KSS 37 | Real Estate Association

 

As with any business, relationship building is always a critical part. Kim Tucker, the owner of Realty Resource, talks about bringing more notes in Kansas City or even across the country by running a real estate association for a wider notes business scope. Kim discusses their real-estate investment club and how they are different from the average with their advocacy and system. She notes the issues with real estate that are going on nationwide and says that doing events allows real estate investors, sellers, and buyers to share ideas and raise funds for certain causes. Kim adds that being in a group is priceless because you have people who are going to share information and can help you in preventing mistakes.

Listen to the podcast here:

Kim Tucker on The Perks Of Being Part Of A Real Estate Association

Thank you for sharing the podcast with a friend, your Meetup groups, your REIAs, wherever you’re networking. Hopefully, you’re networking. If you enjoy the show, make sure to hit the like button. If you’re listening on iTunes, please give me a five-star if you enjoyed that much. I would certainly appreciate that and it allows the podcast to grow because I want to start doing other podcasts and everything else with you. I have a lot of ideas on that. Thanks for being a part of the audience. As far as live events coming up, we’re going to be doing a deal review class on July 13. I would probably be doing one in Tampa the following month as well. We don’t have that quite scheduled just yet. My friends over at Paperstac are going to be hosting that event. We will send out details for you. If you haven’t already, please subscribe to our mailing list, that way I can keep you updated on a regular basis. As I always say, I promise you I’m not going to bombard you with a bunch of emails. I only send them out when I have something that I think you would enjoy or learn from or appreciate.

I’m excited to have a special guest on. I haven’t talked with her formally in a year. She can offer a lot to my audience here on this show because she’s involved in many different aspects of real estate. She’s been involved that way for many years. She has a number of roles. She’s a broker and owner of Realty Resource in Kansas City. She also owns KCMOHomeBuyer.com. She’s the Director of the Mid-America Association of Real Estate Investors and Marketing Manager for KCI Invest. I say this quite often that when you want to get something done, talk to a busy person because they get stuff done. Kim Tucker is one of those people that gets something done. Kim Tucker, welcome.

Thanks for having me on. It’s great to be here.

There are so many things we could get into here. I like to ask people who are active in the market about what they see. You’re doing things that I totally agree with. I preach in my new book and everything else about combining real estate with real estate notes. I’ve never been one who’s just notes and only notes. I’ve always believed notes are simply a part of real estate. You’re active in both. You’re in a pretty active marketplace out there. Tell us what you see on both the notes side and the real estate side of the business, what the trends are, what you see in the future and how you are positioning yourself and your club to work within that?

For myself, we do several things. We wholesale a few houses every year. We’re not out there doing the low-end houses so we don’t wholesale a lot of houses. We’re rehabbing soon-to-be three houses. They’re higher-end houses. We’re doing a few notes here and there. We’ve sold some of our lower houses with seller financing. We’ve created a few seller-financed notes. We’ve bought a few nonperforming notes. It’s tough to find houses and fill in a few initiatives where we can’t find houses. We can rehab a note. We’ve rehabbed a few of those notes. We liked the cashflow coming in from those, which I have no money in those deals. They’ve paid themselves back and now I’m collecting cashflow.

How long have you owned those notes? You said they’re free and clear. What she means is the amount of money capital that she invested in the note has now been recovered through monthly payments and possibly workouts or some adjustments there. When you have long-term cashflow with nothing in it, that is pretty nice. How long did it take to set something like that up on some of your notes?

We bought a package of nonperforming seconds which is a scary thing to do, especially when you’re new to the note space. We went out and did it because we didn’t know anything any better. Between those that worked out and paid off, which a few of them did, that paid most of our initial investment off. We’ve been paying stuff down from cashflows since then. Strangely enough, half of the borrowers are deceased but they’re still paying like clockwork. The heirs took over and they’re paying like clockwork.

You’ve held some of those notes for less than five years, less than three years. What kind of timeframe?

We bought them in late 2014, early 2015 but it took a while to get them worked out and paying. They’d been paying for about three years. Nobody has missed a payment.

