Key Reasons To Invest In Real Estate

The global economic recession of 2008 is often linked to the United States housing bubble and subprime mortgages. In the aftermath of the recession, there was much negative sentiment over the real estate sector and few were inclined to consider investments into the sector, in a positive sense.

Tutorial: Exploring Real Estate Investments

However, real estate investment is simply the purchase of a future income stream from property and quite undeserving of the tarnish to its reputation. Here are some of the key reasons to invest in real estate. (For a complete look back at the mortgage meltdown, check out our Investopedia Special Feature – Subprime Mortgages.)

Competitive Risk-Adjusted Returns
Based on data from the National Council of Real Estate Investment Fiduciaries (NCREIF), private market commercial real estate returned an average of 8.4% over the 10-year period from 2000 to 2010. This credible performance was achieved, together with low volatility relative to equities and bonds, for highly competitive risk-adjusted returns.

Critics would argue that the low volatility characteristic of real estate is the result of infrequent real estate transactions. This means that property values are often determined by third-party appraisals, which tend to lag the market. The infrequent transactions and appraisals result in a smoothing of returns, as reported property values underestimate market values in an upturn and overestimate market values in a downturn.

While it’s true that historic estimates of real estate volatility should be adjusted upward, real time markets are vulnerable to sudden unexpected shocks. A good example of this would be the “Flash Crash” of May 2010, when $1 trillion in stock market value was erased in just 15 minutes. In an environment where market volatility is an issue and the dynamics of algorithmic trading are murky, the more stable pricing of real estate is attractive. (For more, see Did ETFs Cause The Flash Crash?)

 

NCREIF U.S. National Property Index Returns

Source: NCREIF, http://www.ncreif.org/property-index-returns.aspx, 14 July 2011

 

High Tangible Asset Value
Unlike stocks and, to some extent, bonds, an investment in real estate is backed by a high level of brick and mortar. This helps reduce the principal-agent conflict, or the extent to which the interest of the investor is dependent on the integrity and competence of managers and debtors. Even real estate investment trusts (REITs), which are listed real estate securities, often have regulations that mandate a minimum percentage of profits be paid out as dividends.

Attractive and Stable Income Return
A key feature of real estate investment is the significant proportion of total return, accruing from rental income over the long term. Over a 30 year period from 1977 to 2007, close to 80% of total U.S. real estate return was derived from income flows. This helps reduce volatility as investments that rely more on income return, tend to be less volatile than those that rely more on capital value return. (For more, check out Take Advantage Of A Housing Crisis – Rent!)

Real estate is also attractive when compared with more traditional sources of income return. The asset class typically trades at a yield premium to U.S. Treasuries and is especially attractive in an environment where Treasury rates are low.

Portfolio Diversification
Another benefit of investing in real estate is its diversification potential. Real estate has a low, and in some cases, negative, correlation with other major asset classes. This means the addition of real estate to a portfolio of diversified assets can lower portfolio volatility and provide a higher return per unit of risk.

Inflation Hedging
The inflation hedging capability of real estate, stems from the positive relationship between GDP growth and demand for real estate. As economies expand, the demand for real estate drives rents higher and this, in turn, translates into higher capital values. Therefore, real estate tends to maintain the purchasing power of capital, by passing some of the inflationary pressure on to tenants and by incorporating some of the inflationary pressure, in the form of capital appreciation.

The Drawback: Illiquidity
The main drawback of investing in real estate is illiquidity, or the relative difficulty in converting an asset into cash and cash into an asset. Unlike a stock or bond transaction, which can be completed in seconds, a real estate transaction can take months to close. Even with the help of a broker, simply finding the right counterparty can be a few weeks of work.

That said, advances in financial innovation have presented a solution to the issue of illiquidity, in the form of listed REITs and real estate companies. These provide indirect ownership of real estate assets and are structured as listed corporations. They offer better liquidity and market pricing, but come at the price of higher volatility and lower diversification benefits. (Learn more in 20 Investments: Real Estate Investment Trusts (REITs).

The Bottom Line
Real estate is a distinct asset class that is simple to understand and can enhance the risk and return profile of an investor’s portfolio. On its own, real estate offers competitive risk-adjusted returns, with less principal-agent conflict and attractive income streams. It can also enhance a portfolio, by lowering volatility through diversification. Though illiquidity can be a concern for some investors, there are ways to gain exposure to real estate, such that illiquidity is reduced, if not brought on-par with that of traditional asset classes.

Read more: http://www.investopedia.com/articles/mortgages-real-estate/11/key-reasons-invest-real-estate.asp#ixzz1iNzSwTOy

3 Ways To Value Real Estate Investments

Investing in income-generating real estate involves market data and a degree of subjectivity. One of the most important assumptions that a real estate investor must make when valuing properties is choosing an appropriate capitalization rate, which is the required rate of return on real estate, net of value appreciation or depreciation. Put simply, it is the rate that is applied to net operating income, to determine the present value of a property.

