “gambling”, but no matter what you call it...



Don’t Do It!

This is where I learned my biggest, hardest and most expensive real estate investing

lessons. The most expensive lessons always seem to be the ones that make the

biggest impact, don’t they?

What I learned from my own mistakes and how to avoid them in the future would

ultimately inform The Maverick Approach— the framework for how Maverick Investor

Group now helps our clients approach real estate investing based on “real estate

fundamentals”.



The Maverick Approach Buying Rental Properties Based on Real Estate Fundamentals

Buying real estate in an appreciating market is great...

If And Only If

That market ALSO has sound real estate fundamentals.

At Maverick we help our clients determine not only what markets are going up in value

(and where they are in the property cycle to ascertain how much upside potential is left

before the market returns to equilibrium), but we also look at:

The price-to-rent ratio (how low you can buy the property for and how high you can

rent it). Hence, how good is the potential cash flow margin?

Demand drivers like job growth, population growth and percentage of the

population that rents.

Supply side indicators - how much property is available for sale and for rent in a

particular price point? How long does it stay on the market? What is the

absorption rate?

Affordability. What percentage of the population can actually “afford” the median

home price based on the median income (and how much more can the properties

appreciate before the majority of the population can no longer afford them)?



Expenses. How much do property tax rates, HOA fees and other localized

expenses (which vary by market and location) affect your overall cash flow?

Micro Market Factors - What is the ratio of primary home owners to renters in the

community? What are the market rents, the localized vacancy rates and how are

those are trending in the local areas?

Whereas it certainly makes sense to “buy in the path of growth” in many instances, be

advised that many investors including some of the big institutional players are buying in

certain markets that we consider highly speculative. Regardless of the home price

appreciation trends in these markets, we absolutely do NOT recommend our clients buy

there as those markets do NOT have the sound real estate fundamentals that are the

entire foundation of The Maverick Approach. Be sure you know which markets are

which.



Learning how to get access to this type of market data is a core component of the value

we provide to our clients so you can make highly informed decisions when you are

ready to buy investment property.

Mistake #6 Failing to Do Proper Due Diligence

Many people get burned because they don’t do the proper due diligence on their

properties before they close.

The first step in due diligence should be all of the market analysis (both macro and

micro) listed above in the previous section (verifying rental rates, vacancy rates, trends,

etc.), to ensure you are buying in an “investor advantaged” location. We provide our

clients tools and access to relevant data so they can do all this independently.

Once you have established that, you need to go deeper and investigate the actual

property itself. As the buyer, you are always responsible for doing your own due

diligence. Nobody can do it for you and if anyone tells you they can, run in the other

direction. The responsibility is on you to establish a thorough, uniform due diligence

regiment that should include these items as a bare minimum:

A third party home inspection by a professional home inspector. Ensure you

are the one who hires the home inspector (and don’t simply accept an

inspection that was already done and paid for by the seller). When the home

inspector is hired by you, they work for you, and their job is to help you identify

any defects in the property that need to be cured before you close (or if there

are serious problems, to let you know about them so you can decide not to buy



that property).

Independently verifying all of your

expenses associated with the property

(property taxes, insurance rates, HOA

dues if any, mortgage payment if any,

etc.). Under-estimating or omitting

some of these can skew your cash

flow analysis.

Reviewing the purchase contract as

well as the property management

agreement (you have a right to get

your lawyer to review it as well).

Ensure that you get all your questions answered and that you understand

everything before signing.

If there is a Home Owners Association (HOA), you should confirm it is solvent.

Otherwise, your property value could decline based on other residents not

paying their HOA dues. You also need to understand the CC&Rs and confirm

there are no restrictions on renting your property (I have heard about investors

buying property in communities where the HOA did not allow rentals!! Now

that would suck. Confirm before you close!)

“Maverick has been very nice

to work with. They have been

professional from start to

finish and we never had any

sales pressure. Their

customer service was tailored

to our specific needs and we

felt very comfortable through

the whole process.”

Dr. Chris Latvis

Dentist

Avon, CT



Mistake #7 Not Doing the Proper Tax Planning

Residential investment property is the most tax-advantaged asset class in the U.S.

The government has devised a number of major financial incentives to encourage you

to buy and hold rental property. You simply need to know what they are and understand

how to take them. If you are not taking advantage of these tax incentives, you are losing

out on one of the most lucrative aspects of this asset class.

Now, I need to make the important disclaimer that I am not a lawyer or tax professional,

this is not tax advice, tax laws change regularly, and you need to consult your own tax

professional about your individual situation and the most updated applicable law. Got

it? Ok.

