February 2021 KREiA Newsletter by KREIA .com

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 2-21 February 2021 President’s Letter

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Tax Update: CPA Mike Grinnan 3 explains REI tax fundamentals and tells us what’s new this filing year Welcome, New Members!

Mike Butler: How to know when to hold ’em and when to fold ’em

Michelle Rawn: Courts Update

Workshop Preview: How to be successful with Section 8 Government Affairs Links

Sharon Vornholt: ‘20 Things I 14 Learned Doing Business in 2020’ Hampton Scurlock: Want to flip 16 with no money or experience? You need to find a partner KREIA Photos

L.O.T.S. Recap: Steve Craven builds a house near Shively

Dear KREIA Members and Friends, Real estate is undergoing a once-in-a-generation explosion of growth and change, which will result in many wealth-building opportunities. There is no recent comparison to what we are seeing on the local and national market – limited inventory, unprecedented demand for affordable housing, the lowest interest rates in history, and year-over-year price appreciation. We’re also seeing investors’ hunger for real estate information.

Chris McCarty

KREIA’s member-focused information funnel is working to keep you up to date each month. Our board is putting together a full agenda of educational meetings and workshops, both virtual and in-person. Look for a lot of great training and happenings at KREIA this year. If you are a seasoned professional or still on the sidelines – watching, just absorbing or trying to find your starting place – I encourage you to jump in and immerse yourself in the educational and networking opportunities KREIA makes available to you each month. This month, in addition to the usual abundance of educational materials, we will be covering aspects of the new Metro Louisville protected class ordinance that guarantees Section 8 and other subsidized housing program participants access to your rental units. If you need to get up to speed on this ordinance, KREIA is the place to absorb accurate information necessary to know how to comply with these changes and requirements – it’s information you need to know to be in the landlord business in Jefferson County. This month attorney Michelle Rawn is headlining a 4-hour online workshop – free to KREIA members – that addresses how to be a successful landlord within the Section 8 program. Continued on Page 4

Nina Musgrave: Highlights from Harvard’s annual look at the real estate market nationwide Calendar of Events

Copyright MMXXI 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

Advertise With KREIA

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

Greg Nalley

Hampton Scurlock

Rob Bergeron

Christopher Jaquith

Jordan Pohn

Stacey Duvall

Alexis Fentress

ParliamenPast tarian Michelle President Rawn Eric George

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!

What’s New & Different This Filing Season? February 25th’s main meeting will also be ‘Tax 101’ for new investors What’s new this filing season, in the aftermath of COVID19 and moratoriums? CPA Mike Grinnan, who is also KREIA’s Treasurer, is going to give us the scoop during our February virtual main meeting, held online on Zoom. And he’s also planning to cover some real estate tax fundamentals for the new investors who’ve just joined KREIA. Here's an outline of what Mike plans to cover: Tax Updates • A look at the Consolidated Appropriations Act, 2021, signed 12/27/2020, and its benefit to taxpayers, covering: - Pandemic Relief - Stimulus Illustration by Nina Musgrave - Extenders Plus, there will be a Q&A session with Mike! If you’re • A brief description of the PPP program and how it helps wanting an opportunity to pick a CPA’s brain, here you go. — and how it does not Mike’s main presentation starts at 7 p.m., but you'll want • A reminder that there will be no delaying of the filing to log into the Zoom call early to also catch these features: date this year. Returns are due on April 15th. 5 p.m. - 5:30 p.m., New Member Orientation: Want to know what KREIA can do for you? Jordan Pohn and Stacey Must-Know Tax Info for New Investors Duvall will fill you in. You have decided to invest in real estate. Welcome to a 5:30 p.m. – 6 p.m., Early Meeting: Longtime landlord new world of taxes! There are many special rules for real Greg Shell will show you how to appeal the PVA's assessestate investors, and we are going to cover ment of your rental property, possibly lowering the amount the basics for your first of property tax you have to pay. 6 p.m. - 7 p.m., Announcements. In this hour you’ll hear year in real estate the Legislative Update with attorney Michelle Rawn, along investing: with some Advertiser Pitches and Property Pitches. Register now for this meeting at kreia.com! It's free for • Choice of entity active KREIA members and costs only $10 for non-members. or entities • Bookkeeping • Deducting rental Saturday Workshop: How to Be Successful With Section 8 losses • Defining what With the passing of the recent Metro Housing ordinance, photo by bruce w. hinson passive losses are we’re all Section 8 landlords now. Section 8 compliance goes www.obedientcamera.com • How to follow the into effect in Jefferson County on March 1st. Are you ready? On Saturday, February 27, from 9 a.m. to 1 p.m., attorney Mike Grinnan headlined the Feb. 2020 special rules and tax main meeting – our last live main meet- treatment for real Michelle Rawn and investor Stacey Duvall are going to help ing before COVID-19 sent us online. . estate us be ready: They’re headlining a four-hour workshop, laying • Depreciation, repairs, and legally increasing depreciaout the basics and interviewing four experienced property tion deductions managers for tips and best practices. • Filing 1099s ► Register now for this workshop, free for active KREIA • IRA real estate investing and what you need to know members, and read more about it on Page 10. about tax-advantaged structures • Planning for changes 5:30 p.m. Early Meeting: PVA Assessments Do you agree with the PVA assessment of your • Discussion of whether taxes are going up or down rental property? Think it’s too high and you’re • Got kids that are willing to work? Put them to work in being charged too much property tax? Greg Shell your business and save. will show you how to appeal it. • And more! Copyright MMXXI 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.

