how to buy your 1st investment property
TRANSCRIPT
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How to Buy Your 1st Investment Property
“It all begins with that first step”
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Meet Scott Pastel VP of Marketing/Co-Owner
10 years of experience in Real Estate
Licensed Real Estate Agent
BS Degree in Business Administration from Chapman University
Owns 3 rental properties from AZ to AL
Purchased first investment property at age 24
Personally mentored over 500 real estate investors
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TOPICS WE WILL COVER TODAY: Tax Benefits of Owning Investment Property
5 Steps to Owning Investment Real Estate
How to Obtain the Best Financing for Investors
Property Management In’s and Out’s
Which Markets in the Country to Invest
How to Analyze the Financials (Actual Deals)
How to Eliminate as Much Risk as Possible!
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UNCLE SAM WANTS YOU TO BUY REAL ESTATE!
1. Mortgage Interest 2. Insurance 3. Property Taxes 4. HOA payments 5. Property Mgmt. fees 6. Depreciation 7. Repairs and Improvements
Treat your real estate as a business! *Consult with your CPA or Tax Advisor first. If you do not have one, the Network has excellent referals!
TAX Benefits of Owning Rental Property:
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MY PROPERTIES
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Two Most Important Market Factors in Real Estate:
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Two Most Important Market Factors in Real Estate:
• Location, Location, Location
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• Location, Location, Location
•Timing, Timing, Timing
Two Most Important Market Factors in Real Estate:
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Phoenix, AZ • Built 2007, 3 bed, 2.5 bath, 1,749 sq/ft
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Bought in 10/2007 Purchase Price: $207,000 At that time it would have rented for $950
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Bought in 10/2007 Purchase Price: $207,000 At that time it would have rented for $950
How much would you need to pay out of pocket to make the property have a positive cash flow?
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Bought in 10/2007 Purchase Price: $207,000 At that time it would have rented for $950
How much would you need to pay out of pocket to make the property have a positive cash flow?
$107,000 Down $113,210 Out of Pocket with Closing Costs
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Bought in 10/2007 Purchase Price: $207,000 At that time it would have rented for $950
How much would you need to pay out of pocket to make the property have a positive cash flow?
$107,000 Down $113,210 Out of Pocket with Closing Costs
52% DOWN PAYMENT
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Bought in 10/2007 Purchase Price: $207,000 At that time it would have rented for $950
How much would you need to pay out of pocket to make the property have a positive cash flow?
$107,000 Down $113,210 Out of Pocket with Closing Costs
52% DOWN PAYMENT
$150 A MONTH POSITIVE CASH FLOW 1.6% Cash-on-Cash Return
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Phoenix, AZ • Built 2007, 3 bed, 2.5 bath, 1,749 sq/ft
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Bought in 10/2010 Purchase Price: $96,000 Rented for $850
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Bought in 10/2010 Purchase Price: $96,000 Rented for $850
Minimum down payment on residential investment property?
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Bought in 10/2010 Purchase Price: $96,000 Rented for $850
Minimum down payment on residential investment property?
$19,200 Down $22,080 Out of Pocket with Closing Costs
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Bought in 10/2010 Purchase Price: $96,000 Rented for $850
Minimum down payment on residential investment property?
$19,200 Down $22,080 Out of Pocket with Closing Costs
20% DOWN PAYMENT
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Bought in 10/2010 Purchase Price: $96,000 Rented for $850
Minimum down payment on residential investment property?
$19,200 Down $22,080 Out of Pocket with Closing Costs
20% DOWN PAYMENT
$250 A MONTH POSITIVE CASH FLOW 13.57% Cash-on-Cash Return
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The 5 Steps to Owning Investment
Real Estate
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Step 1: GOAL SETTING
Specific Measurable Attainable Result? Timeframe
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It all depends on the following…
1. Your Goals 2. Age 3. Experience 4. Risk Tolerance 5. Amount of Capital 6. Qualifying capabilities
Setting your Real Estate Investing Criteria
Phone: (949)885-8180 Website: www.marshallreddick.com
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Michelle Suiter: Real Estate Advisor No charge
Over the phone or in person
Whether you are experienced or just getting started
Customized plans that fit YOU best
We walk you through the entire process start to finish
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Step 2: FINANCING
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Borrowers with 4 or less properties financed: 1 Unit - 80% financed (20% down) - 680 Fico 2-4 Units - 75% financed (25% down) – 680 Fico
Borrowers with 5 to 10 properties financed:
1 Unit - 75% financed (25% down) - 720 Fico 2-4 Units - 70% financed (30% down) – 720 Fico
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How to calculate your debt to income ratio?
DEBT Divided into Gross (before tax) monthly income = Debt to income ratio
Debts include the following: Minimum payments on Credit cards, Auto loans, mortgages including property taxes and insurance, student loans, any other loan on credit. Debts that do not count against DTI ratios include the following: Auto/Health insurance, cell phone and utilities (including cable), loans to family and friends that are not recorded, business loans.
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640-660 mid fico score = 43.00% Max 660-680 mid fico score = 45.00% Max 680-700 mid fico score = 45.00% Max 700 mid fico score and above = 45.00% -
49.99% Max What are compensating factors?
