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Providing Education, Resources & Networking Since 1978 Kentucky’s premier investment club for landlords, rehabbers and wholesalers Meeting the 4th Thursday of every month (except November & December) KREIA.COM • facebook.com/groups/kreiaky • twitter.com/reiaky

Monthly Newsletter for KREIA Members

Vol 07-20 July 2020 President’s Letter

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Financially Free: Three investors 3 show how rental properties set them on the path to freedom Welcome, New Members!

Mike Butler: Pay yourself first! Never settle for the ‘leftovers’ in rental property cash flow

Michelle Rawn: Courts update

KREIA’s 2020 Election Results 10 Commissioner’s Sale Resumes 10 Nina Musgrave: Gentrification – 14 what we know & what we don’t

Dear KREIA Members and Friends, One of the things I love most about KREIA is the diversity of real estate investing venues that our members represent. Flipping, long-term hold, multi-family, short-term rental and commercial investing are all represented by our membership. While not slighting any of the other venues, this month on our July 23rd main meeting held once again on Zoom, we Chris McCarty will have a stellar panel of seasoned investors discussing the benefits of holding long-term rental real estate to accumulate wealth. Watch your email for instructions on how to participate. Politicians in general and on both sides hardly talk about balanced budgets or fiscal responsibility anymore as each side works to win elections by appealing to their respecttive bases – by providing funds to their constituents. These funds are called by many names, and both sides justify their general merit. The funds are well intentioned, and it’s usually hard to argue in the beginning that they don’t provide the intended results. Today, however, the money source (tax revenue) is often not available from current government coffers to be spent and just gets borrowed and added to the national debt. Without taking any stand on either political side, let’s take a look at a few definitions I scrounged from the Internet that will be impactful to real estate investors and particularly to this month’s topic of buy-and-hold investing.

• Inflation: “a general increase in prices and fall in the purchasing value of money.”

KREIA Photos

L.O.T.S. Recaps: We catch up with rehab projects from John Jones and Dr. Madeline Hicks

• Causes of inflation: “When the total money in an economy (the money supply) increases too rapidly, the quality of the money (the currency value) often decreases. Economists generally think that this money supply increase (monetary inflation) causes the goods/services price increase (price inflation) over a longer period.”

John Wohrle: Q&A about working with contractors to ace your property inspections

• Real Estate Appreciation: “Property appreciation is when the value of real estate increases over time because of an increase in demand for that property. As property

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Copyright MMXIX Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

Your KREIA Leaders

President Chris McCarty

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Secretary Erik Hitzelberger

Vice President John Jones

Treasurer Mike Treasurer-Elect Grinnan CPA Wally Kallbreier

Board of Directors

Put your message in front of the most active rehabbers, landlords and wholesalers in the state! KREIA offers five membership levels for businesses. Go to KREIA.com and join at one of these annual advertising levels to get your ad in every issue of KREIA’s newsletter and be invited to make ad pitches at meetings:

Business Card Membership . . . . . . . . $199 Includes your business-card-sized ad. Admission at monthly meetings is $20. Premium Levels: These four advertising levels include your ½-page ad in each issue.

Rue McFarland

George Foree

Dennis Erhard

Frank Miller

Lauren Willoughby

Hampton Scurlock

Rob Bergeron

Rick Littrell

Christopher Jaquith

Jordan Pohn

ParliamenPast tarian Michelle President Rawn Eric George

Greg Nalley

Get involved with KREIA. You can help with the monthly meetings, L.O.T.S. program, this newsletter, Saturday workshops, Government Affairs roundups, marketing, the KREIA website & more. Work shoulder-to-shoulder with active investors! Ask for someone to direct you as you check in at the front desk at monthly meetings.

KREIA's newsletter is published monthly and serves to educate you and to remind you of upcoming monthly meetings. About KREIA: The Kentuckiana Real Estate Investors Association is a nonprofit organization focused on education, networking and resources for today’s investor. Whether you are just starting out in real estate investing or are working on your hundredth deal, KREIA can help you learn more, earn more, and have more fun doing it. Group discounts are available. Contact us at support@KREIA.com if you: Want to advertise on KREIA.com • Need help • Have a question

Bronze Membership . . . . . . . . . . . . . $499 Includes free admission to monthly meetings for one person. Silver Membership . . . . . . . . . . . . . . $699 Includes free admission to monthly meetings for two people. Gold Membership . . . . . . . . . . . . . . . $999 Includes free admission to monthly meetings for two people and gives you a skirted table in the vendors area. Platinum Membership . . . . . . . . Reserved Includes extra promotion. There can be only one advertiser at this level. Our current Platinum Sponsor, MM Lending, holds exclusive renewal rights until 2021. Questions? Catch up with KREIA Sponsor/ Advertiser Chair Dennis Erhard at the meetings. Or email support@KREIA.com.

