Real Estate Investing Plans, Goals and Crucial Formulas

Real estate investment get-rich-quick methods upset me for a couple of reasons. They generally assume that you are going to self-manage the property yet ignore your cost of time to manage. Moreover, they promote “no money down” methods yet fail to warn you about the risks of high leverage. Besides, I find it difficult to trust anyone claiming to have found a goldmine when they anxiously peddle a map so it can be found. If they really discovered the way to real estate investment riches, why would they share it?

Actually, there is no secret way to attain real estate investing success.

In real life, you must work hard with good research and a commitment to a sound and systematic analysis. Pathways leading from get-rich-quick seminars are littered with disappointment; the key to successful investing, however, is to take as much time as necessary for proper preparation. Time is on the side of the prudent real estate investor.

In this article, we are seeking to help you better understand several nuances associated with real estate investing. We would like to discuss the importance of building a sound investment plan with meaningful goals and then cover the formulas of four popular financial analysis models used regularly in real estate investing.

Build a Sound Investment Plan

Having a plan with stated goals is one of the most important foundations of successful investing. However, it’s not about having lofty intentions and then declaring, “I want to be worth twenty million dollars one day.” There’s nothing wrong with desiring better things in life, the problem is that simply declaring something doesn’t bring you any closer to achieving it. The idea is to develop a general plan with stated goals and a method on how to get there.

Goals Must be Meaningful

Goals are the shortcuts to your desired destinations. Goals are not essential to life, many people do just fine without any kind of goal at all, but goals are essential to successful real estate investing. For a goal to work for you, however, it must be attainable, measurable, tied to a timetable, and clearly defined.

Moreover, divide long-range goals (say further out than one year) into intermediate goals, and your investment plan into subsections such as “cash flow requirements,” “net worth projections,” “tax shelter benefits required,” “cash withdrawal from plan,” and so on.

Start here: How much cash do you have available to invest comfortably? What length of time do you plan to stay invested? How much of your own effort do you plan to contribute?

Define a general plan: You plan to develop or own only the highest quality properties in prestige locations. You plan to own the largest market share of office buildings under 12,000 square feet in your local market. You plan to maximize your tax benefits on purchases and use tax-deferred exchanges and installment sales when available.

Define a detailed plan: How much cash do you want to collect each year beginning in the 10th year? What net worth …

Real estate investment get-rich-quick methods upset me for a couple of reasons. They generally assume that you are going to self-manage the property yet ignore your cost of time to manage. Moreover, they promote “no money down” methods yet fail to warn you about the risks of high leverage. Besides, I find it difficult to trust anyone claiming to have found a goldmine when they anxiously peddle a map so it can be found. If they really discovered the way to real estate investment riches, why would they share it?

Actually, there is no secret way to attain real estate investing success.

In real life, you must work hard with good research and a commitment to a sound and systematic analysis. Pathways leading from get-rich-quick seminars are littered with disappointment; the key to successful investing, however, is to take as much time as necessary for proper preparation. Time is on the side of the prudent real estate investor.

In this article, we are seeking to help you better understand several nuances associated with real estate investing. We would like to discuss the importance of building a sound investment plan with meaningful goals and then cover the formulas of four popular financial analysis models used regularly in real estate investing.

Build a Sound Investment Plan

Having a plan with stated goals is one of the most important foundations of successful investing. However, it’s not about having lofty intentions and then declaring, “I want to be worth twenty million dollars one day.” There’s nothing wrong with desiring better things in life, the problem is that simply declaring something doesn’t bring you any closer to achieving it. The idea is to develop a general plan with stated goals and a method on how to get there.

Goals Must be Meaningful

Goals are the shortcuts to your desired destinations. Goals are not essential to life, many people do just fine without any kind of goal at all, but goals are essential to successful real estate investing. For a goal to work for you, however, it must be attainable, measurable, tied to a timetable, and clearly defined.

