REAL ESTATE JOURNAL
SUMMER 2023
10. Maximizing Returns: Why Real Estate Investors Turn to Private Money Lending for Higher Yield Investments
2. Innovation is More Critical Than Ever 3. NREIA Legislative Update 5. Is Automation Helping or Hurting You? 6. How to Grow a Small-Balance Retirement Account With Real Estate 9. The Impact of Student Debt on Qualifying Tenants
14. Understanding Tax Laws, Regulations is Crucial for Real Estate Investors 15. Proceed With Caution
18. The Infinite Banking Concept: A Safe Haven for Real Estate Investors
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Vol. 8 Issue 3
Why Are Forecasts All Over the Place?
RE Journal
Member Spotlight By Chris Kuehl, Ph.D.
I Cindy and Pete Fischer
P
ete and Cindy Fischer are members of the Chicago Creative Investors Association and met in 2006. Well into adulthood, both have had not only many experiences but also children and a couple of marriages behind them. They both spent over 30 years in other professions working for someone else, with about eight of those occurring simultaneously in real estate investing. In 2009, after a lot of discussion and an investment trial run (buying, rehabbing, and selling a property to Cindy’s son), they created an LLC and started on their journey in real estate investing. They have done well and have shifted investment goals several times. Like others, they have made mistakes and had good successes along the way. Their friends and Continued on Page 12
f you have been turning to the dismal scientists for guidance regarding the rest of 2023 and into 2024, you are likely a little frustrated and confused. One set of talking heads asserts that the world is on the precipice of total economic breakdown and the other set is urging calm as they issue reassuring predictions of a short and mild downturn. Not very helpful for those running a business. I wish I could say I have all the right answers, but I am looking at loads of contradictory data as well. Why? What is making this period so much harder to categorize? It seems to come down to two factors: the labor market and consumer behavior and their subsequent impact on inflation behavior. Nothing has been quite as out of sync as the labor market. There have been rate hikes and a myriad of other attempts to slow the economy, and yet hiring remains strong month after month, the rate of joblessness stays low and wage rates keep rising (faster than inflation). This kind of labor-related stress usually occurs when the economy is booming, not when it is facing threats of recession. It is a problem that has been building for decades but little or nothing has been done to address it. There are too few workers in general due to retirement of the Boomer generation as well
Continued on Page 16
The 8 Bad ‘Ds’ of LLCs – Part 2 More Considerations to Review Before Signing Multiple-Member Agreements
By Jeffery S. Watson
I
n my article in the last issue of the RE Journal, I shared the first four of eight bad “D”s that I consider when drafting multiple-member operating agreements for clients – Disagreement, Death, Divorce, and Disability. If you missed that article, you can find that information by visiting watsoninvested. com/articles/. Let’s talk about the last four.
5. DISINTEREST Rental Housing Journal, LLC 4500 S. Lakeshore Drive, Suite 300 Tempe, Arizona 85282
as factors such as the emergence of the gig economy and all the incentives to stay off payrolls in general. The expectation every month is that job growth will stall and it doesn’t. The hike in the unemployment rate was simply a matter of people in the U-6 category moving to U-3 (in February it was at 7.3% and is now at 6.4%). The U-6 measure counts the “discouraged worker” and these are the people that re-enter the labor force when conditions improve. Consumer behavior has also been unpredictable. Usually
I have been involved in more than one LLC in which one of the memberowners became disinterested with the day-to-day operations of the LLC once
they realized the LLC was not going to be nearly as profitable or exciting to operate as was originally planned. That disinterested member was then unwilling to participate in many of the day-to-day activities. When establishing a multiple-member
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LLC, there needs to be a specific section in the LLC operating agreement outlining the roles and responsibilities of each member. There also needs to be language at the beginning that spells out the consequences when a member fails to fulfill their roles and responsibilities. A good operating agreement will contain language as to what happens if there is a capital call, and one of the members is unable to respond to that call. The same thing needs to be thought through when it comes to member disinterest. Is their ownership interest in the LLC diminished? Is their income from the LLC diminished? What is going on with the business that has Continued on Page 8