TUTORIAL: Exploring Real Estate Investments

Calculating with Capitalization Rate
For example, if a property that is expected to generate net operating income (NOI) of $1 million over the next 10 years is discounted at a capitalization rate of 14%, the market value of the property would be determined to be $7,142,857 (market value = net operating income / capitalization rate = $1,000,000 / .14). The $7,142,857 market value represents a good deal if the property is selling at $6.5 million and it would be a bad deal if the sale price is $8 million.

Determining the capitalization rate is one of the key metrics in valuing an income-generating property. There are several methods that investors can use to find an appropriate capitalization rate.

Market-Extraction Method
This method assumes that there is current, readily available net operating income and sale price information on comparable income-generating properties. The advantage with the market-extraction method is that the capitalization rate makes the direct income capitalization more meaningful.

Determining the capitalization rate is relatively simple here. Assume an investor is considering buying into a parking lot that is expected to generate $500,000 in net operating income. In the area, there are three existing comparable income generating parking lot properties.

1. Parking lot 1 has a net operating income of $250,000 and a sale price of $3 million. In this case, the capitalization rate is 8.33% ($250,000/$3,000,000).

2. Parking lot 2 has a net operating income of $400,000 and a sale price of $3.95 million. The capitalization rate is 10.13% ($400,000/$3,950,000).

3. Parking lot 3 has a net operating income of $185,000 and a sale price of $2 million. The capitalization rate is 9.25% ($185,000/$2,000,000).

Based on the calculated rates for these three comparable properties (8.33, 10.13 and 9.25%), an overall capitalization rate of 9.4% would be a reasonable representation of the market. Using this capitalization rate, an investor could determine the market value of the property. The parking lot investment opportunity would be valued at $5,319,149 (Market value = Net operating income/overall capitalization rate = $500,000/.094).

Build-up Method
The build-up method is slightly more complex, compared with the market-extraction method. The capitalization rate is achieved by combining interest rate, non-liquidity rate (by which it is illiquid due to the nature of real estate), recapture premium and rate of risk.

Given an interest rate of 4%, a non-liquidity rate of 1.5%, a recapture premium of 1.5% and a rate of risk of 2.5%, the capitalization rate of an equity property would be summed as 11.5% (6+1.5+1.5+2.5). If net operating income was $200,000, the market value of the property would be $1,739,130 ($200,000/.115).

Obviously, performing this calculation is very straightforward. The complexity lies in assessing accurate estimates for the individual components of the capitalization rate, which can be challenging. The advantage of the build-up method is that it attempts to define and accurately measure individual components of a discount rate.

Band-of-Investment Method
The band-of-investment method requires the most advanced calculations of the three methods. The capitalization rate is computed using individual rates of interest for properties that use both debt and equity financing. The advantage of the band-of-investment method is that it is the most appropriate capitalization rate for financed real estate investments.

The first step is to calculate a sinking fund factor. This is the percentage that must be set aside each period to have a certain amount at a future point in time. Assume that a property with net operating income of $950,000 is 50% financed, using debt at 7% interest to be amortized over 15 years. The rest is paid for with equity at a required rate of return of 10%. The sinking fund factor would be calculated as:

Interest rate / 12 months
{[1 + (interest rate / 12 months)]^{# of years x 12 months}}-1

Plugging in the numbers, we get:

.07/12
{[1 + (.07/12)]^15×12} – 1

This computes to .003154 per month. Per annum, this percentage equals 0.0378 (.003154 x 12 months). The rate at which a lender must be paid equals this sinking fund factor plus the interest rate. In this example, this rate is 10.78%, or .1078 (.07 + .0378).

Thus, the weighted average rate, or the overall capitalization rate, using the 50% weight for debt and 50% weight for equity is 10.39% ([.5 x .1078] + [.5 x .10]). As a result, the market value of the property would be $9,143,407 ($950,000/.1039).

The Bottom Line
These methods are specifically designed for income-generating properties like apartment houses, commercial and industrial properties. It should be noted that these methods are not appropriate for properties that are occupied by owners. Guessing at the value of an income-generating property can lead to inaccurate assessments and failed investments. Selecting an appropriate capitalization rate increases the precision of an appraisal, and thus, the ability to choose good income-generating property investments.

 

SOURCE

Multi-Family Dwellings – Your Road to Instant Wealth

If you are ready to make the same journey I have to total financial independence then what you really need is to take a step back and think big, you will then find the rest tends to follow

by David Lindahl

 

It’s a fact that those who travel down the real estate investor path have one ultimate aim in mind: total financial independence. But while this is the common uniting thread in the way they do pretty much anything, different real estate investors have different ideas about how to get there. This is why many tend to either take a really long time to get rich, or simply stop as they are getting there because the going is too tough.