With that said, I can tell you that many of our clients have been able to use their

investment real estate as an incredibly strategic vehicle for dramatically reducing their

income taxes. As

mentioned in the

first section of this

report, residential

investment

property is

depreciable for tax

purposes even if it

is appreciating in

value. You need

to remove the

value of the land



and then you can depreciate the structure of your property over 27.5 years. That

means if the structure is worth $275,000, you can depreciate $10,000 per year, and

take that as a “loss”. You can then use that loss to offset some or all of the taxes that

would be owed on the rental income generated by the property, for example. There

are a number of other potential write-offs, as well as ways to accelerate deprecation on

certain parts of your property. You just need to know what they are and how to take

them, legally.

A number of our clients have also been able to qualify for the coveted “real estate

professional” status, which allows your left over real estate “losses” to be taken against

other forms of income (including earned income from your job or your spouses job that

has nothing to do with the property), regardless of how much money you make. IRS

guidelines for this qualification are tightening so be sure to consult with a tax

professional to ensure it is done properly.

The possibility of using residential investment property to dramatically change your

income tax situation is profound. But, you have to ensure you are doing it correctly

and legally. And, as a word of caution here, if you are serious about this you do not

want to rely exclusively on regular accountants who deal primarily with W2 wage

earners. You want to seek out experienced CPAs who specialize in dealing with

professional real estate investors and business owners and are experts in this niche.

Maverick has good relationships with some of the nation’s premiere CPAs that

specialize in working with real estate investors and our clients get exclusive access and

personal introductions. The same is true with asset protection specialists and other

industry experts that can help you with various aspects of your real estate investing.

We have developed an elite network of the nation’s premiere experts and being a part

of the Maverick community gets you personal access at no charge.

###



Special Offer For You:

I would like to offer you a free 30 minute phone consultation

where we can get to know you, understand your financial goals

and real estate investing preferences, answer all your questions

and strategize about how Maverick can support you in meeting

your personal real estate investing goals.

Register Here:





Footnotes: 1. http://www.census.gov/housing/hvs/files/currenthvspress.pdf

2. http://blogs.reuters.com/great-debate/2013/03/07/student-loan-bubble-babble/

3. http://abcnews.go.com/Business/student-loan-

debt/story?id=19150985#.Uaf6ppXr46g

4. http://www.ticas.org/files/pub/2011_Young_Adult_Higher_Ed_Poll_NR.pdf

5. https://www.spice-indices.com/idpfiles/spice-

assets/resources/public/documents/12473_cshomeprice-release-0625.pdf

6. http://www.bloomberg.com/news/2013-05-29/carrington-stops-buying-u-s-rentals-

as-blackstone-adding.html

7. http://us.spindices.com/indices/real-estate/sp-case-shiller-il-chicago-home-price-

index

8. http://drexel.edu/lindyinstitute/projects-reports/reports/


http://www.census.gov/housing/hvs/files/currenthvspress.pdf

http://blogs.reuters.com/great-debate/2013/03/07/student-loan-bubble-babble/

http://abcnews.go.com/Business/student-loan-debt/story?id=19150985#.Uaf6ppXr46g

http://abcnews.go.com/Business/student-loan-debt/story?id=19150985#.Uaf6ppXr46g

http://www.ticas.org/files/pub/2011_Young_Adult_Higher_Ed_Poll_NR.pdf

https://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/12473_cshomeprice-release-0625.pdf

https://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/12473_cshomeprice-release-0625.pdf

http://www.bloomberg.com/news/2013-05-29/carrington-stops-buying-u-s-rentals-as-blackstone-adding.html

http://www.bloomberg.com/news/2013-05-29/carrington-stops-buying-u-s-rentals-as-blackstone-adding.html

http://us.spindices.com/indices/real-estate/sp-case-shiller-il-chicago-home-price-index

http://us.spindices.com/indices/real-estate/sp-case-shiller-il-chicago-home-price-index


Maverick Investor Group, LLC

[email protected]

725-222-0488

9890 S. Maryland Pkwy. Suite #200-A

Las Vegas, NV 89183

About Maverick Investor Group:

Maverick Investor Group was founded by real estate investors for real estate investors.

It is run by investment property specialists that serve real estate investors exclusively.

Vision

To radically improve peoples' lives through real estate.

Mission

To build a socially responsible community that uses real estate as a vehicle for

designing extraordinary lifestyles, living their dreams in the present and affecting

positive change in the world.

Register Here for your Complimentary Phone Consultation:



mailto:[email protected]


HOW TO AVOID THE 7 BIGGEST MISTAKES - Maverick Investor … · 2017-03-07 · “The Maverick...

Documents

Transcript of HOW TO AVOID THE 7 BIGGEST MISTAKES - Maverick Investor … · 2017-03-07 · “The Maverick...