Real Estate Investing In The Northwest & Circle of Wealth Fund III LLC – Impact Investments Podcast


welcome everybody you are attending the
circle of wealth impact investment podcast my name is Heather Dreves and
I’ve got my sidekick Eric good morning everybody glad to be with you yeah
welcome I know a lot of you that are attending the podcast or even listening
to the replay our repeat listeners so we appreciate your continued support we’re
pretty excited about the podcast I feel like we’ve gotten quite the following
and we’ve had some really good feedback from it so so we’re growing into it yeah
absolutely I mean Eric and I aren’t going on the road anytime soon but you
know I think it’s been informative I do want to say that the last podcast we had
and you can replay this at YouTube and Vimeo is that correct we had a guest
speaker from Mountain West IRA and I don’t know about you Eric but she was
really helpful I send a lot of clients to her and she was wonderful with
assisting them on how to roll over their IRAs and also 401ks right and there’s
there’s there’s this you know uncertainty and nervousness with going
from a traditional IRA to a self-directed IRA and she has been
amazing I was just holding customers hands and walking them through the
process yeah I mean a lot of the clients that I dealt with had these accounts
that have been sitting around for years and they just didn’t know how to even go
about getting and moved over so that they can’t start investing in things
like our funds and notes and whatnot basically alternative investments so if
you have interest in that let Eric or myself know just kind of on a side note
and we will get you the replay of that podcast because I thought she was really
informative so good information very good information also we have live chat
up and running so if you’d like drop a question in there and we will address
those as we go yeah absolutely so we’re going to get started here we’ve got a
lot to cover fund 3 it’s been pretty exciting has been opened a month now and
we’ve had some exciting things going on so we want to share that with you but
first we’re gonna give you some updates on the current market and then we’ll go
from there okay let’s talk about the market so SP
500 year to date 19.4 Dow Jones 15.7 Nasdaq 22.5 you know we’ve we’ve just
seen range bound trading on the equity markets for the past several months as
as everyone out there that follows the markets knows you know where we’re
trading on on you know news articles and headlines and we’re trading on tweets
right so a lot of its instability and the equities markets I I do feel like
you know we’re we’re one negative tweet away from testing those August lows that
we saw around the 28 50 mark on the S&P 500 so look out for that I think I think
investors Heather are just struggling with the proactive versus static
management style right do I do I do I raise some cash take some risk off the
table and rotate my assets or do I just sit and ride out the business cycle like
my financial adviser who gets paid on assets or percentage of assets tells me
to do and and I hear this from investors almost daily is you know I’m not sure
what to do about my my equity portfolio my financial advisor just tells me to
leave it be but I think there’s a much higher likelihood of the market going
down than up which makes sense because I mean the markets up the markets up over
300% since March of 2009 okay so do we think that the likelihood is higher that
it’s going to go up or go down in the intermediate long term so I think you
know it’s up to each individual investor obviously but it would be prudent to
kind of take stock of where we’re at from from an equity standpoint and you
know what what’s best for you especially dependent on your age because a 30 year
old investor is obviously a lot different than a 50 or 60 year old
investor so with that said the yield curve you know we’ve seen the yield
curve widened slightly the short-term rate one point six five percent the
ten-year one point seven six percent so even though we’re not inverted anymore
you’re definitely not getting a lot of premium for the extra duration so you
know as a country and as a world economy we continue to be yield starved and that
doesn’t look like it’s gonna change anytime soon
especially with the current federal funds environment and what’s going on
with those interest rate reductions that we’ve seen and will probably continue to
see in the short-term what else you know this is interesting retail sales posted
their first decline in seven months Wow that’s that can be paramount only
because consumer spending represents two thirds of the entire economy so we
definitely don’t want to see that get too sluggish
I’m not overly concerned especially coming into you know the Christmas and
Black Friday season but that’s definitely something to keep an eye on
especially if you’re heavily overweighted in inequities
let’s see some good news the Wells Fargo housing market index rose three points
which marks the fourth consecutive advance so that’s good news
with that said builders are still showing signs of caution with the
Chinese tariffs and you know the possibility of an economic slowdown so
cautiously optimistic from a building standpoint and I would say real estate
in general and lastly the 30-year mortgage rate is at a three year low no
surprise there we’re on a declining interest rate environment and the Fed
seems to want to or at least they’re signaling for they’re signaling that
that trend is going to continue so if you are Lin the market to buy a home now