Join KREIA Joining KREIA is easy: Go to KREIA.com and click the "JOIN" option on the menu. Tell all your investing friends. The cost to join as an individual member is $125 per year, with a door fee of $20 at our monthly meetings (which covers the buffet meal and rent on the hall). Click JOIN at KREIA.com to find out about all the benefits of membership for both individuals and businesses. Too many to list here!

Copyright MMXX Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

The Life-Changing Power of Passive Income In July’s virtual main meeting, trio shares how they became financially free Would you like to learn how to become financially secure? To know that all your bills will be paid for the rest of your life, even if something happens to prevent you from working another day? Financial freedom comes when income from your investments surpasses your financial obligations. This month at KREIA, three landlords are going to describe how owning rental property in Kentuckiana has given them the freedom to live life on their own terms. And they’re going to walk you through how to reach that point too! You’ll be taken on three journeys of what it means to be financially free. For George Foree, who pressed out appliance parts for 30 years at General Electric, owning rental property meant that he would not only survive but thrive when it came time to retire. He described the day 20 years ago when his boss came to him and said his hours would be reduced in an effort to get him to retire. George said he was happy to take that ticket out — at 50 years of age he was already financially free, thanks to investments he had acquired. Since then, George says rental property has given him the freedom to do what he wants, when he wants. George said he plans to talk about the benefits owning rental property gives to investors — passive income, tax savings, appreciation and more. For Greg Shell, owning rental property meant that a medical emergency a few years ago, something that could easily have bankrupted many families in our country, would not make much impact on his finances. “I was in a wheelchair for six months and never had to worry about how I was going to pay my bills,” he said. All due to real estate. Greg started buying property in Georgia when he was an Army Ranger. When he left the service and moved to 5:30 p.m. Early Meeting: Mattingly Edge Hope Dittmeier, Executive Director of Mattingly Edge, will join our call to tell landlords how they can help those with intellectual disabilities find housing – and gain great, long-term tenants in the process.

Louisville almost 20 years ago, Greg did not “sell” his Georgia investments — he traded up using a 1031 Exchange. The Georgia properties became the launchpad for the portfolio of properties he’s built here. Greg said he will present case studies of two of his properties, showing what he paid, how long he’s owned them, and the benefits he’s received by owning them. Greg said he wants to show new investors how they can start with $40,000 or $50,000 and turn that into a great income and retirement. For Christina George, owning rental property meant that she could quit a 14year job as an engineer with General Electric. Christina and her husband — Eric George, KREIA’s Immediate Past President — have the freedom to spend time with family and pursue more real estate investments on their own timetable. Already owning a portfolio of student rentals, they are now looking into purchasing self-storage businesses and have acquired one in Evansville, Indiana. Christina said she will show us some of the systems and outsourcing techniques she uses to turn her investing business into a machine that runs itself with minimal intervention. REGISTER NOW AT KREIA.COM to attend our July 23rd main meeting, which will be held on Zoom – free for members! George, Greg and Christina will kick off our featured presentation at 7 p.m. They’ll take questions at the end. New Member Orientation at 5 p.m.: But please log into our virtual meeting a little earlier so you can attend our Member Orientation with Jordan Pohn, who’ll walk us through KREIA’s benefits. The early meeting, announcements, property pitches and advertiser pitches will follow.

Welcome, New KREIA Members! Travis Downs Andy Edge Grace Guo Brian Jackson Bertina Johnson Kiley Jones

Carter Martin Jr Alen Mrsic Brigitte Owens Julia Sanders Andrew Schlag Andrew Storm

KREIA’s New Member Orientation There will be a monthly presentation of the benefits of joining KREIA at every in-person monthly meeting. The presentation will be given from 6:15 p.m. to 6:45 p.m. in the early meeting room at Woodhaven Country Club. If you bring new investors to a KREIA meeting, please point them toward the orientation. See the presentation online: Join our July main meeting at 5 p.m.! You can also review Rick Littrell’s new member orientation PDF, watch a video of it, and learn how to secure your Home Depot discounts and cash-back bonuses here: kreia.com/MemberBenefits.aspx

