Real Estate Owners
Did you know that 46 of the world’s billionaires made their fortunes in commercial real estate investing? Just look at Donald Trump, Robert Kiyosaki (author of Rich Dad Poor Dad), and the Kennedy family. Their real estate investing produces huge cash flows, also called “passive income” by buying and holding real estate. Then there is Red Auerbach of the Boston Celtics. He made his real money buying apartment buildings, then branching off into hotels. Likewise, Arnold Schwarzenegger made his first fortune buying apartment houses in Colorado.
Here are some of the reasons commercial real estate investing is better than residential:
1. The government takes 33-50% of your profits if you buy and sell homes! When you hold houses for less than a year, your profits are taxed at the painfully high rate of “ordinary income”. With commercial real estate you’ll pay the low capital gains rate (now 15%).
2. When you’re flipping or investing in houses you’ve got to keep working to earn your next “paycheck” through marketing, buying, renovating, and selling or we have to do it on your behalf. And if you don’t want the contractors to screw up, we have to supervise them constantly. Wouldn’t you rather make passive income month after month…and reap positive cash flows from real estate investing– with less risk, less money down, and no tenant headaches?
3. Most bargain homes are in disrepair. You’re at the mercy of contractors. You’ve got to renovate the properties. But most contractors are unreliable. We oversee everything they do, or risk paying for their mistakes. And the good contractors are always booked up for months in advance.You lose money for four to six months. That’s how long it takes to fix up a house and resell it. When the contractors drag their feet, you’re left helpless and stressed out. Every day your house sits vacant, your bank account is further depleted by loan payments, taxes, insurance, utilities and time.
When you finally sell, you’ve got to start all over again, marketing, negotiating, and overseeing the contractors. If you take time off, or can’t work for awhile, you have no income. That’s not financial freedom.
When you invest with us in the commercial properties we find for you our carefully chosen property managers will handle 100% of the tenant management. They charge an average of just 6% of the gross rents (versus 10% for single family homes). This lower percentage, combined with your monthly income, makes it easy to afford a property manager. You will never deal with tenant complaints, repairs, or vacancies.
And you will use a legal tax loophole to pay zero taxes when we sell the properties for you. All you have to do is roll your sales proceeds into a bigger building (with even better cash flow). You could start profiting instantly. Rather than being drained for 4-6 months, carrying the costs of a vacant house, you can enjoy positive cash flows from day one.
When your single family home is vacant, the burden of paying the mortgage, taxes, and insurance falls entirely on you. But if your apartment building has a vacancy, the other tenants cover your expenses. Unlike the average home seller, investors are used to buying on terms. So the seller is much more willing to help you finance your purchase.
In fast growing markets, apartment buildings appreciate faster than houses. Why? When people relocate, they rent before buying. And multi-family properties are valued based on their rents. And history shows that rents always climb along with interest rates.
If you want to collect an automatic monthly income, you need properties with big positive cash flows. But without our checklist, you could overpay, make too many concessions, or lose the property to a competing buyer. We will find you nine ways to slash your costs, increase your income, and increase the resale value of the multi-family building. We will reduce tenant turnover, challenge tax assessments and slash the utility bills. We will raise rents and do renovations which will dramatically boost the building’s resale value.
You, the investor, can partner with us (i.e. you put up the money, we do the work, and we split the profits 50/50).
As the properties appreciate and the tenants pay down the loan balances equities will amass. Raising rents will further multiply the value of the buildings. So sooner or later, you may decide to “cash out”. It won’t cost you an additional 20% of your profits or more. You can legally defer those capital gains taxes forever – using 1031 exchanges. You will roll your gain from each sale into bigger apartment buildings (with bigger cash flows) – and never pay taxes.
We have a Commercial Deal Analyzer. We can determine average yields for an area, compare properties, and will move fast when we find a hot deal – before the seller gets another offer. We fill in the blanks to calculate the projected cash flow, net operating income, and cash-on-cash return.
The next step would be for you to tell us exactly what you are looking for. To do that please fill out the form here:
We will then start to look for properties that fit your criteria.
These terms are important for you to understand as they are the ones most commonly used by the professionals with whom you will be working. This is not intended to be a glossary, but an explanation of the terms through an example.
Net Operating Income (NOI)
The Net Operating Income (NOI) of a property is calculated by determining the
property’s first year Gross Operating Income and then subtracting the Operating
Expenses for the first year.
Gross Operating Income
Less
Operating Expenses
Equals
Net Operating Income
The Gross Operating Income of property is the total income a property can expect
to receive from all sources over a one year period. The Operating Expenses are
the expenditures needed to keep the property operating during the same period.
(See the article Cash Flow Model for a more thorough explanation.
Sample Calculation:
$500,000 Gross Operating Income
Less
$300,000 Operating Expenses
Equals
$200,000 Net Operating Income
The NOI of a property comes directly from the operations of a property and
disregards mortgage payments or other additional expenditures the property owner
may make, such as tenant improvements or leasing commissions.
Capitalization Rate (Cap Rate)
Many investors start their financial analysis of a property by calculating the
NOI in order to be able to calculate a Capitalization Rate (Cap Rate) according
to the following formula:
Net Operating Income
Divided By
Property Price
Equals
Cap Rate
The Cap Rate is expressed as a percentage rate. Cap Rate is typically calculated
based on the first year of operations of the property and an all cash purchase
of the property.
Sample Calculation:
$200,000 Net Operating Income
Divided By
$2,000,000 Property Price
Equals
10% The initial annual un-leveraged return on an acquisition (also known as the capitalization rate or net initial yield).A cap rate measures the ratio between the net operating income produced by a property and its capital cost (the original price paid to buy the asset).
