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Commercial Real Estate Pro Network

Commercial Real Estate Professionals who work with Investors, Buyers and Sellers of Commercial Real Estate. We discuss todays opportunities, problems & solutions in Commercial Real Estate.
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Now displaying: September, 2018
Sep 27, 2018

Conquer your fears so you can leave your W2 job and have success investing in Real Estate.

The investors journey is full of hurdles, road blocks, growth opportunities, and setbacks.  

Dan Handford with Handford Capital is a serial entrepreneur.  He has faced the fear, made a plan and acted with relentless intention and achieved.  When he sets a goal, he runs forward full throttle with relentless intention towards accomplishing his goal. All the while he keeps his eyes open for the next opportunity.

Because, when you reach a goal, you’re not done.  Instead, you have to take the next step In order to continue your growth.  Sometimes you have to take a few steps backwards before you can go forward.

Fear of the Unknown

Fear can be paralyzing.  If your goal is to escape what you know, the W2 job that provides for your family to become a full time Real Estate Investor, what’s holding you back?

For most of us, it’s the fear of change.  

To reach your destination, you have to be willing to leave your driveway and accept that you will make mistakes.  So get comfortable with that.

You don't have to act with blind faith. But sometimes, you have to let go and trust what you have learned, and do the work.

Through the Fear

Here are Dan’s action steps to get through the fear of moving forward.

  • Have the support of your family.
    • If you are married, it’s important to have agreement from your spouse.
  • Prepare for departure from our W2 job.  
    • Six months of salary saved is a good cushion to give you enough time to determine if your plan will work.
  • Determine your worst case scenario?
    • If it happens, could you go back to your W2 job or one in the same field?
  • Make your decision quickly.
    • The longer you delay taking action, the longer it will take to be successful.
  • Be relentless!
    • Your chances of success increase dramatically if you are relentless.
  • When a door closes, look for your next opportunity.

Remember, if you don’t try, you are guaranteed you will not fail but you will also never have the success you wanted.  

For more go to:

Podcast: Tough Decisions for Entrepreneurs

Multifamily Investor Nation

Sep 20, 2018

Passive Income generated from assets is the key to building real wealth.  

AJ Osborne is an insurance agent turned real estate investor who traded the lack of security provided by a job to create generational wealth through real estate.

Naturally competitive, he was a successful benefits insurance broker.  He ate what he killed. If he wanted to make more, he sold more. Ultimately, he realized that he was limited by time, and he knew that at any time, his clients could leave.  This left him feeling less than secure.

Wealth vs Rich

In the 2008 economic downturn, he recognized the difference between being rich vs being wealthy.   Those who he thought were rich, lost the most. The survivors, owned assets that produced income regardless of the economy.  Their income did not depend on their time. He recognized their freedom as true wealth. And, most investors passive income was generated through real estate.

Self Storage Value Add

AJ studied the real estate market and recognized the value add opportunity in self storage.  The market was fragmented, full of amateur operators that left plenty of room for improvement.  

He recognized that the industry has not customer service oriented.  There were additional products and services that customers were willing to pay for, but were not offered.    

He focused on finding poorly run self storage businesses, in underserved markets.  opportunities, initiating systems, and producing predictable outcomes.

Today, he and his father run a portfolio of self storage properties throughout the west.  They have a system.

  • Acquire the under performing property,
  • Install proven systems and additional sales opportunities.
  • Drive revenue and increase value.
  • Refinance.
  • Repeat.  

After each refinance, he was able to pull his initial investment capital out of the deal which gave him the needed capital for the next deal.

The Passive Income Stress Test

Until you test a system, you don’t know if it really works.  For AJ, the passive income from self storage was tested when he was stricken with Guillain Barre Syndrome.  For months he laid paralyzed in a hospital bed, in pain and unable to move beyond blinking his eyes. There was no way he could go to work to sell insurance.  

Fortunately, his self storage business generated income regardless if he was sick.  Not only did his income continue while he was ill, but real estate value grew.

If not for his self storage business, he and his family could have lost everything.  The passive income and wealth created from his real estate proved to be more secure than a job that could disappear.

For more go to:

www.cashflow2freedom.com

Sep 13, 2018

Multifamily Underwriting has three key aspects for consideration to determine if you have a true investment opportunity.  They are Market, Financials and Physical Property.

