[Note: To follow is an excerpt of a radio show interview conducted by Peter L. Mosca, host of Income Property Investment Talk dot com, with Lenny L. Layland, founder and GM of Invest Orlando; and Steven Moreira, CCIM, founder and owner of Magic Financial Services. To listen to the show archive or download an MP3, go to www.IncomePropertyInvestmentTalk.com/031010.]

Mosca: Thank you for coming on our program. Lenny, what is happening in Orlando, can you give us a past, present, and future look?

Layland: It's been a long, good run for us here. Slow, steady growth of population, jobs, and of course, related to that the real estate market. We've had years of steady two, three, five percent growth, and then of course we hit the overheated market and the free flowing of money, which led to speculation here, probably more so than a lot of places in the country. It got out of control. The bubble burst. I saw it coming; so did my real estate brokerage a couple years ago. Now, to the present, the tide is turning. I'm starting my own new firm to take advantage of this market, and continue with my investment group. The future is nothing but opportunity. It's going to take a little time, but the great values are out there, great cash flow in buying income property now. It's just getting the financing.

Mosca: Steve, let me throw it over to you. I know when Lenny said financing that your ears probably perked up, but before you get into that, can you give us your perspective of a past, present, and future of Orlando?

Moreira: Over exuberance is the way we like to talk about it. Looking at it from both finance and commercial markets and the picture from Wall Street Investment community, a big problem in the past was the fact that builders were in the financial business also. You have so many builders that had their own mortgage companies, and basically, when we went into a new home, the entire transaction was really controlled. When I say we, I'm talking about the realtor that would try to get something sold. It really wasn't unheard of for a REALTOR to just refer a deal over, get paid some type of commission and you waited an awful long time for that money and the builder and the contract that would give out. A couple of times I represented someone, they basically would do the title work, they would do the loan, they would control 100% of the transaction, and if you're motivated you're going to sell a home and make a 30 or 20 percent profit on the sale at home. I would venture to say that it was north of 35, 40 percent when the prices went up because the lots and the construction cost didn't rise that high, it was in inventory, and you also are controlling the mortgage process. I don't understand why the government is looking in that area as to builder-owned mortgage companies a lot harder than they're saying that the mortgage broker, per se, is the person that was guilty of all these rampant fraud problems and raised the prices the way they did. Having said that, when you look into the transaction that way, the contracts were sole-ownerists. You weren't really able to go ahead and put other third parties and get other opinions in these fields. So, the massive sub-divisions that were sold at astronomical prices are still feeling the pain. In the pocket markets, the good, well-established suburban neighborhoods in the outgoing areas of Orlando – Winter Park, Longwood, in Seminole County, some of the other more established neighborhoods and College Park, there is somewhat of a comeback in prices.

Mosca: What about investment opportunities?

Moreira: There's a lot of money coming and on the way, and this office is getting daily calls from investors that are looking for pools for non-performing debt. The smart money is realizing that Florida is on sale right now, and as we begin to absorb the existing, bank-owned product, it's a bargain. Both in commercial and residential real estate, I'm seeing things trading fairly briskly. On a residential side, we're getting multiple offers on just about every house we put out there, and we only put out bank owned properties on our residential side because we represent lenders. It's moving quickly. The lenders that are willing to put some money into the house and not sell a dilapidated piece of property, that'll come in and do some painting, some repairs, and try to minimize their losses are seeing a much better price for the properties than the hard-core investment community that wants to buy them on the courthouse steps and they are pretty beat-up as it goes through the litigation process. There are pools of lenders right now and pockets of lenders that are looking at the servicing of their debt a lot differently, at about handling their losses a lot differently; they're willing to improve and help come up with the neighborhoods. It's absolutely a tremendous time to buy a condo or a home here in Florida, but you've got to hire a professional and you've got to do your homework for it to be a successful investment. What I would say to the investment community is come here, and at least look around, and you better do it this year because people usually jump into the market 3 or 4 months after the market recovers. Right now is the opportunity. By this time next year, we're going to be well onto our rebound in central Florida.

Mosca: Where is the economy in Orlando today? Where do you see it in the future?

