Getting started - 1-4 unit Residential Strategies David Barr Realtor / investor
Presentation Outline <ul><li>Why invest in residential property </li></ul><ul><li>Types of residential property </li></ul>...
Why invest in residential property <ul><li>To create an additional source of money </li></ul><ul><ul><li>Monthly income fr...
Why invest in residential property <ul><li>The tenants pay for the building and you get all the benefits of ownership </li...
Types of residential investments <ul><li>Single tenant  </li></ul><ul><ul><li>Single family homes </li></ul></ul><ul><ul><...
Single tenant investments <ul><li>Single family homes </li></ul><ul><li>Townhomes </li></ul><ul><li>Condos </li></ul><ul><...
Single tenant investments <ul><li>Pro’s </li></ul><ul><ul><li>Easy to finance </li></ul></ul><ul><ul><li>Can find one in y...
Multi tenant buildings <ul><li>Duplex </li></ul><ul><ul><li>Two rental units </li></ul></ul><ul><li>Tri-plex </li></ul><ul...
Multi tenant buildings <ul><li>Pro’s </li></ul><ul><ul><li>Less financial risk if one tenant moves out </li></ul></ul><ul>...
Financing makes it easy <ul><li>If a building has less than 5 rental units you can use conventional financing </li></ul><u...
Financing from the bank <ul><li>Typical loans are for 80% - 95% of the purchase price – need 5%-20% down </li></ul><ul><li...
Financing without a bank <ul><li>Who needs a bank? </li></ul><ul><li>Seller financing can work great </li></ul><ul><ul><li...
Pick your area first <ul><li>Identify the best neighborhood for you to invest in </li></ul><ul><li>Best if it is 15 minute...
Look on paper before driving <ul><li>If a property does not cash flow then why buy it? </li></ul><ul><li>You need a way to...
Information needed <ul><li>Purchase price </li></ul><ul><li>Building income  </li></ul><ul><ul><li>rent, laundry, parking,...
What it tells you <ul><li>If the property will cash flow </li></ul><ul><li>Your tax savings </li></ul><ul><li>Potential ap...
Example –S Minneapolis duplex <ul><li>$249,900 asking price </li></ul><ul><li>Income $23,490/yr </li></ul><ul><li>Expenses...
Example - Minneapolis Four plex <ul><li>$299,900 purchase price </li></ul><ul><li>Income $31,740/yr </li></ul><ul><li>Expe...
 
Improving cash flow <ul><li>Get a lower interest rate when financing </li></ul><ul><li>Separate utilities – make tenants p...
Play with the variables <ul><li>Change the purchase price to fit your goals </li></ul><ul><li>Modify the income & expense ...
 
Owning and management <ul><li>Now that you own it what do you do? </li></ul><ul><li>Run a tight ship </li></ul><ul><ul><li...
Protect your wealth <ul><li>Separate your investments from personal property </li></ul><ul><li>Put properties in corporati...
Exit Scenarios <ul><li>Typical investor keeps buying more properties  </li></ul><ul><li>SF – MF – Apartments – Commercial ...
Thank You for your interest <ul><li>I can send you a free copy of this presentation and cash flow spreadsheet </li></ul><u...
Upcoming SlideShare
Loading in …5
×

1 4 Unit Investment Property

1,183 views

Published on

An overview on why and how to buy investment property for the new investor.

Published in: Business, Economy & Finance
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,183
On SlideShare
0
From Embeds
0
Number of Embeds
5
Actions
Shares
0
Downloads
16
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