would be a great time to lock in a mortgage and Heather that’s all I got
for a market okay well it’s interesting the you know Eric and I both prepare
separately for these and I find it fascinating that when we get together
usually the things that he’s going to note and talk about are a lot of the
same types of things I think you know you do a really great job at more global
overall markets one of the things that I think I focus a little more closely on
is our our current market in our our area in the coeur d’alene and Spokane
Washington market and you know the main reason for that is as a fund manager we
are buying real estate assets in these areas and I hear from a lot of clients
that I’m talking to about the fund as some of you may know 25 percent of our
fund balances can be held in realist and as always one of the biggest
concerns is what if there’s a correction in the market they just came out with a
big article this week in our current newspaper and also on the news that the
selling the housing market in the Spokane Washington market is still hot
especially for homes under two hundred and fifty thousand dollars which sounds
probably crazy to some of you in the California markets and whatnot but we
have a huge opportunity as a fund to take advantage of this that is our
target market is those first-time homebuyer homes under two hundred and
fifty thousand dollars so we see a huge opportunity here the other thing that
they notated is there’s no inventory you know sales have gone down but it’s not
because people aren’t buying it’s because there’s not enough inventory out
there which is interesting because I had participated in a fund meeting yesterday
with our construction crew and you know that’s one of the things we talked about
is now is the time to buy and you know especially with winter coming around so
that we can have those houses on the market and ready to go so we’re excited
about it we think that the Spokane market is a great market to be buying
real estate assets as well as Coeur d’Alene I mean for those of you folks
that aren’t familiar with Coeur d’Alene Idaho do a little bit of research it’s
become very popular for vacation homes we get a lot of people retiring here
so the housing market you know just in this general area where our corporate
office has gotten really hot too so we’re excited to venture into that
market yeah so we want to talk a little bit about the fund you know this is the
hype right now up until now we did not have an opportunity for people that were
non accredited to go into a fund environment we are one of the only
reggae funds in the United States that has the model that we do that mainly
sells off our risk with the notes that we originate and selling those off to
end lenders and then participates in real estate assets so we’re super
excited about this I don’t know about you but I’ve gotten a ton of great
positive feedback about fund 3 and the ability to go in for a thousand dollars
I mean there’s just nothing else out there
with that kind of opportunity not only is the fund one of a kind
I mean that’s the issue right now is where do you put your money if assets
are overbought you know so the stock market is is is a very shaky place to be
in the short term for sure the bond market is brutal that yields are at
all-time lows you know so what do you do if you’re gonna investor just a regular
investor that has a nine-to-five and a family and you don’t have hours upon
hours to spend doing research and this and that where does the regular investor
put their money to have some sort of comfort and get some sort of attractive
yield that will help them achieve their goals it is very difficult to find that
asset class in today’s investment sphere if you will well and and also backed by
real estate I mean right you know if you talk about people that have full-time
jobs and you know I can attest to this because I tried this trying to rehab you
know getting into the real estate and doing things to grow your net worth and
you know create a legacy for your family is very difficult when you’re working
full time so the fund is a perfect opportunity to go into an environment
where you’re participating in those real estate assets and those notes and you
don’t have any correlation to the stock market very little correlation to the
bond market you have true diversification right so we opened our
first fund in 2013 so we’ve been in the fund industry for a while in 2014 we
opened our second fund which we called fun to and this was available in
addition to the first fund to accredited investors only so that means you have to
have a net worth of a million dollars or more or you can qualify through income
standards as an individual or a married couple so unfortunately it it quickly
defined who could go into that fund or those funds and then the people that
weren’t accredited the only opportunity that they had to participate in these
type of assets as notes I know it’s like it’s one of those things where it the
wealthy gets wealthier yeah obviously we have nothing against the wealthy but you
know when you have an investment opportunity that’s that second time but
you’ve got to be wealthy your your your admission is to be wealthy you know
that’s you know we don’t want a Segway or you know segment the market like that
and we want to bring this strategy to everybody so August 30th of this year we
were happy and excited and just overwhelmed that we were
our third fun the circle of wealth fund 3 we have 12 months to raised 50 million
dollars so there is a 12 month period of time that we can raise capital into this