As a real estate investor who has become rich by practicing what he preaches, I can both understand the problems involved and the mental set that causes them. Investors of any kind are naturally cautious and quite rightly so and real estate investors are even more cautious than the rest.
Over the course of my career, as I chased my target, I invested in both single and multi-family dwellings, looking at holding a diversified portfolio that included homes as well as apartments. This strategy has given me almost a unique perspective in the real estate industry as I was ideally situated to make direct comparisons between the two and see which one works best.

Now I now that most people reading this will be in one of two camps and will want me to pronounce for one or the other but, realistically, that’s not how real estate investing works.

Certainly, in the journey towards my target, multi-family dwellings made more sense. They made it easy to spread the risks of unoccupied properties, provided liquidity when I needed it and allowed me to have what every investor loves most: a breathing space which provided peace of mind when things got tough.

I have, as you can imagine, bought houses, flipped them quickly and used the money to buy apartments but I have also held onto single-family properties when it made good sense. The obstacles that most real estate investors put in place when they consider which path to take in their careers come from false perceptions and they can easily be dispelled.
A lot, for instance, think that getting into apartments means a lot of trouble with tenants and running different blocks. In inclement weather, you have to make sure the sidewalks and driveways are clear of ice & snow. You have to make sure water isn’t getting into the building, a serious potential for mold growth, and proper ventilation in the summer to make sure that the air circulates evenly.

As the owner of over seven thousand apartments in more states than I care to remember I can say that none of this needs to happen to you. I outsource all the hard work, getting competitive bids from specialist companies because I can offer economies of scale and a growing opportunity to do more business as my portfolio of apartments grows and expands.

This means I can get a better deal in caretaking and even repairs and I do not have to talk to or see a single tenant. If you are ready to make the same journey I have to total financial independence then what you really need is to take a step back and think big, you will then find the rest tends to follow.

Finding a Top Real Estate CPA! Do you need one?

When doing an interview with a prospective CPA, test their real estate tax law knowledge by asking the right questions

by Albert Aiello

 

It is a plain old fact that most CPA’s (and I mean most) know little or nothing about real estate investing and consequently do not know the many great tax-saving gems that real estate is the best at offering, where you can legally pay little or no taxes even with a large amount of income.

My students often ask me to refer them a top CPA who knows my Renaissance Goldmine strategies. Now sometimes I get the word “inexpensive’. Sorry, no top CPA is going to be cheap. Remember value first, price second. Another word I often hear is “local”. My response to this,

Do NOT limit yourself to someone local – A frequent BIG mistake, especially with expert-specialists. If you get that right CPA (local or not) who is highly competent, concerned about you, dependable, professional, not a rip off > GRAB them while they are still accessible! With today’s technology, don’t let physical distance get in the way of money-saving advice!!

When doing a phone interview with a prospective CPA, test their real estate tax law knowledge by asking the right questions. For example, if you are selling a property at profit, ask the prospect, “what is a good way to avoid the capital gains taxes?” If they do not say right off the bat, a “1031 exchange”, forget about them. Or if you are a rental property owner and want more deductions, if the prospect does not say “Componentizing” (“Cost Seg Analysis”) or at least something, again forget about them.
Another money-saving idea – Use a qualified bookkeeper to save time & money – A good bookkeeper can do much of the work a CPA does, but at much lower fees and they can be local. You can use them with no CPA or use the CPA only on an as-needed basis.

Investors’ Best Kept Secret – multi-part Report

There are hundreds of thousands of real estate investors in this country. And the numbers continue to swell, largely because it’s a proven fact that investing in real estate has created more millionaires than any other form of investing! Geez, knowing that little fact… who wouldn’t want to be a real estate investor?

Of course, there’s always “the other side of the coin.” Truth is, 85% of those who call themselves a real estate investor never buy their first house!

These facts quickly lead us to the obvious question. Why? We think it’s simple… most investors never get past the first hurdle… finding a predictable, consistent and reliable source of leads to motivated sellers who are desperate to sell their homes!

As investors, we can’t afford to pay “owner-occupant” prices. We have to find motivated sellers who are willing to sell their homes for significantly less than the retail value.

There must be enough of a “cushion” so we have room for cash flow on a rental or lease option property, retail profit on a fixer-upper, or wholesale profit on a quick-turn deal.

These challenges were exactly what we were facing every day of our investing business. We were pursuing every avenue we could think of to find good deals on a consistent basis. Many ways worked, but they were never consistent. Therefore, they weren’t creating the kind of income that we could rely on. And that was problematic because we really like consistent income. You?

Then we literally stumbled into a wholesale deal that gave us a “net” profit of $55,000… yes, I said wholesale deal! And yes, I said $55,000 profit! I was in the house twice and my business partner was only in the house one time. How cool is that?

