TFC Chronicles (Chapter 4)

Bill, allow me to be the first to comment on this post. You're one of the few I will search out to read what you have to say. I'm the fella in Georgia that bought the Edge10. Thanks for being a member here. Rick in Georgia

BILL I am looking forward to Ch. 4. You always send some great information.

Good to see you back-I enjoy your post

Best of 2012 and beyond

Bill,

needless to say, I am a fan of yours and your posts, so I am looking forward to reading what you have to share in your new chapter; as always, I am sure I will gain some knowledge by reading it.

wishing you continued success,
Val

I have been reading your ch 1 and 2, so now off to read ch 3. Wishing you well and like poster above; You are one of the main people that I read here on DG. But now I realized I could also call to complain. Just kidding!!

Perhaps it is because I came to real estate by way of running my own public accounting firm, but doing things on a professional level seems tantamount in being able to be successful. Having the honor of having a fiduciary responsibility to my clients; buyers, renters, sellers and investors gives impetus on me to always to the best job I can on a daily basis. One way that I strive to attain my client’s satisfaction is to earn their TRUST. While it is written that TRUST is a two-way street, my firm makes TRUST the lynchpin of every transaction we do….even if we have to deal with untrustworthy individuals as part of transaction. Our reputation is built on TRUST and therefore so is our referral system whereby we have made a lot of new clients, friends and (of course) money. Without TRUST, there would be no reason on why we get such high satisfaction comments from our clients. Without TRUST, we could not complete as many transactions as we do because TRUST allows us to shepherd the entire project; always looking out for the best interest of our clients. We are always a principal in every transaction and never an agent. The buck always stops on our desk. Our investors are told that our buyer’s and our seller’s interests come first. In this manner, we always bend over backwards for our buyers and sellers while being transparent to all parties. It allows for us to earn our client’s TRUST as everything is properly disclosed with the emphasis being on disclosed. We try to disclose much more information about each transaction to our clients than is required by law. While sometimes this extra disclosure confuses our clients, we believe that this disclosure goes a long way in building TRUST. And TRUST, is the cornerstone of any people oriented business with real estate being the best example. I simply love this business.

That is an amazing way to do business. Trust is a huge factor for sure. That is what will make a person decided to do business with you. It is what will bring you referrals and it is just a darn good feeling to be that way too. Thanks for sharing Bill:)

I appreciate and admire the way you carry your business; as you say, trust is key to have a true and successful relationship, and I do believe that it is something that is earned; and once you have it, you have to cultivate it, to keep it growing.

Very nice!

Val

A professor stood before his philosophy class and had some items in front of him.

When the class began, wordlessly, he picked up a very large and empty mayonnaise jar and fills it with golf balls.

He then asked the students if the jar was full. They agreed that it was.

The professor then picked up a box of pebbles and poured it into the jar. He shook the jar lightly. The pebbles rolled into the open areas between the golf balls.

He then asked the students again if the jar was full. They agreed it was.

The professor next picked up a box of sand and poured it into the jar. Of course, the sand filled up everything else.

He asked once more if the jar was full. The students responded with a unanimous “YES”.

The professor then produced two cups of coffee from under the table and poured the entire contents into the jar, effectively filling the empty space between the sand. The students laughed.

“Now,” said the professor, as the laughter subsided, “I want you to recognize that this jar represents your life. The golf balls are the important things - God, family,
children, health, friends, and favorite passions. Things, that if everything else was lost and only they remained, your life would still be full. The pebbles are the things that matter like your job, house, and car. The sand is everything else -- the small stuff.” he said.

“If you put the sand into the jar first,” he continued, “There is no room for the pebbles or the golf balls. The same goes for life. If you spend all your time and energy on the small stuff, you will never have room for the things that are
important to you...” he told them.

“So... pay attention to the things that are critical to your happiness. Worship with your family. Play with your children. Take your partner out to dinner. Spend time with good friends. There will always be time to clean the house and fix the dripping tap. Take care of the golf balls first -- the things that really matter. Set your priorities. The rest is just sand.”

One of the students raised her hand and inquired what the coffee represented.

The professor smiled and said, “I'm glad you asked. It just goes to show you that no matter how full your life may seem, there's always room for a couple of cups of coffee with a friend.”

