Serving the Real Estate Industry Since 2007
As we were making our social media rounds today, we came across a fantastic post promoting one of our editions.
We were delighted to discover it was posted by one of the most influential women in the real estate industry.
It made our day, thank so much for acknowledging our work, Patty Arvielo, Co-Founder of New American Funding .
-Written by Lori Peebles, Staff Contributor – Special Feature for Immediate Release –
In a private room in the Marina del Rey library, a handful of people united to discuss the latest real estate market trends in California. The dock-side event was hosted by Linda Pliagas, a journalist.
After spending much of her adult life working in media for a weekly newspaper, a home-school magazine, and several years as a freelancer for a variety of magazines, Linda felt compelled to share the knowledge acquired from a few of her “lucky” local deals.
“I did a couple of transactions that were truly life-changing,” she says, and explains: “I discovered that by simply buying and holding real estate, I could actually make more money than working crazy hours in media.”
She tied in the event by sharing a digital issue she had written and designed of what would later become Realty411.
“My first simple, eight-page digital issue chronicling some tips and anecdotes from my deals was shared around the nation by people in my sphere of influence in Los Angeles and the other cities we owned properties in,” she recalls.
“I even received calls from New York City about it. I didn’t even have a formal DBA! I just put out a little e-mag and it went viral. It was amazing!” she exclaims.
“I knew people wanted information, they wanted Realty 411 from me,” she laughingly explains, adding: “My friends, colleagues and family all knew I was an active investor, and I couldn’t go to a chamber meeting, wedding, or dinner party without being hounded.”
The only real estate investment publications to exist at the time were either sold at newsstands or paid subscription. After previous experiences as a traditional newsstand magazine publisher, she decided to go in the opposite direction and give away information.
The move may not have made money initially, but it certainly made an impact.
Realty411 is credited with being the first viral and freely distributed magazine serving the needs of real estate investors. Realty411 is still hosted on numerous websites and many platforms, reaching up to 30,000 online viewers per issue, on one platform alone (Slideshare*).
Realty411 now also hosts complimentary expos and conferences around the nation, produces a radio podcast, numerous online social networks, and publishes special-edition issues as well. The company recently also teamed up with veteran producers and filmed their first creative TV pilot, Property Pitch, which is being screened at their events this year.
Her entry into journalism began in high school, when she was chosen by her English teacher to work on the student newspaper in Imperial Valley, California. She moved to Los Angeles to escape the heat and attend California State University, Long Beach.
The media bug bit deep and Linda dropped out her junior year to launch her first of many national and local magazines. She ended up completing her degree years later, but by then she had designed newspapers and magazines; pitched story ideas for PR clients; and sold advertising, not only for her publications, but also for other publishers.
After working in media a number of years, Linda realized all her hard work was not really leading her towards the path of abundance.
“I knew media was not regarded as a highly-lucrative profession, but I had a passion for journalism early on. After we purchased our first home in California in 1993, and it nearly doubled in a few years, I knew that real estate could be a great supplement to our income.”
While in the beginning she purchased real estate the “traditional” way, through her expanded knowledge of creative real estate deal making, Linda is now able to put together transactions often with little, if any,
of her own funds. Plus, her skill set as an investor, negotiator, and market forecaster has been sharpened from the 11 years of leading Realty411.
Linda and her husband and real estate partner have owned properties in five states around the nation. Their goal is to help ordinary people create extraordinary lives with real estate. “Even if you purchase one property and let the tenant pay the mortgage, when you retire you’ll be in such a better position that if you had not do so.”
The investment e-zine that began as a hobby now motivates thousands of readers online from millennials seeking to learn to wholesale properties to sophisticated seniors wanting to add passive returns to their fixed-income budgets.
“I enjoy sharing information, which is why I felt a calling for media and why I named the magazine Realty411,” Linda says. “To me a great day is when I receive an email or phone call thanking me for the resources we provide, and I get that often.”
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Article by Bruce Kellogg
“Amortizing” Versus “Balloon” Notes
An “amortizing” note is one where the principal amount is paid off over the term of the loan. A “balloon” note is one where the payments are not sufficient to retire the debt, and an outstanding balance is due at maturity.
What Is The Problem?
The problem arises when the borrower does not have the funds necessary to pay the “balloon” amount when it comes due. Oh, oh! So, here are some ways to deal with that!
Refinance the Property
The first recourse for an owner who wants to keep the property is to refinance either the property itself, or another property in the portfolio.
This is a good approach as long as financing conditions are favorable. If conditions are not favorable, other approaches will need to be considered.
Sell the Property
If the owner does not care to own the property any longer, they can sell it and have the sale pay off the loan. Or, they can sell another property to pay off the loan. If conditions are not favorable for selling, again, other approaches will need to be considered.
Renegotiate With the Lender
This is not an ideal approach because the borrower is negotiating from an inferior position. The lender “has the upper hand” because they can always foreclose.
So, the borrower should offer the lender a monetary “inducement” for an extension, either a fee, an increase in interest, or payment amount, or both. But, it gets the job done! (Unless the lender says, “No”!)
Protective Note Terms
The best way for a borrower to protect themselves from becoming in an uncomfortable position is to negotiate protective terms in the note in the first place. One might be called a “rollover clause” or an “extension”. Here, for example, the borrower gets a time extension, say two years, for a 2% interest rate increase. This must be written in the note as one of its terms.
Another approach is to convert the note into an amortizing one when the balloon payment is due. Again, these terms need to be negotiated when the note is written and included with the other terms. In some cases, lenders do not need a cash payoff and enjoy receiving reliable note payments from a proven borrower.
Bring In A Cash Partner
If the above approaches aren’t working, the borrower can bring in a cash partner. This basically involves selling a partial interest in the property for cash to pay off the “balloon”.
An escrow is recommended with title insurance, and an attorney should draw up an agreement between the parties, who might not be familiar with each-other.
Return the Property to the Lender
This is the least-desirable alternative in most cases. It involves giving up. If it’s going to be done, it needs to be done right, with an escrow, deed with a “Deed-in-Lieu-of-Foreclosure” recitation, title insurance, and transfer of any rents and deposits back to the lender.
The lender should cancel the note, and return the original to the borrower. The lender should also record a “Full Reconveyance” in the escrow to clear the title.
File Bankruptcy
This is an alternative, but a risky one. The day a bankruptcy is filed, a 30-day “Automatic Stay” of all collection actions is established.
After 30 days, the lender can file a “Relief from Stay” request to foreclose on the property.
There is a hearing, and in the case of homeowners the bankruptcy judge will urge the parties to work something out.
In the case of investors, the “sympathy factor” is usually low because investors are considered to have resources and several years to handle the “balloon”. The lender is due the money, the judge is likely to rule. (i.e., no relief!)
Conclusion
A “balloon” payment is one of those things that isn’t a problem, until it becomes a problem. It is best to deal with it up-front, in initial negotiations, when the note is originated.
During the term of the note, keep working to pay it off. If the due date comes and the payoff funds are not in-hand, find expert help. You’re going to need it!
Good luck…
Bruce Kellogg has been a Realtor® and investor for 36 years. He has transacted about 500 properties for clients, and about 300 properties for himself in 12 California counties. These include 1-4 units, 5+ apartments, offices, mixed-use buildings, land, lots, mobile homes, cabins, and churches. He is available for listing, selling, consulting, mentoring, and partnering. Reach him at [email protected], or (408) 489-0131.