Potentially more exciting than the $55,000 of cold, hard cash in our bank accounts was that we believed there were many more homeowners just like the one we had freed from foreclosure! I bet you would have examined the heck out of that deal to figure how to find more like it, too. Right?

Well, that’s exactly what we did and we found an untapped market niche of highly motivated sellers that all the other investors were intentionally avoiding!!

Needless to say, we were “dancing in the streets” excited!

The niche we found was the “troubled bankruptcy” market.

The homeowner (Jessica) that we “saved” from her foreclosure nightmare had been in bankruptcy just prior to us “stumbling” into her living room. Jessica couldn’t meet all the responsibilities that the bankruptcy court imposed, so she was unceremoniously “kicked out” of bankruptcy. And when that happened, the bank came running after her house again… foreclosure was looming large and in her state of Georgia, the process only took 35 days. Needless to say, she was more than a little thankful that we came to the rescue!

As we learned more about Jessica’s situation and the details surrounding a typical bankruptcy, we started to define this “troubled bankruptcy” market.

Let us be perfectly clear… we do not advocate marketing to people who have just filed bankruptcy, whether it’s a Chapter 7 or a Chapter 13 (the two types of personal bankruptcies). Why? First of all, because not everyone in bankruptcy is a homeowner so you would just be throwing away thousands of dollars with your marketing campaign. Secondly, if someone in bankruptcy is meeting all the requirements imposed on them by the bankruptcy court, they are totally NOT motivated to sell because they are enjoying the protection of the court. In short, as long as they meet the bankruptcy court requirements, all other legal actions against them stop! Most importantly from our perspective, their bank can’t foreclose on their home so there is zero motivation for them to sell… at least not at an “investor” price.

HOWEVER, what we do advocate is marketing to: (1) homeowners, (2) in bankruptcy, (3) who are unable to fulfill their responsibilities to the bankruptcy court.

This is our target market… for the simple reason that at least 95% of the time, these homeowners will soon get kicked out of bankruptcy. And when that happens, their mortgage company will move quickly toward foreclosure. Again, this is the ideal time for us, as investors, to insert ourselves into the lives of these homeowners and offer our assistance as buyers.
Are you starting to see why these homeowners are highly motivated to sell? They’ve been through it all… they were unable to make their payments, then perhaps they were facing foreclosure, then they filed bankruptcy to stop the foreclosure, and now they’re losing their bankruptcy protection. So they realize that foreclosure is coming again.

Clearly, YES, they are extremely motivated to sell so they can get this emotional and stressful time in their lives behind them!

A Primer on Reverse Mortgages

Today the concept has gained widespread acceptance as seniors have found it to be a great solution to rising expenses and fixed incomes.

 

Unless you have been living on Mars or some other distant planet, by now you must have heard about Reverse Mortgages. Wherever you go in this country or even abroad, you can see Reverse Mortgages discussed on television, hear about it on radio, or read about it in a newspaper. Just turn on your television now and see what I mean.
The topic is frequently written about in local and national news media. As often as not, the authors of these stories project themselves to be authorities on the topic but don’t have a clear understanding themselves. They haven’t done their homework, or they simply took uninformed comments made by someone else and treated those comments as fact.

Their lack of knowledge does not stop them from spreading misinformation with no remorse.

Last summer, a major news network personal finance commentator announced that a reverse mortgage was a way for senior citizen to receive money by selling their home to the bank, who then took the house from them when they died. We immediately emailed the commentator to make the correction but to no avail.

Today, let’s try to help you have a better understanding of this wonderful retirement funding tool that all this hoopla is about.

Simply put, Reverse Mortgages date all the way back to the 19th century France where it is said the first Reverse Mortgages were done. In England, back in 1940, the story goes that a resourceful lady came up with an idea to buy homes, and rather than pay cash for them she allowed the homeowner to remain in the home, for an agreed lifetime rent. However, Instead of collecting rent, she deducted it from the purchase price of the home. Then, at a later date when the sale was completed she would deduct the unpaid rent from the proceeds of the sale. She was able to buy five homes this way, where the people died before they used up their rental arrangement. She was then able to resell the homes, to someone else, and in some cases the same home several times.

“This could have been the first Lease Option!”
In Modern times the Reverse Mortgage concept had a resurgence in Portland, Maine when Nellie Young and Deering Savings and Loan Bank collaborated on a Reverse Mortgage in 1961. In 1977 the RAM (Reverse Annuity Mortgage) was introduced by a savings and loan firm in Ohio.

Today the concept has gained widespread acceptance as seniors have found it to be a great solution to rising expenses and fixed incomes. Some folks are using Reverse Mortgages for increased monthly income. Many seniors are using Reverse Mortgages to pay off a mortgage with undesirable terms. Some folks are taking advantage of the cash option and using the large sums of available cash for a variety of other purposes, while others simply leave the funds in a line of credit with the lending institution that allows them to access the money whenever they need it.

