How to Invest in Real Estate to Solve Problems

How to Invest in Real Estate to Solve Problems

How to Invest in Real Estate to Solve Problems
Invest in Real Estate to Solve Problems

How to invest in real estate to solve problems is a natural question for many real estate entrepreneurs. Real estate investing, like any other business, exists to solve problems. Whether it is providing relief from the burden of a possible foreclosure or improving neighborhoods by fixing dilapidated houses, real estate investors provide solutions to people and communities in need. Thinking of a real estate investor as a problem solver, make take a shift in your thinking. But in my experience, seeing your business through this lens has been eye-opening and rewarding. This post will explore several ways that show you how to invest in real estate to solve problems.

Real Estate Investors Add to the Economic Well-Being of the Community

Real estate investors help other businesses and local government by adding to the overall economic well-being of the community. For example, when a real estate investor rehabilitates a piece of property and puts it back on the market, the money spent during that process:

·     increases the tax coffers,

·     boosts the economy through the purchases of good and services, and

·     provides work for those in construction, financial services, and household goods and services businesses.

During the real estate downturn from 2006 to 2014, real estate investors played a major role in turning around the real estate market.   A study sponsored by Bigger Pockets. com,  a leading web site for real estate investors, indicates the housing crisis pushed nearly 4 million foreclosures onto the open market. The housing crisis devastated home values.  During this time, real estate investors bought many of these foreclosures when few other people could or would. The actions of real estate investors provided stability to the crumbling housing market. On average real estate investors spend $7,500 per home renovation. This spending pumps in more than $9.2 billion every year into construction-related spending.

Real Estate Investors Help Families in Times of Distress

As a real estate investor, my entire business model is based on ways to solve problems for my clients. When people find themselves in times of distress during a divorce, bereavement, loss of a job, or dealing with tax issues, a real estate investor has a variety of programs and services to help the client solve his problem. For example, as a real estate investor I can quickly help a family who inherits an outdated and unwanted home. We can also deal with any of the belongings in the property. During your time of grief, especially if you are far away, a real estate investor could promptly solve your problem.

Real Estate Investors Help Families Find Affordable Housing

As the housing markets recover in most parts of the country, real estate investors continue to help those most in need of affordable housing. Real estate investors provide services that many financial institutions and traditional real estate firms do not. For example, it’s estimated that over eighty percent of the population in the United States cannot qualify for a traditional mortgage loan. This means that there is a huge underserved market for housing that traditional financial institutions are failing to fill. Real estate investors can help these people solve their problem with a variety of tools to put them on a path to home ownership.

To learn how we help our clients live the life of their dreams through real estate investing, contact us at The Book On Investing (www.thebookoninvesting.com) and RADAR Investments, Its Always On!, (www.pathway2buyhomes.com) and www.pathway2sellhomes.com

 

 

 

What Happens When You Plan Your Exit Strategy Before You Buy

 Plan Your Exit StrategyWhat Happens When You Plan Your Exit Strategy Before You Buy!

Are you ready to plan your exit strategy before you buy property?  To plan your exit strategy for your real estate investment before you buy, may sound like starting your meal with dessert. However, it can prevent you from getting into a bad deal. In his landmark book, Seven Habits of Highly Effective People, Stephen Covey calls the second habit, “Begin with the End in Mind.” This is especially true in today’s real estate market.

Unless you want to wander aimlessly down a highway you need to know your exit before you get on the interstate.  In real estate investing the same principle applies. To be successful, you need to plan how to exit the deal when you enter the deal.

This article will discuss what happens when you plan your exit strategy for your real estate investment before you buy.

What is an Exit Strategy

 

To begin our discussion, first we will discuss “what is an exit strategy.” An exit strategy is essentially the way that you plan to dispose of the property that you are considering buying. To be successful in real estate investing, you must know your exit strategy when you purchase the property. The goal in real estate investing should be building wealth for you and your family, period. Think about the ways that this investment will increase your wealth. Will the deal give you tax benefits, appreciation, or income? If you are fortunate you may get all three in your deal. Or are you looking to recover your expenses quickly and earn a profit?

Why is it important to have an exit strategy?

 

Many people believe that real estate investing is about buying a piece of property just to possess it. Or, they call themselves “Real Estate Investors”, when they purchase real estate at a specified price and “hope” that that price will increase over time.  These types of “investors” are often disillusioned when the cost of maintaining a property becomes prohibitive or the value of the property decreases significantly.  But knowing how and when you plan to dispose of the property, helps you decide on how to structure the deal. It helps you decide on the price and the time frame that are suitable for your goals.

What would happen if you had an exit strategy?