Affordable housing in real estate is the big hot button nationwide. Click To Tweet

It’s hard to come up with a real property story where you have that unless you paid that in cash and you paid a good price for it. You don’t hear those stories too many times on the brick and mortar side of the business where the home has been paid off in three years simply from the monthly payments coming in. It’s quite nice to have that situation. Getting back to the marketplace, you said some things there that I was thinking. You’re reflective of what I see as doing all my research and such where it is more difficult to find houses right now. You shifted on your real estate purchase side, the brick and mortar side to buying higher end homes. Has that been simply a market condition or something that you’d wanted to do?

We’ve been in the lower end homes. We still buy in better neighborhoods of lower-end homes. In Kansas City, that would probably be the $75,000 to $100,000 range. One of our notes was that price range of house that we’ve got a great deal and we seller-financed it to a landlord, he’s making money on his rental. For us to rehab the lower-end houses, unless you’re seller-financing them or holding them for rentals, they are a little bit tougher to sell because you get right down to closing. The buyer can’t get the financing at $100,000 price point.

When you get over $150,000 to about $300,000 in Kansas City, you put it on the market and a realtor will bring a buyer. Very rarely do you have any issues with the buyer getting financed other than maybe an appraisal. That’s still very rare in Kansas City. There are so many investors in Kansas City chasing deals that we’re all fighting for the same deal. Sometimes shifting a little bit to a different market within the metro gives you a little bit of a chance to get more deals. I’m looking to bring more notes in Kansas City or even across the country because chasing houses is getting tough.

Statistically and through the research, you’re saying exactly what I show in charts and graphs. It’s nice to hear it from somebody who’s actively involved in all those sides. Banks are getting away from the lending in general, but they’re very particularly getting away from the lower end because we have more non-banks doing loans. They don’t have to do those loans. They’re not a part of the Neighborhood Stabilization Act or the Neighborhood Improvement Act. They don’t have to do those loans. One of the things you said is the only way to sell those low-end properties is seller financing and creating your own notes, which I fully agree. That’s going to be big because you don’t have the banks doing those loans. That used to always be the competition.

The higher end homes, they’ve got more loan programs. Banks are interested in doing that type of lending. It completely makes sense. If you’re reading this, you’re still in real estate and haven’t looked at notes, you can see the importance of what Kim was saying there as well as that can fill in the void. That’s why it’s great to have knowledge in both of those particular areas. That’s great advice for everybody to take a look at. You also run a real estate investment club. Why did you start the club? I know it takes a lot of work to put that together. What have you seen the benefits of that and maybe some success stories of some of the people that go to those clubs? I’m trying to encourage people more and more to network, get out, learn the pace of the business and the language of the business. How’s the club? How’s it grown? Why did you start it?

First, we are an association. We’re a little bit different than the average club. There are a lot of groups here in Kansas City. They don’t call them clubs anymore. They call them Meetups. We have Meetups all over the city that are smaller groups. We’ve got some that are larger. With a trade association, we have a little bit more. We have newsletters. We have vendors. We also have advocacy. We keep an eye on what’s going on and try to keep our members informed. There are a couple of things that are going on in Kansas City. If you have readers that invest in Kansas City but don’t read the local papers, the two big things in Kansas City are a lack of affordable housing and tenant advocacy. That’s one little segment.

We have a lot of issues around that coming in the city of Kansas City, Missouri, the lower end markets of the houses. The new hot button that came in was the Jackson County, Missouri which is where Kansas City, Missouri is. It came out with tax appraisals on properties that are completely out of line because they quit paying for their access to MLS. Now there’s a big lawsuit. It’s in the news. It was the class action lawsuit. There’s a ton of stuff and you can google KCTV5. One of the benefits of being a part of a local association, especially if you’re out of state and we have a lot of out of state investors in Kansas City, is to know these issues. The association keeps people informed. If you don’t live here, you don’t know about it. For example, I was at a National REIA event. We have a lot of investors from Colorado. I was speaking to the leader of the Colorado REIA out there. Now he’s going to inform all of his members of the issues in Kansas City because they invest in Kansas City and don’t know.

I was going to ask you about the National REIA. You were there. What insight can you give us from there? For those who don’t know all the various associations come together on a national meeting share ideas, concepts, information and news. What insights you might be able to tell us from that?

