how to avoid the 7 biggest mistakes - maverick investor group · “ maverick has been really great...

7 Biggest Mistakes

Real Estate InvestorsAre Making in the

Current Boom Cycle

How to Avoid the

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DISCLAIMER: THE AUTHOR OF THIS REPORT IS NOT A LEGAL OR TAX PROFESSIONAL AND

THE INFORMATION HEREIN SHOULD NOT BE CONSTRUED AS LEGAL, TAX OR

OTHER FINANCIAL ADVICE. THIS REPORT IS FOR INFORMATIONAL PURPOSES

ONLY. THE AUTHOR DOES NOT ASSUME ANY RESPONSIBILITY FOR ERRORS

AND OMISSIONS. MATTHEW BOWLES AND MAVERICK INVESTOR GROUP, LLC

SPECIFICALLY DISCLAIM ANY LIABILITY RESULTING FROM THE USE OR

APPLICATION OF THE INFORMATION CONTAINED HEREIN. IT IS THE DUTY OF

ALL READERS TO CONSULT THEIR OWN LEGAL, TAX AND FINANCIAL

PROFESSIONALS REGARDING THEIR INDIVIDUAL SITUATION AND APPLICABLE

LAW BEFORE PURCHASING ANY REAL ESTATE. BUYING REAL ESTATE

INVOLVES RISK WHICH BUYER ASSUMES. ALWAYS CONDUCT YOUR OWN

DUE DILIGENCE.

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Introduction Understanding the Seismic Shift in Today’s

Residential Investment Property Market

The next great real estate boom cycle is now thoroughly underway.

But today’s real estate expansion cycle has some unique differences from

previous ones, including a “seismic shift” already underway in the residential

investment property market which is localized, fragmented and imperative for you

to understand for 2 reasons:

1. It will be the primary driver for a huge transfer of wealth over the next two

to five years, and smart real estate investors that make the right plays will be

able to make (or recover) their fortunes, reduce their tax obligations dramatically,

hedge against inflation, and create substantial streams of passive income that

provide increased freedom, time and mobility, so that you can take your lifestyle

design to the next level (whether that means improving your golf game, jet setting

around the world, volunteering for causes you care about or simply spending

more time with your family).

2. Investors who make the wrong decisions will lose big because the reality

(that most real estate gurus and investment property promoters won’t tell you) is

that most real estate is not a good investment. In every real estate cycle people

who don’t understand how to buy right continually lose their shirt....again and

again, like clockwork, with mistakes that are easy to avoid. Don’t be that guy (or

gal)!



My name is Matt Bowles, and I have been investing in

residential investment property for over a decade, during

which time I personally purchased millions of dollars of

residential investment property. I have been through

both boom and bust cycles, made almost all the mistakes

in the book myself, learned through doing, and came out

much stronger and wiser as a result. I took my real life

knowledge “from the trenches” (that most real estate

books, courses and gurus won’t teach you) and,

together with my business partners, used it to

formulate “The Maverick Approach” to real estate investing…designed to help

you navigate the traps and pitfalls so you can win in the real estate game.

In 2007 I co-founded Maverick Investor Group, which was named one of the Top 50

Real Estate Opinion Makers and Market Leaders by Personal Real Estate Investor

Magazine--the leading U.S. magazine for individual real estate investors. Maverick has

presented at real estate conferences around the world, been featured on ABC, NBC,

CBS, FOX, TheStreet.com, Real Estate Wealth Magazine and a number of other

publications. My business partners

and I have helped individual real

estate investors like you (not

Funds or Institutions) buy over

$100 million in residential

investment property across 15

states, which has enabled many of

our clients to take control of their

financial future and take their

lifestyle design to a whole new

level.

Maverick Investor Group Named

"Top 50 Real Estate Investment

Opinion Makers & Market Leaders"

by Personal Real Estate Investor

Magazine.



As we move through this next great

expansion cycle, there are different

players in the space, different market

movers, and new factors that savvy

investors need to understand. This

report is your guide for navigating the

new real estate economy and

understanding the unique aspects of

this particular expansion cycle.

So, come along for the ride and I will

show you how to avoid the 7 biggest

mistakes that real estate investors

are making in today’s market so you

can be better positioned to make the

right real estate investment

decisions that can fundamentally

change your financial future over the

next 2 to 5 years.

Remember, as with all investing there is never a ‘guarantee’ in real estate (and if

anybody tells you there is, you should run in the other direction) but there are people

who consistently win in the real estate game, and there are very specific (and not very

complicated) reasons for that, which I will unveil in this report and show you how to

apply.

Let’s begin...