Welcome, New KREIA Members! Carl Armijo Michael Bartley Todd Bingham Hal Bomar Nathan Butler Sheri Cannon Michael Collins Mike Connell David Ducharme Joseph Dye Kentrick Griffith Emily Hazelbaker

Richard Henderson Nicole Howley Steve Hughes Steven Johnson Shaun Kehl Phil Lockhart Anthyun Mask Mike McKnight Ronnie & Alyssa Mossotti Regina Porter Edikson Rodriguez Blaine Routt

Kelly Samuels Sean Stewart Tracy Thurman Sharaya Wagner Donna Wisdom

KREIA’s New Member Orientation There will be a short presentation of the benefits of joining KREIA at every regular monthly main meeting. While we’re virtual, tune into our Zoom call at 5 p.m. to hear from Jordan Pohn and Stacey Duvall. The next orientation is scheduled for February 25. Online Presentation: You can view a recent presentation by Jordan and Stacey by visiting the Intro to KREIA page at kreia.com (About/Intro to KREIA on the menu). On the Member Benefits page (Join/Member Benefits), you’ll learn how to secure your discounts and bonuses.

Chris McCarty: President’s Letter Continued from Page 1 Additionally, at this month’s main meeting held via Zoom, CPA and longtime KREIA board member Mike Grinnan will discuss new tax law changes as well as tax fundamentals that are important and relevant to every level of real estate investing. Check out KREIA’s website for more information – and while you’re there, also check out the Members Only section to catch up with our educational videos and to dive into our archives. COVID-19 has wrought havoc in all our lives. As an organization we have been challenged this past year with the pivot of learning to meet virtually and to provide infrastructure to the membership when we have limited inperson meetings and events. The last in-person main meeting we held was a full year ago, February 2020. In spite of the limitations COVID-19 dealt us, KREIA’s membership has grown and prospered – due to the demand for information and to the efforts of our awesome volunteer board and also from individual volunteers. Our current plan is to resume our monthly in-person main meetings – with caveats – beginning with the April main meeting on April 22 at Woodhaven Country Club. We are working through the specifics, but we’re planning April’s meeting, which is focused on how to rehab houses, to be held in person with a limited number of participants (yet to be determined). There will also be a virtual Zoom simulcast available online if you choose to stay home or if limited capacity dictates. Either way, we are determined to get the group back together in person for compliant meetings and to bring back the networking opportunities KREIA is famous for. Stay tuned for updates on this in-person April meeting, but in the meantime the February and March main meetings will be held on Zoom, and both promise great and impactful content. A special thanks is also in order for the volunteer effort of the KREIA board and volunteers who work hard each month to bring to the membership the meetings and content that make KREIA the organization it is. A lot of selfless, oldfashioned hard work is involved to get this consistent content out each month to our 720-plus members and growing. If you have an opportunity, please say thanks to the volunteers, many of whom are just passing through on the board, giving back to this awesome organization. God Bless and good luck with your investing, and know that KREIA is here to help. If myself or any board member can assist with anything outside the regular communications, please feel free to reach out directly, and we will help with any of your needs. Chris McCarty KREIA President