A Reverse Mortgage is a retirement funding solution that helps seniors remain independent thru their golden years with safety and security not offered by any other mortgage product.
The advantage of a reverse mortgage can be endless, but different, so have your questions answered by an expert, not the news media.

Case in point, we were working with the Founder of an investment club who is in his 70’s and has a home worth $1,500,000. Due to the fact he could not prove income and there was some credit issues on his credit he was receiving a high interest rate on his loan. By securing a Reverse Mortgage he was able to pay off the existing mortgage and received cash in excess of $300,000.00.

He then was able to lend out money and receive a high interest rate. Which allowed him to earn more money then it cost him. By not making payments on the old mortgage he had money to spend on other items. I have found many seniors working with their family in this way and are able to invest in investment properties. Some have even been able to secure foreclosure properties since they had the funds to pursue them and cash to rehab them.

With the increase of foreclosure properties and having cash available this can open many opportunities for people.
“I know that I know what know, I know what I don’t know, and I know what I need to know”

Updated 13 Shortsale Property Package ~Great Income Producers

I just got some hot deals and I wanted to let you know as soon as possible I’ll get these properties or available find some other investors and go in and take all these properties of my hands. Check out these numbers subtract the renovation figures if you can do better. But you can’t beat these numbers. Drive by take a look at it, and submit your offers.

4090 Old Spanish Trail, Boynton, FL

$49,900

3 Bed, 1.5 Bath Home

Potential Rental Income $1,000 month

Currently Vacant

 

Sales Price	$59,900.00
Taxes	$1,000.00
Insurance	$1,500.00
Management Fee	$1,200.00
Maintenance	$1,200.00
Utilities	$0.00
HOA	$0.00
Vacancy	$600.00
Total Expense	$5,500.00
Rental Income	$12,000.00
NOI	$6,500.00
Net Yield	10.85%
Gross NOI	20.03%

All figures approximate. Great house in good area with central a/c. Price includes $10,000 renovation credit.

1377 7^th Street, West Palm Beach, FL

$39,500

3 Bed, 1 Bath Home

Potential Rental Income $1,000 month

Sales Price	$58,000.00
Taxes	$1,430.00
Insurance	$1,500.00
Management Fee	$1,200.00
Maintenance	$1,200.00
Utilities	$0.00
HOA	$0.00
Vacancy	$600.00
Total Expense	$5,930.00
Rental Income	$12,000.00
NOI	$6,070.00
Net Yield	10.47%
Gross NOI	20.69%

All figures approximate. Price includes $10,000 renovation credit.

1441 8^th Street, West Palm Beach, FL

$39,500

3 Bed, 1 Bath Home

Potential Rental Income $1,000 month

Currently Vacant

Sales Price	$58,000.00
Taxes	$1,501.00
Insurance	$1,500.00
Management Fee	$1,200.00
Maintenance	$1,200.00
Utilities	$0.00
HOA	$0.00
Vacancy	$600.00
Total Expense	$6,001.00
Rental Income	$12,000.00
NOI	$5,999.00
Net Yield	10.34%
Gross NOI	20.69%

All figures approximate. Price includes $15,000 renovation credit

 

619 8^th Street, West Palm Beach, FL

$259,000

2 Bed, 1 Bath Home

10 UNIT APARTMENT BUILDING

2 Bedroom, 1 Bathroom Units

Potential Rental Income $7,500 month

Currently Vacant

 

Sales Price	$349,900.00
Taxes	$3,000.00
Insurance	$3,000.00
Management Fee	$9,000.00
Maintenance	$9,000.00
Utilities	$0.00
HOA	$0.00
Vacancy	$4,500.00
Total Expense	$28,500.00
Rental Income	$90,000.00
NOI	$61,500.00
Net Yield	17.58%
Gross NOI	25.72%

All figures approximate. Price includes renovation credit.

1621 Tropical Drivee, Lake Worth, FL

$35,000

2 Bed, 1 Bath Home

Potential Rental Income $850 month

Currently Vacant

Sales Price	$39,900.00
Taxes	$1,137.00
Insurance	$1,500.00
Management Fee	$1,200.00
Maintenance	$1,020.00
Utilities	$0.00
HOA	$0.00
Vacancy	$510.00
Total Expense	$5,36700
Rental Income	$10,200.00
NOI	$4,833.00
Net Yield	12.11%
Gross NOI	25.55%

All figures approximate.