“ Maverick Investor Group has pioneered

a business model that helps individual

investors from around the U.S. and

around the world buy quality turn-key

real estate in the best real estate

markets. ”

Andrew Waite, Founding Publisher

Personal Real Estate Investor Magazine



Mistake #1 Confusing “property flipping” with “real estate investing”

Back when I lived in Los Angeles full time, I was sitting on my rooftop pool deck (which

our LA-based clients endearingly referred to as “the Maverick office” because this was

where nearly all of my in-person client meetings were held) and i got a call from a

producer at a major TV network. She told

me they were in the early stages of

designing their next reality TV show, and

they wanted to make something akin to

ABC’s SharkTank (where aspiring

entrepreneurs pitch potential investors) but

for real estate investing. She had heard

about Maverick Investor Group and was

wondering if we wanted to be involved, so I

told her it sounded interesting and asked

her to tell me more.

As she continued speaking, it became

clear that she didn’t want to make a show

about real estate investing....she wanted to

make (Yet Another!) show about flipping

properties. She wanted to take a film

crew around with a couple individuals who

would muck through distressed properties,

do the acquisition, renovation, and then

attempt to re-sell them.

“ A year and a half ago, I was a brand

new investor, and now I have my 5th

property under contract through

Maverick. Everything I’ve learned from

Maverick in the past 18 months has been

priceless. I consider Maverick to be an

essential asset in my real estate wealth

building and I can’t imagine going

forward without them.”

Ali Boone,

Aeronautical Engineer

Los Angeles, CA



I explained to her that real estate investors (like the investors on the SharkTank panel

she was attempting to emulate) do not spend their time mucking through distressed

properties and renovating them. There are a number of reasons for this. To begin

with, real estate investors do not “flip” properties because flipping negates almost all the

unique benefits of residential investment property.

These are the primary advantages for real estate investors that are buying and holding

residential investment property:

Owning Hard Assets.

Deeded, freehold residential

investment property is a

hard asset that you

completely own and control

yourself. Serious investors

build a portfolio of cash flowing

rental properties and keep a

substantial portion of their

wealth invested there.

Flipping means you are

continually getting rid of these

assets instead of building a

portfolio of them.

Tax Advantages.

Residential investment

property is the most tax-

advantaged asset class in

“ Maverick has been really great in helping

my clients make more money and keep

more money. They understand what it takes

to find really good investment properties.

Every one of my clients that has bought a

property through Maverick has come back

and bought additional properties. Even our

staff CPAs are buying through Maverick.“

Diane Kennedy, CPA

Best-Selling Author of Real Estate

Loopholes and Loopholes of the Rich



the U.S. As long as you are buying to hold, the U.S. government allows you to

“depreciate” your rental property (the structure, not the land) over 27.5 years and

take that as a “loss” on your tax return, even if the property has gone up in value

(in addition to a number of other tax benefits).

Flipping properties negates just about all of these tax benefits and may also

throw you into the “real estate dealer” category, which can be especially dis-

advantageous for tax purposes.

Passive Residual

Income. Performing

rental properties (provided

you buy them right)

produce passive residual

income (“PRI”). Also

called “positive cash flow”,

this is your gross rental

income minus all of your

fixed expenses (taxes,

insurance, property

management fee, HOA if

any, mortgage payment,

etc.), minus an estimate for

vacancy and maintenance.

It is “passive” because you

don’t have to actively work

for it, and it is “residual”

because it flows to you

every month.

“ The beauty of Maverick is that they go

out into the best markets around the

country and find investment properties

that perform. The properties come with

tenants and property management in

place already so the heavy lifting is done

for you.”

Jon Swire, Keller Williams

Top 25 Agents in the U.S. for Five

Consecutive Years; Author of There's No

Free Lunch in Real Estate



Building a base of hard assets that generate PRI is what smart real estate

investors do. Producing enough PRI to cover your living expenses so that

you don’t need to work for active income enables you to recapture your

time and design your lifestyle as you choose.

On the opposite end of the spectrum, flipping properties is “work” that (in a

best case scenario) produces “active” income, which builds nothing and

ends the minute you stop working, just like any other job. Whether you are

working for yourself or someone else, it is still a job.

Hedge Against

Inflation. When you own

residential investment

property you have one of

the only assets that

provides a built-in hedge

against inflation. Home

prices rise with inflation, as

do rents (which you have the

ability to raise each year

when you sign a new lease

with your tenants). Buying

and holding residential

investment property is one of

the most effective ways to

defend your wealth against

inflation.

“ Maverick has built its business on

sound economic and financial principles,

and it has access to deals individual

investors would never be able to get

close to because it is bargaining with

collective buying power.”

Rob Cass, Publisher

Local Real Estate Deals Magazine



Needless to say, flipping properties obviously provides no such protection

against inflation.

