WHY INVEST
The stock market, the bond market and savings account simply cannot provide the return that one can make in real estate. Why? Because this is the only investment set up where you can get your initial capital back and create wealth. Here are several reasons that Real Estate, in my opinion is the best investment one can make
- Real Estate in our market appreciates!! We don't live in California, where they need 50 year amortizations on their loans to afford the housing we don't live in New York where it costs $750,000 for a tiny condo. We live in Suburban Chicago where the real estate is actually very affordable all the while it appreciates!! We are not like parts of the country (Denver or Arizona from what I have read in many real estate books and heard via horror story) where it may double in a couple of years then come crashing back.
- You are using borrowed money to buy an appreciating asset. This appreciating asset is being paid for by a renter therefore you are getting money from a bank in the form of a loan and someone else is paying it back for you all the while you are taking advantage of appreciation.
- Tax benefits Real Estate can be depreciated on paper consult your CPA!! This is a huge reason why I got into real estate. You can also sell real estate without being taxed if you do a 1031 tax exchange consult your CPA!! I am not a CPA nor do I claim to know tax law consult your CPA on the tax benefits of real estate.
- You don't just generate income you create wealth. Through equity, principal reduction and appreciation you will put together a huge stockpile of wealth. When I first started buying real estate my goal was to become a custom home builder. Now, I would never build homes the reason because you have to keep building homes to make money. With rental real estate that you hold, you will have a portfolio or real estate that was purchased with the banks money, is appreciating in your name and is being paid for by someone else!!
- My Real Estate has very little risk. The real estate that I sell has very little risk homes priced under $175,000 for example move at an extremely fast pace compared to higher price levels. Why? Because with modern day lending nearly everyone with a pulse and a pen can get approved for a loan. I jest, but in all seriousness, first time home buyers and other investors look at this price range favorably.
The Bubble
The general consensus today is that there is a real estate bubble ok where? I just don't see this bubble. Values in the mid-west have historically increased around 6% a year. I assume 5% to be safe. Are we seeing a devaluation in real estate? Everywhere I look I see new homes going up I see recent college grads who don't want to live at home with their parents I see baby boomers who want a 3 bedroom ranch instead of their 4 bedroom colonial I see Section 8 tenants who cant afford a home I see transient job markets where people move in and out of I see investors who would like to retire before they turn 100 years old The long and the short of what I see I see people needing a place to live. What market do I focus in? The first time home buyer and the new markets
If the specter of a real estate crash keeps you up at night, here's something to dream about: The biggest construction boom in U.S. history will unfold between now and 2030. According to a new report from the Brookings Institution, nearly half of the residential and commercial structures needed by 2030 -- about 100 billion square feet -- have yet to be built. That estimate includes 60 million new housing units.
So how do you bet smart on the next residential real estate boom? One way is to look at how the nation's top homebuilders size up new markets.
The magic formula centers on job growth, says Bob McLeod, CEO of Newland Communities, the largest residential community developer in the United States. The $4 billion privately held company owns top-selling developments in five red-hot real estate markets -- Phoenix, Sacramento, Southern California, Tampa, and the Washington, D.C., area. Before Newland buys a plot of land, McLeod says, the company's researchers pore over job forecasts for the region, looking for a minimum of 5,000 to 10,000 new jobs created annually over a decade. If it's below that, he'll pass.
Nearly as important is job diversity. In the Tampa area, where 30,000 Newland units appreciated an average of 25 percent in 2004 (the average for the region was 10 percent), McLeod expects to continue developing for 10 years, because farming, the military, port operations, and technology are all driving job growth. No single industry dominates, so the pool of potential buyers doesn't dry up if one sector takes a big hit.
So where would McLeod like to break ground next? California's Orange County, Dallas, Houston, and Minneapolis are all on the list, as well as secondary cities like Atlanta, Charlotte, Portland, Ore., and Raleigh. Says McLeod, "All these places are bubble-proof." -- M.V.C .
http://www.business2.com/b2/web/articles/0,17863,1026875-8,00.html
Not Convinced?
In case you are not convinced think about this, every year lumber goes up in price plumbers get raises carpenters get raises land becomes more scarce and why is it that people believe there is a bubble? Because they remember the 4 th quarter of 1999 and the first quarter of 2000 when the stock market had been going gang buster and then it collapsed. After 9/11 Did people pull there money out of the stock market yep, to the point where the market was shut down and the Dow was around 7,500People lost money. Did everyone Fire sale their homes to get their equity out and move somewhere else? No. Now the market slowed the whole nation slowed the whole world slowed. I was buying homes!
Inflation
The dollar you earn this year will be worth $0.97 next year. If you realize that money loses value, you will comprehend that real estate gains value. The cost of replacing your real estate goes up every year because money becomes less and less valuable every year.
