Author name: Erion Shehaj

I help professionals achieve financial freedom through real estate so they can live life on their terms. The ideas I write about come from my 20+ years of experience as a real estate broker, investor, and guide. I’ve helped clients purchase over $300 million in real estate assets to build their wealth. More importantly, I’ve been through different economic cycles and watched patterns emerge. I know what works and what doesn’t for busy professionals with demanding careers. I consider it my job to cut through the noise, eliminate the overwhelming options, and present you with a clear, proven path forward. Too many successful people never achieve financial freedom because they’re paralyzed by options or chasing the next shiny strategy. I am originally from Albania, a rugged country on the Mediterranean sea in southern Europe. I came to the US as an exchange student in 1999 and was the first member of my family to go to college. I believe that we best appreciate opportunities by way of contrast. Growing up in a totalitarian and communist country was not easy – but it has also provided me with a unique perspective that I utilize to spot opportunities and help my clients apply to reach financial freedom. My work isn’t about get-rich-quick schemes or building “empires” that become second jobs. It’s about using real estate as a tool to engineer the life you truly want—where work becomes optional, time belongs to you, and your finances support your values rather than dictate your choices.

April rental market report: Highest rents on record plus units leased soar 24%

Every year since 2007, the number of properties leased during the month of April had been 8-10% lower than the corresponding March figure.

This year, the Houston rental market shattered this well-established trend. According to statistics obtained directly from the MLS for investment grade rental properties, a total of 507 single family homes were leased during the month of April. That figure represents a 24% increase year over year and an 8% jump over last month.

The solid jump in units leased was certainly welcome news. But was this increase as a result of higher demand or lower prices? The numbers answered that question emphatically in April. Average rents climbed to $1578 per month – a 6% increase year of year and a 3% jump over March 2013.  Not only that, but the April average rent is the highest rent on record. So clearly, organic tenant demand is the culprit not reduced rents.

Average days on market came in at a low 27 days  – on par with both April 2012 and last month.

Available inventory of investment grade properties for lease dropped to 465 homes (down from 507 on April 1) on the back of the increase in units leased. When we look at the average units leased over the last 12 months, that number comes in right at 500 properties/month so there’s less than 30 days inventory on the market. The current supply demand relationship points to further strength in the rental market for investment grade properties in the months to come.…

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In the path of growth: Exxon’s mammoth campus under construction in North Houston

During the acquisition phase of your Blueprint real estate investing strategy, the temptation is to focus exclusively on well established neighborhoods. But as a neighborhood becomes more and more established, home prices rise and returns drop. So how can you get better returns without sacrificing quality?

You buy properties in the path of growth.

That well established neighborhood of today was at one point not so well established. Needless to say, investors that purchased properties in the neighborhood during that period paid considerably less money for them that you’d have to pay today. It makes perfect sense: At that time, the investment was riskier since no one could know for sure how the neighborhood would turn out. Therefore it was only right that the return should be higher as well.

So, how can we determine which locations and neighborhoods are going to be the popular neighborhoods of 10-15 years from now? More importantly, how can we avoid the misstep that the location we thought had promise doesn’t turn into a dog instead? To get the answers to those questions, let’s take a look a current case study.

Exxon Mobil’s mammoth campus

. There are over 20 structures being constructed  on a 386 acre site west of I-45 just south of the Woodlands in what the Houston Chronicle is calling a  “mini downtown”. The completion of the project is expected in the middle of 2015. When completed, the complex will house 10,000 employees, 2000 of which will be transferred from Fairfax, VA and the rest will be repurposed Houston employees.…

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Houston housing market: Inventories Shrink Further Pushing Sales and Prices Up in March

The housing market in Houston strengthened further and posted higher sales and prices during the month of March fueled by an ever shrinking inventory of properties. As usual, I want to give you the “espresso” version of the report with the numbers you need to know:

  1. Total sales came in at 7006 properties (19% increase over March 2012)
  2. Active listings on the market were 32,704 (down 22%)
  3. Pending sales  were 4433 (up 6%)
  4. Average price was 236,195 (up 4%)
  5. Median price was 172,000 (up 6%)
  6. Inventory shrank to 3.5 months (down 38% over last year, and down from February’s 3.6 months, too)

I also want to share with you a couple of interesting statistics.

When the sales numbers are broken into price brackets, the only bracket that experienced decline in sales were properties under $80,000. Every other price bracket experienced double digit increases. Why is that? Well, it’s NOT because homes in that price range aren’t selling as well. It’s because homes in that price bracket are becoming fewer and fewer as the market as a whole rises.

