Last night we had a webinar for our Real Estate Investor Bronze Members where we discussed the strategies (and resources for implementing those strategies) that are working right now in our current market.
Part of what I discuss in the webinar is that anyone can actually do these strategies in this market if they choose to. You know how to access everything you need and as I mentioned any parts that you do not want to do yourself are able to be outsourced to someone who would love to do that for you. In fact, I have most of the systems to outsource those tasks as well since I have outsourced just about every part of the real estate investing business. If you are a Bronze Member and need help with that, just let me know.
Please enable Javascript and Flash to view this Viddler video.In the webinar I discuss wholesaling, virtual wholesaling, buy and hold, real estate partnerships, subject to and lease options as well as owner financing and private money.
Enjoy the video!
Sincerely,
James
P.S. If you have not downloaded the free real estate courses we have available, you can do that on the Real Estate Course Downloads page.
Tonight for our Real Estate Investor Bronze Members I am holding a training webinar called Real Estate Investing Strategies Working Right Now. In this webinar I will be talking about which real estate investing strategies are working best right now and highlight some of the training materials we have for our Real Estate Investor Bronze Members that can be used to learn specific implementation strategies, checklists, forms and downloadable training courses on the specific areas.
These are some of the topics that I have on the outline to talk about:
- Wholesaling – Wholesaling is a great way to generate immediate chunks of cash as a real estate investor and a strategy that I strongly recommend for new investors wanting to get involved with the business as it will help you earn while you learn.
- Virtual Wholesaling – Virtual Wholesaling is similar to wholesaling in many ways except you are able to focus on markets that are not local to you in your wholesaling. You will be growing multiple buyers lists, employ marketing in multiple geographical markets–often out of state–and have key dream team members in those areas to help you.
- Buy And Hold – Right now a good long term Buy And Hold strategy is extremely powerful. Interest rates are at or near all time lows, the trend is that more people are moving toward renting and we are heading toward a period of high inflation meaning property values will likely rise considerably. A potential challenge is investor financing which I plan to address in detail for our members.
- Subject To and Lease Options – Buying properties “subject to” the existing financing or structuring a creative Lease Option deal are two different, but similar strategies that specifically address the investor’s financing challenges while still solving problems that many sellers have in our current market.
- Partnerships – There are many folks that want to get involved in real estate investing but do not have the time or expertise to really learn the business. There are some great opportunities for professional real estate investors that have the time and expertise to partner with folks interested in the benefits of real estate investing (income, depreciation, equity build up, appreciation and, in some cases, leverage) to work on the financing side with professional investors so that each of them could achieve more than they might otherwise achieve alone in a win-win partnership.
- Multi-Units and Apartments – While this is not an area of expertise for me since my focus has been primarily on single family homes, I see an opportunity in this strategy and I think for the right person it is something worth at least looking into.
In tonight’s training session, I will also be sharing the amazing resources that we have for the following as well to address the very specific challenges of financing on the side of of the investor buying and also for profitable exit strategies for investors as well:
- Owner Financing – Since this is a major area of focus in our business, I have some amazing resources and training materials on this topic.
- Private Money – Last year when I actually got licensed in my state to be able to raise private money, I was one of only two people who had gotten licensed in the last 10 years and yet there is a huge opportunity with the low returns that folks are getting on their money for real estate investors to work with private individuals with private money loans secured by investment real estate.
- Rent To Own and Lease Options (as exit strategies) – I will also be sharing some of the strategies for offering creative, flexible financing to your end buyers to make your exit strategy more profitable and give you a significant marketing advantage.
As you can see, there is quite a bit to cover on tonight’s webinar so I will be mostly pointing out specific training resources that we have already available including checklists, systems, forms, audio downloads and more. I will, technology willing, be placing the recording of the webinar up on the Real Estate Investor Wiki within a couple days.
Until my next post,
James
In some ways, rental properties are like reptiles. They don’t need to be fed every day, but periodically, they do require a rather substantial meal.
For example, let’s say that you have a pretty decent rental with about $200 per month in positive cash flow. Great! That’s $2,400 extra dollars of income a year! But…not so fast. This extra money is critical to your success as an investor, but it should be looked at as part of the reserve you should keep on hand to feed your rental when it gets hungry.
So, let’s say that in your pretty decent rental, you have a pretty decent tenant that pays their rent on time every month for two years. Great! That’s $4,800 extra dollars in the bank. But, like I said before, not so fast. During these two years, you were only plagued periodically with small maintenance items. There was a little trouble with some ants which cost you $95 in pest control. Then the plumber had to pay a visit – that was $200. And, of course, the furnace needed to be serviced which ran you close to $300.
Still, not so bad, $595 from your $4,800 leaves you up $4,205. But then your tenant moves out. The good news is that a portion of their security deposit covers the clean up as was mandated in the lease. The bad news is that you need to replace the carpet and that’s going to cost you about $1,500. Between getting it fixed up and placing a qualified new tenant, your rental ends up sitting vacant for about a month, which means another $700 going out for your mortgage payment.
But still, you’re at a healthy $2,005 profit for this property. Not too bad. But then, and here’s the kicker, a nasty winter storm blows through and causes the roof to sprout a leak. The contractor comes out and tells you that your roof was already in poor condition, and it’s time to put a whole new roof on.