Still on the phone with the TV producer, I concluded for her in summary that real estate

investors make decisions and cash checks. They want passive residual income,

financial independence and the ability to recapture their time and design their lifestyle to

maximize their freedom. Flipping properties simply doesn’t provide a path for that.

She agreed that it sounded far more compelling to be a real estate investor than a

flipper. But...she said that she still needed to make a show about flipping because it

was more interesting to a TV audience and, after all, her network is in the business of

getting TV ratings.

And so....the property flipping shows

continue!

Which explains why the confusion

continues, particularly amongst newer

investors trying to get in the real estate

game.

I have chosen to start the 7 mistakes

with this one, because this mistake is

not just expensive, but it can often turn

people off from real estate...for life.

Even if you were ok with all the

disadvantages outlined above, and you

decided you still wanted to muck

through distressed properties and work

hard to make active income without any

“ I was looking to buy a strong cash flow

property and you found a great value

proposition for me. The best thing about

working with Maverick was the personal

attention I received. The whole

experience was tailored to my specific

needs as an investor. You listened to my

needs and responded well. The

customer service was excellent."

Bruce Warner, CPA

Garden City, UT



of the benefits of holding investment property....Remember that what I have outlined

above in my description of flipping is an absolute best case scenario.

Keep in mind that property flipping comes with an incredibly high degree of downside

risk and rarely produces this best case scenario, especially for individuals who are

relatively new at it. For example, when you buy properties at foreclosure auctions, you

often cannot even get inside the property to inspect it until after you have purchased it.

This means there is an unknown level of repairs that could be substantially higher than

you estimated. It could also take you much longer to complete them, and much longer

to rent or sell than you anticipated, increasing your holding costs. These variables can

quickly eviscerate your profit margin...or make it negative.

By contrast, when you buy properties through

Maverick Investor Group, the properties are

either new or completely renovated, and you

can conduct an independent 3rd party home

inspection as part of your due diligence to

verify everything was done properly. There

are also local property management services

available to lease and manage your property,

so you don’t have to be a landlord.

And the final (and perhaps most formidable)

challenge to flipping properties is simply the

amount of competition. There are multi-million

dollars companies that do this professionally, at

scale, in most major cities. How, exactly, are

you as an individual property flipper going to

compete with the resources of those entities?

“ Maverick is the first real estate

company I’ve worked with that really

understands small investors. All my

questions were answered completely

and their customer service was

excellent.”

Jason Crew, CEO

Houston, TX



Apparently there is a big ‘consumer’ market for the property flipping TV shows.

Apparently, there is also a big consumer market for info-products hawked by self-styled

real estate gurus about how to get rich quick flipping properties. If you are someone

who finds those things alluring, I would encourage you to think hard about whether it is

a sound financial decision for you to put your time and money into a property flipping

endeavor. Based on the amount of investor-failures I have seen so far this year alone,

for most people it is not.

On the other hand, if you are interested in real estate investing, either because you

are a newbie looking to get into the game or because you are a seasoned investor

looking to expand your existing portfolio, I would like to make you a special offer:

I would like to offer you a free 30 minute phone consultation

where we can get to know you, understand your financial goals

and real estate investing preferences, and then answer any

questions you may have and strategize about how Maverick can

support you in meeting your personal real estate investing goals.

Schedule your free consult with us, custom tailored to your

personal needs and goals here:

www.maverickinvestorgroup.com/phoneconsult




Mistake #2 Buying real-estate-backed securities instead of deeded, freehold real property

This is similar to Mistake #1 but the special interest groups trying to steer you in this

direction are different.

Whereas Reality TV shows, infomercial gurus, and local real estate investment clubs

(whose primary business model is to help real estate gurus hawk their info-products to

would-be real estate investors) are the

primary culprits trying to convince you that

“flipping properties” is the way to riches...

Financial advisors/planners and the mega-

financial-institutions where they work are

behind the big money advertising campaigns

to convince you that you should surrender

your money entirely to them (under the guise

of “retirement planning” or “building a nest

egg” or whatever the marketing term of the

month is) and allow them to invest it into

paper assets on your behalf, and that this is

the “responsible” way to go.

Like the infomercial gurus, these financial

planners are also trying to convince you

to give them your money, but these folks

use more of a “long-term responsible

“ Working with Maverick is different

than working with other real estate

companies because I don't feel

pressured.

You guys are easy to work with and

your customer service is excellent. I

would definitely buy real estate from

Maverick again because I trust you

guys and trust is a big deal.”

Sarah Luu, Real Estate Broker

Sunnyvale, CA



investing” discourse as opposed to the “get-rich-quick-so-you-can-buy-flashy-cars-like-

me” discourse of the infomercial gurus.