401K
Every day every month every year people put money into the stock market where does it go? If we put money into these companies and these mutual funds why doesn't the stock market go up? Why is it everyday corporate America puts 3% of their paycheck toward their 401K? Because the company matches it ok consider the following.
| Your Salary |
$100,000 |
| 5% of your salary |
$5,000 |
| 3% Match |
$3,000 |
| Total Investment |
$8,000 |
| Assume 10% return |
$800 |
| Plus your Company Match |
$3,000 |
| Tough to get excited about.. |
$3,800 |
That is assuming a 10% return! Good luck finding that in today's market.
Tips
- Get interest only mortgages if you want to pay principal you can if it gets tight you are alright. Paying principal back to yourself is like an old woman putting money under her mattress.
- Stay around $175,000 or less. I've bought properties well above that and done fine, but its a case by case basis. The numbers just work out better at lower prices, trust me.
- Listen when someone who's done it gives you advise not selling rent it not renting market it don't know how to market, then ask me I've never had a problem!!
- Invest aggressively in a conservative medium buy a lot of homes at a steady pace and watch their value slowly and steadily increase over time.
- Your property does not have to be a foreclosure the example above was a listing in a town I liked with upside potential I paid pretty much full list and borrowed on my credit cards to fix it up.
- Leverage the right people. Don't be a hammer swinger! Let our system help leverage your time and money.
- Use our banks they close I've messed around with so many shot in the dark lenders that bs. you around our lenders are good use them.
The 5 Steps
- Purchase a piece of Real Estate that is undervalued I used to drive around and use 4 or 5 different realtors to find me deals none of them had a system. Our system consists of these steps, the first of which is Purchasing a piece of real estate that is undervalued. I will help you find that piece of real estate. I use a variety of tactics and connections to develop a robust selection of foreclosures, bank owned properties and rehabs that can be profitable if managed the appropriate way.
- Rehab the property. The first mistake that real estate investors make is putting too much money into a property. I have watched investors rehab homes with the following strategy: I want this place to look like a home I would live in this is a mistake in my opinion. I rehab homes to the point that they are livable and will appraise out where I feel the value is. If the property is designed to buy and sell, then keep in mind it should show like a model new kitchens and baths for example are a good idea. I like tan walls, white trim, neutral decor and new carpet. If the property is designed for a buy and rent, I will keep the rehab light make it nice make it neat, but don't dump tons of money into the property. When the tenant moves out in 1,2 or 3 years for example, you will have to rehab the property again if you plan to sell!! When I started in the rehab business I purchased older homes that were outdated and needed cosmetics since then I have done more intensive work, but I no longer rehab the homes myself. I suggest leveraging one of our 4 crews. I use these same crews myself and we have been able to take advantage of their expertise by keeping them busy. They are constantly working and therefore can provide us with some phenomenal pricing deals. Some crews specialize in lighter work and others specialize in more intense rehabs.
- Rent the property. We have leasing agents who can help you with this process, but I stress the word help. It is ultimately the investors job to make sure your investment is profitable. THERE ARE NO GUARANTEES IN THIS BUSINESS!! The only guarantee is that if this business were a piece of cake everyone would be doing it. Advertisements in the paper have helped me immensely. I have an ad that I use religiously and I have never had a difficult time with getting renters very few investors do but if you think I am going to wave a magic wand and rent your property you are crazy. The ad is a must, a sign in the yard is a must and keeping the price competitive is also a must. Do not think you can quit your job and live off of rental income right away. THIS WILL TAKE A LONG TIME TO HAPPEN!! But it can happen!!
- Cash out Refinance the property. There is a section on how this works. For now just understand that when you refinance and take cash out, you open up the door to getting some or all of your initial investment back so that you can grow your portfolio of real estate.
- Manage the property. Take care of your tenants. My tenants love me because I treat them with respect and respond to their maintenance needs quickly. I don't currently have much in the way of maintenance, but there are the occasional calls. When I got into this business I budgeted for a lot of maintenance calls and headaches this has not been a problem as I have put together a rehab/handyman crew that will handle these concerns.
Cash Out Refinance
Purpose: The cash out refinance allows you to retrieve your initial investment back, along with your rehab costs, providing for your investment in Real Estate to be completely void of your personal funds.