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

How to Know When to Hold ’em, When to Fold ’em By Mike Butler When do you keep holding ‘em, and when should you fold ‘em? This is a question you will be asking yourself as you acquire rental properties. Most investors do NOT know how to properly identify each rental property as a “Hold ’em” or as a “Fold ‘em.” So, when should you sell a property to clean up and polish your rental portfolio? Most CPAs, financial advisors and coaches will commonly advise you to evaluate the performance of each property with totals for each year. (Got Investor Books Pro? Just “push the button” to see. Find it at InvestorBooksPro.com.) Viewing this report will give you the financial performance of each of your rentals. All the experts will confidently tell you to unload or sell the poor-performing properties. STOP!!! Please do NOT follow this strategy. There’s so much more you must factor in before pulling the trigger to sell a property. For many of us old-timers, it is absolutely insane to see the incredible high prices being paid for single-family homes and apartments. Absolutely CRAZY! Why is this happening? More buyers than the inventory of properties for sale. Combine this with the super-low interest rates for the last 10 years, and that results in buyers being able to “Buy More House,” to afford to buy higher-priced homes and apartments because their monthly payments are so affordable. Why is that happening? A quick history lesson here. During the last financial tsunami of 2009-2010, there was an avalanche of foreclosures. The market ended up with too

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• Very poorly built – close to 100 years old • Spongy, soft floors that are very uneven • Roof needing repairs constantly • NOT energy-efficient • Very poor floor plan • Plumbing super-old and shot • Very high-maintenance • Termite damage everywhere • If you have this, sell now

many properties for sale and very few qualified buyers, and America got off the real estate investing bandwagon. Investor groups all across American saw a huge drop in membership. Even KREIA dropped to 48 active members in 2011. When this happens, prices drop. The biggest drops happen in the high-end luxury homes and the low-income neighborhoods. So if you want to clean up your rental portfolio and get rid of your ugly or pain-in-the-butt properties, NOW is the TIME to SELL and get top dollar. Insane top-dollar prices are being paid right now because it is a seller’s market: Not enough inventory for sale and too many buyers. Back to poor-performing properties. Before you pull the trigger, you should consider three factors to confirm your decision to sell. Let’s use the houses below for this example. 1. CONSTRUCTION: Is it well built, energy-efficient, lowmaintenance inside and out, and using a good floor plan? This has nothing to do with neighborhoods, but take a look at these houses. They are ALL in the same block here in Louisville (the 2700 block of W. Kentucky). 2. TENANT: Next up is to score your tenants. Give them an A, B, C or F. Many times I have seen investors want to dump or unload a great property because they are experiencing so much with their current tenant. The score for your tenant is not limited to their payment history. It also includes how they take care of your property. Are they a pain in the butt? And are they the cause of almost out-of-control repair and maintenance requests? You could have a great property with a pain-in-the-butt tenant. If you discover this, you have two choices: a) get a new tenant, or b) retrain this tenant. If you believe this tenant is not trainable, then getting a new tenant might solve your problem for the types of houses in photo #2 and especially in photo #3. 3. NEIGHBORHOOD – LOCATION: Yes, I’m picking on lowincome neighborhoods because this is where and how I got Continued on Page 32

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• Very well built • Brick home • Maintenance-free exterior • Good floor plan • Energy-efficient • Concrete drive & garage

• Newer built plastic house • 2-story not preferred, but better than house #1 • Maintenance-free exterior • Great floor plan • Energy-efficient • Will attract great residents

• Newer built plastic house • Camelback style • Maintenance-free exterior • Great Floor Plan • Energy-Efficient • Will attract great residents