It is important to distinguish between the two though, because they target different

groups of people.

If you hear language about getting rich and about being able to buy real estate with no

money and no credit, guess who that is targeting? Obviously people who are not rich

and who have no money and no credit. The “nest egg” discourse of “give us all your

money if you want to call yourself a responsible human being who plans for retirement”

is targeted more towards people who actually have money to invest.

And while your financial planner may offer you the opportunity to invest in a Real Estate

Investment Trust (REIT), or buy stock in

publicly traded home building companies

as a way of “taking advantage of the real

estate boom”, remember these are

securitized paper assets that do not

provide any of the benefits of owning

residential investment property

discussed in Section 1 above.

Q: Do you want to know why 99% of

financial advisors are not going to

recommend that you buy deeded,

freehold investment property?

“ I would definitely buy real estate

from Maverick again. They thoroughly

research their offerings...only

selecting a property or project that fits

their rigid criteria for investment. Plus

they follow up and are extremely

responsive.”

Richard Hall, Real Estate Broker

Austin, TX



A: Because (s)he doesn’t make a commission on it (and it reduces the amount of

your money they will have under management).

Mistake #3 Buying Commercial Real Estate instead of Residential Investment Property

Now that we have established

the importance of buying

deeded, freehold investment

property that you own and

control (and now that you

understand who is trying to

deter you from doing so and

why), the next question is:

What kind of investment

property should you buy?

People with a substantial net

worth are often confused about

whether to buy residential or

commercial real estate. And

while I have absolutely nothing

against commercial real estate

in principle, during this current

boom cycle....there is a big

difference.

“ Most property providers are transactional

sales companies that operate in one market

and try to convince people to buy in their

market at all times, but the reality is that the

best real estate markets change over time.

Maverick was able to completely turn this

around and develop a model that puts the

investor first instead of the market or the

property. Maverick starts by understanding

the personal financial goals of each client

and then helps them develop a real estate

investing strategy that enables them to

diversify across markets as they build their

portfolio over time."

Robert Rakowski, Associate Publisher

Personal Real Estate Investor Magazine



Historically, well capitalized investors who could afford it, would often choose to invest

in commercial real estate, figuring the capitalization rate (and overall return on

investment) should be better if you are putting more money into a larger asset that

should be more scalable and less cumbersome to manage. Hence the more efficient

thing to do, according to the historical assumption, would be to buy an apartment

building or an office or retail complex instead of a bunch of single-family homes.

Not So Today! And this is a mistake you definitely want to avoid.

Starting in 2007, we witnessed a cataclysmic real estate market crash which, when all

was said and done, resulted in a dramatic “over-correction” of the residential property

market. What emerged out of that over-correction (sometimes called a “market

inefficiency”) was an extraordinary value proposition enabling individual real estate

investors like you to purchase fully-renovated single family homes for less than the

builder replacement cost. At the same time, rental demand began increasing as more

and more homeowners were displaced through the foreclosure process and thrust into

the rental market. Now, overlay those general trends with select markets that were

experiencing both job growth and population growth, and you had a perfect storm that

provides the potential for residential real estate investors to win big…if you knew where

to buy.

For the first time ever, Wall Street and some of the largest private equity funds who

typically buy either no real estate or exclusively commercial real estate, decided to jump

into the single family rental property space and start buying up homes because the

opportunity was just so much better than other asset classes (including distinct

advantages over commercial real estate).

Over a decade since the initial housing crash, the foreclosure crisis has stabilized, most

of the large insitutional players have gotten out of the market, and home prices have

been recovering year over year….but price-to-rent ratios for residential investment



properites are still uniquely advantageous in many markets, and long-term trends still

favor investors in very important ways.

In addition to understanding the comparative value proposition that makes residential

investment property more advantageous than buying commercial property right now in

terms of home price trends....it is also imperative to understand how much more

compelling the rental demand is for residential property and what the long-term rental

trends look like as well.

U.S. Census Bureau Reports Number of U.S. Renters is

Increasing

The U.S. Census Bureau reported that home

ownership has dropped to 65%. That means

that the percentage of people renting their

homes rose to 35%, the highest percentage

of renters since the mid-1990s. This is very

significant for owners of rental properties

because it means the demand for your asset

(rental property) is increasing. In fact, this

same report from the US Census Bureau

reports that the vacancy rate for rental

properties across the US is the lowest it has

been in over a decade and continuing to trend

downward.1

To really understand rental demand, including

likely future trends, it is important to dig a little

“ The best thing about Maverick is

that you guys are creative thinkers

and problem solvers - always willing

to go the extra mile to make the

deal work. You guys are always

available. You walked me through a

lot of the basic stuff. I really

appreciated it and am looking

forward to the next deal.”