Moreover, divide long-range goals (say further out than one year) into intermediate goals, and your investment plan into subsections such as “cash flow requirements,” “net worth projections,” “tax shelter benefits required,” “cash withdrawal from plan,” and so on.

Start here: How much cash do you have available to invest comfortably? What length of time do you plan to stay invested? How much of your own effort do you plan to contribute?

Define a general plan: You plan to develop or own only the highest quality properties in prestige locations. You plan to own the largest market share of office buildings under 12,000 square feet in your local market. You plan to maximize your tax benefits on purchases and use tax-deferred exchanges and installment sales when available.

Define a detailed plan: How much cash do you want to collect each year beginning in the 10th year? What net worth …

Private Note Holder Leads

The private note holder industry is one of the greatest opportunities available in the market no matter the economy. There are always going to be opportunities in this industry for someone to make money. If you know anything about Real estate and the value of the industry then you know about cash flow. If you have cash flow then you have wealth. Many people will start buying seller finance notes to create this cash flow. Other times notes are created to facilitate the sale of a property but the holder does not want to hold the cash flow. It does not really matter why they don’t want it. Perhaps there are other interests where they want to put the money or maybe they just want to have the cash now. Whatever the reason there are many private note holders who would rather sell the note they hold for cash. To them immediate cash is king.

If you are looking to work the note business as a broker or beginning buyer of notes then the right note holder lead list is important for you to be able to contact these potential note sellers. It is also important to understand what such a lead list really is and what your expectations should be. It is true there are many of these note holders who do not want to keep the note they ended up with. It is not true however that any company can offer you a note holder lead list which exclusively contains people who want to sell. Not holder lead lists are simply public record data that has been gathered for marketing purposes.

There are some important things to understand before buying a mortgage note holder lead list. The first is to understand the data and recognize it for what it is. With many consumer lead lists the data is simply pulled from current addressees and is current with the name and address that exists now. This type of list is not a specialized list. When you are dealing with a more specialized list such as seller finance note holder leads, the data you seek is specific to the document that was recorded and not to the current address or name. With the private mortgage not holder list you are seeking data that was recorded often years prior. It is the action of the private note being created that you are seeking.

Once you understand that the data is often “old” data due to the nature of the requested information then you can move to understanding the statistics. Make yourself aware of the possibilities of what may have happened since that note was created. The best possible option is that the note was created and the seller or note holder still lives at the same address and no mistakes were made in recording and he wants to sell.

That is not always the way it goes however. Often times the note is created and then the seller moves. Other times …

Real Estate Development – The Secret You NEED to Know If You Want to Become a Property Developer

We've had a few people tell us that they really want to become a successful Real Estate Developer but they are not sure if they have what it takes. So here's some information that we thought might help …

Having our own architectural practice means we're able to work with some of the most successful Real Estate Developers in the business and observe first hand exactly what type of mindset it takes that allows them to build property empires and accumulate massive fortunes.

Many studies have concluded that each one of us has a wealth blueprint. From our earliest moments our views towards money are conditioned by the sources around us like our parents, friends, relatives, teachers, classmates and the media. This programming extremely influences our wealth accumulation.

We found that part of creating a 'Developer's Mindset' mean that we needed to first remove any blockages that could hold us back from achieving our true potential. These blockages can be physical (a real injury), emotional (beingjudged or rejected), mental (not having language skills) or spiritual (taking certain teachings to their limit). Whatever its type – these blockages can be like a big rock in front of you that impede your forward progress.

The problem is – it is not always easy to identify these blockages. We sort help from internationally privatelyowned development coach Paul Blackburn and during his Mental Toolbox he explained to us that it's our money beliefs that can hold us back. Paul classifies people's money beliefs as:

– It's Easy: These people believe that there is never enough time to take advantage of all the opportunities they see lying around. If you can, hang around these people, their attitude may rub off!

– It's Hard: These people grow-up hearing 'we can not afford it', their catch covers include 'money does not grow on trees'. They believe money is hard to come by and even harder to keep.