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Update on the Courts By Michelle Rawn As you are aware, the CDC issued an eviction moratorium for evictions for nonpayment of rent currently extended through March 31, 2021. The President of the United States is still discussing halting all evictions and foreclosures through September 30, 2021. I believe this moratorium will be extended again. The CDC moratorium is nationwide but applies only to evictions for non-payment of rent where all adults on the leased premises have submitted a signed CDC Renter’s Declaration. Kentucky is still for the most part not permitting any questions to tenants who have submitted the Declaration. The Kentucky courts are a little more flexible with us questioning the tenants if the case has been continued more than once for the tenant to apply for rental assistance. Floyd and Clark Counties in Indiana will permit questions to the tenants to prove they fall under the protection of the moratorium and have declared in a few cases the moratorium did not apply and entered judgment in favor of the landlord. Evictions for non-rental lease violations (unauthorized occupants, disturbing the quiet use and enjoyment of the neighbors, etc.) and non-renewals/lease terminations are not affected by the CDC eviction moratorium and currently can move forward as usual. The moratorium did not cancel or suspend rental payments but basically guarantees that a tenant cannot be evicted for non-payment of rent. While this moratorium is in place, if your tenants reach out to you to accept payment from a rental assistance program or want to try and work out a payment arrangement, you will want to think strongly about this before saying no. These rental assistance programs might be your only chance to receive payment for at least part of the rent owed while the moratorium is in place. Please be sure to review all of the requirements of the rental assistance programs as most of them require the landlord to not evict the tenant for any reason for a set time period once the funds are received. And some also require you to provide a 30-day notice going forward for nonpayment of rent instead of the standard 7-day notice. As all of us know, things are still changing rapidly. Please feel free to reach out to me or to John in my office to see if there have been any more developments or updates. I hope you and your families are staying safe and healthy. Michelle R. Rawn Rawn Law Firm, PLLC Tel: (502) 639-9396 / Fax: (502) 276-0607 Email: Michelle@rawnlawfirm.com

How to Be Successful With Section 8 Please join KREIA Saturday, February 27, from 9 a.m. until 1 p.m. for a webinar on “How to Be Successful With Section 8.” It’s free for active KREIA members. As you are aware, the Louisville Metro Government approved an ordinance with four new protected classes: Homeless Status, Veteran Status, Conviction History, and Lawful Source of Income. Three of the four classes went into effect immediately. Lawful Source of Income goes into effect as a protected class on March 1, 2021. This means that all landlords and property managers will be required to include an applicant’s housing voucher as part of his/her monthly income. This also means that these housing providers can no longer state, “We do not accept Section 8.” All housing providers in Louisville Metro will be required to permit the applicants who are receiving government rental assistance, including but not limited to Section 8, to apply to rent available properties. Please Note: These applicants do not receive preferential treatment and will have to go through the same screening process as all other applicants. In order to facilitate this transition for our members, please attend our workshop. Joining us on the call will be four property managers with varying years of experience in working with Louisville Metro Housing Authority (“LMHA”), and they are going to share their secrets on how they have found success with Section 8. You will learn from: • Clay and/or Stephanie Smith of LREI Property Mgmt • Ashley Combs of Ramey & Associates, Inc. • Kim Kramer of Best Rentals, LLC • Lori Reese of Summerfield Realty, LLC We have all heard the trials and tribulations of dealing with LMHA. Our guest speakers have had their fair share of issues but have persevered and have learned how to have a working relationship with LMHA. They are going to share a wealth of knowledge and also answer your questions. Please join us on February 27. Register now at kreia.com. – Michelle R. Rawn

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

20 Things I Learned Doing Business in 2020 Achieving success during a pandemic requires making some changes By Sharon Vornholt I want to talk about 20 things I learned in 2020 and how to use that to make 2021 better than ever. Closing out what has been an incredibly challenging year, people are walking away from it feeling a lot of emotions. There have been a lot of heartaches and a lot of hardship – not to mention a lot of worry and anxiety. Today I want to look at some of the things that affected me and my business. And in that process, try to put a positive spin on some of those things. I want to find the benefit and look for lessons that I can take away from 2020 so that I can move through 2021 on a positive note. So, if you’re ready, let’s dive in.