It’s pretty much the same nationwide. Affordable housing in real estate is the big hot button nationwide. Every state has the same issues. Some states more than others, especially if you’re in Oregon or California or New York. Illinois, they’re having the same issues. Just because you don’t invest in those states, you should keep an eye of what’s going on because as it happens on the East and West Coast, it comes in. If it’s not the affordability and the tenant advocacy is not in your area, it’s coming. That’s the benefits we’ve seen here in Kansas City. I have several of my members that have traditionally bought houses like at the tax sale or lower end houses. They’ve rented them out or they’ve contract for deeded them, which in the eyes of financing is a seller finance transaction. In the eyes of the city, it’s a rental property. I have several of my investors here that were owning rentals on contract for deed or as rentals that have converted them through a traditional seller financing with their tenant so they don’t have to deal with all the issues that the city is creating with the new tenant advocacy laws.

KSS 37 | Real Estate Association

Real Estate Association: When you get over $150,000 to about $300,000 in Kansas City, you put it on the market and a realtor will bring a buyer.

 

Those laws are going to spread. Is that the chatter that you heard at the National?

Every REIA that is focused on advocacy and not all of them are. There are a lot of groups that they go in there. They’re there to teach you how to invest in real estate or take your money on training and not worry about the other stuff. Most members of the National REAI, the chapters, they do have an advocacy piece to make sure you are informed of what’s happening. All of those that were there were talking about rent controls and making it harder to screen tenants and issues like that we’re seeing coming into law or trying to be passed in Oregon, California, New York and Illinois. It’s coming to other states. It’s important to know that stuff so that you can get ahead of it. You may not be able to stop it. You need to learn how to work with it if you can’t stop it.

It’s almost impossible for a single individual to stay on top of all of this stuff everywhere. That’s a great benefit to these associations. That is a distinction between Meetups where most Meetups are a little bit more casual now. Meetups play the role, please understand me. I work closely with a couple of Meetups here, but they’re more for networking. Most of those Meetups will tell you, “We’re not there to educate and inform. We’re there to network and do deals.” It’s quite different when you belong to a larger club like you’ve been able to build there. You stay on top of everything. You benefit the membership base for that. One thing that you didn’t mention was opportunity zones. I was expecting some chatter about that.

They do talk about that quite a bit. I know National REIA has had a few webinars on opportunity zones. I know more national people have been doing webinars and information on the opportunity zones. I haven’t dug deep into that myself. In Kansas City, Missouri, the areas where the opportunity zones are aren’t necessarily where I want to put my money. For example, I’m going to bet that probably 95% of any of the residential plots where I live, because I live in a rural Central Missouri, is opportunity zone. I don’t invest where I live.

It is something you have to learn about because when a new concept like that comes out and everybody’s attracted, who doesn’t want to pay less taxes? All of us want to pay less taxes. The knee-jerk reaction was everybody’s got to jump into these opportunities zones and you’ve got to be careful. You have to learn about it. I’m still trying to learn more about it. I’ve accelerated my learning a little bit. We put together a fund and I’ll be going down to Puerto Rico. The entire island of Puerto Rico is an opportunity zone. Does that mean you can go in there and start buying up anything? No. You’ve got to do your homework. You still have to do the due diligence and learn a mechanism there. You run a good and well-attended association out there. It’s going great. How much have you grown percentage wise or number wise? What do you work together with at these clubs?

We started our membership probably at about 250 people back in 2004. At the height of the market in 2008, we were right at a little over 500. Now we have about 650. Those are paid members. We probably have another 3,000 people on the mailing list who consider themselves members, but they haven’t had to pay a due for anything particularly. When they want to come to an event or they want to call and ask me a question, they renew their membership. A paid membership is a little over $650. It’s been hold and steady right around that number. We shot up the beginning of the year and we pretty much held steady. A lot of that’s fueled by the HGTV and the reality TV stars doing their little guru shows. They come to town and then people go send some money with them and find out that truly they need to come to join the local REIA because, “I paid them $40,000 and they tell me what to do.” Those are the local REIA network and learn from them as well. Start with us first before you spend $40,000.