fund so that is something to be mindful of if you’re thinking that this might be
a good fit for you and it is open to non-accredited investors you do not have
to be accredited minimum is $1,000 to go into it why we open the fund it’s pretty
simple it allows us to raise money for anyone not just accredited investors
that’s the big one it offers our clients a financial stake and rewards early
adopters for the role they play in the funds growth it allows our clients to
also who were once unable to participate in passive returns to get into the fund
environment and it expands real estate entrepreneurs access to capital we
continue to fund more deals more often Co goes on fire we just about doubled
our staff so we have loan officers working tirelessly to get all of your
broker’s deals funded so we don’t have a concern with deal flow if you have
interest you can always visit our website to secured Investment Corp comm
once there you can get more information you can contact Eric or myself and we
can talk to you a little bit more about the fund why we think you should get
involved with the fund and Eric already touched on this it’s not correlated to
the stock market you know I don’t know how much clearer we can be about that
you have no management responsibilities you don’t have tenants calling that
their toilets backed up you’re not trying to rehab a house and you’re over
the budget and things aren’t on the same timeline that you thought they should
the cash flow our fund does pay out every month you do have the opportunity
or the option to actually roll those dividends back into the fund most of the
people are doing that that I’ve been speaking with it’s protective equity
provide shield against market volatility there is huge investment diversification
you know even if you are a lender that wants to buy a note let’s say you have
$50,000 you buy one note that borrower may or may not make their payments if
they stop making their payments you are not getting your payments on a monthly
basis when you go into a fund environment you’re diversified that
$50,000 could be spread out over 400 notes there’s tax advantage strategies
available we talked a little bit about that you know if you have an IRA or a
401k that’s not doing anything you should definitely look into rolling that
over to a self-directed custodian that gives you the opportunity to invest in
alternative investments yeah that’s a good point Heather I actually spoke with
a customer this morning he’s been in annuities he’s been sold several
annuities by a financial advisor and he’s got an annuity that he’s been
holding that some eight-year long contract he’s been in it for six years
and the the account value was less than it was when it started yeah and this is
at a time where the market is ripping real estate’s ribbon and this poor guy’s
stuck in annuity for six years and it’s less than it was initially so needless
to say he’s out of the penalty phase he’s gonna be transferring that over to
a self-directed IRA and into fund three so I mean just look at what you’ve got I
think half the battle is investors in general don’t know what they even own
right you know they know they’ve got investment accounts and there’s
something going on in there and they hope and pray it goes up but try to do
more than that take stock of what you’ve got see how its performing and give us a
call if you have any questions because we’d be more than happy to help you well
I talk to a lot of people that have old 401 k s– from five jobs ago and they
have no idea where it’s at or what it’s doing so that’s a perfect opportunity to
take advantage of that get it rolled over and get it put in to put it to work
also ability to invest in real estate without the hassles of being a landlord
you know we’ve already talked about that being a landlord I’m one is not that
glamorous neither is rehabbing homes so let us do
the heavy lifting for you alignment between the investor and the
fund manager fund manager does not make money unless investors make money so we
have what’s called a preferred rate it’s not a guarantee but on fund three it is
six percent which means the first six goes to the members of the fund so we
are not profitable as a company as a fund manager unless we get you at least
six percent and then everything above and beyond that is split 50-50 you also
have the ability to keep your IRA funds fully deployed for longer peer
of time this is a common complaint I get and you would think that investors that
fund notes would be happy when their borrowers pay off because they’re
successful most of the time they aren’t especially if they’re a paying borrower
the last thing they want to do is go find somewhere else to put their money
because that money goes back to their IRA custodian the custodian holds it for
a week then we have to find them another note
or put it in the fund there’s another 10 to 15 days that it’s underplayed so you
know honestly it’s probably 20 to 30 days that IRA funds are sitting there
under ployed when they get paid off on a note the fund that money’s always out
there working so let’s talk about historical returns because I think that
that’s something important to point out now all precursor this so we keep legal
happy Dan these are not guarantees historical performance does not
constitute future performance but I think it’s important to point out like I
said we’ve been in the fund industry for a while we’ve this is not our first
rodeo so I’d like to talk a little bit about our historical return so in 2014
fund two paid out a annualized yield of nine point two four percent 2015 was