11. I could either do things the hard way, or I could invest in myself and my education. One thing I have learned over time is that you will go faster and make more money (sooner) if you learn from someone who already has the skills and knowledge you need. 12. Learning new ways to lead. Virtual events became the new norm. 13. The big question: would people invest their money in virtual events? And if they would, how could you make these interesting and keep people engaged? 14. Stepping outside your comfort zone will be necessary. If you’re living inside your comfort zone, you’re not growing, and your goals are too small. You need to get uncomfortable. 1. Things don’t always work out as planned. On January 15. You’re going to need your “tribe” more than ever 1, 2020, no one could have predicted that we would be when things are tough. Do you have a tribe? facing a pandemic. 16. After a year where everything just 2. I needed to look at my original seemed so heavy, so hard, I began goals and figure out what I could looking for simpler, easier ways of doing keep, what I could tweak, and what things, and I found that. was off the table at least for now, 17. In this year of discovery, you will and that’s what I did. learn what you are capable of. 3. Many things in my business 18. Finding out what you are capable were built around my signature of, no matter how hard things are, makes course, Probate Investing Simplified. you more fearless and less afraid of what I knew it was going to be challenging life throws at you. Making lemonade marketing my course in the face of from lemons becomes the norm! — Sharon Vornholt COVID-19. What changes would I 19. Here’s a big one. Your setback just need to make? might end up being responsible for your 4. Dealing with uncertainty. You must take action so that future success. you keep moving ahead, even if it’s imperfect action. 20. Deciding what 2021 will look like. It’s up to you! 5. The importance of patience and being kind to yourself during challenging times. My big discovery: I had a mindset This article is a distillation of a “Let’s Talk Real Estate” issue. podcast episode I recorded in December. To listen to the full 6. There is only one person who can fix your mindset, and episode, visit bit.ly/k2102_sharon and click the Play button that is you. When you put your focus on the solution and in the audio widget. not the problem, you have an immediate shift in your ● mindset. 7. Pivoting your plans. What you had planned previously is almost certainly going to need changes or even a Sharon Vornholt is a local marketing expert with a national complete overhaul. presence. Visit her site, LouisvilleGalsRealEstateBlog.com, to 8. Hope isn’t a strategy. You’re going to need a plan. find years and years of articles with tips on wholesaling, 9. I realized I needed to come up with a new plan or marketing, branding, probate, and other real estate topics. maybe even new or improved goals. This is probably true On her podcast, Sharon interviews well-known investors for most real estate investors. from all over the country. 10. It was clear that I would most likely need to learn new ways of doing things.

“Resilience is a muscle that you have to exercise to keep it in shape, and this year it got a good workout.”

Howdy, Partner! Must-Know Tips on Teaming Up Want to start flipping with NO money or NO experience? Find a partner By Hampton Scurlock I’m asked often to partner on various deals, and many times it makes sense to do so. However, it does not make sense for me (or another experienced investor) to find the deal, fund it, do all the work, and give up half of the profits when we do most of the work – or all of it – and take all of the risk. Someone recently asked me, “Would you let me watch you do your next flip and split the profit with me?” “If it’s my flip, then no,” I said. “But if you find me a good off-market flip house, then the answer would be yes.” He seemed a little upset at first but got the point when I asked him this: “Could I sit and watch you work at your job and then we split your paycheck?” In a partnership, everyone needs to bring something to the table. In the first scenario, this person didn’t offer or seem to bring anything to the table. He was wanting to eat, but he didn’t bring anything to the picnic. I was already doing this flip without him, and he was not offering anything of value to me or the project.