Farlan Dowell, Sales Manager

San Francisco, CA



deeper and get to the economic drivers that are contributing to these statistics.

Former Homeowners Want to Live in a Single Family Home, Not

an Apartment

One of the effects of the foreclosure crisis is that it displaced a huge number of

American families who have steady, good paying jobs. They have entered the rental

market and have to remain there for quite some time. They cannot buy another home

because their credit took a major hit and they still cannot get a bank loan anytime

soon, so they need to rent. Because they used to be homeowners, they want to

live in a single family home, not an apartment. So there is a large and continually

growing rental market for single family homes. This trend will likely benefit owners of

single family rental properties more so

than owners of apartment complexes.

Increasing Student Loan Debt

Is Causing Generation Y to

Remain Renters Until Much

Later in Life

Looking forward at the next generation of

potential homebuyers who did not get

tripped up in the last housing downturn,

there are additional factors keeping them

as renters until much later in their lives

than the previous generation. In

general they are putting off marriage and

family formation until later, but one

crucial economic factor is the exorbitant

“ I'm a conservative real estate investor

and prior to working with Maverick I

had never considered investing outside

of my local area. But Maverick helped

me buy out-of-state properties that had

a better net return and better capital

appreciation potential. What I like best

about Maverick is their follow through

and their immediate response to my

questions. I have closed on 3 Maverick

properties in the last 5 months and I

am now working with them to buy my

next one."

Paul Keele, Electrical Contractor

Reno, Nevada



amount of college debt today’s students are incurring as tuition rates continue to

skyrocket. Hundreds of thousands of dollars in non-dischargeable debt that cannot go

away even with a bankruptcy is keeping Generation Y as renters for much longer than

prior generations.

Reuters recently reported that “More than 40 percent of 25-year-olds now have student

debt, and 35 percent of twentysomethings are more than 90 days delinquent on loans

that are being repaid.”2 By contrast, ABC noted that under 25% of Baby Boomers had

college loan debt. And not only do more students have debt today but the amount of

debt is getting much larger as tuition rates skyrocket.3 A bi-partisan poll reported that

73% of today’s young adults say they owe more in student debt than they can manage.4

So, whether it is because they cannot afford a down payment, or because they cannot

get a mortgage due to delinquent student loan payments, these economic factors are

increasing the number of renters in the U.S. and shaping trends for years to

come.

If the U.S. is able to get the student loan situation under control and Gen Y starts

increasing their home-buying power, great, you will have more demand by people who

want to buy your property when you are ready to exit. If the student loan problem

continues and more people are driven to remain renters, you will be providing a

valuable service by offering a quality rental property to help meet the increased rental

demand.

In any case, residential investment property is what provides the greatest value to

today’s renters and what is currently providing the greatest returns to real estate

investors.



Portfolio Diversification

By purchasing multiple single-family homes instead of one apartment complex (or other

commercial building--office, retail, industrial, etc.), you are able to diversify

geographically. It allows you to build a diversified portfolio of cash flowing

residential investment properties over time and across markets, which also helps

to mitigate your downside risk in the event that one property or market does not

perform as well as you projected.

Retail Exit Strategy

Commercial properties--such as apartment complexes--are owned exclusively by

investors. That means that when you are ready to sell, you need to sell to another

investor who, like you, will be looking to get a great deal and want a discount on the

property.

Single family homes, however, are also in

demand by primary homeowners that want to

live in them. And those are “retail buyers.”

By selling your property to an owner-

occupant, you have more upside potential

between what you bought it for and what

you are able to sell it for on the retail

market when you are ready to exit.

Segmented Liquidation Strategy

Finally, when you have a large piece of

commercial real estate, you only have two

choices: Sell or Continue to Hold. If you

“The property I bought through

Maverick is one of my greatest

cash flow properties, it performs

even better than I expected. Plus

Maverick is very easy to work

with and has excellent customer

service so I would definitely buy

real estate from them again.”

Dr. Brad Baver

Real Estate Investor

Fort Mohave, AZ



have a portfolio of residential investment property made up of numerous single

family homes across many markets, then you can engage in a “segmented

liquidation strategy”, meaning you can sell some properties while continuing to

hold others, either because you need the money or because it is the optimal point

in the property cycle to do so. It gives you more flexibility and freedom to control your

financial future and strategically maximize your gains.

Maverick Investor Group helps you do exactly this--we assist our clients in building a

portfolio of residential investment property over time and across markets for

maximum control, profit and lifestyle benefits.