President’s Letter Continued from Page 1 becomes scarcer, but still desired, the price for it increases. This kind of natural real estate appreciation is a great (and not to mention effortless) way of making money in real estate and getting a good return on investment when you decide to sell the investment property. The annual appreciation of residential real estate in the United States is 6.564% per year, based on the average sales price of new houses sold from 1963-2014, as provided by the US Census Bureau.” Wow! These are unprecedented times with the COVID crisis. And the Federal Government has in the past three months, with no corresponding offsetting tax income, printed enough new money – and will again with likely new assistance and stimulus initiatives on the short-term horizon – to add 25 to 30 percent to the national debt. Right or wrong on the part of the government in solving the crisis, this will very likely cause the inflation of our currency. Subsequently the inflation of real estate value will at least offset the negatives of devalued currency, giving real estate owners and investors a huge advantage over non-owners. In our Louisville metro market, the past 10 years have seen unprecedented real estate appreciation. Add to this the timetested benefits of depreciation of real estate to shield investment income from taxable income, along with rental income generated by owning real estate, this market has once again proven this to be the easiest path to wealth for anyone who follows the simple principles. Now with the unfortunate likelihood of inflated currency adding to the value of real estate, this message is timely as you hear from this month’s panel on the specific practices they use as successful real estate investors in this market. Please join us on July 23 and bring your questions for follow-up after the presentation.

Chris McCarty KREIA President

GOVERNMENT AFFAIRS LINKS State Government Roundup Kentucky Realtors Legislative Updates. Read weekly updates on bills in play in Frankfort at the Kentucky Realtors’ site: bit.ly/KYR_LEGU

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Local Government Roundup Louisville Metro Government: Get a summary of local affairs (and state) by the Greater Louisville Association of Realtors (GLAR): bit.ly/LRGAU Copyright MMXX Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

Some of KREIA’s national sponsors via National REIA. For the full list, and info on discounts, visit nationalreia.org/benefits

Always ‘Pay Yourself First’ When Running the Numbers Never settle for the ‘Leftovers’ in rental property cash flow By Mike Butler When we got started investing in real estate, most of us used the “Leftover Formula” to determine profit or income. Before the end of this article, you will learn how to ALWAYS “Pay Yourself First!” before you make your offer. When it comes to life, there is no pause or rewind button. Therefore, you must be efficient as possible in order to achieve all the things you want in life both personally and financially. Your time is precious and valuable. Don’t waste it. Implement some simple rules to turbo-charge your profit and income on your deals. For example, when I got started years ago, I cannot tell you how many properties I bought because they were a “deal,” having no idea what the definition of a deal was and not knowing what to do with a particular property… but I bought it because it was a Great Deal. Ask yourself, “What is a Deal?” What is your definition of a “Deal?” BEFORE You Make Your Offer, you must have an exit strategy. Decades ago, I started with three Exit Strategies to choose one or more. Today, I have over seven Exit Strategies to choose from, depending on the property. Seven Exit Strategies to help maximize profit and income, combining training, education, and experience. I take each of the seven exit strategies and plug each into this property BEFORE I make my offer. Knowing your Exit Strategies BEFORE making your offer greatly reduces your risk and gives you complete confidence in making your offers. “You Make Money When You Buy” is a very true phrase when you learn how to pay yourself first. Now here’s the mistake I made many times when I got started investing. Not only would I buy a property because it

was a “deal,” and 99% of my deals were rental properties, I used a little paper chart to help me cipher what my monthly loan payment would be for borrowing x amount of dollars at x percent interest rate. My second step was to determine what the market rent was for this home and then deduct the expenses – property taxes, insurance, repairs, and then the loan payment on the property. After ciphering all these numbers, the bottom number, the “Leftover Number” was what my projected cash flow would be. This is wrong! See the chart below at the left for the old-school way to cipher using the “Let’s See How Much Is Left Over for Me” formula. The “Leftovers” formula was putting the cart before the horse. Let’s just rearrange some things in the formula and begin again. See the chart below:

STEP 1: Start with Market Monthly Rent for this singlefamily rental. STEP 2 – Pay Yourself First: Simply enter the dollar amount you want to put in your pocket every month. This dollar amount goes first and to the top of the expense list. You must pay yourself first. This is why you are a real estate investor. STEP 3: Next, enter all of the other monthly expenses associated with owning this single-family rental. STEP 4: Take Market Rent minus all of your expenses and you will end up with a “Debt Service” dollar amount at the bottom. This formula reveals how you can pert’ near guarantee your Pay Me First dollar amount as long as your monthly payment does not exceed your Debt Service number. Pretty cool, ain’t it? Continued on Page 30