In the second scenario, he was hypothetically at least bringing me a good house to flip, and that is something of value. He could also bring value if he wanted to fund the deal or help with construction, oversee the project, provide sweat equity, or sell it for free or discounted commission (if he were a realtor), or provide value to the partnership in some other way. I’ve recently partnered with a few newer investors who had found me wholesale deals in the past, and now they wanted to learn how to flip or get into buy-and-hold investing. They had provided tremendous value previously, and I was happy to help them learn other aspects of real estate while we both enjoyed a profit. There can be many benefits to a partnership to help all parties involved if done correctly. Here are some basic tips regarding partnerships: ● Profit splits do not have to be 50/50 but should be fair to all involved. ● A newer investor can learn immensely from a more experienced investor. The additional experience, contacts, Continued on Page 24

At Right: Julia King, credit repair expert from King Financial Repair, was the featured speaker at our Feb. 9 Lunch & Learn event. She described things you should do – and should not do – if you’re looking to raise your credit score in order to qualify for loans at better interest rates. Below: KREIA members came to Martin’s Bar-BQue off Westport Road in the East End to attend Lunch & Learn.

photo by bruce w. hinson www.obedientcamera.com

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photo by bruce w. hinson www.obedientcamera.com

photo by Rob Bergeron Above: A socially distant crowd turned out for KREIA’s Feb. 4 Happy Hour event. Above Right: Lunch & Learn host Ed Gibson introduced Julia King. Below Right: Mike Fallot of MM Lending was one of the featured speakers at our January virtual main meeting, “Road Map to Real Estate Wealth.”

Zoom screen grab

St. Dennis L.O.T.S. Home: A Closer Look Steve Craven spots an infill lot and builds a new house on the site By Lauren Willoughby If you Google for the street view of 2409 Mercer Ave. in Louisville, you’ll see an empty stretch of grass that ends in a stand of trees. Google is behind the times! If you get in your car and drive to that spot now, you’ll find a brand new home. The transformation from bare lot to finished house happened because, one day, Steve Craven was driving for dollars. He ended up in the Steve Craven hosts at KREIA’s first new-build L.O.T.S. events in years. The 1,300-square-foot house has St. Dennis neighborhood, 3 bedrooms, 2 full baths, and an enviable front porch. (Photos by Alexis Fentress) where he spotted a man sitting near a camper that was parked in an otherwise Another reason to build instead of rehab is low inventory empty lot between two houses. – fewer than 1,000 houses on the MLS as we go to press – “I said, ‘Would you like to sell it?’ and we negotiated right means too much competition for good rehab houses. there on the spot,” Steve said. “I pulled title that day and And if you’re faced with too much competition for rehab the next day came out and paid him cash – literally the properties, heed what longtime KREIA member Katie easiest deal I’ve ever done.” Crotzer likes to say: “If I can’t find inventory, I create it.” She This house is Steve’s first new build, but he’s no stranger and her husband, Wil, build houses all over Shelby County. to working on houses. He has rehabbed several. But from Any downsides to building new? Permitting. “Our what he said during L.O.T.S., his rehabbing days may be electrical permit was eight weeks alone to get them to come behind him. He said he’s shifting his focus to do more new out here,” Steve said. He attributed the delay to COVID-19. construction. And he’s becoming a licensed contractor and Steve’s long-range plans are to create inventory to meet starting up his own contracting business to facilitate that an underserved need: Supplying affordable new homes to plan. He said when his team (master plumber, electrician home buyers. “Ninety-nine percent of Look for the and HVAC specialist) is not building houses for his company, houses coming on the market right now video from that are new builds are $279,000 or the this L.O.T.S. event, he would consider allowother side of $300,000,” he said, “and already posted to ing other KREIA members our Videos page. that’s not fair to people who can’t to hire them. afford that but still want a nice new home.” So, why build from the Steve wants to offer new construction homes, cookieground up instead of cutter style, starting at a price point of around $159,000. rehab? And for a final reason to build instead of rehab, there’s “It’s a lot less headprofit. Steve’s real estate agent, Alexis Fentress, just reportache. There’s no hidden ed they’ve accepted an offer above asking price. (Alexis was or covered-up stuff, no also the on-site L.O.T.S. host during the Zoom call, while surprises, so it makes it a MM Lending’s Mike Fallot anchored from his office.) lot easier.” Steve described a THE NUMBERS house he rehabbed where Lot Purchase Price: $8,000 Estimated Sale Price: $159,000 he was all in at $290,000, Steve Craven is a self-confessed Estimated Profit: $50,000+ All-In Cost: $98,000 “car guy” – he owns two car lots. yet the ARV was $320,000 But it’s probably safe to say he’s a – a very slim margin. Why do we call it “L.O.T.S.”? Because we Learn On The Site! serious “house guy” now too. “That was not fun.” 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 Market, According to Harvard University Highlights of 2020 Annual Report tell story of COVID-19 effects & trends By Nina Musgrave