Layland: Looking out my window, the blue skies and 70 degree weather, that obviously is a big plus, but we're so much more than that. There's a wide range of industries now, and it's only going to continue to grow. We have great medical research with the Burnham Institute going in here; University of Central Florida is one of the largest universities in the country now. We're doing great. The tax credit programs have certainly helped our real estate market, and great numbers and sales and bidding wars are happening again with a lot of first-time buyer. It will continue to do so. There's stimulus money coming in, billions coming in the Obama programs, for the new, high speed train, and then locally the light rail train, which will certainly have a huge impact in the short run. I have an office building right across from the Longwood planned station, as does Steve nearby, so we I think will benefit greatly from that. There is going to be tons of construction, a big boom for the economy in the short run, and probably pretty positive for us individually although personally. I'm not 100% convinced that is the best thing for the market and whether it will be really utilized and pay for itself. That's to be seen.

Moreira: I was a little excited when I heard that. I'm a developer also, so I actually have four projects within walking distance of this light rail, but I'm going to just give you some statistics and I would encourage anybody that's investing in a community where there's a possibility of light rail to look at the city of Charlotte. That's one of the greatest success stories in the southeast. For the naysayers of the light rail, we've had many down here in Orlando, and also the cost of it, you really have to look at the fact that development and jobs just seem to cluster around rail stations where you can park your car and only use it if you really want to go somewhere. The way it's set up here in Orlando, it comes down to what I would describe now after coming from the northeast, living in New York and New Jersey, as the Orlando experience. You come to Orlando, you get off the plane, and you're in one of the top 3 or 4 airports state-of-the-art in the entire country. The Orlando airport; I've flown in and out of all of them, is probably the best as far as access parking and everything else. When you get here, we have 50 million visitors coming through the airport of tourists and all kinds of people, so that money flows into this economy in a much greater fashion and in a lot of the cities that are impacted by this recession. When you go down to our convention center, neck and neck with Las Vegas, we're getting many, many bookings and we're way ahead what we thought we would be inside of that convention center. You've got Harry Potter coming into Universal Studios in the spring, and it's going to be a huge, worldwide promotion. It's going to give Orlando so much attention. When we talk about the medical center: we've got a new VA Hospital, we've got all those veterans coming home that are going to need that care; they can move to a warm climate. The actual medical center is about 800 to 1000 acres – that's not a small project. The Florida hospital system does an incredible job. They've got state-of-the-art facilities that they're building in 6 or 7 cities around Orlando that are clustered, along with Arnold Palmer, where my children were born, probably one of the greatest medical facilities for children in the world. Orlando has so many things that are positive for it, that when Florida comes out, the first who is going to lead the pack is going to be the city of Orlando.

Mosca: What about lute rail?

Moreira: When we talk about light rail, we received $1.4 billion from the government to build high-speed rails from Orlando to Tampa, which would be the first leg because Florida had already done all of their homework on high-speed rail years ago. You'll be able to get on a train about 20 miles from Daytona and be able to ride all the way to Tampa without ever needing a car to do it. There are all these little city centers that are going to be clustered around it. So the light rail, along with the high-speed rail, is going to have a huge effect on our job market and on this economy construction-wise. In the city of Longwood, where we both live, we know that starting in June is $192 million of new construction clustered around our light rail, so if you multiply that times every station, it's easy to do the math and realize that we're going to have a shot at a Charlotte-like effect probably even much greater in our economy here in Orlando through some of these programs. It's just taking time to get into the market. Another thing that I'm seeing as owner of a small manufacturing company – we manufacture aluminum green windows here in the city of Longwood and have been able to create 12 new jobs this year -- a lot of folks are replacing their windows, they're doing insulation, they're going along with the programs. Solar heating is flying off the shelves everywhere, and it's really a wait list to get a solar hot water heater around here. You couldn't do it for 4 to 8 weeks. When you go around the rest of Florida, there's another initiative in southwest Florida to build the largest solar-heating project that we've ever had in our state. Some of the stuff the government is talking about and is trying to get into play is just taking time to unleash.

Mosca: How important is it to work with a professional on a local level who knows the market, who knows the property, who knows the servicing and who can do all the diligence work up front to make the investment more appealing to the lending community?

Layland: Talking about our market and the market in general, gets me so excited and motivated again. I have been tiptoeing back into it but sometimes you just don't see the forest for the trees. Boy, I am excited and need to go out and get that capital. Buying these properties at prices we could pay ten years ago is just unheard of and it is that great opportunity. As far as the source of financing, the problem is local banks, community banks, regional, national, any financing on investment property I've found almost nonexistent. The fact that there are still opportunities and pooled investments and turnkey properties and opportunities out there, I think now is certainly the time to buy in this market.