– Easy Come, Easy Go: By being in 'lucky' situations, they find money both relatively easy to make and ridiculously easy to blow. They have a roller coaster existence, characterized by the expression 'easy come, easy go'!

– Struggle: These people believe that it's not OK for money to just turn up – It must be earned. They typically utter 'another day, another dollar'!

– Always Broke: 'Money does not go as far as it used to' these people will often say they believe wealth is immoral, wrong or shameful.

– I'm Powerless: These people feel they are powerless to earn more, complaining 'I can not, it's too hard'. As their parents usuallyave them too much, they never learned to make an effort themselves.

– Drama Queen: They are always broke because there is always some earth shattering money difficulty occurring.

In the first eLesson of our RED Club mentoring program we talk about how we had to change our money beliefs and reprogram ourselves so we could attract an abundance of wealth. We also talk about the mental habits …

Five Fundamental Principles for Success In Real Estate Investing

Many people are feeling the budget crunch, not to mention being tired of their 40-60 hour a week job. Because of this, they are looking into other ways of making a living, such as real estate investing. Real estate investors can sometimes make tens of thousands of dollars per month working only ten hours a week! But whatever business is right for you, there are several principles that will make the difference between success and failure.

1. You have to find customers. In real estate investing, these are your prospects – people who have the right kinds of homes that they want to unload, or people who want to purchase the kinds of homes you can find. You can be an expert in the real estate business, but if you do not find these prospects, you will not be making any money.

Similarly, in any other business, you have to generate awareness of your services and find those people who want what you have to offer. This is why every business expert stresses that you must plan for at least some investment of time and money into marketing, advertising, public relations, and similar activities.

Fortunately, with email, auto-responders, and the like, you can be contacting a few hundred people a week, but without doing the actual grunt-work of dialing phones, stuffing envelopes, and the like.

2. You need to screen your potential customers so that you do not waste gobs of time on people who will never do business with you. There is no reason to feel bad about this screening process. If they are not really potential prospects, they will be wasting their time, too. Consider that of all the people who contact you with real estate to sell, probably less than 5% of them are genuine prospects. Think of the rest of them as "concerns."

If you learn to screen prospects, you can save yourself hours of valuable time. Good ones will work with you on a deal. Bad ones will want everything their own way, and they will want all of the money. Learn to avoid these customers.

3. The third step is to create and present your offers. Good prospects often do this for you. It is a good idea to simply ask a potential real estate seller how much is the least they will accept. If they name a price, then they have created the offer.

4. The fourth principle of successful business dealings is follow-up. Many people underestimate the value of following up on your prospects. The internet and email have made follow-up simple. Keep in mind that a full 82% of business revenue has been found to come from the second to seventh contact with the prospect. You do not have to spend all your time following up, though. Even contacting three or four people a week can make a big difference, especially if you have screened those prospects.

5. Finally, close the deal quickly. In most cases, you do not have to …

Octagonal Shaped Real Estate Signs Give Agents an Extra Angle

Marketing professionals everywhere know that there is no such thing as enough, or even too much exposure when it comes to advertising brands and selling products. These same professionals also know that cheap, or better yet free, advertising can not be beat. Sure, there are big corporations out there with the means to spend whatever is necessary to splash the company logo across Times Square and the Daytona 500, but for those of us without that big budget, a little ingenuity is necessary in keeping costs down all the While gaining maximum exposure and thus, business.

Tell me how … PLEASE !!!

I will … but first, let me tell you a story. A few days ago I was in my car driving to work when my eyes were involuntarily drawn away from the road towards the front yard of a house that I pass by everyday. I see this house every single day, but never once have I actually observed any detail about the house. I could not even tell you the color of the house (I've since noticed that it's yellow) or whether it's made of brick or wood paneling (wood paneling). Must be something about the house being located on a busy roadway; Egypt, you could make the argument that it's just any old house with no exciting features. Either way, for some reason, on this one particular day, my eyes were drawn towards this yellow house made of wood paneling like moths to a light. Something was different, something new that grabbed my attention without even asking me for permission. A metal sign had been placed in the yard with a name, a phone number and the words "For Sale."