Lack of Affordability:

● The number of units with rent contracts of at least $1,000 rose by 10.4 million from 20042019, while the number renting for under $600 fell by 2.5 Yes, 2020 is in our rearview mirror. I could not be million. happier! Yet, most of us can agree the effects from last ● Housing affordability year are still relevant in 2021. problems are more than twice For context, I wanted to reexamine our country’s as common among renters than housing market as a whole. Each year, I look forward to among homeowners. The State of the Nation’s Housing report from Harvard ● Rental households also faced more food instability University. than homeowners. While it is dry from academia, it is an excellent way to ● The lifting of affordability restrictions on thousands review. The following information is pulled from the of subsidized units over the course of this decade is a report. I hope you find it useful for reflection, and threat to the current low-cost housing stock. continued planning, of the responsibilities we have as Homeownership, Nationwide: investors to our community and neighbors. ● Homeownership rates continued to rise, yet is still Overall Review of Rental Units, Nationwide: below the peak of 69 percent in 2004. 2019 home● Rental units make up about a third of housing units ownership rate was 64.6 percent. in the average census tract. ● The number of homeowner households grew at a 1.3 ● About half of all rental units in the US are located in million average annual rate over this period, more than just under a quarter of census tracts. making up for nearly a decade of decline. ● Rentals make up more than 80 percent of the ● Mortgage delinquency rates fluctuated between a housing inventory in just 4 percent of tracts, generally record low of 3.2 percent to 7.8 percent. The number of located in urban areas. mortgages 90 or more days continues to rise. ● Nearly a third of census tracts is 80 percent ● The median sales price rose 3.3 percent in real terms owner-occupied, typically located throughout suburban for the first six months, compared to the same period in areas. 2019. More information on Harvard University’s “The State of the Nation’s Housing 2020” can be found online at www.jchs.Harvard.edu

2020 Rental Units Update, Nationwide:

Racial Disparities, Nationwide:

● The National Council of State Housing Agencies calculates a cumulative rent shortfall of at least $25 billion by January 2021. ● Single-family units and large multifamily properties drove rental growth in the last decade. ● Cost-burdens are on the rise for middle-income renters. In 2018, 47.5 percent of total renters were costburdened. ● Delinquency rates for multifamily mortgages has not risen appreciably. The share of multifamily loans seriously delinquent was 0.19 percent in the second quarter.

● Between 2007 and 2009, Black homeowners were 76 percent more likely than white owners to lose their homes. Today, Black households now aged 55-64 have a homeownership rate of just 53.6 percent (compared to 81.9 of white households of the same age). ● In high ownership neighborhoods, people of color make up only 20 percent of households, including 6 percent who are Black and 8 percent who are Hispanic. ● In 2019, some 43 percent of Black, 40 percent of Hispanic, and 32 percent of Asian households spent more than 30 percent of their incomes on housing, compared with 25 percent of white households.

