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Happy New Year!
2012-The Year of Equity.
What a special year we had in 2012!
The price appreciation we enjoyed on our hard real estate assets was nothing short of amazing. Through 2009-2011 we were always of the belief that we were buying these assets at unbelievable discounts. The cash-flow and the substantial discount versus replacement cost demanded that these assets be valued higher than the cost basis we were fortunate to acquire them at. We were certain that appreciation was coming, but we underestimated how quickly our market could change. Money constantly moves to where it finds value, and our secret in Las Vegas was quickly found out by everyone. We saw and continue to see an increasing amount of world wide investors (especially from China & Canada) looking to capitalize on real estate opportunities in the most exciting city of the world.
Timing once again proves to trump all, and fortunately for us our timing was spot on.
Below is a press release from 1/3/12 in which Trulia.com came out and stated that Las Vegas was named the #1 turn-around city in the country for 2012.
Will we see continued appreciation in 2013 like we saw in 2012? Probably not. We are however hopeful that these prices continue to hold. We feel that this market shows the new bottom. The banks have learned if they withhold inventory, work short sales, and perform loan modifications they will receive a higher rate of return on their non-performing assets. When the banks need a quick influx of cash they realize it is better to sell the Note (Trust Deed/Mortgage) to an institutional investor versus taking the asset all the way to foreclosure.
Many of you are asking since the LV real estate market is on fire should we consider selling? I believe the answer should be no. We have a great thing going and everyone of our assets is cash-flowing. I believe our best years are yet to come. Every month the cash-flow is lowering our initial investment into the home/note, or providing upgrades that are improving the quality of the home or lowering our future carrying costs. Though there are those who make money flipping real estate and notes, Wealth is obtained by those who Hold Real Estate and Notes.
Unfortunately the window of opportunity on buying hard real estate assets has appeared to have closed, and it is hard not to think “I wish we would have bought more”. Luckily we are extremely fortunate to have a new and possibly more lucrative opportunity before us. Our economy continues to be fractured. Though we may technically not be in a recession, a large percentage of Americans feel as if we are. Unemployment, record deficits, and our Governments inability or unwillingness to work together continues to paralyze our economy. It is during recessionary times that fortunes are made, luckily for us that window is still open.
What is Integrity Wealth Building Doing in 2013?
As I have spoken about in previous emails IWB has been purchasing Notes (1st Trust Deeds/Mortgages) directly from the bank. Fortunately we are part of their Tier 1 pricing program and have been buying these assets at an unbelievable discounts. Once we acquire the debt, we first ascertain if home retention is the borrowers goal. If it is, we try to assist in finding a program that is advantageous to the borrower as well as the investor. We have had a lot of success putting win/win scenarios together. For those of you who have not yet participated in our Note Acquisition Partnership Program we have opportunities lining up in 2013.
IWB has adjusted its growth strategy by focusing more on the note acquisition/disposition and less on its construction based background. We have thinned our construction crew and added to our office staff.
IWB continues to exploit any and all other cost savings opportunities or government sponsored programs that we can participate in. One of our associates is working with a local insurance provider that appears to be able to save us 20%-40% on our insurance coverage. The bulk package of properties we can bring to the table can lower our carrying costs, while providing virtually the same coverage we have previously enjoyed. In 2012 we were able to complete quite a few landscape upgrades with the water authority paying $1.50/sq ft for our conversions. This not only paid a large portion of the improvement and added curb appeal, but also lowered our usage of the most precious and increasingly expensive resource we have in the desert.
In 2013 we see a lot of opportunities in note acquisitions. Like the LV Real Estate opportunity, there is a finite amount of time with this opportunity. We feel we have until the end of 2014 to build something special together. As we saw with the Las Vegas RE opportunity money can quickly move to where it finds safe secure investments, with aggressive returns. Though we feel there is a 2 year window, IWB plans on being aggressive purchasing these conservative investments in 2013. I am not only doing this with my personal cash but also with my self directed retirement account. For those who have not yet established a self-directed ROTH retirement account I highly recommend you do. We can fund our 2012 IRA contribution up until April 15th 2013 ($5k-$6k). Meaning if you had funds available you could place $10k-$12k in a ROTH retirement account today. Though the average 75% purchase price on one of our note opportunities is $30k-$50k we have had success putting together partnerships for as low as $11k. As we all know taxes went up on all of us one way or another, not just those making $400k+. Unfortunately there is a very high likelihood of them continuing to escalate. In my opinion the self directed ROTH retirement account (401k or IRA) is the best tool that is currently available to shield us from tax exposure.
In closing I want to thank each of you for working with me and Integrity Wealth Building. I value not only your partnership but also your friendship. I want to especially thank those of you who have been kind enough to refer me to others, it shows not only what you think about me but also about what we are building together. One of the reasons we have been able to scale the business is because of your kind words and referrals. We were able to break the 100 mark in purchases and sales in 2012. This increased volume allowed us to grow our business at IWB, achieve Tier 1 status, lower acquisition pricing for IWB as well as you the investor, and also gave IWB the flexibility to give our borrowers every opportunity to save their home.
We had a great year together, and I look forward to an even more productive year in 2013!
Thank you,
Jeff Sustaita
Integrity Wealth Building LLC
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