So what? Real estate "For Sale" signs are all over the place nowdays!

Yes, but in my own defense, there are other houses on the same block that have metal "For Sale" signs in the yard and I never noticed any of those houses before either! Hmm … very peculiar. There are several homes with metal "For Sale" signs in the yards on a busy street that I drive down everyday; And yet, for some reason, on this one particular day, and everyday since for that matter, my eyes are somehow immediately drawn towards this one same yellow house with the wood paneling.

Fill me in already! What is going on?

The truth is, there really is nothing totally off-the-wall unique about the house. The secret, my friends, is in the shape of the metal sign in the yard. The metal sign is in the shape of an octagon, just like a STOP SIGN!

Holy cow, that's awesome! Wait, why is that awesome?

Since we are so accredited to seeing the unique shape of a stop sign while we are driving, our minds automatically associate that shape, the octagon, with the action of stopping. So, when I was driving down the same road I always use to get to work and saw that eight sided metal …

Are You A QUALITY Real Estate Professional?

Real estate professionals come in all sizes and shapes, as well as possessing a variety of different attitudes, perceptions, skills, etc. I often counsel potential buyers and sellers, to interview prospective agents, before they select or hire the one, who is best suited to meet their needs, requirements, etc. Since for most people, a house represents one of their most valuable single assets, it does not make sense to protect yourself, by being as certain as possible, that you feel comfortable with, have confidence in, and are on the same page, As the person you hire? As a Licensed Real Estate Salesperson, in New York, for over a decade, I believe, each of us in this profession, should ask himself, Am I, a QUALITY Real Estate Professional?

1. Question; Quest: What is your inner quest? Do you seek to have the best you can be, improving constantly, or do you settle for the expedient path? What questions do you ask yourself, and do you question your reasons, reasoning, empathy, etc?

2. Useful; Usable; Unique : Will you provide useful information or guide others to resources, where can they get their questions or concerns answered? How usable is your approach, and does it get you where you hope to be? What about you is unique (in a good, positive, way), which identifies you from the many others in the same industry? What do you do, or do differently or better, than others do?

Attitude; Aptitude; Attention: Do you proceed with a positive attitude? When obstacles present themselves, do you perceive problems, or challenges to overcome and resolve? Have you enhanced your skills and honed your aptitude, to best serve others, and yourself? Will you consistently pay attention to needs, concerns and details?

4. Listen; Learn; Leadership: Will you commit to listen more than you speak, so you can effectively answer the questions asked, and address the needs, concerns and priorities of clients and customers (actual and / or potential)? Will you go beyond training sessions and seminars, and transform what you learn, to judgment, and wisdom? Will you take command of situations, and exhibit true. Quality, necessary leadership?

5. Interesting; Integrity; Intelligence; Ingenuity: Will you be really interested in what clients and customers have to say, and care about? Will you commit to absolute integrity and ethics, in every aspect of your professional life? Will you assure you have sufficient fine – tuned your intelligence, so you understand what needs attention? Do you possess the ingenuity to use the best nuances and / or strategies, to serve your clients needs?

6. Trustworthy; Timely : How trustworthy are you, and do others perceive you as being that way? Will you proceed in a timely manner, answering calls, texts and emails promptly, following up, and paying keen attention?

7. Yes; You: Are you ready, willing and able, to get to the point that all parties are going to say yes ? This means, your goal and strategy must focus upon getting all parties …

Investing In Real Estate For Beginners: Apartment Complexes

Here is some advice for investing in real estate for beginners who are thinking about investing in apartment complexes. Many commercial property advisors with an opinion say that apartment complexes with over 150 units are the properties to buy, it’s not necessarily true. Multifamily units are indeed a solid investment. However, what you really want to invest in is where you can earn the most rent per unit. Often that is in multifamily complexes with less than 100 units.