Hampton Scurlock: Howdy, Partner! Continued from Page 16

(when they did not before), it may appropriate to allow that partner a larger percentage. ● Often the and knowledge/skills acquired can often be more valuable more partners or than the actual financial gain. people involved, ● Spell out the responsibilities and discuss worst-case the more difficult scenarios. Hope for the best, but plan for the worst. You it is to make decineed to decide with your partner if you are going to sell the sions. house you partnered on. If you can’t sell it or if the market I know many changes, are you prepared to rent it out? If so, who is KREIA members responsible for management, repairs, bookkeeping, etc.? who are willing to Can one partner buy out the other if necessary? If so, at partner or assist what price or how is that determined? Of course, put these newer investors. You just need to ask them to do it and be and other items in writing. Consult an attorney or use the prepared to discuss what you can bring to the table – and services of one to draft the agreement to cover the interests what you expect them to bring as well. Now go find a deal of both parties. and a partner if you need one! ● Find someone you can get along with and coexist. (And ● create an exit plan if things change.) Pixabay.com ● If you do a task poorly or despise doing that task, find someone who is good at that task or enjoys doing it. That Hampton Scurlock is a real estate investor, mentor, and makes things more enjoyable for everyone. KREIA board member. He hosts the NexGen real estate ● Your partnership can last for just one deal or property, meetups on the 2nd Tuesday of the month at Rooster’s in or it may last for years, even decades. Plan accordingly and Middletown from 6-8 p.m. He partners with and assists adjust from deal to deal or as deemed appropriate. If the many investors. Hampton also hosts the KREIA Happy Hours profit split is 70/30, but now the 30% owner/profit sharer is and Game Nights with Alexis Fentress and hopes to see getting more involved or has money to contribute now more of you there. Especially you, yes you.

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.

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 MMXXI 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: When to Hold ’Em and When to Fold ’Em Continued from Page 6 started. Let’s pretend your poor-performing property is a #2 or #3. Great property to hold – but there is one more big consideration to factor in before you make your decision. Your house might be awesome, but where is it located? • Is there a liquor store with a big parking lot nearby, where problem people hang out, get drunk, fight and more? If this is next door to your house, sell now. • If you have railroad tracks on the side or behind your house, this could it make it very hard to rent to great residents. • What about a neighbor or two whose yards look like Fred Sanford’s yard? Or a neighbor who has three pit bulls on logging chains to a tree? No responsible person in their right mind would rent this home. • A nightclub or bar with all kinds of noise and activity up until the wee hours of the night. • A business that makes loud noises 24 hours a day. All these above things you cannot control. You might want to sell now with prices so high. In summary, now is the time to sell your junkers or unwanted properties, but please make sure you carefully review these three things in addition to their financial performance. To your continued $uccess,

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,” now available in its 2nd edition.

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UPCOMING EVENTS

Tax Fundamentals & Updates

❖ March 4th — 5 p.m.-7 p.m. KREIA Happy Hour. Networking What’s new this filing season, in the aftermath of COVID-19 and at Martin’s Bar-B-Que Joint (East End). Everyone invited. moratoriums? CPA Mike Grinnan is going to give us the scoop – Hampton Scurlock and Alexis Fentress host. Bring a mask. and he’s also planning to cover some real estate tax fundament- ❖ March 9th — Noon-1:30 p.m. Lunch & Learn. Meet up for als for the new investors who’ve joined KREIA. Feb. 25, 5-9 p.m. education and networking. Members only. You buy your own lunch. Ed Gibson hosts. Speaker info will be emailed to you. ► Early Meeting: Greg Shell explains how to appeal your PVA tax assessment ❖ March 18th — 6 p.m.-8 p.m. KREIA Game Night: CashFlow. Want to get out of the Rat Race? Play the CashFlow board ❖ Feb. 27th — 9 a.m.-1 p.m. Saturday Workshop (Virtual). game with other investors pursuing financial freedom. We’re all Section 8 landlords now, according to Jefferson Everyone invited. Hampton Scurlock and Alexis Fentress host. County’s new housing ordinance. Are you ready? Attorney Michelle Rawn headlines a seminar on “How to Be Successful Main Meeting Calendar With Section 8.” It’s free for KREIA members. Register now! ❖ March 2nd — noon-1 p.m. L.O.T.S. event. We visit KREIA Past Here’s what’s coming in the months ahead: • March 25: Wholesaling with Vena Jones-Cox President Frank Miller’s condo rehab project in Fern Creek. To • April 22: Rehabbing for Big Profits be held live and in person (with strict limits) and via Zoom call. • May 27: Foundations of Finance with Erik Hitzelberger Members only. Watch for your email invitation.

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