The most investor-advantaged markets change over time, and Maverick studies local

market trends very closely. If you would like to discuss what we feel are today’s most

investor-advantaged markets, and how you can own turnkey rental property in them

(new or fully-renovated properties with local property management services in place to

lease and manage the properties) regardless of where you live, I would like to offer you

an introductory phone consultation customized specifically for you:

I would like to offer you a free 30 minute phone consultation where we can

get to know you, understand your financial goals and real estate investing

preferences, and then strategize with you about how Maverick can support

you in meeting your personal real estate investing goals.

To schedule this free consult with us, custom tailored to your personal

needs and goals, just Register Here:





Mistake #4 Sitting on the Sidelines and Hesitating to Buy Property

Given the historical moment that the real estate market is currently in, this mistake could

be the most expensive one you ever make. Let’s take a brief look back over the past

few years to see how this mistake has impacted people...

In 2010, we helped many of our Maverick clients buy turnkey property the Phoenix,

Arizona market and they did fantastic. That was the time to buy. Those who didn’t

buy missed out.

We started getting our clients into Atlanta, GA well before the big funds even arrived

(over a year before the article above was published). Since early 2011 Maverick

Colony, Blackstone, Waypoint Real Estate Group LLC and American Homes 4

Rent have converged on Atlanta in search of low-priced properties to buy and

rent out, after helping drive prices up 34 percent in Phoenix from a year ago.



clients were buying in Atlanta. Once the funds got there, things just went through the

roof....and our clients who bought have been sitting back and riding the wave.

The S&P Case-Shiller home price

data for April 2013 showed that

Atlanta home prices were up 20.8%

from a year earlier, marking the

largest annual increase in Atlanta

home prices since the Case-Shiller

Index began tracking it in 1992!5

Home prices are going up fast

and you too can buy in the path

of growth and benefit from this

momentum. But things are

moving fast, so there is no more

time to be sitting on the

sidelines.....or you will miss the

whole boom cycle. In the 4th

quarter of 2012, Maverick started

helping our clients start buying in the Chicago market. Here is the home price

appreciation graph for the year after our clients got in the market. The Green Circle is

when our clients entered the market:

According to the S&P Case-Shiller Home Price Index, Chicago home prices increased

10.3% in the 3-month period of May-June-July 2013 alone.7 That was the fastest home

price increase of any market in the country tracked by the index during that time period.

We have many clients who bought multiple Chicago properties in 2013 through

Maverick and absolutely crushed it.



In 2014 we helped our clients get into the Dallas-Forth-Worth market in Texas. At the

time DFW lead the country in both job growth and population growth for large metro

areas and, in addition to massive rental demand, DFW home prices jumped 10% in a

year and continued to rise through 2015.

In 2015 we helped our clients start buying in Philadelphia, PA, and in 2016 the Philly

market saw an 11.6% rise in home prices in a single year. 8 Philly saw an additional

12.7% increase in 2017 (more than twice what the other top 10 largest U.S. cities

averaged), and in Q1 of 2018, Philly saw the highest number of home sales the city has

seen in any Q1 since 2007!

There is still substantial upside potential in many markets, especially cities like

Baltimore where I personally just bought a property for my own portfolio in 2018 (as

have many of our clients) because home prices in that market are rising but still well

below their pre-recession peak, yet rents are high, so it has some of the best cash flow

margins in the country. The lesson in all this is that you need to know which market

to buy in, and what point in the property cycle to buy.

Many of the most advantageous real estate markets over the last decade are no longer

the most advantageous markets to continue buying in today because prices have gone

up faster than rents and there has been a process of “yield compression”. If you

bought at the right time and locked in your price-to-rent ratio, you are golden. But

continuing to buy as prices rise without proportional increase in rents means your

returns are being diminished, and it will soon become less advantageous to keep buying

there and more advantageous to buy in another market. This is exactly what Maverick

helps our clients do....but in order to take advantage of the opportunity you need

to get off the sidelines and get in the game.



Mistake #5 Speculating

When I started investing in real estate in the 2004 boom cycle, it looked a lot like today.

Home prices were shooting up, and it felt like you couldn’t lose no matter what you

bought. As a brand new investor, I didn’t have a company like Maverick to guide me,

so I read a bunch of books, listened to some self-styled “experts” and assumed that as

long as I bought in what appeared to be a growing market, not much else really

mattered since I would surely profit off capital gains at the end of the day even if the

cash flow was negative...

Let’s just say that when the boom cycle ended, that theory didn’t pan out so well.

Some call it “speculating”, some call it “gambling”, but no matter what you call it...

Don’t Do It!



This is where I learned my biggest, hardest and most expensive real estate investing

lessons. The most expensive lessons always seem to be the ones that make the

biggest impact, don’t they?