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Update on the Courts By Michelle Rawn I know that most of you are anxious to know when the courts will return to normal and evictions for non-payment of rent will be able to start. Below is the breakdown of evictions under the CARES Act and in Kentucky and Indiana. In Kentucky, Governor Beshear has not set a date yet as to when evictions for non-payment of rent will be able to start. Currently we are able to evict for non-rental lease violations and lease terminations/non-renewals. These cases are mostly being handled via Zoom, and landlords/ property managers are required to be on the call. Some good news, we were informed in early July that set outs/ warrants for possession will be able to move forward on new case filings. This means since eviction court started back up, if you received a judgment, you are now able to file a warrant for possession and move forward with sitting out the occupants. Finally, nothing in any of the Executive Orders entered in Indiana relieves the tenant from his/her obligation to pay rent. In Indiana, per Executive Order entered on June 30, 2020, the eviction moratorium will end on July 31, 2020. This means that evictions, those already filed and those waiting to be filed, should be able to move forward with new hearing dates on August 3. I will keep you posted if there are any changes to this date. Also, eviction hearings going forward in several counties will be handled virtually for the plaintiff and his/her attorney. Only the defendants, the judge and court personnel will be permitted in the court room, and the capacity is limited to a total of 10 individuals in the court room at any one time. Finally, nothing in any of the Executive Orders entered in Indiana relieves the tenant from his/her obligation to pay rent. Nationally, the CARES Act applies to those properties, both multi-family and single-family, where the loan for the property is either a Fannie Mae, Freddie Mac or HUDbacked loan; the property is a tax credit development; or the tenants are receiving government assistance with rental payments, including but not limited to Section 8. If any of the above guidelines apply, then eviction proceedings for non-payment of rent may not be started until July 25 and the notices given are all required to be 30-day notices; this includes lease terminations/non-renewals and non-rental lease violations (i.e. an unauthorized occupant); and nonpayment of rent. For those properties covered under the CARES Act, you cannot charge late fees from March 24 through July 24. That being said, unless Kentucky lifts its suspension on evictions for non-payment of rent by July 25, then only evictions for non-rental lease violations and terminations/non-renewals will be able to be filed.

As all of us know, things are still changing on a daily basis. Please feel free to reach out to me to see if there have been any more developments or updates. I hope you and your families are staying safe and healthy. ► The O-395-19 anti-discrimination ordinance is back on Metro Council’s docket. Stay tuned for updates. Michelle R. Rawn Rawn Law Firm, PLLC Tel: (502) 639-9396, Fax: (502) 276-0607 Email: Michelle@rawnlawfirm.com

KREIA’s 2020 Election Results The board would like to thank everyone who ran for positions this year. The results are as follows: Officers President – Chris McCarty Vice President – John Jones Secretary – Erik Hitzelberger Treasurer – Mike Grinnan Treasurer Elect – Wally Kallbreier Board at Large: 2-Year Term Lauren Willoughby, George Foree, Rob Bergeron, Jordan Pohn, Stacey Duvall and Christopher Jaquith Board at Large: 1-Year Term Alexis Fentress

We are looking forward to an exciting year with many great speakers, events and programs. We appreciate everyone who joins our monthly Zoom meetings and are looking forward to when we can meet again in person. — Michelle R. Rawn , KREIA Parliamentarian & Chairman of the Election Committee

Master Commissioner’s Sale Is Back Have you missed being able to bid live on foreclosures? Good news! The Jefferson County Commissioner’s Sale resumes on Thursday, July 23rd – with changes to the sale location, dates and times, due to COVID-19 emergency orders. The bond application process has also changed. Health and safety measures will be imposed. The new venue is Louisville Slugger Field, in the West Side Hall of Fame. The doors will open at 9 a.m. and bidding starts at 9:30 a.m. on the days of the sale. For the full list of health rules, info on the new application process and a list of upcoming sale dates, visit the Commissioner’s website: jeffcomm.org