619 59^th Street, West Palm Beach, FL

$39,900

2 Bed, 2 Bath Home

Potential Rental Income $900 month

Currently Vacant

Sales Price	$42,000.00
Taxes	$1,305.00
Insurance	$1,500.00
Management Fee	$1,200.00
Maintenance	$1,080.00
Utilities	$0.00
HOA	$0.00
Vacancy	$540.00
Total Expense	$5,625.00
Rental Income	$10,800.00
NOI	$5,175.00
Net Yield	12.32%
Gross NOI	25.71%

All figures approximate. Solid home in good rental area with central a/c. Price includes $10,000 renovation credit.

 254 Lytton Court, West Palm Beach, FL

$79,900

3 Bed, 2 Bath Home

Potential Rental Income $2,000 month

Currently Vacant

Sales Price	$115,000.00
Taxes	$3,000.00
Insurance	$1,700.00
Management Fee	$2,400.00
Maintenance	$2,400.00
Utilities	$0.00
HOA	$0.00
Vacancy	$1,200.00
Total Expense	$10,700.00
Rental Income	$24,000.00
NOI	$13,300.00
Net Yield	11.57%
Gross NOI	20.87%

All figures approximate. Home with cottage in Historic area of WPB. Price includes $XXX renovation credit.

5344 Bosque Lane, #104, WPB

$39,900

2 Bed, 1 Bath Home

Potential Rental Income $900 month

Currently Vacant

Sales Price	$42,000.00
Taxes	$200.00
Insurance	$0.00
Management Fee	$1,200.00
Maintenance	$1,080.00
Utilities	$0.00
HOA	$3,120.00
Vacancy	$540.00
Total Expense	$6,140.00
Rental Income	$10,800.00
NOI	$4,660.00
Net Yield	11.10%
Gross NOI	25.71%

All figures approximate. Beautifully renovated townhome in desirable rental/owner area. Price includes $2,000 renovation credit.

 3850 Orange Street, Lantana, FL.

$45,000

3 Bed, 1 Bath Home

Current Rental Income $900 month

Currently Occupied

Sales Price	$59,000.00
Taxes	$863.00
Insurance	$1,500.00
Management Fee	$1,200.00
Maintenance	$1,080.00
Utilities	$0.00
HOA	$0.00
Vacancy	$0.00
Total Expense	$4,643.00
Rental Income	$10,800.00
NOI	$6,157.00
Net Yield	10.44%
Gross NOI	18.31%

All figures approximate. Price includes $6,150 renovation credit.

 

4001 San Castle Blvd. Lantana, FL

$39,900

3 Bed, 2 Bath Home

Potential Rental Income $1,000 month

Currently Vacant

Taxes	$808.00
Insurance	$1,500.00
Management Fee	$1,200.00
Maintenance	$1,200.00
Utilities	$0.00
HOA	$0.00
Vacancy	$600.00
Total Expense	$5,308.00
Rental Income	$12,000.00
NOI	$6,692.00
Net Yield	11.17%
Gross NOI	20.03%

All figures approximate. Great house in good area on huge corner lot. Price includes $15,000 renovation credit.

 

125 South F Street, Lake Worth, FL

$97,700

DUPLEX – 2 Apartments

Current Rental Income $1,650 month

Currently Occupied

Sales Price	$97,700.00
Taxes	$2,033.00
Insurance	$1,650.00
Management Fee	$1,980.00
Maintenance	$2,040.00
Utilities	$0.00
HOA	$0.00
Vacancy	$0.00
Total Expense	$7,703.00
Rental Income	$20,400.00
NOI	$12,697.00
Net Yield	13.00%
Gross NOI	20.88%

All figures approximate. CBS Duplex: 2/1 & 1/1. Needs less than $2K in light repairs/paint

Tenants pay own utilities; owner pays lawn.

 

510 South F Street, Lake Worth, FL

$77,000

TRIPLEX – 3 Apartments

Potential Rental Income $2,000 month

Currently Vacant

Sales Price	$129,900.00
Taxes	$2,940.00
Insurance	$1,900.00
Management Fee	$1,200.00
Maintenance	$2,400.00
Utilities	$0.00
HOA	$0.00
Vacancy	$1,200.00
Total Expense	$9,640.00
Rental Income	$24,000.00
NOI	$14,360.00
Net Yield	11.05%
Gross NOI	18.48%

All figures approximate. CBS Triplex 2/1, 1/1 & 1/1. Price includes $32,000 renovation credit

 

For more information about this property and others like this one visit www.southfloridareinvestments.com

Cash or Hard Money

561.670.3297

edays@rocketmail.com

How to Explode your Wealth in Emerging Markets in the US

Emerging real estate markets are truly virginal opportunities for profit, provided you get in there early and make your mark.
Everyone who is involved in real estate knows that an emerging market is like a goldmine. It creates a pressure-cooker environment of development where all the normal conditions of the real estate market are compressed in a tight space of time.

Demand for real estate properties goes through the roof, prices are adjusted upwards to reflect an insufficient supply and profitable deals can be made fast.