If you had an exit strategy, you would have a better understanding of the maximum amount of money to spend on your deal.  If the market is good and I know that the property will command premium rents or a long- term lease, then I might use a buy and hold strategy to hold on to the property for long term wealth creation and positive cash flow.  If the property is in an up and coming neighborhood, I know that I can make a quick return by forcing the appreciation of the property. Then I may consider a rehab or fix and flip exit strategy to make a quick return on my investment.

Conclusion/Call to Action

Knowing your exit strategy, gives you the confidence needed to know that whatever the situation, you are making the right decision. Wining at the real estate investing game requires knowledge, skill, and abilities to analyze and evaluate every scenario. You will need several arrows in your quiver to hit the bull’s eye with your investing.

To learn how we help you live the life of your dreams through real estate investmenting, contact us at The Book On Investing or RADAR Investments, Its Always On!  

 

We look forward to hearing from you.

Leave us a comment below!

 

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Cash Flow: Watch Your Wealth Grow!

Watch Your Wealth Grow!
Cash Flow: Watch Your Wealth Grow!

Cash flow came up the other day in an interesting conversation with a friend over a Starbucks coffee. He knew that I like investing in real estate but he wanted to know how real estate investing grows wealth. Now, I knew that my friend has an analytical mind and I know that in his question, he would be analyzing every word that came from my mouth. So, I thought about his question for a few seconds and realized that I had to give him an answer that would satisfy has curious mind. I then picked up a Starbucks brown napkin and wrote four terms: cash flow, equity, depreciation, and appreciation.

Grow Your Wealth By: (1) Cash Flow

First, I told him that real estate investing provides for gross spendable income or as we say in the real estate investing, cash flow. I asked him to imagine buying a property for 60% of the market value, using the bank to finance the property and then renting the property out for twice the mortgage that you are paying on it. He said that “it sounds good!” I said, that’s cash flow making you wealthy!

Grow Your Wealth By: (2) Equity

Second, in addition to cash flow, now take the same property  and hold on to it for a number of years. Let your tenant pay your down your mortgage. This means that the debt on the property is decreasing and your equity is increasing.  The equity in the house is a valuable asset. It can be used as leverage to buy another property to start the process over again. I asked him, still sounding good? He replied, keep going. I said, that’s how you grow your wealth!

Grow Your Wealth By: (3) Depreciation

Thirdly, I said after considering the cash flow and equity take the same property and deduct the cost of depreciation for the wear and tear on the house by the tenant. Then you use that depreciation as a loss on your taxes. This could save you thousands on your taxes. I asked, “still with me” he nodding his head. I said, this how savings in taxes grows your wealth!

Grow Your Wealth By: (4) Appreciation

Lastly, I said consider cash flow, equity, depreciation, and now add in appreciation to the property. I told him that the savvy real estate investor makes money when he buys a real estate deal not when he sells. Remember I told him to imagine buying this property at 60% of the market value? This means that in a worst case scenario, the property should appraise for what you bought it for. So you would not lose any money. The upside of appreciation is that the property will more than likely rise in value and become more of a good investment over time. I said, are you still concerned about growing your wealth?

After about 10 minutes of my back of a napkin presentation, I asked him if he could find the same benefits by investing in stocks, bonds or precious metals. He said no. He thought that what I explained to him sounded good but, was still wondered if he could grow wealth by investing in real estate. I said yes, I am doing it now!

Conclusion

My friend was so impressed with my presentation that he bought my favorite Starbucks coffee. He had learned four ways to grow wealth by investing in real estate. He had learned all about (1) cash-flow; (2) equity; (3) depreciation; and (4) appreciation. He asked about how he could learn more. I hope that you do to! If you would like to learn what I am teaching my friends and clients, come to The Book On Investing to learn about my Savvy Investor Program.

The Blizzard of 2016: A Valuable Lesson About Delegating

Are You Overwhelmed? Or Will You Delegate?
Overwhelmed? Or Will You Delegate?

 

Have You Learned to Delegate?

Learning to delegate can be  problem for many entrepreneurs and small business owners. Is your desk piled high with projects that you can’t seem to complete?  Are you feeling overwhelmed? Perhaps failing to delegate is a problem for you. A wise mentor once told us that learning to delegate is a key wealth building strategy.  You need a team to help you create the life of your dreams.  As an entrepreneur and business owner you must learn to delegate those things that don’t make you money.  If you do not learn to delegate, your business will be limited in scope to only those things that you can personally accomplish.