Gentrification: What We Know and What We Don’t

Opportunities and costs not black & white – gray area may contain the gold migration. Most gentrification happens in places that have By Nina Musgrave been so impacted by disinvestment, any new development Gentrification has been a hot topic in real estate investing and in our society since seems drastic and transformational. A new coffee shop or the word was first used in 1962. Webster’s bourbon bar definitely stands out! Arguably the neighborhood never wanted or needed a coffee shop; it defines gentrification as “the process of needed a place to buy fresh produce or socks without repairing and rebuilding homes and busimultiple transfers on public transportation. The residents nesses in a deteriorating area (such as an urban neighborcan benefit, nonetheless – with safer structures (that are hood) accompanied by an influx of middle-class or affluent being used rather than sitting vacant), new opportunities in people that often results in the displacement of earlier, the labor market, reduced exposure to poverty, and better usually poorer residents.” options for affordable housing. It comes from the root word gentry, and leans into the The negative impacts of gentrification are obvious. etymology of “a class whose members are entitled to bear a Residents can be pushed out, away from their friends and coat of arms, though not a noble rank, especially wealthy families, leaving a community that was home for land owners having such status.” generations. Property taxes rise, frequently to unaffordable Gentrification typically has a negative connotation; however, there are few robust studies that look behind the rates. Limited long-term research on out-migration shows these displaced individuals and families may have increased scenes to possible upswings it brings the neighborhood’s housing cost burdens, hypertension and mental health care. original residents. They may never end up living in an area similar to the one We know when neighborhoods are undergoing gentrithey left. fication: a coffee shop pops up in a previously rundown Neighborhood stabilization is important, and as real corner, houses are flipped, front doors are painted, rents estate investors we have an exclusive opportunity. How can rise and demographics of the neighborhood drastically our investment strategies maximize the benefits, while change because displacement occurs. Or do they? A recent study in July 2019 by the Federal Reserve Bank minimizing the negatives of gentrification? of Philadelphia and NORC at the University of Chicago shows residents may gain more from gentrification than the traditional narrative tells. This does not mean gentrification is good or bad, per se — it simply means the impacts are much more involved than the blanket statement, “Banks and real estate investors are the primary causes and beneficiaries of gentrification. Everyone else loses.” While gentrification spurs about 10 percent of moves for less educated renters (and much less so for renters with more education), the typical move rate without gentrifiication is 6 percent. This means the majority of residents stay, often lifelong, including their children. They share in neighborhood improvements in ways that are difficult to capture without using a wider lens. This map shows displacement/migration of low-income citizens by census tract in our area. This is from a University of Minnesota Law School project. To see data on the interactive Changes in neighborhoods come national map, visit bit.ly/k2007_map from in-migration rather than out-

photo by bruce w. hinson www.obedientcamera.com

photo by bruce w. hinson www.obedientcamera.com Top: At our July 7 Lunch & Learn, John Walton of Express Cabinet Store talked cabinet installation and demonstrated some of his products – he brought a sample of the “Frank Miller Special” (white Shaker cabinets). In the background at left are Susan Walker and George Foree. Middle: Ed Gibson hosted Lunch & Learn in his own back yard! He addressed socially distanced investors, who dined al fresco in lawn chairs on yummy Jersey Mike’s sub sandwiches. At right, Hannah Gill followed up after Frank Miller in our June virtual main meeting on Zoom. Bottom: Several investors met up at Bearno’s for our first live Happy Hour in a long time. Left to right: Scott Keeney, Mike & Wendy Kays, Alexis Fentress, Steve Yousten and Jim Young. Photo courtesy Please help us with August’s of Alexis issue! Email some photos to Fentress.

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kreiaphotos@gmail.com Copyright MMXX Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

Recent L.O.T.S. Homes: A Closer Look Dr. Madeline Hicks rehabs labor of love in Chickasaw neighborhood By Lauren Willoughby The last time we attended a L.O.T.S. event hosted by Dr. Madeline Hicks, back in 2018, she blew us away with the elegant finishes on the home she flipped in the Highlands. So we couldn’t wait to see her most recent project. This time Dr. Hicks transformed a large, two-story house in the Chickasaw neighborhood, close to where she grew up. She’d been watching this house at 905 S. 47th Street for a while. When a neighbor alerted her that it was up for auction, she leaped into action. The house has a river view and some unique local history: “Cactus” Tom Brooks once lived here. If you’re of a certain age and grew up within range of WHAS’ TV signal, you’ll know that “Cactus” was the sidekick of Randy Atcher on the popular “T-Bar-V Ranch” kids’ show in the ’50s and ’60s. “It needed a lot of work, and it was a little scary,” Dr. Hicks said of the house. In eight years of being vacant, the house had attracted an infestation of raccoons – which ruined the floors. Dr. Hicks had planned to refinish the hardwoods, but they were too far gone. Plus, moisture had rotted out some of the structure. In an extensive renovation, Dr. Hicks replaced all the flooring, added stately wainscoting to the living room, and took out three first-floor walls to open up space. She put granite in the kitchen, including a granite-topped island. She added a half-bath by borrowing from garage space, and all