Networking is so critical. It’s amazing how many people don’t get that. They think, “I can learn this, go out and practice it.” When you have people, they’re part of the association, everybody there at some point is going to be a competitor. There’s a limited amount of properties. When you’re in a group like that, you’re going to have people who are going to share information and can help you. Preventing mistakes is priceless. We could go out there and get into the deal because I know you and I’ve seen this before, whether it be notes or real estate. People go in, they buy a note or property, they didn’t know anything and they didn’t have the proper contacts. The next thing you know, they lost money and they’re done. They’re not going back into that. There’s so much opportunity for that. The other aspect I like about your association and what you’re doing is in your real estate investments and every member of yours who are actively investing in real estate is helping the local economy, the local community, local homeowners and everything else. You are also giving back to the community in way of a food drive. In fact, you have one coming up?

We do two events every year. One, to help the members network. Two, to raise money for something. Our July event is our networking event. We’ve been doing it for many years, but we started counting years ago. It’s been consistently in July. This is to raise money for the local food bank. We’ve had people that bring canned goods or non-perishable and the food bank has the ability to turn $1 into three meals. You and I can’t go provide three meals with a dollar but they can through their corporate sponsorship. We try to raise money. We’ve been averaging around $3,000 every year. We’ve changed a few things. We have $4,000 either donated or pledged from our vendors.

We probably have about 40 vendors coming so you can come build your team. We usually have probably 100, 200 investors coming in to network, to talk to the vendors, to talk to each other, ask questions, exchange business cards. It’s a totally free event, although we’re going to hit you up for a small donation to harvesters at the door for $5. Our goal is to raise $5,000. We are right on target to do that. We might even exceed our goals. If you’re in Kansas City in July 9, come join us. If you like speed networking in December, we do the same thing only for Toys for Tots when we ask for you to bring a toy.

Networking is critical in the real estate world because people are going to share information and help you in preventing mistakes. Click To Tweet

What if we have some readers that don’t live in Kansas City? That’s a good market for notes and probably invest in the state and everything. If they wanted to give a small donation or something like that, is there a way that they can do that?

We have a special link. We’re tracking everything through our link. We specifically want to do that because we usually get a corporate match. Every donation that goes through our link, corporate match dollar per dollar goes from three meals to six. Our link is MAREI.org/harvesters.

A $5 donation, it can become significant when you have a lot of people jump on board there. If anybody is interested in doing that, it would be a very nice thing to do, going out to great people in the local community out there that could use that. Kim, what else is going on in the note world for you? You talked a little bit about seconds. That’s something I don’t go into myself that much. Are you looking more on performing notes, nonperforming notes or you’re looking for whatever opportunity works?

Kevin, we’ve been focusing on our real estate deals for the past couple of years. We haven’t been doing a lot. When one comes along that we’re able to buy the house at the right value, that we could offer it on seller financing, we’re doing that. More in the note world that I’m doing of late, I have three or four very experienced investors. I’m doing private lending in the note world. I’m upping my profits by getting points and higher interests or a flat fee. I have a six months minimum interest. He borrowed the money like the first week of January and he paid it all back by the last week in January. I got six months of interest for 21 days. It was a lucrative loan. Whenever he pays off early, I’m ecstatic. If he doesn’t pay up early, I still get my face value of the notes. It’s a good return either way. That’s primarily what we’re doing in notes now is private lending.

I’m always amazed at the private lending aspect because Kim and I have known each other for several years. Before I got back into notes, I was in the note business doing hard money loans here in Florida. I’ve put together a fund and I got caught up into the crash a little bit with that unfortunately. It amazes me that there are still so many money lenders that don’t see what’s the difference between lending money and buying a loan that’s already been created. One, you’re creating a loan and the other one, you’re buying a loan that’s been created. Yet they sit there on their hands going, “I don’t have enough people to lend to because it is harder to buy these properties.” There’s less turnover on that money and they don’t go outside of the lending. I’m going, “You’re in the note business. Take a step over and buy a note that’s already been created.” It’s crazy to me. You could go back and forth. Are you utilizing any special techniques or using trusts or anything like that when you do the loans or you’re doing a flat-out short-term loan agreement?

I don’t do a trust, but the majority of my private lending money is either coming from my Roth IRA, which means I’m paying no taxes on that return or I also have a traditional Solo 401(k) so it’s not Roth yet. The awesomeness of the Solo 401(k) is if you need a huge tax deduction, you can put a large amount of money into the 401(k) every year and that’s the tax deduction. I’m going to pay taxes on that later in a year that might be a lesser profitable year. I could go convert that to Roth and pay the taxes then or maybe wait until I withdraw the money and pay the taxes then.