Thank you for sharing

I have a old laptop (around 10 years old) that is running Windows XP and Office XP. It hasn't been used in a long time....a real long time. However, it is a functional computer. I have placed it back in service as a special duty computer for an experiment. I am going to build a powerpoint presentation on it and use it at my RTO houses to show special features of the house, google maps for shopping and schools, school district information, etc. In other works, a multimedia brochure. Click a button and it will calculate your monthly payment dependant on what you want to use as an option fee. If I get positive feedback from this over the course of 2012, I will probably upgrade the concept to a new tablet. We'll see how it works.

please give us the link when you get it up and running!

January is now over and all W-2s, 1099-INTs, 1098s and 1099-MISCs are printed, mailed to recipients and efiled to IRS. Now I am on to completing all the LLC, partnership and corporate returns. Hope to have all of the LLC returns completed by the end of February. But TGIF (Thank God It's February) because January has plenty of all nighters trying to get everything right. It was easier this year as more and more things are being completed electronically. Since I have an accounting background, my goal is to have everything online for all employees, investors, partners and vendors by the end of 2013. Online quarterly statements should be online in time for 1st quarter 2012 info. Just keep our fingers crossed.

Spent the afternoon at a bank today and tried to talk some common sense whereby I would buy their entire local foreclosed portfolio at a fair price to allow them to move their asset base from non-performing to performing. All they had to do was to underwrite the new mortgage with an 18 month balloon to give me time to fix and flip. Of course, I would flip some of them in month 1 but others would be flipped later in the cycle. 47 houses were involved. Even though they agreed that it was a great plan, they could not proceed because it was too new of a concept and it might fail. (I pointed out that by holding the houses now they had already failed.)It just shows you that most of the real estate establishment can't get out of their own way. I could go on and on about their short comings in this environment but what good would that serve. Just moving on to my next project.

Let me tell you of my experience on May 4,5 and 6 as I was out of town looking for real estate for my daughter to buy for her new job.

We were considering the entire spectrum of property from renting at an apartment complex, renting a single family home (listed and non-listed) and buying a home (listed and FSBO). I called on a total of 14 listed properties with various agents and 6 FSBOs. None of the calls on any property answered on the initial call. All 20 went to voicemail. But here is the interesting part. All FSBOs called me back within 2 hours. At the time that I am writing this, only 1 agent called me back (within 10 minutes) and the others still have not returned the call on the 8th of the month (most calls were made on the 5th).

My take from this is that real estate agents just don't get it. If they are supposed to be representing their clients; shouldn't they have the duty to return a call at the minimum? Perhaps, the homeowners should be told of the poor performance of their agents. What are the agents liability? Nothing because no one will ever know.

This is the reason that the agent relationship model is broken. It gives too much money to the listing agent for the sole purpose of getting it in the MLS. The real heroes are the selling agents as they are bring the buyer to the party. Perhaps if the split was 1% listing and 5% buyer agent, listing agents would have an incentive to work harder. In today's internet age, the 3% to 4% they earn for listing is out of whack. This would incentivize both sides to do the best job that they can. But when you're earning 3% - 4% just to list the property, it has a tendency to lull that agent into a belief that they don't have to provide service.

Now, I know I will receive comments that will try to put the nominal agent in a better light. To that, I say that I recognize my experience was a small sample. But the small sample was my entire experience and it is what it is. Poor performance from listing agents who don't deserve a dime.

BTW, the are of the country was York, PA. The professional agent's name was Carol Gottschalk-Smith and the poor agent's names are being withheld as I don't want to contend with legal issues with agents that will give excuses not to look bad.

....collect rent at one of my units at midnight because she works 2nd shift and it is the best time to talk to her. Unbelievable, but I do the things necessary to watch out for my investors.

I'm just catching up with your posts... it's been a while, sorry!

Let's see... Loved your post about the Philosophy Professor and our priorities in life.

the one about the bank not wanting to sell you their portfolio...they are stupid! Did you consider asking them for half of their portfolio, and show them that it does work and then go back for the second half?

and regarding your post about the re agents who don't return calls... what are your thoughts about using companies that you can pay a flat fee for them to put your properties on the MLS?