bathrooms were tiled and graced with quartz vanities. She redid the HVAC, electric and plumbing, which came to a combined cost of about $31,000. She refinished the hardwood front door and added stained glass – which is a signature of her rehabs. By the time you read this, we should have Dr. Hicks’ L.O.T.S. video ready, so you can follow her on a tour of the house and see a breakdown of the expenditures. Look for it by selecting Videos under the Members Only menu at KREIA’s website. If you watch, you’ll see that Dr. Hicks has knocked it out of the park again on this labor of love. THE NUMBERS Purchase Price: $52,116 Renovation Costs: $115,008 Holding/Selling Costs: $22,164

Dr. Madeline Hicks led us on a virtual tour for the June 30th L.O.T.S. event. A loan from MM Lending funded the deal. (Still image courtesy of video shot by Mike Fallot)

Est. Sales Price: $245,000 Expected Profit: $55,712

KREIA V.P. John Jones renovates probate deal in Windsor Forest KREIA Vice President John Jones might have had some concerns after buying this flip house just as COVID-19 was making itself known. Would the banks stop lending, cutting off buyers (and sellers) at the knees? Would buyers back off and wait things out? Would he be stuck with this house at 9104 Lakeridge Drive? But it turns out that Louisville’s market keeps rolling like a freight train – for now, at least – with scarece inventory pushing home buyers to compete for houses. Four months after buying this Windsor Forest brick ranch house in Southwestern Louisville, John has rehabbed it and sold it and is expecting a tidy profit. John found the deal by marketing to probate leads and used private money to purchase the house, though he tapped his own company’s funds to pay for the renovation. The rehab turned out to be mostly cosmetic. “It just needed to be cleaned up and brought back to life,” he said. Continued on Page 30

John Jones hosted our first virtual L.O.T.S. event on June 2nd. He walked us through the house and the deal via video and Zoom.

THE NUMBERS Purchase Price: $113,000 Total Rehab Cost: $50,519 Total Fees: $20,475 Carrying Costs: $10,759

Sales Price: $235,000 Seller Concessions: $3,000 Net Profit: $37,247

Why do we call it “L.O.T.S.”? Because we Learn On The Site!

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Q&A with John Wohrle of TGAP Property Services The best way for your house to ace its inspection is to keep up with maintenance John Wohrle is Director of Marketing and Business Development for TGAP Property Services, an inspection repair service that aims to be your one-stop shop for addressing issues that need to be cleared up before a house can sell to a home buyer or receive its certificate of occupancy. John allowed us to pick his brain about working with contractors. Do you have any tips on writing a scope of work? The most important piece is making sure that your bid is detailed and that each individual part of the process is spelled out exactly on what needs to be done. You should also have your labor and supplies separated. What are the most common things that come up in inspections? As far as what we see, the most common thing is vinyl siding damage, along with crawl space-specific work – joists or whatever it is underneath the house that people don’t normally crawl under to look at. A lot of things that come up are minor, such as damaged drywall in the house or a leak from the roof that’s caused discoloration. Those are the kinds of things that you want to take care of before you start your real estate transaction process, because they cause buyers alarm, even though they may not be a big deal. The most important thing is that you do proper maintenance on the home, so that when it comes time for a real estate transaction, you just have normal wear and tear, and not actual system deficiencies, whether that be electrical, plumbing or HVAC. Do you have any tips on communication between an investor and a contractor? I think the best way to communicate is in writing, whether through text message or email or some type of app. A lot of times what ends up happening is that there’s a miscommunication: somebody says something, and somebody else forgets to write something down. What is the best way for an investor to determine that the work a contractor has agreed to do gets done? Require photo updates. One thing we do is take a lot of pictures as progress is being made. Those pictures go into our system so that we can track each job. It’s important to document things. If your contractors are working on something structural under the house, where people can’t see, it’s vital to have photo documentation of that. When did the smartphone become such an essential tool for contractors? It’s been culminating for a while. We have the ability to

