math, math. (and only then, location)

Math, Math.(And only then, Location)

Betty Kincaid, PMN

Why work with investors?

What can you do today to double your business?

What’s different about working with investors?

How much will it make?

Rate of Return

Tax Shelter

• Depreciation• Passive loss rules• Long-term capital

gain tax• Tax deferred

exchange

Leveraged Growth

• Offers the ability to borrow large sums

• At fixed interest rates

• For long periods of time

• Compound growth

Cash Flow

• Income• Appreciation• Gain in value due to

owner expertise• Loan amortization

Disadvantages

• Lack of liquidity• Loss of value due to

market• Property hazards

• Management requirements

• Legislation• Unexpected expense• Liability

What could go wrong?

• Liability• Vacancy• Repairs• Tenant Issues

Make Your Money Going In• Below-market acquisition• Terms/Concessions• Stick to criteria• Investment policy• Keep emotions out of the

equation• There are plenty of fish in

the sea• Take action

Types of Return on Real EstateEquity rises as debt is reduced and value increases

Types of Return on Real EstateCash flow rises as debt decreases and rents increase

Commercial Property

Specialty Property

Residential Property

Buy and sell Cash rules

Know your numbers Be flexible Plan for contingencies

Buy and hold Long term

Maximum equity Increase net worth Appreciation & cash

flow

When Analyzing Property

What rents and sells best

Realistic appreciation rate

Realistic vacancy rate

When Analyzing Property

Reasonable fair market rent

Reasonable operating expenses

Realistic projected sales costs

What do you need to know?

ObjectiveRisk vs. ReturnType of Property

Capitalization rate

The rate of return the investor can expect to get from the property.

Not dependent on financing.

Capitalization rate

Net Operating Income_________________

Sales Price

Gross Rental Income-

Operating Expenses=

Net Operating Income

Cash-on-Cash return

The rate of return the investor can expect on his cash investment

Completely dependent on financing

Cash-on-Cash returnNet Operating Income

−Debt service payments

=Income before Taxes_________________Total Cash at Closing

Property #1

4128 Story RockLas Vegas, NV 89115MLS# 1189472

Compare Rates of Return

Property #2

6027 Crumbling RidgeHenderson, NV 89011 MLS# 1147814

Property #3

391 Umbria WayHenderson, NV 89014 MLS# 1131668

The Millionaire Real Estate InvestorGary Keller

Rich Dad, Poor DadCash Flow Quadrant

Robert KiyosakiFlip: How to Find, Fix and Sell Houses for

ProfitRick Villani