To create the life of your dreams you must develop the wealth making strategy of delegation.  Here are 3 tips about delegating:

(1) Learn to Delegate:  Delegation is a key strategy for maximizing your results. The Blizzard of 2016 gave us an opportunity to exercise the strategy of delegation. We had to decide whether to work on our business, i.e. preparing the next presentation. Or are one or both of us would shovel the snow from the Blizzard of 2016? Because it was a magnificent snowfall, the aftermath and clean up would be a massive undertaking. We choose to delegate the task.  We paid some local fellows about $15.00 an hour to shovel the snow from the driveway and sidewalk.  Then we turned our attention back to what makes us money and what we do best:  writing, coaching, and presenting.  That type of delegating works for us.

(2)  Examine How You Spend Your Time: Are you still doing minimum wage jobs? As a business owner you must examine how you spend your time and learn to delegate those minimum wage activities that keep you from focusing on wealth creating activities.  Every day we make an intentional decision not to involve ourselves with minimum wage activities. Therefore, we delegated the snow shoveling.

(3) Make Others Part of Your Team: What would you have done?  Would you have chosen to save the money and shovel the snow yourself? We decided to make the guys who shoveled the snow part of our team for the day! They did in two hours what would have taken us all day. We then worked on our business. Delegating works for us!

Key Lessons: The key lessons are: (1) learn to delegate; (2) examine how you spend your time; and (3) make others part of your team.  Are you making an intentional decision to delegate? Are you using your time to launch or grow your business so that you can spend more time with your family and doing the things you love?  Or are you spending time doing minimum wage jobs?  To learn more about delegating get your Free Report on Building Your Business DreamTeam.

Let us hear from you! Share how delegating has worked to help you create the life of your dreams!

Real Estate Investing 101: Looking at the Numbers

Real estate investing means you must look at the numbers.  Would you love to invest in real estate but that don’t quite understand the numbers enough to make an informed decision? I am often asked, “How do you determine if a deal is a good real estate investment? Well, I use a simple formula when I evaluate a property in a real estate investing deal is to determine if it’s a good candidate for a rental with positive cash flow. This formula also allows me to determine if I need to use a different strategy to make a real estate investing deal profitable.

Take this house below as an example.

Real Estate Investing 101

The purchase price of the property in this real estate investing deal was $80,000, and it rents for $900 per month. Therefore $900 monthly rent x 12months = $10,800 per year. The expenses would include 10% property management fee ($1,080 per year), annual taxes of $1,000(per year) and annual insurance of about $600 (per year). This equates to $10,800 rent per year – $2,680 yearly expenses (PM, Taxes, Insurance) = $8,120 per year.

In addition to the above expenses, I would also add another 10% for unexpected maintenance and vacancies. Therefore, $8,120 – $812 (10%) = net $7,380 yearly positive net cash flow from this real estate investing deal.

Once you have the net cash flow figure, this figure is then divided by the purchase price of $80,000 and then you will get a sum of 0.0913 which would mean a cash on cash return of 9.13% from this real estate investing deal.

As you can see, this is a pretty good return on investment from this real estate investing deal. These numbers are based on a cash purchase but could even look better if you used leverage or financed using the bank’s money.

To learn how we help you create the life of their dreams through real estate investments, contact us at The Book On Investing or RADAR Investments, Its Always On!

 

Real Estate Investing: Are You Achieving Your Goals?

As a real estate investor, are you achieving your business goals? Goals are important for every aspect of your life, but they are especially crucial when it comes to starting your own business.

They will be at the heart of all your plans and instrumental in

making strategic decisions about where and what in which to invest.

Determining your goals at the beginning of the process is

essential. One of the biggest reasons investors fail is that they

don’t have a game plan laid out. Investing based just on how much

you have at hand or in something that just comes up, is the surest

way to lose money rather than make it. Plus, without knowing where

you’re going, you’ll never know whether you are on track or whether

your projects and investments really are in line with your

long-term needs.

Goals are not to be set aside and stored for an end of year review.

We’ve found that the edge you’ll need to succeed comes from

formalizing your goals and tracking your achievements against those

goals on a regular basis. We diligently write ours monthly and

“find ourselves effortlessly achieving them” (to quote our favorite

coach Raymond Aaron, www.theultimateauthorbootcamp.com).
Once you write out your goals, post them somewhere you can see them

on a regular basis to constantly remind you of all you are working

towards. Dexter keeps his goals in his office near the

computer so he can see them daily. If you do the same for both your

business and personal goals, you will see how focusing on those

every day will help you design the life that you want to live.

Conclusion

Now you need to work on establishing your business goals, beginning

with the big picture and working your way backwards. After that,

you need to walk through the actual process of determining exactly

what financial goals will create the lifestyle about which you are

dreaming.

Remember that with real estate investing as one part of your

financial plan, you can create the life of your dreams by following

a few time-proven strategies and techniques. Download your free

article on real estate investing.

Let us know if you found this post helpful!