|
Chase's Cash out Refinance Program
|
| Proposed Chase Foreclosure Deal |
| Purchase Price |
100,000 |
We will Negotiate with the bank. |
| Rehab Cost |
6,500 |
Use our crew or your own. |
| Down Payment |
10,000 |
We have programs from 0%-10% |
| New Chase Value |
140,000 |
|
| Earthmover Credit Union 80% |
112,000 |
This is a second mortgage that is in addition to your first |
| Existing First Mortgage |
90,000 |
|
| Cash To You!! |
22,000 |
You now have Equity in an appreciating asset, more cash to move onto the next property |
| Equity |
28,000 |
What you have in equity |
| Cash to you - Dn Pmt. And Rehab |
5,500 |
|
| This is what you are ahead! |
33,500 |
Total of the increase in equity and cash resulting from your Chase Transaction |
| Payment Analysis |
|
|
| First Mortgage-90,000 @ 6% int. only |
450 |
|
| Home Equity with Earthmovers |
|
There is a 15 yr. Amortization with Prime-1/2% as the rate |
| -22,000 @ 4.5% |
165 |
|
| Estimated Tax and Insurance |
185 |
Estimate will vary |
| Total Payment |
800 |
|
| Estimated Rents |
1,000 |
|
| Monthly Cash Flow |
200 |
|
Why Chase Team
Experience With over 600 transactions closed a year you will find experience makes a difference. The average realtor in 2006 sold 6 homes who do you want representing you. Next time you talk to a friend's wife or a distant relative of yours who is a realtor and wants you to work with them, ask them how many investment properties they own. How are they going to guide you with no experience? Simply put they will misguide you. Go with the team who understands the properties, the markets and the system Chase Real Estate.
The System The system is simple, need a leasing agent we have them. If you need a rehab team we have them, if you need money we have lenders and other very creative ways to help you finance your projects. I don't know of any other agent who uses the team approach or any other team who has a system that you can tap into simply put we have a corner on the market.
The 5 Deadly Sins of Real Estate Investing
- Over-rehabbing. Don't do it you will never get your money back keep it simple and clean. Rehab the home but your rental property does not need to be a mirror of your own home.
- In-action. This is the one I hate the most. My house is not sold rent it my house is not rented put and ad in the paper and a sign in the yard people don't want to pay $1,350 for my rental property LOWER THE RENT!! These things came very simple to me, but most people don't catch these easy solutions. If your payment is $1,000 and you can only get $950 in rent, RENT IT ANYWAY!! WOW that is so easy but people don't realize, the $600 you lose in cash flow can be made up in appreciation and tax benefits!!
- I want to buy and sell. Great you can do that I have done that it works just not as well as buy and rent. Check out the scenario below.
Buy and Rent Vs. Buy and Sell
| Purchase Price |
100,000 |
100,000 |
Purchase Price |
| Rehab Cost |
6,500 |
6,500 |
Rehab Cost |
| Down Payment |
10,000 |
10,000 |
Down Payment |
| New Estimated Value |
140,000 |
140,000 |
|
| Equity Line at 80% of new value |
112,000 |
135,800 |
Negotiated Sale Price |
| Existing First Mortgage |
90,000 |
-4,074 |
Commission to Agent |
| Cash out to You!! |
22,000 |
-2,500 |
Closing Costs |
| Less Dn Pmt/Rehab |
-16,500 |
-5,000 |
Carrying Costs |
| Cash out less the Dn Pmt./ Rehab |
5,500 |
-100,000 |
Purchase Price |
| Equity in the Property |
28,000 |
-6,500 |
Rehab |
| Awesome!! |
33,500 |
17,726 |
Not Bad |
Hypothetical Situation**
- I want to quit my job and rehab. I have heard this 1 million times. After a number of years, with this system, you will have a nest egg built up but don't for a second think this is easy or that you can get rich quick buying real estate. However, you can put together a ton of equity and cash over the years through investing and rehabbing, enough so that there will come a day that you retire and simply speculate but that day wont come after a few years, in fact it is still not here for a lot of investors who have been doing this a long time but you can equip yourself to the point where, if you never bought another piece of real estate in your life, 15 years from now everything you bought this year would have doubled assuming your properties appreciate at 5% a year.
- Never starting!! This is where 99% of people make a mistake you have to have the courage and foresight to take charge of your personal and financial future. I had no one to guide me in this business when I started I had help for sure, but no one told me that I could do as much as I have done in fact most of my friends and colleges told me I couldn't do it. Well I have done it and so can you.
GO CONFIDENTLY IN THE DIRECTION OF YOUR DREAMSLIVE THE LIFE YOUVE IMAGINED
-Thoreau
Your Goal Buy 5 homes in 2005
Purchase 5 homes for $100,000 each valued at $140,000 this year and look at where you will be in 2020.