Market Keys for Success

When looking for a Market it is important to look for an emerging market.  An emerging market is one that has jobs, jobs, jobs. Population of the city is not as critical as the number of jobs and its distance to a major market, however you will want to set some minimum population criteria.  

You are looking for growth.  Talk with the locals to determine the true prospects for new jobs. Call the local brokers, property managers and the chamber of commerce and to to the building permit office to find out the path of progress and where the population is moving.   

While underwriting the market, get to know the real estate professionals that you will need on your team.  These are the boots on the ground that will be able to provide you with potential properties. Vinney has found that you will be more successful if you specify exactly what you are looking for, class of property, neighborhood, number of units, etc.

Once the brokers know your criteria, they will bring you deals.  

Financials for Multifamily Underwriting

There are two aspects to your initial multifamily underwriting. You want to start with the financials.  How is the property performing financially? At the same time, you can do an initial property inspection using online searches or with the help of your broker.  

Vinney recommends that you never fall in love with the property.  Only fall in love with the numbers.

What to look for in the numbers.  Start with the rent roll, and expenses.  You are looking to identify areas where you can save money, or those that will be different than the sellers.  Vinney recommends you use his Deal Analyzer. You can list the sellers numbers, and the numbers you find that will reflect our operating cost side by side.   This will more clearly identify if the property is a real investment opportunity.

One key metric is Cash on Cash ratio.  This provides a simple measure of the net return on the cash required to close the deal.  Vinney looks for 10.5% as a minimum for the multifamily properties he acquires.

If the initial numbers look good and you pursue the property, you will need to do a more thorough analysis to confirm the sellers numbers including bank statements, utility statements, leases, trailing twelves, etc.

The Physical Property

The physical property has two aspects you are looking for during your physical inspection; value add opportunities and capital improvements that are needed.  

The best investment opportunity will be one that you can add value to.  This could be updating the kitchen and baths, painting the exterior, adding storage space, dog parks, etc.  These improvements that residents are willing to pay more. This translates to a higher Net Operating Income and higher property value.

The condition of the physical property cannot be underestimated.  During the physical inspection, you are looking for the physical condition of the property; roof, plumbing, electrical, heating & cooling systems, paint, parking lots, landscaping, etc.  Make notes when you find needed repairs.

Vinney has had greater success by communicating immediately with the seller’s broker about any needed repairs rather than waiting.  By communicating right away, the seller is not caught off guard at closing.

When you determine the repair cost, Vinney has been successful by requesting a seller credit at closing rather than a sale price reduction.  The benefit of a credit is that you have the funds needed to make the capital improvements needed instead of paying for out of cash flow.

To develop your multifamily underwriting skills, get in the habit of analyzing deals.  This practice will sharpen your ability to recognize when a true investment opportunity comes your way.

For more, go to:

www.vinneychopra.com

Text: SYNDICATION to 474747

Sep 6, 2018

Tax Free Investing? 

Real Estate Investing provides unique tax strategies not available in all asset classes.

Scott Smith is an attorney and the principal at Royal Legal Solutions, based in Austin, TX.  His clients are strictly real estate investors. This narrow focus allows him to dive deep into specific aspects of real estate investing and help investors safely navigate their options for maximum tax savings.

Tax Free Investing

Traditionally, the phrase “tax free” investing may better be thought of as tax deferred. Whether you invest in a traditional 401k that taxes the upon withdraw, or a Roth IRA which taxes the funds prior to use, there is tax, but the difference is when the tax is paid.  Real Estate Investing truly provides some opportunities to generate cash through a nontaxable event.

The conversation with Scott Smith focused on how to accelerate the growth of your retirement account using two different strategies available to anyone who qualifies.  

Solo 401k

If you have non W2 earnings, and can demonstrate that you are “active”, you may qualify for a Solo 401k.  There are multiple advantages available if you structure the entity properly and can demonstrate that you are active in the operations.

  • The ability to deposit up to $50,000 annually into this Solo 401k.
  • Opportunity to borrow upto 50% of the balance without creating a taxable event.  Note: the loan must be repaid prior to retirement.

Self Directed IRA

A Self Directed IRA provides investors the opportunity to select the investments you want to invest in, except for “prohibited transactions” .   If you are a W2 employee looking to invest in a real estate syndication for example, but do not have the savings to do so, you might be eligible to use your employer sponsored 401k.

For more go to:

https://royallegalsolutions.com/

Podcast: The Real Estate Nerds Podcast

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