Val

the flat fee MLS is the best way to go if you are determined to use MLS. We market all of our properties internally through our dedicated websites but have used the flat fee model once. It was a single family home in Florida in which we had a huge margin and could easily pay a selling agent's commission.

Also, I did ask the bank if they wanted to scale the process down but they just don't want to change their model. One day they will look back and realize that if they could have been more flexible with investors, they wouldn't have all the inventory they're holding.

As you may know, I have said many times that the recovery won't begin until 2014. Some events that have unfolded recently are even putting that in jeopardy. One of the best run banks (JP Morgan)in the country is in the middle of trading losses from hedging interest rates and currencies. So far the losses have reached over $2 Billion (yes, with a B). The problem isn't the losses as JPMorgan can offset this amount easily. The problem will come from the mounting legislative pressures that will put additional rules/laws/regulations on banking. This in turn will stop the lending recovery for at least a year. 2013 is going to be an ugly year. Needless to say, this is going to kick the housing recovery on its head. (of course, it is possible that Congress doesn't do anything; but being an election year, they will do anything for publicity) I tell you this because I don't want to see anyone get locked into a process that they have no exit strategy. Profits abound for those who know what they are doing; but if you don't, be careful with your holdings. This information is meant as a macro comment and it will have different outcomes in different parts of the country. Be aware of you part of the country because all real estate is local.

The JPMorgan loss has now grown to $3 Billion and because of the type of hedge they used, I would guess it could grow to $5 - $7 Billion before its all done. Never try to catch a falling knife.

We are making a dramatic update in our company and creating a specific real estate channel for anybody that wishes to join us on social media. Please feel free to join us at

FaceBook at www.facebook.com/trustpointhomes

and at

Twitter at www.twitter.com/trustpointhomes.

We hope to bring you interesting tidbits on a constant basis starting by the end of July 2012.

Our real estate business is centered around the principal that everybody deserves respect, until you prove to me that you don't. Our business model is that of providing rent-to-own homes for our customers which come in many flavors. While we occasionally do business with a 740 FICO customer, who just doesn't want the hassle of going through a bank loan; most of our customers come to us with bruised credit. That isn't hard to imagine in today's economy.

Anyway, with that background out of the way, our program tries to match their needs to the available homes that we currently have available. So when we have an open house or field a call from on of our ads, we attempt to find out what they are truly looking for in a home. We want them to be comfortable in their choice as we give them up to 7 years to refinance. We give them 7 years because we want them to understand that we care and that their family deserves a nice home in nice neighborhood, without feeling pressured to go get a new loan. The option fee is variable as we try to match the customer's cash flow needs.

A lot of other rent to own investors try to get their new customers to refinance in 1 year or lose their option fee. We believe that model is predatory as 98% of these people are on shaky ground to begin with and this is simply taking advantage of people, in our opinion. Because we give a lot of service to our customers (including straightening out their credit for FREE), we get a lot of referrals and usually fill our new places within two weeks.

Each customer deserves are respect and understanding as most of them have just gone through hell...foreclosure, loss job, prolonged illness in family, divorce, repossession, eviction or death in the family to mention a few. Sometimes just being human to recognize their plight goes a lot way in converting a customer to a very satisfied customer.

What goes around, comes around and we a strong believers of walking the walk, not just talking the talk.

Real estate really isn't a get rich quick scheme, even though some late night infomercials (not Dean's) would have you believe differently. However, real estate investing is a time honored method to build current income and net wealth in a systematic manner. Anybody can do it, or can they?

Our firm, TrustPoint Homes, believes that it is a lot easier to be a successful investor by being part of a group that can widen your horizons in such areas as property management, making creative financing work, learning the ratios of a successful flip, knowing how to raise private mortgages for your purchases, having an internal network that is geared to helping you succeed, and much, much more. In today's environment, while it is possible to go it alone, there is no reason to be alone.

That's why we have developed, over the last five years, a Licensee model that allows you to have the look and feel of a larger company but call the individual shots yourself. If you have always thought about being an investor to make more money than you are today; you owe it to yourself to take a look at our opportunity.

While it is not for everyone, for a lot of people in can be the missing piece of the puzzle to propel your career as a real estate investor. We especially love to have working investors as they have an understanding to the concepts of real estate. We merely take your understanding to an entirely new level.