Furthermore, when you think about homes under $80k, what’s the first thing that comes to mind? Foreclosures, right. Not all properties in that price range are foreclosures but most of them are. And there’s the second statistic I wanted to share with you. Bank owned foreclosures as a percentage of sales are declining substantially. During March, foreclosures accounted for just 12% of total sales – that’s down from the 15-19% levels we’ve seen this year and the 25% that’s been the norm during the period after the 2008 recession.…

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Fine tuning your asset protection strategy for real estate investing

A few weeks back I wrote about how long term real estate investors can protect themselves from liability exposure.

That article argued that a wise investor that builds a great long term real estate portfolio must also build a strong impenetrable “wall” around it for protection.

A properly constructed asset protection strategy protects you in two primary ways. First, it protects you and your other assets from liability that might arise from your ownership of investment real estate. In that sense, it creates separation between your “personal” assets (primary residence, cash, stocks etc) and your real estate portfolio. Second, it protects your real estate assets from liability that might arise from your ownership of other real estate assets. In other words, it should prevent “liability contamination” within your portfolio.

The proposed solution to these issues is the utilization of limited liability companies as a holding vehicles. And to avoid triggering the due on sale clause in their mortgage, investors should setup land trusts. So far so good.

But after several conversations with current clients on that very strategy, I realized that there were still many unanswered questions. For instance:

Should each property have its own dedicated LLC or should you hold your entire portfolio in one LLC?

If you setup dedicated LLCs will you need to file taxes for each LLC each year and is that practical?

Will you lose important tax benefits like depreciation and tax deferred exchanges if the property is held in an LLC?

Let’s address each of those questions individually.…

Fine tuning your asset protection strategy for real estate investing Read Post »

Fine tuning your asset protection strategy for real estate investing

A few weeks back I wrote about how long term real estate investors can protect themselves from liability exposure.

That article argued that a wise investor that builds a great long term real estate portfolio must also build a strong impenetrable “wall” around it for protection.

A properly constructed asset protection strategy protects you in two primary ways. First, it protects you and your other assets from liability that might arise from your ownership of investment real estate. In that sense, it creates separation between your “personal” assets (primary residence, cash, stocks etc) and your real estate portfolio. Second, it protects your real estate assets from liability that might arise from your ownership of other real estate assets. In other words, it should prevent “liability contamination” within your portfolio.

The proposed solution to these issues is the utilization of limited liability companies as a holding vehicles. And to avoid triggering the due on sale clause in their mortgage, investors should setup land trusts. So far so good.

But after several conversations with current clients on that very strategy, I realized that there were still many unanswered questions. For instance:

Should each property have its own dedicated LLC or should you hold your entire portfolio in one LLC?

If you setup dedicated LLCs will you need to file taxes for each LLC each year and is that practical?

Will you lose important tax benefits like depreciation and tax deferred exchanges if the property is held in an LLC?

Let’s address each of those questions individually.…

Fine tuning your asset protection strategy for real estate investing Read Post »

The number one rule of investing

As the Sage of Omaha eloquently put it, the number one rule of investing is Don’t Lose Money. At first sight it is a blatantly obvious piece of advice although I suspect most investors don’t realize just how sophisticated it really is.

The Case Study

Allow me to share a hypothetical case study with you. Suppose you invested $100,000 in the S&P 500 on January 1, 2006. For the purposes of this example, there are no management fees or costs. During 2006, this index grew 13.62% so at the end your investment would be worth $113,650. The following year it was up 3.53% so your investment grew to $117,661. So far so good. But as we all know, 2008 was not a very good year. The market dropped 38.49% so now your investment value dropped to $72,385. However, during 2009 the market came back with purpose closing the year  with a 23.45% gain and lifting your investment’s value to $89,359. And the rise continued in 2010 when the market was up 12.78% lifting your portfolio to $100,780. During 2011 the S&P 500 was flat so your value was unchanged.

In summary, during a six year spell, your investment had a flat 2011,  four positive years with cumulative gains of 53% and one losing year where your investment lost 38%. So we should be up 15% right? Actually we’ve made a life changing $780 over 5 years. That ads up to two lattes a month! That’s before we consider the facts that over the same period,  inflation “ate” over 15% of our investment’s purchasing power and stock market investments usually aren’t free of management costs.…

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Straight talk on investing in small multi family properties

“I know you are against investing in two to four unit properties – but that’s the direction I’m leaning in at the moment” – Theresa said somewhat tentatively.

