Note: To follow is an excerpt of an interview with Brad Harker, Land and Loan Specialist with Kingston Management Services LLC, a successful bidder of FDIC distressed assets, who discusses the intricacies of this asset, and provides guidance on how to achieve investment objectives via land purchases. To listen to the show archive or download an MP3, go to www.IncomePropertyInvestmentTalk.com/081209.]

Mosca: Why is land an important part of any investor’s portfolio?

Harker: The homes that sell in the United States are obviously a very integral part of this economy. Land traditionally has been a great asset to hold on one’s balance sheet. It also has become a fantastic investment tool. It’s also obviously a great opportunity for purposes of development and building lots and homes eventually. So, land is a very diverse asset and in a market that we would consider a cycle like this that is unprecedented that it definitely has some things that we need to understand about it but it is no less a great opportunity. It’s a place we should really be paying attention to and watching as we look to rebuild and prepare ourselves from a financial perspective.

Mosca: The Kingston Company. Not your traditional household name. Can you tell us about Kingston Company and the background with your FDIC bidding package?

Harker: Kingston Company and Kingston Management Services and all of its participating members and partners have holdings. It’s the belief of KMS that this is a viable business for the next five to 10 years simply because we have so much jockeying, reshuffling, within the bank sector. As we look at these assets, Kingston has a very different approach and we see this as an opportunity to create a win, win, win, if you will between ourselves being in the business, the investors and the borrowers that pick out these loans, and the American tax payers who are looking for as much of a recovery as possible. We secured that successful bid because we have a desire to work with the borrowers that took out those loans in the first place and aid those local areas, not necessarily create a greater problem. For us, it’s exciting to see viable projects continue.

Mosca: Can you talk to us about the ANB package itself?

Harker: If you have $5,000 or $10,000 or up to several million dollars in your account all can play regardless of real estate experience. The laws of supply and demand will never go away and eventually we will catch up with our inventory. Anybody can get involved and the simplest way to get involved is to buy a finished lot. If you find a finished lot right now the operating word is basis, or the value of that lot compared to what you bought it for. As we get more complicated you may choose to buy and build a home, a great investment strategy where you will find a very comfortable return on money. Other groups are coming in and buying a bulk of lots, perhaps the remaining 10 lots in a 20-lot subdivision, and they are able to get a much better price.

Mosca: Any trends?

Harker: One interesting strategy is the investor who goes to builders, some of the larger national builders and talk about a takedown strategy, meaning the builder can buy maybe three or four lots upfront and buy two every month at their pace. We call it a takedown strategy but it allows the builder who is willing to pay closer to market value for that lot whereas the investor has been able to acquire that lot at a bulk rate, at a discounted rate based on the volume.

Mosca: There are a lot of opportunities here. It all goes back to the individual investor, what the investor is looking for, what their risk tolerance level is, where they are at right now, and how much they have to invest, right Brad?

Harker: Exactly. There are a lot of tax advantages with owning property and various things that not being one licensed to give that advice talk with your accountant and talk about different places that you can invest in land and utilize that for tax purposes, obviously, if you sell land to exchange it into other types of properties as well. We have 1100 loans which is actually close to 6000 properties. Within that, we have hundreds and hundreds of lots, parcels of grounds ranging between five and several hundred acres. For someone that wants to get involved the easiest way to do it is to visit the virtual deal room on your Web site at Income Property Investment Talk dot com. We have a lot of property in every single stage of the entitlement process, where a lot of the guesswork and a lot of the risk are gone. It’s a matter of buying it right, being familiar with your market and what homes will sell for, and then building the right product on top of that lot.

Mosca: I read an article about a husband and wife who own a particular piece of property their whole lives and now they can no longer afford the mortgage payment. My thought is wouldn’t it be nice if I had the money and I invested and I bought the loan and then I worked with that husband and wife so they could keep their property. Is that a possibility within your package?

Harker: Absolutely. Basically, the process of that real property is secured usually by some sort of an institution in the form of a note, mortgage, a deed or trust and so what a lot of people are doing is they are coming in and saying maybe I know the person that took out that loan in the first place and I'd like to see that home finished. There are absolutely some great opportunities from the security standpoint to get involved not necessarily buying the real property but to actually buy the note. There are several groups that have different strategies whether that be to on a larger scale to foreclose against the property and it allows them to have a little bit more control throughout the process and just to protect their interest. This is a great time to get involved in real estate. Start building your portfolio now. There is no better time to buy then right now.

Mosca: [Michael Madsen of RealSource Retirement Services joins the show]. Can IRA investors pull together their funds and invest in some of these opportunities and possibilities?

Madsen: Absolutely. In fact, we've seen quite a few clients actually do that and be very successful in doing so. It's allowable. People just aren't aware of it but you can do it and if you have further questions on how to make that work give us a call and we will walk you through it. We all work hard for our money and with our money why shouldn't we be able to invest it in what we know. We had the status quo against us for a long, long time that we weren't under control of our retirement but that's changing. Government is passing laws and regulations that are allowing people to control their own funds but no one is going to come knock on your door and tell you to do it. It's something that you have to go after and you have to want it and you have to seek it yourself.

Mosca: Mike talks to a prospective investor and this investor has $25,000 in her self-directed account. The account might be larger but maybe this investor is saying she wants to test it out first before putting a significant percentage of her IRA funds into real estate. Are you saying that there are opportunities in that package for someone who has something like that?

Harker: Absolutely. There is always a place to start and we have a lot of people that do that. They test the waters and have a great experience and they come back with a much larger investment position, so absolutely.

Madsen: The problem is a lot of people run into restrictions. That’s where establishing relationships is key. We have relationships with one or two banks who will help you leverage your IRA and find a property. Once again, you better have the relationships and get in touch with the right people if you want to make something like that happen.

Mosca: What is your golden nugget for today?

Madsen: I would say deals and relationships. If you are out there listening please do not underestimate the value that companies like RealSource bring to the table. We have thousands and thousands of man-hours to find in these deals for our investor clients. This is an exciting market and we are at the headwaters of some great things that are going on due to thousands of man-hours, and of finding deals and making relationships.

Harker: We’ve witnessed an unprecedented cycle in the market and it creates opportunity. Regardless of your current financial position, there is an opportunity to start building and whether that's launching into a career in real estate and/or just putting your money there, this is an opportunity and a great time to make that move to building real wealth. Portfolios like ours are a fantastic way to get involved.

Published: August 27, 2009

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Peter L. Mosca is president and founder of BAK Communications, Inc. He has over 22 years of communications and media consulting experience, serving a variety of nonprofit organizations, including the CCIM Institute and the REALTOR Association on all three levels – national, state and local. He is the Spokesperson Trainer for the CCIM's Jay Levine Academy and trains hundreds of residential REALTORS nationwide to be effective industry spokespeople. He is consistently ranked as "excellent" by about 90% of those who attend his presentations. While his principal consulting focuses are public speaking and media relations development and content delivery and management, Peter is also the host of the Voice America Network's weekly radio program, "Income Property Investment Talk," a one-hour program that brings the powerhouses of commercial and residential real estate to property investors every Wednesday at 11 a.m. EST. Peter is married 17 years to his wife Barbara. They have two children: Ashley, 15 and Kelli, 12. Hence, the name BAK Communications, Inc.