I love what you’re saying about 401(k)s because I know everybody in the industry that I’ve been around for all these years, everybody says IRA. We default verbally to the IRA because everybody understands that. When you compare, I’ve done this for years and I’m going, “Why don’t we keep going IRA? Why don’t they spend more time on 401(k)?” Nobody that I’m aware of in the industry is doing that now except for NuView. NuView Trust is another self-directed IRA company. They had an event and there were probably 250 people. They’re all looking for alternative investments. It was crazy. They don’t know what to do with the money. NuView has been one of the only companies that are building a relationship with them that promotes more of the 401(k) because you can put so much more money in there every year. You can also prevent making mistakes. If you make a mistake, they’re quite different making a mistake with a 401(k) than there is with an IRA in the sense of combining or commingling or crossing that line of personal and retirement funds. I’m glad to hear that. It’s not spoken about quite enough. You formed your 401(k) with your own investment company.

It’s under my investment company. I use Quest. They don’t go out and promote the Solo 401(k) a lot, but they do offer it. I believe John Hyer and Dorsie Boddiford are both teaching using your Solo 401(k). One of their main reasons is that if you screw it up in an IRA, your whole IRA could be forfeit. In the Solo 401(k), if you screw it up, only the deal you screwed up could be forfeit. There’s a lot less liability on your account if you do something wrong with the 401(k).

That’s an important point. In fact, I did a podcast with Blake from NuView. He made a good example. He goes, “If you had checkbook control for example with an IRA and you had auto-draft protection and something happened where managers went ahead and sent an invoice, it was paid and you went to overdraft, you commingled funds. It could be something like that.” As Kim was saying, that means that whole account now is considered cashed out. Not only do you pay federal income taxes on the entire amount, but also the 10% penalty. If it was in a 401(k) that did that, you get an, “Pay taxes on this,” but it doesn’t do the whole thing. That’s a big deal.

KSS 37 | Real Estate Association

Real Estate Association: There’s a lot less liability on your account if you do something wrong with the 401(k).

 

If you want to get something done, you go to a busy person. Kim is busy running a club, but also an active investor and diversified. When people get started in the real estate business and start to add in these other things with notes and they start to do lending and everything else, you’re going to have plenty of opportunities in real estate regardless of what ultimately happens here. A lot of people think we’re in a bubble right now with prices. Some people think it will mellow out a little bit, but you’ve got to be prepared and have a team. As I like to say, it’s not always what you know, it’s also who you know.

Having lived through 2008 and the recession, I observed all of the investors in my association and those that were not one hit wonders and only did one thing were able to weather the storm because they can fall back or adapt into a different type of investment. Those that only did one thing, for example wholesaling or flipping, they went by the wayside because houses weren’t selling and banks weren’t lending. There were no investments to be made unless you had you could adapt and change. Having three or four different niches in the note and real estate industry is very helpful, especially when the economy changes. You can adapt and change faster.

If you’d like to help a family in need in the Kansas City area, I know their donations would be appreciated. Visit Mid-America Association Real Estate Investors website, MAREI.org. Even if you go to the homepage, you can see the link where you can do a nice donation. It doesn’t have to be a lot. It would be a nice thing to do. Kim, thank you so much for being on and sharing some insight with us. I appreciate it.

Thank you for having me on. This is my first podcast. I’m going to have to do a few more and become an expert at it.

Anything I can do to help, let me know and hopefully I can get out there and see you, maybe come to the club or something in the future as well.

That will be great.

Thank you so much, Kim. Thank you, everybody, for reading. I look forward to putting together another podcast for you.

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About Kim Tucker

KSS 37 | Real Estate AssociationFull service and full-time Realtor since 1990, Kim L. Tucker serves the Greater Sacramento and Placer County areas. Ms. Tucker has helped several generations of families successfully buy and sell homes. She also volunteers her time and expertise, helping to preserve the property rights of homeowners.

She has served as a Director for the Placer County Association of Realtors, a California and National Association of Realtors Director, since 1995. Kim has also served as Place County Association of Realtors President in 2001 and 2017 and was awarded the prestigious title of Realtor of the Year in 2006 and 2018.

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