When you are making a purchase bid for a large complex, you are often bidding against financial institutions with deep pockets. This creates two distinct disadvantages for you as a beginning investor.

First, most beginner commercial investors are forced to join a large consortium of other investors to get in on a multi-million dollar deal. This dilutes your ownership interest and the weight your opinion counts when issues arise such as when to sell.

Second, when you and your investors are bidding with the last dollars that you have to invest, the large institution can easily out bid you by several thousand more than you can raise. Going up against large institutional investors can be overwhelming.

There are many other reasons to invest in complexes with less than 125 units:

A. There is less upkeep and maintenance. You may be able to avoid the added expense of an on-site manager and full-time maintenance crew.

B. There are more medium-size complexes available at any given moment. That means less competition from other investors and more opportunity to find one with exceptional cash flow.

C. Cash on cash returns for medium complexes are frequently better than for large complexes as you are able to offer a wide variety of amenities and services.

D. You will not be dealing with a financial institution as the seller with a cumbersome sale policy. The seller will more likely be an individual or small partnership that can provide flexible sales terms if they choose.

E. They typically will require less equity to acquire. This means you can control the property as an individual or with a couple of partners. You thus own a higher percentage of the property and thus a bigger amount of the profits.

F. Often the less knowledgeable seller has avoided raising rents because they have become friendly with the tenants or they are afraid the vacancy rate will increase. By studying the local market rents and vacancy rates, you could find that you can immediately increase cash flow through rent increases.

There are some very good arguments to owning small apartment complexes in the 4 to 12 unit range. This can be a good start if you personally manage them and perform most of the maintenance. However, this size complex seldom generates enough income to leave a profit when a property management company is hired.

Investing for beginners can begin with small complexes and once the income is stabilized buy another. After a couple of years, you will have 3 or 4 small …

IRR or NPV? How About Neither?

Among real estate financial analysts, there are those who prefer the Internal Rate of Return (IRR) and those who prefer Net Present Value when assessing the reliability of a potential acquisition. When my clients ask me which measure I prefer, my response is always "Neither".

Many financial analysts, real estate focused or otherwise, accept that there are limits inherent with both measures, but will still use these measures as most of their lenders, equity investors, or partners "expect" that these return measures will be part of the investment Decision.

However, before delving into the reasons I do not rely on either IRR or NPV for my real estate decisions, a brief discussion each is warranted.

The IRR is, simply put, the discount rate (expressed as a percentage) at which the net present value of an investment becomes zero. Typically, the advantage of using the IRR is that it allows for an easy comparison between investment alternatives with an option offering a higher IRR being better to an option with a lower IRR.

However, when choosing an option with a higher IRR, you may actually be choosing an option with a lower real rate of return. Although it seems improbable, real returns can be distorted because of the most dangerous assumption inherent in IRR calculations, this being that interim cash flows will be re-invested at the same high rates of return. The IRR is only really accurate when an asset generates no interim cash flows, or where those interim cash flows can actually be re-invested at the actual IRR. As such, in most instances the IRR will be distributed, and in many cases, significantly so.

NPV is similar to IRR in some respects in that they are both factor in the "time value of money". Specifically, the NPV is the difference between the present value of cash in-flows and the present value of cash out-flows that occurs as the result of investing in a cash producing asset like real estate.

This number can be negative, positive or zero. As one would expect, an opportunity with a negative NPV would have been viewed as one to avoid. Also, a neutral or zero NPV should also be viewed somewhat negatively, as if the opportunity has any risk whatever, it would be preferred to simply do nothing. Of course, an investment with a positive NPV may be considered attractive based upon risk / reward assessment.

However, like the IRR, the NPV method suffers from a critical deficiency. The largest drawback to the calculation of NPV is its reliance upon a discount rate. As NPV computations are simply a summation of multiple cash flows, the discount rate chosen used to calculate the final NPV is critical to an accurate assessment. The problem is that in these calculations, the discount rate is arbitrarily chosen, and varying discount rates, even those that only differ slightly, can have a significant effect on the final output.

