Real estate is an amazing way to amass a huge fortune if you buy houses to rent out and let the property rise in value and the tenants pay off your mortgage.
It can also be used to generate immediate income and on-going cash flow.
In this audio program (one of many in the Top Secret Courses series) we’ll teach you about both…
This audio program includes the following:
- Cash Flow versus Equity
- Short Term versus Long Term
- Creative ways to improve your cash flow when:
- Renting property
- Negotiating to buy
- Negotiating to sell
- Carrying back financing
- Finding deals and motivated sellers
- Selling faster and smarter
- Refinancing to lower interest rates
- Doing repairs or maintaining property
- Calculating when a value will double: the rule of 72
- Number of houses to become a millionaire in X years
- Paying off mortgages early as rents go up
- Which loans to pay off first? Interest rate or lowest balance?
- Over time which income and expenses go up, which stay the same?
- Buying twice as many houses as you need so you can sell half to pay off the remaining half
- Taxes and real estate
Details:
- Featuring Jassen Bowman with Steffanie
- Running time: Approximately 64 minutes
- Includes access to members only password protected website with outline and supplemental information
- Product ID: TSC0008
Use the link below to order this audio program and at the end of the checkout process you will be given a download link to instantly download the entire program:
Or, get this download for free! Here’s how: just become a Real Estate Investor Bronze Member and get instant access to this and over 100 other real estate investing course downloads plus much, much more including on-going consulting for your real estate investing business.
So, you finally found a motivated seller. You went to see the house. They are willing to sell you the house for $30,000 less than what you think it will appraise for. Isn’t that a good deal?
Maybe, maybe not. There’s a lot more to real estate investing and deal analysis than just comparing what you can buy a house for and what you think it could appraise for. If you want to disagree with me, I have literally dozens of houses that I can sell you for $30,000 or more below current appraisal value that I wouldn’t touch.
Now, don’t get me wrong… I’ve bought houses with tons of equity; and just because of the equity before. But, I won’t buy houses with tons of equity with certain exit strategies.
For example, I won’t buy houses just because it has tons of equity if I am going to rent it long term UNLESS (and it is a BIG unless) it has positive cash flow. Makes sense right? Who wants to feed a house $100, $200, $300 or more each month? Even if it has $30,000 in equity, feeding negative cash flow houses will eat you alive.
That’s why I suggest analyzing deals based more than just on equity. I strongly advise my clients and other investors to use Net Operating Income. Net Operating Income, in my opinion, is the only true way to determine what you can really afford to pay for a house as a real estate investor.
Never heard of Net Operating Income? Well, grab your favorite beverage and settle in. It is one of the best tools for analyzing deals and it is easy to calculate.
Here’s a quick break down of how to calculate Net Operating Income for a property:
1. Determine what the market rent is.
2. Subtract out an allowance for vacancies.
What remains is what we call Net Rent.
3. Add up all the expenses including taxes, insurance, management, a reasonable estimate of maintenance, HOA, utilities and so on EXCEPT your mortgage payment.
4. Subtract all the expenses from Net Rent.
What remains when you subtract all your expenses except your debt or mortgage payment is what we call Net Operating Income.
The Net Operating Income will tell us just how much debt the house can really afford. If we know what interest rate we can get on a loan and the duration of the loan, then we can plug in the Net Operating Income as the payment and any good financial calculator can tell you the most you can afford to pay for the house with the Net Operating Income as the payment.
Then, when you make your offer to a seller, you can sit them down, show them what the real expenses are for the property and what you expect to get in rent and explain to them why you can pay what you can.
Forget about making offers at 70% of value without being able to justify a ridiculous price… when you make an offer based on Net Operating Income, you can very clearly show any seller why it is that you can pay only your price.
If you would like an example of how I analyze an actual deal using Net Operating Income, I’d be happy to provide you with a real live example of one I analyzed recently. We even do live deal analysis with Real Estate Investor Bronze Members during our consulting sessions on deals they are considering buying.
Until my next post,
James
When considering making an investment in real estate, many new investors struggle with what to offer. Part of the challenge for them is deciding what their exit strategy will be. In other words, will they be purchasing the property and then immediately reselling it? Will they sell the contract before they even close? Will they be buying it to rent and hold long term?
Not knowing what you ultimately want to do with the property makes it extremely difficult to structure an offer to purchase.
This is actually a challenge we had when modeling the how to make purchases of real estate in our Learn To Be Rich investment game. Here’s how I handled it.
To simplify the process, we divided purchasing real estate into two major categories: buying for equity or buying for income.
Buying for equity is purchasing the property at a discount from the current fair market value. This is usually when you are buying a house to fix up and resell.
Buying for income is purchasing the property based on the payments and expenses you will incur when you hold the property as a rental. It also includes assessing the income that the property will produce. This analysis is typically used when you will be holding the property as a long-term investment.
By simplifying the process, investors can now decide whether they are buying for income or equity. It makes it much easier to recognize a good deal with this clear-cut criteria.
For example, if an investor is buying based on equity and he wants to make $10,000 on the deal, he can easily calculate what he can afford to pay for the house in order to net that amount in profit.
On the other hand, if an investor is buying based on income and he wants to make $100 per month, it is just as easy to calculate what his payments and expenses will be. By getting an accurate estimate of what the rental income will be, you can then reverse calculate the price you can afford to pay by using current interest rates in order to have the desired monthly payment amount that makes the property cash flow.
For our consulting and mentoring clients, we teach both strategies in our courses on how to analyze deals.
Until my next post,
James
P.S. One of the free course downloads we are currently giving away is on deal analysis and is available for anyone who joins our mailing list.
