Real Estate Investment Blog

60 Second Insights – Property Income

60 Second Insights – How do I verify the income of the property?

This week’s question comes from George and George asks, ”Dave, how do I verify the income of the property especially when I don’t trust the seller?”

Well, the first thing you do when you’re verifying the income is you match the rent roll with the actual leases and when you see they match up together then your rent roll should match what it says from the lease from money coming in and then you take a look at the income report. OK and see if the income report is matching the rent roll OK that matches the leases. And then you know here’s the thing owners can fudge that and they do it often, the dishonest ones. So what you should do is take the next step and get the bank statements so ok you give me the profit&loss statements, you give me the rent rolls and now give me the bank statements and backup the fact that this money’s actually come in and if you do that you will know that the income is actually the income.

You got a question? Put in the blog below. I might just answer next week.

Should I Allow Pets

60 Second Insights – Should I allow pets?

Now this week’s question is, “Dave, Should I take pets?”

When I first started investing I didn’t take pets because I didn’t want pets to destroy my units, I didn’t want to have the extra costs when a pet left the property you know the cat stink, the dog you know scratching all over the place and then I realized that 25% of all tenants have pets and I was excluding them from you know my renting share when I was looking out in gaining more rental for my properties. So when I started with the pet policy and you wanna have a pet policy that allows pets to come in you can charge extra for them 25-30$ you get a pet security deposit which is a 150-200$ and what you have done by doing it will only allow one cat and/or one dog that dog can be more than 20 pounds. You do that and you’ve just increased your market share every time you look in for a new tenant into your property. That’s what we do with pets. Hey you got a question? Put it on the blog section below. I might just answer that next week.

What is the Difference Between Debt and Equity Partners?

Hey welcome to another edition of 60 second insights

This week’s question is what is the difference between equity partners and debt partners.

Debt partners are like lenders, they are going to loan you money and you are going to have an obligation to pay them back. They are not going to participate in the equity in the deal.

That’s a good thing because all you do is give them a return at 5, 6 or 7% or sometimes a little bit higher and when the deal is done, it’s done. The benefit of using a debt partner is the fact that you can actually re-finance them out of the deal.

Equity partners, will give you money and you have no obligation to pay them back. But if you’re smart and you are good investor, you will be owners of the property. They are going to participate in the cash-flow, they are doing to participate in the upside of the property, that is why they want to be equity partners, it is a good deal they want to participate in the upside.

The bad news for you as a sponsor is when you want to re-finance the property or pull a bunch of money out because you can’t manage it properly, you pay out the equity partners and they are still owners in the deal.

So equity partners are easy to raise money from because everybody wants to take part in the upside but debt partners you can re-finance right out of the deal. That’s the difference. Hey if you have more questions put that in comments below and I might answer that next week.

Are Hard Money Lenders Used for Single-Family or Multi-Family Properties?

Hey welcome to another edition of 60 seconds insights. Now today’s question comes from Jonathan.

Jonathan asks, are hard money lenders used for single-family properties or multi-family properties?

The answer to that question is to use them for both. The trick to using them is, because most people start with hard money lenders, the fact that you want to find the lenders that will loan you at 65 cents on a dollar with no money down. Typically they will all loan you at 65 cents a dollar but you want to get a lender who will loan you with no money down.

So the trick is to buy deals at $0.60 on the dollar, subtract the rehab costs, negotiate down from there and you can get in and rehab with none of your own money out of your pocket. That’s how I got started with multi-family properties, first I started with credit cards then I went with hard money lenders, then if the interest rates are between 18 to 22% they charge you 3 or 4 points. But the beauty is, the income from those properties will allow you to qualify for a bank loan later on. Then what you can do is re-finance, get the rates lower down to whatever market rate is at that time. Usually way below 8, 9 or 10% and your cash will skyrocket.

What Makes a Good Management Company?

60 Second Insights – What makes a Good Management Company?

This week’s question is, “How do you know if Management Company’s any good”?