have a computer in our hands all the time. And with that computer having a camera and video, it gives us the ability to be able to document and put things out there. As a contractor, it’s an extension of what we do. We have hammers and nails and saws and all the things that go into construction, but on the other side of it we also have the technology in our hands to be able to serve the customer even better. What do you instruct your crews to do now to address working safely during COVID-19? It’s really about educating and arming our guys with masks and hand sanitizer and things like that. I actually printed off the hand-washing procedure for them from the WHO and CDC sites, making sure they understand how to protect themselves and the customers and not spread the virus. You mention you make use of SUPRA. What is that? Most Realtors use SUPRA, which is a lockbox system that’s tied to an app on their phone. With SUPRA when you get to a house you use the app to open the lockbox. We often use it to access houses when bidding something or making repairs. Continued on Page 26

Do You Want Your Business Card to Appear Here? Join KREIA as a Business Card Advertiser for only $199/year and see your ad in a year's worth of KREIA newsletter issues! Copyright MMXX Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

Missing Your KREIA Member Directory? Request It Now Do you have your KREIA 2020 Member Directory? If not, do what needs doing. Want to research properties on the you need it. Request your copy at bit.ly/k2020_directory PVA? See if your motivated seller has paid his property tax? We’ll mail it to you! Look up a deed? Find flood plain info? Check out local Why do you need a Member Direccodes & regulations? Request your tory? Because it’s got phone numbers directory here: bit.ly/k2020_directory and email addresses of other KREIA We’ll send it to ya for free, for members. AND a handy Yellow Pages cryin’ out loud! section where KREIA’s advertisers as We started distributing KREIA’s well as regular members promote their 2020 Member Directory at our Februbusinesses and side gigs. You might be ary main meeting, and then <sigh> surprised at what your fellow KREIA COVID-19 happened. investors are up to and the ways they We prefer to distribute directories at can help you meet your goals and finish live main meetings, because that your projects. encourages attendance at our events. Are you looking for … And we love it when we’re all together • an accountant? in one room – live, in-person network• a plumber? ing is the magic that helps us grow as • a painter? investors. • a general contractor? But as we all know, live main meet• an attorney? ings are impossible right now. • an investor-friendly real estate Here’s the next best thing… we’re agent? sitting on a PILE of member directories, • a flooring installer? because most of you did not attend our Get it by visiting bit.ly/k2020_directory • any of a dozen or so other February main meeting and pick up You know you want to. All the cool kids specialists? your copy. So, for the love of all that is are doing it. The nerds too. Find all these people AND MORE in holy, request your Member Directory the Member Directory. Use it to build your team! Request now! Go to bit.ly/k2020_directory your copy here: bit.ly/k2020_directory. There are also resources and tips for brand-new investors We’ll get one out to you in the mail, no charge. in this here thing. COVID-19 has really thrown a wrench into our ability to If you’re an active P.S. Please request your Member network with each other. The Member Directory can put member who has Directory at bit.ly/k2020_directory some networking mojo back into your hands, giving you the not already picked up by August 13, 2020. contact information you need to reach out to hundreds of your copy, we’ll mail one other Kentuckiana investors. to you. For free. Why else do you need a Member Directory? Because it For reals. includes a must-bookmark list of local websites that help you Thank you. That is all. Q&A With TGAP’s John Wohrle Continued from Page 22

going to be like HGTV – BAM, three days and it’s done, and you’ve got this beautiful, finished home. I would say, be realistic, and know that it takes longer than most think. How should an investor vet a contractor? At TGAP our focus is on helping those in the real estate Look at how they operate. When they show up to do a industry with their inspection repair service needs. We are bid, how quickly do you receive it? And is the bid detailed your one-stop shop, we are licensed and insured, and we enough for you? Those are the key signs that the person is have a full-time service team ready to help you. We provide legit and they’re there to perform a service for you. you with detailed repair estimates, and we are ready to The other thing is licensure and insurance. We’re big rule quickly make the repairs needed. We are also currently followers. As contractors we pay a lot of money for our setting up Zoom meetings for anyone who would like more business insurance and also for workers’ comp. information. Contact us at (502) 430-2624 or via Got any tips for investors attempting their first flip? tgappropertyservices.com. During the COVID-19 pandemic I think one of the biggest misconceptions about flipping we are offering a special discount of 10% to all KREIA or investment property in general is that people assume it’s members, using the code TGAPKREIA20. Copyright MMXX Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 (502) 509-2216 www.KREIA.com DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.