The cost for this? $5,000. Ouch. No more profits left, you come out of pocket $2,995 because, after two years of sparse meals, your rental property is hungry.
What exactly am I trying to say here? Only this: investing in rental real estate is a long term commitment.
Should you acquire properties that cash flow? Absolutely! Should you expect this cash flow to supplement your income in the short term? Probably not, unless you either got an extraordinarily good deal (above and beyond what most investors get), or you put a significant amount of money down.
Investing in rental real estate has many benefits, but, in my opinion, short term income is usually not one of them.
Until my next post,
James
P.S. An alternative to this scenario is to make money investing in real estate with very high cash flow properties or deals structured to produce very high cash flow as we teach to our Real Estate Investor Bronze Members. Or, consider making money investing in real estate with wholesaling or virtual wholesaling.
Well, maybe not never sell your rental property, but hardly ever sell your rental property.
So much work goes into buying rental property, that I would strongly encourage you to really consider another alternative to selling your rental property provided they meet the following minimum criteria.
First, does it have positive cash flow?
Now, my definition of positive cash flow may be slightly different than your definition, so I want to be clear here.
Positive cash flow, as defined by me, is what you get when you take your gross rent that you are supposed to collect each month, then subtract out 5 to 10% (depending on your current market) for vacancies. This is your net rent.
Then, from your net rent you subtract out property management fees, an estimated monthly budget for maintenance requests, any utilities that you are responsible for, your monthly property and other taxes, your monthly insurance and any other fees like an HOA, lawn care or snow removal.
What remains is your Net Operating Income.
If your mortgage payment (principal and interest) is less than or equal to your Net Operating Income, I consider that to be a break-even or positive cash flow property.
So, if the property has positive cash flow AND the market outlook is acceptable, then I would suggest never selling the property.
But wait! What if I need money? I would suggest that you look just about everywhere else before you look at liquidating your real estate.
The fees for selling real estate are very high. It is not unusual to spend 10% of the value of the house in fees, concessions, fix up, real estate commissions and so on when selling a property.
That’s usually much higher than the fees you’d pay borrowing the money from somewhere else, plus you’d lose the rental property asset.
By selling, you no longer get all the benefits of owning that rental property like income from the rent and increases to rent over time.
You also miss out on the tax benefits of depreciation from the house when you sell it.
And if you still have a mortgage on the property, then each month you are paying down that mortgage with the tenant’s rent payment and building up more equity.
Usually the biggest benefit of all is appreciation. House prices tend to go up in value over time. With a $200,000 property appreciating at 5% per year, you’d be losing out on at least $10,000 per year in appreciation by selling.
The last thing to consider is the time it took you to find the property, fix up the property and get a good tenant in the property. If you keep the property then you are leveraging that time. If you sell it, you need to start over and find a new property.
So, if you can avoid it, I suggest not selling your rental property.
Until my next post,
James
P.S. Download over 100 real estate courses plus much, much more with our Real Estate Investor Bronze Membership.
As both an active real estate investor and a currently inactive real estate broker associate who catered to investors, I have the conversation about Flipping versus Buy and Hold a lot.
So, I wanted to share with you some insight into the differences I see between the two.
First, I need to admit that I am primarily a buy and hold investor, but I do occasionally fix and flip a property to supplement cash flow needs. I am moving move towards quick turning properties.
With that being said, here is how I see the differences between buying property to immediately resell or buying properties for long-term wealth accumulation.
Buying properties to resell immediately requires that you have systems and a team in place to help you purchase, fix up/rehab, market and sell properties.
Buying properties as long-term rentals requires that you have a team to help you purchase, fix-up the property for tenants, and get houses rented. Either you need a property manager to manage your tenants or you need to manage your properties directly. Even with a property manager, you still need to manage him or her to make sure he/she is performing the job satisfactorily.
In my experience, a fix and flip property requires more personal interaction. I find myself more involved with handling the purchase, and overseeing the rehab and sales process. On the other hand, my experience with acquiring rental properties takes very little of my time. Perhaps this is because I have great teams already in place.
The biggest difference between buying houses for fix and flip versus buy and hold comes down to finances. Both require cash or access to cash via credit or a partner, but rental properties that you buy to hold long term with relatively high levels of debt, typically don’t produce a significant amount of income in the short run. In fact, having a positive cash flow of $100 to $200 a month, when you factor in repairs between tenants and improvements to the property like the occasional roof, means that you really don’t have any cash flow at all when you look at the numbers over a period of several years.
On the other hand, buying to fix and flip can generate chunks of cash relatively quickly… in a few months on a fast rehab and sale. Wholesaling properties can generate cash even faster.
So, if you are trying to generate immediate profits, I suggest looking at buying to fix and flip. If you have income from another source and are looking at real estate as a wealth building asset, I would strongly suggest you consider long term buy and hold.
Until my next post,
James
P.S. We teach a variety of short term solutions to cash flow and long term wealth building strategies to our Real Estate Investor Bronze Members. Sign up today to access a wealth of training materials (over 100 real estate courses) plus on-going training and free real estate investor consulting sessions.