The overwhelming majority of case studies or portfolio scenarios I’ve written about involve the acquisition of a portfolio of quality single family homes in great school districts. Therefore, it is not at all surprising that some of you might assume I discourage the purchase of other categories of investment real estate.

But the truth is I’m not against investing in any type of investment real estate. Nor do I have a bias to favor single family properties over all else.

So then, why am I advising clients to focus on single family homes when investing in the Houston market?

Our process to identify target acquisitions is deeply rooted in the principles of our Blueprint real estate investing strategy . In a nutshell, we look for quality, recently built properties zoned to great school districts that would attract long term quality tenants and offer solid returns.

To understand why small multi-family properties don’t fit that general standard, one must understand the concept of “highest and best use”. Imagine for a second that you are a real estate developer and you need to make some decisions on what to build on a vacant plot of land. If the land is a corner lot at a busy intersection with lots of traffic near the Galleria, you probably don’t want to build a home on it.…

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A two word mantra for Blueprint real estate investing

Lately I have been thinking at length about what is at the  core of our Blueprint real estate investing strategy. There are many moving parts and elements to consider when putting together such a strategy: Location of properties, assets specs, financing, asset protection, tax implication, exit strategies etc.

But as crucial as are all those aspects, at the end of the day, the Blueprint real estate investing strategy can be summarized in a simple two word mantra:

Buy Quality

When you buy quality, you are really buying good tenants that take care of your investment and pay rent on time. When you buy quality, you are really buying low turnover rates, long term leases and low vacancies. When you buy quality you are buying more options, more flexibility and top dollar exit strategies.

And last but not least, when you buy quality, you always outpace those who buy cheap.…

A two word mantra for Blueprint real estate investing Read Post »

Houston real estate market roars into spring + Introducing HIGR chart

It’s as if someone flipped a switch on January 1, 2013.

The market has not been the same ever since. During the previous two years (2011 and 2012) the  Houston real estate market reversed course and started its steady climb of recovery. Sales started to come in at double digit increases year on year and prices rose slowly but surely. Inventory levels were dropping but there was sufficient supply to serve the growing demand. Rental prices were rising as tenant demand soared in response to population growth and strong job creation numbers in Texas.

Real estate investors responded in kind by acquiring more properties to serve that demand. Up to this point, nothing out of the ordinary. After the slow and lethargic sideways market we experienced after the 2008 recession, the daylight of recovery came as expected. Until this January.

The consumer confidence that had been the missing ingredient for the robust recovery that ultracheap money should have created, was finally here. Job numbers started to look better as employers put behind the uncertainty of a three year old election campaign. Most people didn’t have to constantly worry if the next week could bring the dreaded pink slip. And it’s as if they looked around and realized that with mortgage rates this low, there would be no better time to buy in a very long time.

So, sales grew at an accelerated pace and carried prices higher with them. Bank owned properties made up an increasingly smaller part of total sales as the much speculated about “shadow inventory” never materialized.…

Houston real estate market roars into spring + Introducing HIGR chart Read Post »

Asset protection strategy for long term real estate investing

Throughout ancient history, the most powerful monarchs in the world built grandiose cities that were the epicenter of trade, commerce,  art and civilization.

Rome, Athens, Babylon, Constantinople just to name a few, all had a similar configuration. The center of the city was a reflection of the monarchs own power and wealth with its royal palaces, buzzing markets, amphitheaters and temples. But in the outskirts, there were always strong walls to protect the city from possible attacks from those who were after the riches that the center offered.

In my opinion, that is an excellent metaphor for the crucial importance of a solid asset protection strategy for your long term real estate investing. When you execute our Blueprint real estate investing strategy, the goal is to build something beautiful that allows you to accomplish extremely important goals. A net worth that’s large enough to produce an income that gives you freedom. Which in turn removes most obstacles so you can pursue the life you want, whatever that entails. Follow the time tested principles we outline and you will build your beautiful “city center”.

But that beautiful thing you built, requires a strong, impenetrable wall around it to protect it from outside threats. Neglect asset protection and all your disciplined efforts and sacrifices expended over a decade of investing could all have been for naught.

Liability exposure for real estate investors

Real estate investors face two major types of liability that a solid asset protection strategy can help combat. The first is liability associated with the asset(s) owned by the investor.…

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