Mike Butler: Pay Yourself First Continued from Page 6

L.O.T.S. Recap: John Jones Continued from Page 19

Question: “Can This Be Applied to Apartments, MultiFamily, Commercial, Self Storage, Marinas, Commercial and even skyscrapers?” Answer: The above Pay Me First formula is your foundation, your blueprint in helping you determine the profitability, cash flow, and more on all real estate before you make your offer. The “Pay Me First” chart is simple and should be used for all single-family offers. All of the other types of real estate have just a few variables to plug into this formula. For example, on most apartments, you will have a house meter electric charge, water, and dumpster service to get started. The same applies to all other types of real estate investments. So from now on, make sure you “ALWAYS PAY YOURSELF FIRST” along with knowing your exit strategy before you make your offer. Special thanks to Lauren Willoughby! Lauren requested this topic because it helped her and she wants to help you learn from this small lesson. FYI, Lauren is the cornerstone for KREIA making sure so many things are completed properly “behind the scenes’ such as your newsletter, website content, member directory and so much more! Thank you, Lauren! To your continued success,

The newer furnace was in good shape, and he was able to keep the bathroom wall tile. He also kept the kitchen cabinets – but did have a Miracle Method finish applied. The first step in rehabbing the house was to get rid of the piles of possessions left by the previous owners. Here’s what John did: He refinished the hardwood floors, which were in good shape except for about a 500-squarefoot portion that was stained – and he replaced that section. He painted the interior walls gray with white trim. John turned the first-floor laundry room back into a spacious closet, and he replaced the linoleum in the entry with hardwood. The main bath got a refinished tile floor, and the vanities were replaced. All the commodes were replaced, along with the lighting fixtures, switches and outlets. In the kitchen he added recessed lighting to the ceiling, replaced the counters with granite, and installed stainless steel appliances. One of the bedrooms had a smoke residue, so he KILZ’d it with oil-based KILZ. Down in the basement, he removed a wet bar and took out a second kitchen, restoring the laundry area to the downstairs. He updated the basement half bath and painted the brick fireplace, creating a cozy family area. Outside, he tweaked the landscaping. John has a warning for investors looking to rehab in this neighborhood. “You want to be cautious in Windsor Forest if you think you’re getting a great deal – you might find out you have to pier it,” he said. “The big issue here is that there’s lots of settling.” But the previous owners had already addressed that, and all John had to do was a bit of tuck pointing. Early in the rehab, John had estimated his selling price at $225,000, but he sold it for $10,000 more – boosting his profit significantly on this very handsome house. You gotta love this Louisville market. At least for now. Look for John’s rehab video at kreia.com.

P.S. Sign Up for Your FREE Investor Training Every Tuesday at 12 noon: MikeButler.com/PowerLunch Mike Butler is a KREIA Past President, a recipient of the Ed Melton Award, a property manager, a high-volume landlord, a principal in Tenant Finder Service, a retired Louisville undercover police detective, and the author of the bestselling real estate book “Landlording on Autopilot.”

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UPCOMING EVENTS

Become Financially Free With Rentals We’ve invited a trio of local landlords to share their journeys in achieving financial freedom with passive income – and they’ll show you how you can do it too! Join George Foree, Greg Shell & Christina George on our July 23rd virtual meeting. It’s free for KREIA members! Register now at kreia.com Member Orientation: Log onto the Zoom call by 5 p.m. to catch a discussion of KREIA’s benefits with Jordan Pohn. Early Meeting: At 5:30 p.m. on the call, Hope Dittmeier of Mattingly Edge will show landlords how they can help people with intellectual disabilities find housing – and gain great, long-term tenants in the process.

❖ August 4th — Noon-1:30 p.m. KREIA Lunch & Learn. Host Ed Gibson has invited KREIA Past President Frank Miller to speak. Stay tuned for info on the location of the event. ❖ August 6th — 5-7 p.m. KREIA Happy Hour. Host Hampton Scurlock says we’re still planning to meet at Bearno’s in Plainview. Though, as you’d expect, rules on gatherings during COVID-19 may affect us. Stay tuned on this, too. ❖ August 20th — 6 p.m.-7:30 p.m. KREIA Game Night: CashFlow. Want to get out of the Rat Race? Play the CashFlow board game with other investors pursuing financial freedom. We’ll send email updates with more information.

Main Meeting Calendar Here’s what’s coming in the next few months: • August 27: Finance • September 24: REOs & Auctions • October 22: Shark Tank (tentative)

We look forward to seeing you at our next main meeting!