Well, the answer to that question can be very long. There is series of questions that you wanna be asking them but what you wanna do is you wanna try to x-ray them because everybody is gonna have a hail over the head when you asking them questions everybody’s gonna tell you that they are the best but you wanna ask questions that have double meanings. For instance I always ask,”hey! How many properties do you own that are like mine in my area and the area that you’re gonna be manager?” and the management company thinks that you are asking that question because you wanna know if they are experienced managing those types of properties and they’ll tell you how many they own. That’s not why you’re asking that question. You’re asking that question because you wanna know if they own properties like yours in that area and you both need tenants and they screen the tenants Who do you think gets the good tenants and who do you think get the bad ones? Coz I gotta get the good ones. So we never hire management companies that own properties in our area, only management companies that manage properties in our area. Hey you got a question? Put it down on the blog section below. I might just answer it next week

60 Second Insights – If The Deal Is So Good…

60 Second Insights – If the deal is so good…

Today’s question comes from Jim. Jim says,”Hey! How do you handle a question from an investor who says , if that deal is so good, why don’t you put your own money into it?”

First of all, you tell the investor that you are the sponsor of the deal; you are the person that puts in sweat equity in the deal, your reputation is on the line and you’re the asset manager. And that’s how you earn your keep in a particular deal. So yes! The deal is good, you wanna be a part of it and that’s why you are sponsoring the deal and typically you don’t put any money into the deal. That’s how you roll. Now some investors not gonna like that. And that’s ok. Because somewhere else someone so what? Next I still have investors today tell me hey if you don’t put any scheme in the game I’m not gonna do any deal with you. Here’s another trick I wanna show with you. As you know you can get acquisition fees from most of your family properties. Well, tell the investor you gonna put 5 or 10% of your own funds in, ok, typically the acquisition fee, if 5% acquisition fee of the purchase price is what’s more 10% of the raise which you’ll be able to put in. So you can not only put in 10% of the raise through the acquisition fee but you will still have money left over from that acquisition fee. So you’re technically in the deal with no money in your pocket. You […]

60 Second Insights – How Do I Invest Using My IRA?

Today’s question is how to invest in real estate with your IRA.

First you pick a custodial account such as iPlan, equity trust, Pensco. Then you have to find a brokerage account such as Fidelity or TD Ameritrade or one of those.

Then you have to roll the money from the brokerage house into the self-directed IRA. Once it’s there, you want to get your paperwork in order. Once you get all of the documents in place in entity DOR that needs to be filled out in order to get the money in place and a custodial account will take over. You need your property package, subscription, operating and questionnaire in your articles for organization to make this all happen.

Got a burning question?
Leave it in the comments section below and next week we might be answering your question.

60 Second Insights – Funding Deals

60 Second Insights – Funding Deals

Today’s question is, how do I fund my deals?

Hard money is secured by real estate. A hard money lender typically will charge a 11-15% interest plus points. A point is 1% of the loan amount. They will get interest on their money every month until you are out of the deal which is typically under a year. Debt partners- a debt partner usually comes into the deal in a promissory note. They typically charge 10% interest, they get paid on an annual basis and they are in the deal for 2-3 years then they get their money back. Equity partners-this is the way savvy investors invest in real estate. It’s a syndication you’re portion 100,000 dollars, you would get 9% first year, 10% the second 12%, the third that is 31% cash on cash return from what we buy the property for to what we sell the property for, you would get another 50% of that. Add the figures together, divide by 3 and you get a 27% annualized return. Bingo! You’re in. That’s the way serious investors invest. Got a burning question? Leave it in the comments section below. And next week we might be answering your question.

60 Second Insights – What is a Sponsor?

What is a Sponsor?

Hello my name is Jeannie Orlowski welcome to the first edition of 60 second insights. In this series we are going to answer burning questions in 60 seconds or less.

A sponsor is someone who qualifies you for the mortgage amount. If you have a three million dollar property you are going to put 20% down. You will need to have the net worth equal to 2.4 million or the bank may require you to have a sponsor. They also may require you to have up to six months liquidity for mortgage payments- that you can co-sponsor with your sponsor who qualifies you for the mortgage.

Sponsors are everywhere. You can find them at local real estate investment club, you can find them in your own neighborhood, maybe even in your own family. People that just want to get a piece of the deal. They don’t want to do all the legwork that goes into getting a deal under contract doing the due diligence getting all of the necessary documents together in order to close on a property they just want to put up their tax returns and get a piece of the deal and that’s how you find sponsors. If you have any questions regarding sponsors, private money or any other burning questions leave it in the comment section below and perhaps next week we will be answering your burning questions.