What I learned from my own mistakes and how to avoid them in the future would

ultimately inform The Maverick Approach— the framework for how Maverick Investor

Group now helps our clients approach real estate investing based on “real estate

fundamentals”.

The Maverick Approach Buying Rental Properties Based on Real Estate Fundamentals

Buying real estate in an appreciating market is great...

If And Only If

That market ALSO has sound real estate fundamentals.

At Maverick we help our clients determine not only what markets are going up in

value (and where they are in the property cycle), but we also look at:

The price-to-rent ratio (how low you can buy the property for and how high you

can rent it). Hence, how good is the potential cash flow margin?

Demand drivers like job growth, population growth and percentage of the

population that rents.



Supply side indicators - how much property is available for sale and for rent in a

particular price point? How long does it stay on the market? What is the

absorption rate?

Affordability - What percentage of the population can actually “afford” the median

home price based on the median income (and how much more can the properties

appreciate before the majority of the population can no longer afford them)?

Expenses. How much do property tax rates, HOA fees and other localized

expenses (which vary by market and location) affect your overall cash flow and

your “capitalization rate”?

Micro Market Factors - What is the ratio of primary home owners to renters in the

community? What are the market rents, the localized vacancy rates and how are

those trending in the local areas?

Whereas it certainly makes sense to “buy in the path of growth” in many instances, be

advised that many investors are buying in certain markets that we consider highly



speculative. Regardless of the home price appreciation trends in these markets, we

absolutely do NOT recommend our clients buy in markets do NOT have the sound

real estate fundamentals that are the entire foundation of The Maverick Approach.

Be sure you know which markets are which.

Learning how to get access to this type of market data is a core component of the

value we provide to our clients so you can make highly informed decisions when

you are ready to buy your investment property.

Mistake #6 Failing to Conduct Proper Due Diligence

Many people get burned because they don’t conduct the proper due diligence on their

properties before they close.

The first step in due diligence should be all of the market analysis (both macro and

micro) listed above in the previous section (verifying rental rates, vacancy rates, trends,

etc.), to ensure you are buying in an “investor advantaged” location. We provide our

clients tools and access to relevant data so they can do all this independently.

Once you have established that, you need to go deeper and investigate the actual

property itself. As the buyer, you are always responsible for doing your own due

diligence. Nobody can do it for you and if anyone tells you they can, run in the other

direction. The responsibility is on you to establish a thorough, uniform due diligence

regiment that should include these items as a bare minimum:

A third party home inspection by a professional home inspector. Ensure

you are the one who hires the home inspector (and don’t simply accept an

inspection that was already done and paid for by the seller). When the home



inspector is hired by you, they work for

you, and their job is to help you identify

any defects in the property that need to be

cured before you close (or if there are

serious problems, to let you know about

them so you can decide not to buy that

property).

Independently verifying all of your

expenses associated with the property

(property taxes, insurance rates, HOA

dues if any, mortgage payment if any,

etc.). Under-estimating or omitting some of

these can skew your cash flow analysis.

Reviewing the purchase contract as well as the property management

agreement (you have a right to get your lawyer to review it as well). Ensure

that you get all your questions answered and that you understand everything

before signing.

If there is a Home Owners Association (HOA), you should confirm it is

solvent. Otherwise, your property value could decline based on other residents

not paying their HOA dues. You also need to understand the CC&Rs and

confirm there are no restrictions on renting your property (I have heard about

investors buying property in communities where the HOA did not allow

rentals…Now that would suck. Confirm before you close!)

“Maverick has been very nice

to work with. They have been

professional from start to

finish and we never had any

sales pressure. Their

customer service was tailored

to our specific needs and we

felt very comfortable through

the whole process.”

Dr. Chris Latvis

Dentist

Avon, CT



Mistake #7 Not Doing the Proper Tax Planning

Residential investment property is the most tax-advantaged asset class in the

U.S. The government has devised a number of major financial incentives to

encourage you to buy and hold rental property. You simply need to know what

they are and understand how to take them. If you are not taking advantage of these

tax incentives, you are losing out on one of the most lucrative aspects of this asset

class.

Now, I need to make the important disclaimer that I am not a lawyer or tax professional,

this is not tax advice, tax laws change regularly, and you need to consult your own tax

professional about your individual situation and the most updated applicable law. Got

it? Ok.

With that said, I can tell you that many of our clients have been able to use their

investment real estate as an incredibly strategic vehicle for dramatically reducing their

taxes. As mentioned in

the first section of this

report, residential

investment property is

depreciable for tax

purposes even if it is

appreciating in value.