Moreira: The lender of choice in the commercial world now is the insurance company. They are the ones that are actively looking to place debt, so the best way to go is to get with a mortgage banker. If you are looking to finance something non-recourse, you can get 60 to 70% loan to value. An insurance lender is willing to look at a triple net lease, or if it's a multitenant property like retail or office, you are really going to need some solid tenants and some long-term leases to get yourself some good debt that's really at great rates that's non-recourse. When you talk about the local market, lenders are still in a holding pattern except for a couple of banks that are extremely well funded. The days of 80, 85, 90% financing are gone. As far as residential financing, the lender of choice really at this point is FHA unless you are a veteran, then it's VA. There is some conventional product with the large banks, but the underwriting is conservative. Everything that I've seen that comes across our desks as correspondent lenders is reviewed, so two appraisals in the residential world. They are appraising down because they are looking for the other shoe to drop on that next foreclosure next door. There is residential funding around and there is even residential funding with some of our local banks for investor product but you are going to have a good chunk of money down. If you could get 40% of current value and be able to cover repairs, you could get 60% on a loan to make the stuff work. The other thing that Lenny said is absolutely true. Prices will double in 5 years because we are at a 10-year low in pricing but the current pricing is factored into the loan amount. For those investors that go to the no money down classes and a lot of things that are now offered on television, the days of being able to walk into a bank because you got a great deal on a foreclosure and get 100% financing are definitely over. If you are buying $150,000 house and you are even paying $50,000 for it, that bank is going to expect you to put some skin in the game and more than 5, probably 20 to maybe even 30% and they really prefer the loan to be north of $50,000.

Mosca: Did the TARP money help or hinder the process?

Moreira: The players the hardest to work with right now unfortunately are the big banks that got the TARP money. I've got a little bit of personal anxiety over that because the taxpayers did help many of them get out of it. They created conglomerates that are still out there but they are really not funneling and that's my biggest concern, that money into the business community where investors like Lenny's group can get it and do something in improvements. You really have to go out and find private equity and private equity in investors want a 10 to 20, 25% return and that's expensive capital even at great prices.

Layland: They are holding off on commercial investment. Everything is owner occupied from the FHA level so as investors in the small time wanted to get in this market, they are making it more difficult. The sky is the limit if we can give them the opportunity and the vehicle to do it and that will only help the turnaround.

Mosca: Do you see patient capital coming into the market in 2010?

Moreira: I have as much money as possibly I could get out there right now for deals. What I don't have is deals. Banks that are supported by the government aren't writing assets down, the FDIC is in no hurry to leak out all of this stuff. We are going to have to drip it out patiently and every day they are dripping out some very good deals. Then again, it takes investment capital. There are not any giveaways. There is still going to be sweat equity, there is going to be risk with capital, there is going to be government officials that really have to think this process through because in reality what we are doing is we are re-trading the American real estate frontier in our greatest growth states -- California, Nevada, Arizona, and Florida. We are re-trading the price values down 50, 60% of what we thought it was worth 4 years ago. Will those prices rise again? Yes, but the ones who bought it at those prices, just like if you bought a stock and you had to sell or get out, they are going to lose that money. The folks that have new money are going to make great profits and reap huge benefits over being able to go 3 to 5 years distance to watch this economy improve and our country get back to where it was in commercial real estate world. If you let the wealth of businesses go down through commercial real estate totally devaluing because there is no funding in the marketplace that really needs to be a priority right now and it needs to be a priority ahead of the many favored political arguments that are now taking place to fix other social matters.

Mosca: What is your golden nugget?

Layland: Get into this market any way that you can. Hopefully we can get some help from the government and banks in continuing to loosen up the dollars so these astute investors can capitalize on the market and help turn it around.

Moreira: The greatest markets over the last ten years have been Nevada, California, Arizona and Florida. As far as I am concerned those markets are going to be unbelievable, great markets again. A year from now, properties in all four of those states will be at least 15% higher, maybe 20 and from there they are going to continue to rise. When I say that I don't mean the general market, I mean the folks that really went in there and looked and found themselves a deal will make no less than 15 and a lot of them are going to double their money if they went with the right, smart advisor that really knows their marketplace. Get a professional, that's the nugget.

Published: April 15, 2010

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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.