eleven point eight two as you can see we had to get ramped up and get some assets
in their fund some notes buy some real estate 2016 was fourteen point four four
percent 2017 was eleven point zero six percent and 2018 was twelve point two
six percent so these are the same types of yields that we anticipate fund three
has the ability to make our target yield right now is ten percent we tried to
take a little bit more conservative route but what I can tell you as fund
three is going to participate in the same activities as fun too so again this
is not a guarantee or a promise that that’s what fund three can make just
simply a picture of what our other fund has done in its historical returns sure
so a lot of you are probably saying well how does how does the fund actually
produce and create income so there’s a several different ways income is
produced from the sale of properties held by the fund so these are the types
of properties that we’re talking about in the Spokane market Coeur d’Alene
market once we sell those all those profits go back into the fund points on
any notes that originate so our kogo notes fun three
will participate in originating those they earn a yield off of the origination
points when we close on those interest on notes that are carried by the fund
and then we sell those notes off and I think Eric does a really good job at
explaining the risk that we’re selling off so maybe you can talk a little bit
about that yeah I mean its unique right because the average lender is in search
for deal flow they’ve got access to capital but they need deal flow we’re
the opposite we have extremely strong deal flow which allows us to turn our
inventory and shut our risk and what I mean by that is we originate short term
mortgages we look to sell those mortgages in the secondary market
immediately so we’re looking for an interest rate spread not to hold the
loan a duration so we’ll originate as say ten percents and we’ll sell it on
the secondary market it’s a 7% retaining that 3% spread and doing that over and
over again with our capital the only reason we’re able to do that
successfully is because we have extremely strong deal flow so that is
that that in that is the value proposition from a risk standpoint right
because people think oh mortgages you know if the economy goes bad and people
start losing their jobs you know they’re gonna default on their mortgage and and
and as a fund member I’m going to be at risk with this strategy we try to
eliminate that risk component as best we can the average duration that we will
hold a mortgage is 64 days and the average duration of the mortgages
themselves is 18 months so you can see we’re moving them extremely quickly and
our notes sold very quickly I actually have two examples of our first two notes
fund three originated so I’m pretty excited about that I can tell you that
one of them was actually spoken for in regards to an Inlander buying before we
even closed it like we had to hold him off from wiring his funds were like it
hasn’t closed yet so they do they do turn very quick we have a very big
database of clients in excuse me institutional and also individual note
buyers that buy our notes so we don’t have a lack of
people that want to buy notes typically it’s more of a inventory issue so I’ll
talk a little bit real quick about this first note that we funded was a property
out of Vicksburg Michigan this was a refinance transaction so these people
had actually already bought this property came to us needed some money to
finish the rehab so they had a lot of skin in the game so we funded a loan for
eighty two thousand five hundred and fifty dollars this one turned within
like two days rate of return that we paid our end lender so the person that
bought the note got ten percent and the fund kept four percent so we will
continue to get a four percent Interest read on this every month when these
people are making their payments our servicing department breaks up that
payments the fun gets its interest spread the UH Thunder gets its note
right so pretty good opportunity this property was assessed at or appraised at
a hundred and twenty seven thousand so we had a sixty five percent loan to
value we have huge equity huge yeah the second one we did was out of Tallahassee
Florida this was another refinance this guy had
actually already rehabbed this property it’s a great little property but came to
us because he was leveraging it and buying another property very
sophisticated investor so we originated a loan for sixty thousand five hundred
we paid an end lender nine percent and we kept an interest spread on this of
two and a half percent so twelve-month known this act was actually written out
of fifty percent loan to value so there’s a 50% equity play in this note
also so the other thing that we talked a little bit about is the properties that
we buy in the Spokane Washington market and the Coeur d’Alene Idaho market so I
thought it might be interesting to see a couple of the projects I know these
aren’t ones that we’ve done on fund three yet but these are actually two
specific projects that we bought for fun too
we rehabbed them and sold them so I just thought I’d share a little bit of info
about that this was a property out of Spokane that we bought for a hundred and
thirty five thousand our list price was a hundred and ninety nine thousand we
sold it actually for 206 it got in a bidding war it was under contract in
five days of being listed and we made a profit for the fund of twenty one
thousand five hundred and eighty four dollars so super exciting I mean