| Property |
| Year |
1 |
2 |
3 |
4 |
5 |
Value |
Loan Total |
Equity |
| 2005 |
140,000 |
140,000 |
140,000 |
140,000 |
140,000 |
700,000 |
560,000 |
140,000 |
| 2006 |
148,400 |
148,400 |
148,400 |
148,400 |
148,400 |
742,000 |
560,000 |
182,000 |
| 2007 |
157,304 |
157,304 |
157,304 |
157,304 |
157,304 |
786,520 |
560,000 |
226,520 |
| 2008 |
166,742 |
166,742 |
166,742 |
166,742 |
166,742 |
833,711 |
560,000 |
273,711 |
| 2009 |
176,747 |
176,747 |
176,747 |
176,747 |
176,747 |
883,734 |
560,000 |
323,734 |
| 2010 |
187,352 |
187,352 |
187,352 |
187,352 |
187,352 |
936,758 |
560,000 |
376,758 |
| 2011 |
198,593 |
198,593 |
198,593 |
198,593 |
198,593 |
992,963 |
560,000 |
432,963 |
| 2012 |
210,508 |
210,508 |
210,508 |
210,508 |
210,508 |
1,052,541 |
560,000 |
492,541 |
| 2013 |
223,139 |
223,139 |
223,139 |
223,139 |
223,139 |
1,115,694 |
560,000 |
555,694 |
| 2014 |
236,527 |
236,527 |
236,527 |
236,527 |
236,527 |
1,182,635 |
560,000 |
622,635 |
| 2015 |
250,719 |
250,719 |
250,719 |
250,719 |
250,719 |
1,253,593 |
560,000 |
693,593 |
| 2016 |
265,762 |
265,762 |
265,762 |
265,762 |
265,762 |
1,328,809 |
560,000 |
768,809 |
| 2017 |
281,708 |
281,708 |
281,708 |
281,708 |
281,708 |
1,408,538 |
560,000 |
848,538 |
| 2018 |
298,610 |
298,610 |
298,610 |
298,610 |
298,610 |
1,493,050 |
560,000 |
933,050 |
| 2019 |
316,527 |
316,527 |
316,527 |
316,527 |
316,527 |
1,582,633 |
560,000 |
1,022,633 |
| 2020 |
335,518 |
335,518 |
335,518 |
335,518 |
335,518 |
1,677,591 |
560,000 |
1,117,591 |
That's correct just 5 properties appreciating at 6% a year for 15 years and you can be a millionaire! Now its not as easy as winning the lottery, but your odds of actually becoming wealthy are much better work this system and you will not have to work every day for the rest of your life. Get aggressive Buy 5 homes per year for 5 years!!
Purchase 5 homes for $100,000 each valued at $140,000 this year and every year after for just 5 years look at where you will be in 2022.
Be aggressive and watch what can happen!!
| Property |
| Year |
5 |
10 |
15 |
20 |
25 |
Value |
Loan Total |
Equity |
| 2007 |
700,000 |
|
|
|
|
700,000 |
560,000 |
140,000 |
| 2008 |
742,000 |
700,000 |
|
|
|
1,442,000 |
1,120,000 |
322,000 |
| 2009 |
786,520 |
742,000 |
700,000 |
|
|
2,228,520 |
1,680,000 |
548,520 |
| 2010 |
833,711 |
786,520 |
742,000 |
700,000 |
|
3,062,231 |
2,240,000 |
822,231 |
| 2011 |
883,734 |
833,711 |
786,520 |
742,000 |
700,000 |
3,945,965 |
2,240,000 |
1,705,965 |
| 2012 |
936,758 |
883,734 |
833,711 |
786,520 |
742,000 |
4,182,723 |
2,800,000 |
1,382,723 |
| 2013 |
992,963 |
936,758 |
883,734 |
833,711 |
786,520 |
4,433,686 |
2,800,000 |
1,633,686 |
| 2014 |
1,052,541 |
992,963 |
936,758 |
883,734 |
833,711 |
4,699,708 |
2,800,000 |
1,899,708 |
| 2015 |
1,115,694 |
1,052,541 |
992,963 |
936,758 |
883,734 |
4,981,690 |
2,800,000 |
2,181,690 |
| 2016 |
1,182,635 |
1,115,694 |
1,052,541 |
992,963 |
936,758 |
5,280,591 |
2,800,000 |
2,480,591 |
| 2017 |
1,253,593 |
1,182,635 |
1,115,694 |
1,052,541 |
992,963 |
5,597,427 |
2,800,000 |
2,797,427 |
| 2018 |
1,328,809 |
1,253,593 |
1,182,635 |
1,115,694 |
1,052,541 |
5,933,272 |
2,800,000 |
3,133,272 |
| 2019 |
1,408,538 |
1,328,809 |
1,253,593 |
1,182,635 |
1,115,694 |
6,289,269 |
2,800,000 |
3,489,269 |
| 2020 |
1,493,050 |
1,408,538 |
1,328,809 |
1,253,593 |
1,182,635 |
6,666,625 |
2,800,000 |
3,866,625 |
| 2021 |
1,582,633 |
1,493,050 |
1,408,538 |
1,328,809 |
1,253,593 |
7,066,622 |
2,800,000 |
4,266,622 |
| 2022 |
1,677,591 |
1,582,633 |
1,493,050 |
1,408,538 |
1,328,809 |
7,490,620 |
2,800,000 |
4,690,620 |
|