If you are in real estate you want to make money as well as help the local and national economy and in an emerging market there is plenty of scope to do all of this. Money can be made fast because properties appreciate quickly and buyers are eager for the properties that are on the market. The local economy begins to boom as properties sold become cash cows as their owners update them, renovate them and furnish them, helping to revitalise, in this manner, the local economy.

Any local economy doing well has a positive contribution to make in the national economy and the country as a whole.

This is a lot of good you actually do all round not to mention the benefit you can reap for yourself.

It does beg the question however how exactly do you recognize an emerging market and how do you strike it rich when you do?

 

Well, if we take things in reverse order the secret to making money from an emerging market is to get in there at the beginning, capitalize on the upward pressures and sudden growth spurt and get out before it begins to run out of steam, get crowded with other investors and suffer from slimming profit margins. Over the past 3 years, I have closely been analyzing emerging markets around the US. During this period I have acquired over 5,000 units!
To locate an emerging market successfully, you need to be in the market before the masses are. Signing up for the local government newsletters, becoming aware of large industries moving into new areas and local regeneration schemes backed by hefty government subsidies and investments are always good signs of the beginning of an emerging market.

Where your skill will have to come in is exactly in the way you develop all these alerts and then work to analyse them so you can make an assessment ahead of everyone else. The good news is that these skills are easy to learn and easy to apply.

As a real estate investor discovering an emerging real estate market a few times in your career can give you enough of a cash boost to really push you well on your way to total financial independence.

Ok, stop me if you have read this one before: the US is one of the world’s biggest developing countries. That’s right! I know we are considered to be a fully developed rather than a developing nation with a market that has, in many places, reached its peak and is now in a state of differentiation but that’s only the larger picture.

Within that there are a lot of micro-economically controlled areas where the picture is no different to an emerging market like we see in Eastern Europe.

As a real estate investor who has managed to get in first in an emerging real estate market in the US and make big money, fast, I know that the reason we are so blessed in terms of local economics is the size of our great nation.
By the same token, this very size creates specific pockets of real estate development which, to the savvy investor represent an opportunity that simply must not be allowed to pass by.

The reasons an emerging market is so important to a real estate investor are simple: money, money and more money.

 

Emerging real estate markets, as the name suggests, are free from the constraints of the more developed, rarefied, matured markets where the only way to make your mark is through the far more difficult method of service differentiation and market segmentation.
In an emerging real estate market it is possible to experience the heady feeling of being, again, a pioneer, moving forward into new territories and developing new markets ahead of the pack. I know, from direct experience, that there are certain signs that you can learn to be on the look out for which are a dead giveaway of an emerging market.

The best news, of course, is that almost anyone can learn how to do it, provided they are prepared to put in the time and effort.

Emerging real estate markets, for example, are almost always marked by a total employment boom and an expanding zone of out-of-towners looking to move in.

These demographics are readily available if you know where to look and, when analysed correctly, will give you the indicators you are looking for.
Emerging real estate markets are truly virginal opportunities for profit, provided you get in there early and make your mark. To the savvy real estate investor they represent areas of development which simply cannot be overlooked.

Foreign Investing Fun

Put your plan in writing. Plans equal profit when well thought out and properly implemented.

To stay on top of your game, you must stay on top of the market. It’s current major news that investors from foreign lands are coming in droves to take advantage of the low home prices in America. For them, the exchange on money is nearly equal and our home prices are far lower than theirs, earning them a nice return on their investment.

What do you think when you hear this news? Do you think good for them, or do you think about how you can help them and earn a living yourself? If you are a smart investor, then I hope it’s the latter.

Why not become the go-to person in your area to provide the deals foreign investors are seeking? Simply find out what they are looking for, how much they are spending and for what return, and put together that package for a fee.

Obviously they want properties with tenants that cash flow, they need property management in place and they seek a certain rate of return on their investment. There are attorneys, real estate agents, accountants and others who specialize in catering to foreign investors. Why not make them a part of your team and learn this market.
Build your network with the team players these investors need. You’re already in the real estate business so making these contacts is easy. Marketing is the next step. You’ll need to study online sites that cater to foreign investors to get an understanding of the lingo they use and learn how to advertise to them.

You’ll need to be sure to offer online information and online communication portals since they are sleeping while you are working and vice versa.

Be sure to put the plan together as you think through the entire process. You must be ready for opportunity when it arrives. Imagine marketing to foreign investors and the first contact wants 5 properties within the next 30 days. Would you be ready to handle that?

This should be your minimum goal when putting together the plan. Our plan entails buying the property, fixing it up, renting it out and then offering it as a performing property along with property management. When it meets their criteria, then you make it simple for the buyer to make a quick decision.
Catering to a new client that makes a decision quickly and then wires cash has been fun to say the least. We love what we do and have changed our business model to add catering to foreign investors as a huge niche in our current market.