So, if both the Internal Rate of Return and Net Present Value both …

What You Should Know About 'As Is' Real Estate Contracts

As is real estate contracts can be a very potent recipe for a disaster, unless you know exactly what they mean what you are getting in to. Those two simple words actually make a lot of difference and ignorance is usually the main reason why people lose money over as is contracts.

Let's first explain what the term 'as is' on any legal contract stands for. The term 'as is' when used as a legal term signifies that the property that is being referred to in the contract or the document is being sold / purchased in the exact condition it is and no further amends, repairs or additions will made to the Property by the seller. So once the property is sold, the seller is absolved of all responsibilities and no claims can be made based on defects, damages, etc.

So, as we all know all to well by now, the main risk in buying an 'as is' property is the potential loss from having to make too many repairs. Properties that are sold as is sold that way for a reason. There are usually damages and problems caused by many factors like neglect and old age, which need to be repaired. When a buyer is signing in to the purchase, there is no turning back.

So the steps that need to be take should be taken in advance when the 'as is' contract is being made. The buyer should ask the lawyer to include a clause or a condition through which the contract may be terminated during an inspection period. This period is also referred to as the option period and in some states, the buyer can legally return out of the deal at any time without having to show any reason at all provided that the provision was already there in the original contract.

The seller does not lose anything here either, because a non-refundable option money is paid for this period that will not be returned if the buyer decides to terminate the contract. However, if earnest money has been paid then that amount will be returned to the buyer. During this period, the buyer is free to inspect the home as he pleases. If the buyer chooses to cancel, it has to be done within the inspection / option period, beyond which the contract can not be gotten out of that easily.

Another related aspect here is the home inspector who is often hired to give an opinion about the state the home is in. Sadly, many have lost a lot of money due to fraudulent individuals claiming to be professionals. So do not always trust a home inspector and make sure that you get someone who has at least some reputation and training to show. Another important thing to remember is to get a competent lawyer who has had ample experience in the field. And make sure you read the contract thoroughly and understand it fully before signing it. …

Land For Sale In Texas – Buy Sell Agreements And Contracts

Nothing takes the place of experience but if you are a beginner at buying and selling property, you need to know about contract negotiations if you don’t use a licensed realtor.  The fact that you must pay a realtor a commission keeps some from wanting to employ one.  I understand this when it comes to saving some money; however, if you ever have a contract for land and it goes bad because you did not understand some of the language in the contract, that six percent you would have paid a realtor that would have caught the error would seem cheap!

During the looking phase of Texas land buying there is homework that must be done on closing the land transaction.  The sales price negotiation, title company, closing attorney and deposit are likely to cause a headache or two.  Your contract should cover every possible situation.  Keep in mind roll back taxes, even though in my opinion is seems a very unfair system.  That’s a discussion for another time.  If you are attempting to buy or sell this land for sale in Texas without a realtor, at least ask some advice on the contract.  Try help from a title company, since you have to hire a title or abstract company to get the closing started anyway.  Many times the title company is owned by a local attorney and they probably have a closing contract that they are familiar with and like to use.  That will make it easier on you and less likely to run into problems at closing.

Please let me warn you of a few things to keep in mind before you sign a contract.  Remember that after you sign a contract it could be as bad as “Katie Bar the Door”.  Let me tell you from experience that I have let something slip by on the contract and believe me, not good.  You definitely want to be clear of the time frame of the closing.  If you don’t have financing arranged or predicate the contract that you will be able to get financing.  I have bought and sold a lot of land in Texas and I suggest that you predicate your contract if you are a novice at this.

When buying land for sale in Texas be careful when signing documents, especially the buy sell agreement.  This is also the contract of the sale and purchase of real estate.  If your inexperience comes back to bite you, this paperwork can cause years of misery and financial ruin.…