that’s a no-brainer I think this thing by the time we bought it and turned it
was in under 90 days that’s huge profit for the fund the other one I was going
to show you was a property also out of Spokane sell price was 179 hundred I
can’t even talk today a hundred and seventy nine thousand nine hundred we
sold it for a hundred and eighty five thousand five hundred and fifty dollars
so this is another one that also went above and beyond what we listed it for
and we had a profit of twenty one thousand five hundred and one dollars so
another big win for the fun so we love those those things really juice the
yields of the fund our fund reports actually break out interest earned
profits from properties and whenever we have big quarters with properties you
know and we sell four to five we have huge returns so it’s easy to see that
this is a good strategy for both of the funds so do we have any chats in I think
before we get into that I think I let me give this to you here I think one thing
that we we don’t talk about enough is the investment committee you know and
our our our CEO Lee Arnold’s is the chief investment officer and has about
twenty years experience in flipping real estate has done over a billion dollars
in transactions and is a huge huge part of our success here and I don’t feel
like we talked about him you hit the role he plays enough because he is a
secret sauce and the reason why we do our you know real estate transactions
here locally in the Spokane in North Idaho market is because he’s the mat
he’s the master of this area I mean no one has a better pulse over the real
estate market in Eastern Washington then he does and then I also say my partner
here is probably one of the most knowledgeable people in the industry
when it comes to private lending notes and that side of the business so we’re
extremely well equipped from a manpower standpoint
and I just don’t think we really give ourselves or give you enough credit in
that regard that’s nice you thank you I will tell you it takes a team of us I
mean we you know one of the things that I think a sets us aside also with our
funds is we’re very organic like we are not relying on buying leads to originate
notes from other people we have our own origination Department a lot of our
clients whether they’re brokers are borrower’s come from our education you
know that feeds into that deal flow one of the things that we did when we first
started the funds and we were buying real estate we were trying to sub out
all the work right and we found it just was impossible I mean the timelines and
the quality of the work and this is a huge a testament to Lee he said forget
this we’re gonna build our own construction through he got our
contractor’s license and we have our own team so we don’t rely on subs to get
these projects done we meet on a weekly basis on all of those projects as a team
I was in the meeting yesterday there were like 12 of us in the room it was
crazy we have an amazing accounting department you know and without Eric
raising money for the funds I have Lisa in my office selling the
notes so it takes a tribe you know but I do think that we have a rockstar team
and we have it down to a science you know it’s a well-oiled machine and is it
always perfect do we always buy the best product you know the properties doesn’t
not ever pay absolutely I mean those things happen but I think because we
have such a close pulse on it and we meet so often as a team we can
strategize and pivot very quickly to you know change strategies identify problems
you know or identify activities that we think are gonna be more profitable so I
appreciate that thank you call us yeah absolutely so I put our contact
information up on the PowerPoint so you should be able to see that you can visit
circle wealth fund comm the funding departments number is you had a little disconnect the feed was
not great and then it came back on so I hope you’re still able to see us and
hear us but Rick had a good question he asked what the minimum tie up is for the
fund the minimum tie up is 12 months so we’re in for 12 months after the 12
month mark you can divest up to 25% of the account value per quarter thereafter
great thanks for the question Rick that’s a really good question not to
beat a dead horse but the minimum minimum to go in is $1,000 and it has to
be in thousand dollar increments so you can’t put fifteen hundred dollars or
twenty five hundred and so forth we can help you if you have IRAs and if you
need any of that help please let Erik or I know we’ve got a great resource that
will help you if you need to roll it over if you already have them set up
with self-directed custodians we can also walk you through that process
there’s some forms that they typically require you to fill out but we’d love to
have you be part of the fund I mean it’s as simple as that
we think this is a huge opportunity to and get involved not just with the fun
but with the company I mean you’re helping our borrowers accomplish their
goals and dreams our brokers people that come through our education that are
trying to get started as you know are real estate investors so it’s a pretty
exciting time to get involved with it I totally agree yeah so again if you want
to get a hold of Eric or I call our office at eight hundred eight nine eight
two seven one seven or you can visit our website at circle of wealth fund comm
and you can request more information from there absolutely bye guys thanks
for joining us thank you have a good day

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