You need to remove

the value of the land

and then you can

depreciate the

structure of your



property over 27.5 years. That means if the structure is worth $275,000, you can

depreciate $10,000 per year, and take that as a “phantom loss”. You can then use that

“loss” to offset some or all of the taxes that would be owed on the rental income

generated by the property, for example. There are a number of other potential write-

offs, as well as ways to accelerate deprecation on certain parts of your property. You

just need to know what they are and how to take them, legally.

A number of our clients have also been able to qualify for the coveted “real estate

professional” status, which allows your left over real estate “losses” to be taken

against other forms of income (including earned income from your job or your

spouses job that has nothing to do with the property), regardless of how much

money you make. IRS guidelines for this qualification are tightening so be sure to

consult with a tax professional to ensure it is done properly.

The possibility of using residential investment property to dramatically change your tax

situation is profound. But, you have to ensure you are doing it correctly and legally.

And, as a word of caution here, if you are serious about this you do not want to rely

exclusively on regular accountants who deal primarily with W2 wage earners. You

want to seek out experienced CPAs who specialize in dealing with professional real

estate investors and business owners and are experts in this niche.

Maverick has good relationships with some of the nation’s premiere CPAs that

specialize in working with real estate investors and our clients get exclusive

access and personal introductions. The same is true with asset protection

specialists, mortgage lenders, insurance providers, and other industry experts

that can help you with various aspects of your real estate investing. We have

developed an elite network of the nation’s premiere experts and being a part of

the Maverick community gets you personal access at no charge.



If you would like to schedule a phone consult discuss your real estate investing goals,

as well as any expert-introductions you may need, and to get your questions answered,

I’d like to offer you completely free phone consultation. You have made it to the end of

this report, so you are obviously serious and diligent. We always appreciate that about

our clients and would love to get to know you better and see how we could provide

value to you. You can just click on the link below to register for the completely free

consult so you can get to know us and see if it would be a good fit for us to work

together. We look forward to speaking with you!

###



Special Offer For You:

I would like to offer you a free 30 minute phone consultation

where we can get to know you, understand your financial goals

and real estate investing preferences, answer all your questions

and strategize about how Maverick can support you in meeting

your personal real estate investing goals.

Register Here:





Footnotes: 1. http://www.census.gov/housing/hvs/files/currenthvspress.pdf

2. http://blogs.reuters.com/great-debate/2013/03/07/student-loan-bubble-babble/

3. http://abcnews.go.com/Business/student-loan-

debt/story?id=19150985#.Uaf6ppXr46g

4. http://www.ticas.org/files/pub/2011_Young_Adult_Higher_Ed_Poll_NR.pdf

5. https://www.spice-indices.com/idpfiles/spice-

assets/resources/public/documents/12473_cshomeprice-release-0625.pdf

6. http://www.bloomberg.com/news/2013-05-29/carrington-stops-buying-u-s-rentals-

as-blackstone-adding.html

7. http://us.spindices.com/indices/real-estate/sp-case-shiller-il-chicago-home-price-

index

8. http://drexel.edu/lindyinstitute/projects-reports/reports/


http://www.census.gov/housing/hvs/files/currenthvspress.pdf

http://blogs.reuters.com/great-debate/2013/03/07/student-loan-bubble-babble/

http://abcnews.go.com/Business/student-loan-debt/story?id=19150985#.Uaf6ppXr46g

http://abcnews.go.com/Business/student-loan-debt/story?id=19150985#.Uaf6ppXr46g

http://www.ticas.org/files/pub/2011_Young_Adult_Higher_Ed_Poll_NR.pdf

https://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/12473_cshomeprice-release-0625.pdf

https://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/12473_cshomeprice-release-0625.pdf

http://www.bloomberg.com/news/2013-05-29/carrington-stops-buying-u-s-rentals-as-blackstone-adding.html

http://www.bloomberg.com/news/2013-05-29/carrington-stops-buying-u-s-rentals-as-blackstone-adding.html

http://us.spindices.com/indices/real-estate/sp-case-shiller-il-chicago-home-price-index

http://us.spindices.com/indices/real-estate/sp-case-shiller-il-chicago-home-price-index


About Maverick Investor Group:

Maverick Investor Group was founded by real estate investors for real estate investors.

It is run by investment property specialists that serve real estate investors exclusively.

Vision

To radically improve peoples' lives through real estate.

Mission

To build a socially responsible community that uses real estate as a vehicle for

designing extraordinary lifestyles, living their dreams in the present and affecting

positive change in the world.

Register Here for your Complimentary Phone Consultation:


Maverick Investor Group, LLC

[email protected]

725-222-0488

9890 S. Maryland Pkwy. Suite #200-A

Las Vegas, NV 89183



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