Look at our opportunity at: http://www.tphopportunity.com/

PS- Please note that this opportunity is still in preliminary development and is currently being offered as an "early bird" roll out. Our official roll out will be 1/1/13 at which time all the pieces will work seamlessly and will cost a lot more.

I usually put great news up her but I felt I needed to share a bad news as well in the spirit of transparency. 2012 was the toughest year for us EVER. We just had so much crap hit the fan that I couldn't keep ahead of it. A lot of it had to do with the interaction with STUPID people but, nonetheless, I have to deal with it. Large projects, small projects, multiple states, investor issues, tenant issues, etc. But the good news is that I got rid of the offending problems on November 30 and then took December off to rest and rebuild.

Here is the letter that I sent to our shareholders, debtholders, investors and other interested parties. I am putting it here simply to show that negative things can happen in real estate but how you deal with it can be the difference in your survival. Here is the letter:

January 15, 2013

Dear Readers-

As most of you know, I took a short research sabbatical to ascertain the direction of TrustPoint Financial Corp. after such a disappointing 2012. I had to do this because, quite frankly, I was burnt out and needed a break; but also because I needed to see first-hand what was going on in our historical target cities. This sabbatical encompassed mid-December to mid-January with travels and research in multiple states and cities. Most research was completed in cities along the I-75 and I-95 corridor including Dayton, Columbus, Cincinnati, Lexington, Knoxville, Atlanta, Tampa, Orlando, Daytona Beach, Jacksonville, Savannah, Charleston, Columbia and Asheville. Additional research was done in Washington DC, Baltimore, York and Philadelphia. People were talked with in these locations and a sense of each city’s real estate’s health was formed. This information was cross checked with national data reported by governmental and real estate industry experts. Without going into major detail of the information garnered, the following raw information can give you a sense of what is going on in the industry:

Percentage of homes that are underwater in each county

Hamilton County, OH 31% Charleston County, SC 28%
Clermont County, OH 28% Dorchester County, SC 38%
Montgomery County, OH 37% Richland County, SC 32%
Franklin County, OH 33% Buncombe County, NC 13%
Fayette County, KY 16% Fairfax County, VA 16%
Knox County, TN 19% Prince William County, VA 32%
Sevier County, TN 25% Prince George County, MD 54%
DeKalb County, GA 55% Anne Arundel County, MD 27%
Gwinnett County, GA 53% Baltimore County, MD 30%
Fulton County, GA 44% York County, PA 28%
Beaufort County, GA 28% Philadelphia County, PA 27%
Hillsborough County, FL 45% Delaware County, PA 23%
Pasco County, FL 50% Gloucester County, NJ 31%
Polk County, FL 48% Camden County, NJ 32%
Osceola County, FL 57%
Orange County, FL 49% All counties shown are in
Volusia County, FL 43% metropolitan areas of target
Flagler County, FL 38% cities visited. Info is believed
Duval County, FL 52% to be accurate from source

Needless to say, looking at these latest percentages from our target cities shows that the movement in each market is being weighed down by the number of owners that cannot sell their house in today’s market. This eliminates the ability to trade up or trade down in a traditional sense as money would have to be brought to the closing table to pay off the existing mortgage. However, with that said, housing on a national level, has seen 2012 be the first year in 6 years to have year over year appreciation. This could be signaling a bottoming process that will put in a floor in many local markets, including the ones mentioned above. (Philadelphia was the only major market NOT to show appreciation for 2012)

Because of this bottoming process, we may be in a period of a major transition. Acquiring many homes in this timeframe could lead to financial gains over the next 5 years. The secret is to accumulate various homes in various markets as not to put all the eggs in one basket. To feed this accumulation, it will be necessary to devise a program to capitalize on underwater homes to allow the homeowner to escape their current situation. I believe that this can be completed in short order and field tested over the coming months, all things being equal.

There is also other important market research (such as the percentage of homes that are without mortgage) that have also been completed on each market, but I am not going to bore you with any other numbers at this time. The most important decision is what the next step is. In my opinion, that step should be the maximization of acquired homes, the expansion into new markets with strategic partners, and the development of new programs that mirror the turning point in the market.