We’ve even started a property management division and have put the team players in place to offer effective and efficient management. When these buyers are happy and the return keeps on coming in, they will buy more properties, tell their friends and family to buy properties from you and well…you get the picture.

Remember to be the best at what you do and as I always harp in every article, regardless of the subject, put your plan in writing. Plans equal profit when well thought out and properly implemented. Have fun with your foreign investor clients!

Private Money – Where is it?

There is no time like now to take advantage of all of the real estate opportunity available so take what you learn and go for it.

It seems we have to start all over again with regard to this subject since so many of the hard money lenders went out of business just like the big banks did. Large loan amounts collateralized by investor owned property that many investors just walked away from since these lenders weren’t keen on short sales but I’m sure they changed their tunes quickly.

Hard money a/k/a private money is money loaned by private individuals either licensed as lenders or arranged through mortgage brokers to collateralize investor purchased property.

They are high interest – interest only, short term loans designed to offer investors the opportunity for easy access to money based on a properties equity, regardless of its’ condition and with less consideration on the borrower’s credit, employment or assets.

With the brand new laws regarding mortgage licensing, it will only get tougher before it gets easier.
For investors, relationships is where it’s at when it comes to obtaining private money to use to invest in real estate.
With folks losing so much in the stock market and with their retirement funds, people are eager to invest their money into real estate but they either don’t know how or don’t have the time. These are your private lenders – they just don’t know it yet.

Investors are paying as much as 18% interest and 3 points (minimum) for the use of hard money when they can find it, so why not offer folks who want a place to park their money a better than bank return and at the same time, obtain a huge savings from the normal 18% usually being paid.

Investors aren’t just the ones buying real estate; they are folks with money to invest into an investment vehicle that will give them a return greater than they are currently earning. The level of risk taken will be different based on the investor. Real estate mortgage investments can be designed to offer lower risk, higher return investment vehicles.

The real estate investor can determine a loan amount based on a percentage of a property’s value. The lower the loan amount in comparison to the value of the property makes the investment appear more attractive. Offering first mortgage positions gives the financial investor’s loan a priority position if a foreclosure suit must be used to collect the debt. High interest and/or points can be offered to attract financial investment partners.

To avoid falling into securities legal red-tape, keep all investor money separate and do not combine investor money into the same mortgage.

For example, if two investors make a loan to you and both loans are for $50,000 and you buy a property for $70,000, do not combine the money to purchase the home. Give one investor a first mortgage for their loan amount and the other investor a second mortgage for his/her loan amount. You can make these two equal amounts or divide them whichever way is agreed. You may offer investors a slightly higher interest rate for taking a second position but all of that is negotiable.

In the relationship building stage, you will want to take the investor out for lunch or dinner to discuss the process and give them any sample documentation they can expect to receive once they are working with you as well as an outline of a sample investment along with disclosures galore.

As soon as one of your investors earns a nice return, what will they do? That’s right, they will begin sharing their new found fortune with their friends. It’s that word of mouth that helps you grow your private money tree.

Here are a few tips to create a rewarding relationship that your investors will appreciate:

• Once you have investor money in your stewardship, keep them informed of what is happening with each penny (we email them spreadsheets that show their investment amount, how much is being used and what it is earning, as well as the address of the collateral and photos).

• Give them the proper documentation that confirms that their investment is secured within 24-48 hours of the investment being made.

• Do not conduct any process such as this without the help of your savvy attorney who will bring proper disclosures to the table to protect you, correct documentation to protect your lender-investor, and a sense of security to your prospective investor that you do everything legally and properly.

• Confirm with your investor that the financial relationship between you and he/her will be strictly confidential.

• After conducting business and solidifying your relationship with your investor, ask for a letter of recommendation for your portfolio to share with future potential investors.

One final tip: don’t be so quick to offer the usual hard money rates of return this industry is known for to investors who aren’t familiar with those rates. Why? Something that sounds too good to be true will scare them away. Instead, offer rates better than banks are offering but lower than real estate industry rates commonly offered. Perhaps 7% to 8% for example. These rates are higher than mortgage rates being offered, better than bank rates for CDs, etc. but much lower than what you could get anywhere in the real estate investment industry scene.

You can also offer the investor a piece of the action if you will. If they are willing to allow you to use their money for a long-term hold at a low rate, then you may want to offer them a percentage of the future sale or cash flow. This would change the relationship between you and the investor as far as the documentation is concerned and that’s why it’s vital to use the right attorney to help you put these relationships together legally so everyone wins as they expect.

So there may be a forest of dead private money trees out there, but you can begin planting new seeds and bringing in the harvest of the many investors out there who aren’t hard money lenders but aren’t happy with the returns they are currently earning elsewhere.

There is no time like now to take advantage of all of the real estate opportunity available so take what you learn and go for it.