For example, a property’s capitalization rate is ten percent if it is purchased for $10 million and produces $1 million in net operating income during one year.
A Cap Rate can be looked at as a first year return to the investor comparing how
much the investor would receive from operations with the price that would be
paid in an all cash purchase of the property. It is a measure of performance the
investor can look at to compare how their money is working for them in one
property compared to another property or investment.
Many institutional investors purchase their properties for all cash, not using
any financing. For them, the Cap Rate is a valuable method of comparing
properties. Individual investors often use financing and it may be more
appropriate for them to use additional methods of comparing first year returns.
Cash On Cash
Many investors who use financing to acquire properties use the Cash on Cash
method to compare first year performance of competing properties. Cash on Cash
takes into consideration the fact that the investor does not have to have all
cash to purchase the property, but also will not keep all of the NOI because
they must make their mortgage payments from their NOI.
First, the investor must determine the amount they must invest to purchase the
property or their Initial Investment.
Total Purchase Price Plus Costs
Less
Amount Financed
Equals
Initial Investment
Sample Calculation:
$2,050,000 Price + Costs
Less
$1,550,000 Loan
Equals
$500,000 Initial Investment
Next, the investor must determine the first year Cash Flow from operations,
including the payments due on the financing.
Net Operating Income
Less
Payments on Financing
Equals
Cash Flow
Sample Calculation:
$200,000 Net Operating Income
Less
$140,000 Payments
Equals
$60,000 Cash Flow
With the calculation of the Cash Flow and the Initial Investment, the investor
can make another comparison of how their money performs in this property
compared to other properties. By calculating Cash on Cash the investor can
calculate a first year percentage return on their investment in the property.
Cash Flow
Divided By
Initial Investment
Equals
Cash on Cash
Sample Calculation:
$60,000 Cash Flow
Divided by
$500,000 Initial Investment
Equals
12% Cash on Cash
The Cash on Cash percentage can be looked at as a first year return to the
investor comparing how much the investor would receive in cash flow from the
property when the property is purchased using financing. It is a measure of
performance the investor can look at to compare how their money is working for
them in one property compared to another property or investment, when financing
is used.
Many investors use the Cash on Cash percentage in their investment decisions as
more accurately reflects their results than does the Cap Rate which ignores the
financing used to purchase the property and the payments that must be made on
that financing from the NOI of the property.
# of Units: 20
Price $1,250,000
Owner Financing: Yes
http://interactive-media-network.com/real-estate/property/street-city-state-zip-2/
3 bedroom, 3 bathroom
$279,000.
http://interactive-media-network.com/real-estate/property/street-name-delray-beach-florida-33484/
Here are the steps you will take to list your property:
1. Register your username and password. You will receive an email with your password. You do not have to sign in at this time.
2. Once we have received your signed listing by email we will change your registration capability to Editor.
This will allow you to log in and post your pictures, videos, and the description of your property.
Please subscribe for our free report which will show you creative ways we use to market and sell your property. You will then receive the forms that we need filled out and returned to us by email.
Before you add an image:
Make sure the images are named your street name-city-state-zipcode1 lower case. The next would be your street name-city-state-zipcode2. You should add up to 12 pictures: 1 clear picture of the outside front, 1 of the outside backyard toward the house, 1 of the living room, 1 of the 1st. bedroom, 1 of the bathroom, 1 of the 2nd. bedroom, 1 of the 2nd. bathroom, 1 of the kitchen, 1 of the view, 3 of any areas needing repair ( if any). If it is a commercial property you can substitute the picture of the 2nd. bedroom with a Clubhouse (if there is one)
and of the 2nd. bathroom with a picture of any other communal area.
3. Please follow these steps:
Log in and on left click Gallery/Images
Click Add New Gallery
Name your Gallery your street name, city, state, zip.
Click Add Gallery
Click upload image
Choose your Gallery in the drop down menu. Browse your computer for your 9 -12 pictures.
Click Properties
Click Add new
In Title put your Street name (not the #), City, State, Zip.
Click tab under Visual (Add Next Gen Gallery)
In the drop down menu find your property Gallery and insert
Fill in General Information
Put square footage where it states Area
In Tabs put Acre:, Year Built:, Taxes (Yearly):, and Maintenance (Yearly):
In Tabs if commercial also add: # of Units, Square footage in each unit:
Check type of property on the right
Click Publish/Update on right
Click View property above Title
Save the URL in your browser of your property in your html editor or Word doc. Add above it if it is a private home #of bedrooms, bathrooms or if it is a commercial building state number of units and price.
Click on Posts.
Add New. To the right check commercial or residential listings. Choose the one that your property falls
under. In the Title Put in your Street name (not the #), City, State, Zipcode.
To the right of Upload/Insert click on Add an image.
Click on NextGen Gallery.
Select your Gallery
Click Show of frontal view of property
Click insert into Post
Insert the URL and brief description of your property that you saved in your html editor or Word doc.
To the right under Post Tags click choose from the most used tags
Click on each tag that corresponds to your property. You can add your own lower case tags also by entering them into the Add new.
After each one click Add.
You can add 360 degree panorama picture and a video also. To do this go to 360 tab above the description screen or to add the video go to Upload/Insert and next to add image is add video. A Google Map will automatically be added if you added the exact address.
You can also add Schools and Businesses in the area
It would be a good idea to make a pdf. To do this use Word.doc and then convert to pdf. Add pictures, address, description and include our contact information. You can add it by clicking download.
Click Publish
A screen will pop up in the upper right had corner of your computer which will ask you to insert the characters you see. Do this for all 25. This will submit the post of your property to 25 other sites. It will
also be added to Twitter, Facebook and many other Real Estate sites.