Secondarily, I am also spearheading another important direction and that is of increasing the capital of the company so that ongoing operations, general obligations and new opportunities can be met in a much more fluid manner. The last 4 years of the real estate downward cycle has not been kind to the company as mark-to-market losses and true monetary losses have bled us dry. That is something that I hope to resolve by the end of September so that we can expand our bargain hunting by the next winter cycle.

Next, I am simultaneously working on a plan of action that delivers multiple streams of income to our company. This will probably be an ongoing process as I believe it is important to diversify in this economy so that we are not dependent on one market ever again. The housing collapse should teach us that a historical safe investment focus can turn into a nightmare overnight. More on this diversification process as they are developed, but it is my intention to transform TrustPoint Financial into a holding company instead of a front line operational company. This will allow us to reduce our contingent liability while focusing on intangible based income.

Lastly, I hope all of concentrated efforts will bring TrustPoint to a return to profitability in 2013. It is important on so many fronts that this mission cannot fail. I will be sending individual thoughts and requests on how you can help in the rebirth of TrustPoint over the next couple weeks. I also plan on sending an updated monthly missive which will highlight the steps being taken, the results obtained, the opportunities unearthed and the programs developed. This monthly missive will start at the end of February since half of January is already gone.

Please feel free to email me or call me with questions, productive critiques or positive ideas as I do not hold the entire book of knowledge and can always use the help. I look forward to speaking with you soon.

Sincerely,

TRUSTPOINT FINANCIAL CORP.

While this is never an easy process, you must deal with problems straight up when you get them. And that includes delivering bad news as well. I never like that but it has to bebalance Anyway, I just wanted to show that there is a balance in real estate and everything doesn't go peaches and cream. But there is always a better tomorrow.

(Sorry that the table didn't insert well)

Today, I simply wanted to enter my last entry into the TrustPoint Chronicles. It is a sad day for me personally as TrustPoint Financial Corp. was founded by me over 12 years ago. I had a lot of success and grew at a very fast pace. I was lucky enough to be involved with real estate during the boom years when it was almost impossible to do anything wrong. Our portfolio swelled in Florida and Ohio as being in real estate was almost magical. But all parties must end. As I have said before, we just didn’t see such a swift and deep recession during 2008 – 2010 reducing the prices of our holdings so quickly. The firm attempted to navigate through the morass, but in the final analysis, it could not overcome the general overhead of the firm coupled with some non-adjustable note terms and simultaneous vacancy issues. I tried to salvage portions of the firm, but lady luck was not on my side and the writing on the wall was clear. Shut down was imminent and today is that final day of operations. It has been a great experience and I fully believe that real estate can be the long term success vehicle that it is meant to be. But I think, in hindsight, if I would have kept the firm smaller and not been doing business all over the country, and kept ownership to myself; the results might have been different. I have met many people on this site and wish each of them well as a lot of them are pursuing their dream. There will be better tomorrows for all of us and there will be some hard times as well….but just keep focusing on the prize and never give up on your dream.

Knowing what you know NOW, what would you have done different??? WHY?

I learned to keep it all simple and always be in charge and NEVER try to get too big that you can't stay on top of and in control.

I was trained (like most) that you outsource and hire to let 'them' do the work, but, I had reservations and BAD experiences when "I" wasn't in CONTROL of the idiots that would slowly, eventually DESTROY the things I had worked SSOOO hard to build.

Best

I wish you well and Thank You for your help on this site over the last couple of years.

Sorry to see you go. Keep in touch.

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

This post is to update the situation on behalf of my Dad. All of the litigation with TrustPoint has ended with the judge signing off on the plan that was proposed by my Dad over 1500 days ago. It should also me noted that while my Dad could have bankrupted the firm and had all investors eat dust, he choose the high road to have the investors paid in full over time. To that end the judge approved the format where the investors get 0% accrued interest until 1/1/14 and then get paid back slowly over the next decade at 2%. He then has effective removed himself from the real estate investment business for TrustPoint and has helped me set up my own firm using his techniques.

Many lessons have been learned and I had a front row seat watching the entire episode unfold. It will make me a better REI as I have learned much over the last 5 years.

Tell your Dad I said hello and wish him all the best. We miss him around here.

Michael