*With our Credit Analyzer Software we can help IMPROVE a borrower’s credit score in some cases by ordering a “Rapid Rescore”
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Please save yourself the trouble and DON’T use a Broker or your
local retail bank! In almost all cases you will either
lose the deal or have major delays. I can’t stress this enough…
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Reed Hazard Branch Manager Cell: 949-973-5226 Email: [email protected] www.reedhazardloans.com
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How to Choose Where to Invest:
1. Job Market 2. Vacancy Rate 3. Economic Diversity 4. Housing Affordability 5. Landlord Friendly? 6. Strong Education 7. Reliable Property Management
Step 3: Due Diligence
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Unemployment Rate = Vacancy Rate
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Over 6 million people live in the greater Atlanta Metro!
Phone: (949)885-8180 Website: marshallreddick.com
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CNN Money-September 30, 2013
•MSN Money-
Phone: (949)885-8180 Website: marshallreddick.com
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HOW TO CREATE “Worry-Free” Investing
No condos or townhomes Must Cash Flow! Buy Rent-Ready Buy Tenant Occupied Target suburbs of Large Metropolitan markets 3-4 bedroom units Hire a Home Inspector Hire a Professional Property Manager
Phone: (949)885-8180 Website: marshallreddick.com
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Step 4: Escrow Process
• Read and Sign Purchase Agreement • Home Inspection • Appraisal • Select Rental Insurance • Title Insurance • Notarize Documents
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Step 5: Select Property Manager and
Get Property Rented!
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How to Ensure “Worry-Free” Property Management
What a GOOD Property Manager Does: Estimates fix-up costs Gets your property fixed up quickly Advertises and shows the property Finds and screens applicants Gets the tenant to sign a lease Collects the rent Provides a monthly and year-end statement Conducts periodic inspections
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How Much Will It Cost? Leasing Fee
Management Fee is usually 8%-10% but
varies depending on the geographic location
We have REDUCED fees (6%-8%) for anyone who invests through the Marshall Reddick!
IF YOU BUY IN THE RIGHT AREAS IT WILL
STILL CASH FLOW!
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Tenant Laws
California is a “tenant state,” meaning that the laws favor tenants’ rights, such as rent control or making it difficult to evict problem tenants.
Sources: http://realestate.msn.com/article.aspx?cp-documentid=13108353
http://www.landlord.com/lawresoverview.htm
www.rentlaw.com
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Tenant Laws
• In California, it takes a minimum of 3 months before a judge hears and decides on a case.
• In “Landlord-Friendly” states it can be as little as 2 days before a trial is held!
Sources: http://realestate.msn.com/article.aspx?cp-documentid=13108353
http://www.landlord.com/lawresoverview.htm
www.rentlaw.com
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Rule of thumb for investors:
“Live where you want, invest where the numbers make sense.”
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WHAT DOES 90K GET YOU IN LA? What property class does this property fall into? How much maintenance and vacancy will you encounter?
20%? 30%? 40%?
351 E 97th St Los Angeles, CA 90003 (Near Watts) Price: $90,000 3 Bed and 1 Bath 630 Sq Ft Year Built 1927
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LETS COMPARE…PROPERTIES Memphis, Tennessee Riverside, California
Price: $335,000 4 BED/3 BATH Sq Ft: 2,288 Year Built: 1988 Price/sq ft: $146
Price: $ 109,900 4 BED/2.5 BATH Sq Ft: 2,529 Year Built: 1985 Price/sq ft: $43.46
Sources: http://www.realtor.com/realestateandhomes-detail/137-Gracefield-Way_Riverside_CA_92506_M22634-25635#SendFc http://www.realtor.com/realestateandhomes-detail/24511-Highpine-Rd_Lake-Forest_CA_92630_M21748-21378
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Top Investment Markets in the Country:
We choose real estate markets based on the latest research and data!
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Top Investment Markets in the Country:
We choose real estate markets based on the latest research and data!
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Every Investment has its Risks
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Main Risks Associated with Real Estate Investing:
Vacancy
Maintenance
Property Values
Natural Disasters
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The Beauty of Real Estate!
You can Eliminate as much Risk as Possible!
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Vacancy Large City/Job Market/Good P.M
Maintenance
Property Values
Natural Disasters
How can we Eliminate as much Risk as Possible?
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Vacancy Large City/Job Market/Good P.M
Maintenance Newer Properties/A&B Class
Property Values
Natural Disasters
How can we Eliminate as much Risk as Possible?
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Vacancy Large City/Job Market/Good P.M
Maintenance Newer Properties/A&B Class
Property Values Must have Positive Cash Flow
Natural Disasters
How can we Eliminate as much Risk as Possible?
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Vacancy Large City/Job Market/Good P.M
Maintenance Newer Properties/A&B Class
Property Values Must have Positive Cash Flow
Natural Disasters Rental Property Insurance
How can we Eliminate as much Risk as Possible?
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How to Get Started: 1. Email Michelle Suiter to schedule a free phone consultation
2. The no-obligation consultation will consist of: 1. Creating your investment criteria 2. Which markets fit your criteria 3. Analyzing potential investments 4. Ask any and as many questions as you would like!
Michelle Suiter Real Estate Advisor Direct: (949) 885-5162 Email: [email protected]
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Call: (949) 885-8180
Email: [email protected]
Website: www.marshallreddick.com
4299 MacArthur Blvd. Suite 102, Newport Beach, CA 92660