1 4 Unit Investment Property

  1. 1. Getting started - 1-4 unit Residential Strategies David Barr Realtor / investor
  2. 2. Presentation Outline <ul><li>Why invest in residential property </li></ul><ul><li>Types of residential property </li></ul><ul><li>Financial strategies and structures </li></ul><ul><li>Considerations for investing </li></ul><ul><li>Evaluating deals – cash flow is king! </li></ul><ul><li>Owning and managing the property </li></ul><ul><li>Exit scenarios </li></ul>
  3. 3. Why invest in residential property <ul><li>To create an additional source of money </li></ul><ul><ul><li>Monthly income from rents </li></ul></ul><ul><ul><ul><li>Cash flow after all expenses </li></ul></ul></ul><ul><ul><li>Appreciation </li></ul></ul><ul><ul><ul><li>Increase in building value over time </li></ul></ul></ul><ul><ul><li>Tax benefits </li></ul></ul><ul><ul><ul><li>Depreciation provides tax deductions </li></ul></ul></ul><ul><ul><li>Leverage </li></ul></ul><ul><ul><ul><li>Use the equity to buy more property </li></ul></ul></ul>
  4. 4. Why invest in residential property <ul><li>The tenants pay for the building and you get all the benefits of ownership </li></ul><ul><li>Unlike the stock market, values never go to zero – real estate always increases in value over time </li></ul><ul><li>90% of all self made millionaires did it by investing in real estate </li></ul><ul><li>Wealthy families own lots of real estate to preserve their wealth </li></ul>
  5. 5. Types of residential investments <ul><li>Single tenant </li></ul><ul><ul><li>Single family homes </li></ul></ul><ul><ul><li>Townhomes </li></ul></ul><ul><ul><li>Condo’s </li></ul></ul><ul><li>Multi tenant </li></ul><ul><ul><li>Duplex’s </li></ul></ul><ul><ul><li>Tri-plex’s </li></ul></ul><ul><ul><li>Four plex’s </li></ul></ul><ul><li>Rehab and flip </li></ul>
  6. 6. Single tenant investments <ul><li>Single family homes </li></ul><ul><li>Townhomes </li></ul><ul><li>Condos </li></ul><ul><li>Lots of inventory to choose from </li></ul><ul><li>You can rent $50,000 to $500,000 homes </li></ul>
  7. 7. Single tenant investments <ul><li>Pro’s </li></ul><ul><ul><li>Easy to finance </li></ul></ul><ul><ul><li>Can find one in your neighborhood </li></ul></ul><ul><ul><li>Get higher rents than apartments </li></ul></ul><ul><ul><li>Lots of foreclosures available </li></ul></ul><ul><li>Con’s </li></ul><ul><ul><li>More maintenance </li></ul></ul><ul><ul><li>Greater financial risk if tenant moves out </li></ul></ul><ul><ul><li>Getting a great buy can take time – need to find desperate sellers </li></ul></ul>
  8. 8. Multi tenant buildings <ul><li>Duplex </li></ul><ul><ul><li>Two rental units </li></ul></ul><ul><li>Tri-plex </li></ul><ul><ul><li>Three rental units </li></ul></ul><ul><li>Four plex </li></ul><ul><ul><li>Four rental units </li></ul></ul>
  9. 9. Multi tenant buildings <ul><li>Pro’s </li></ul><ul><ul><li>Less financial risk if one tenant moves out </li></ul></ul><ul><ul><li>Less maintenance – one roof, yard, etc. </li></ul></ul><ul><ul><li>Higher building value appreciates more each year </li></ul></ul><ul><li>Con’s </li></ul><ul><ul><li>Costs more to buy – need more down payment </li></ul></ul><ul><ul><li>Future value is determined by income you have </li></ul></ul><ul><ul><li>More tenants and toilets </li></ul></ul>
  10. 10. Financing makes it easy <ul><li>If a building has less than 5 rental units you can use conventional financing </li></ul><ul><li>Anything from single family to a 4-plex </li></ul><ul><li>This makes these investments the easiest to buy for the common investor </li></ul><ul><li>A multitude of financing programs, 20% to zero percent down loans </li></ul>
  11. 11. Financing from the bank <ul><li>Typical loans are for 80% - 95% of the purchase price – need 5%-20% down </li></ul><ul><li>Interest rates on rental property are higher than owner occupied property </li></ul><ul><li>Your credit score is very important </li></ul><ul><li>The zero down loans are becoming extinct </li></ul><ul><li>Lenders are becoming more difficult </li></ul>
  12. 12. Financing without a bank <ul><li>Who needs a bank? </li></ul><ul><li>Seller financing can work great </li></ul><ul><ul><li>Contract for Deed </li></ul></ul><ul><ul><li>Lease option to purchase </li></ul></ul><ul><ul><li>All terms are negotiable </li></ul></ul><ul><li>Trade for other properties, boats, cars etc. </li></ul>
  13. 13. Pick your area first <ul><li>Identify the best neighborhood for you to invest in </li></ul><ul><li>Best if it is 15 minutes from where you live </li></ul><ul><li>Even if it is a great deal, driving an hour to fix something at midnight is a bummer </li></ul>
  14. 14. Look on paper before driving <ul><li>If a property does not cash flow then why buy it? </li></ul><ul><li>You need a way to quickly evaluate the hundreds of opportunities available </li></ul><ul><li>Helps you in determining the true value of a rental property </li></ul><ul><li>You can use it to set a sale price or negotiate a better deal </li></ul>
  15. 15. Information needed <ul><li>Purchase price </li></ul><ul><li>Building income </li></ul><ul><ul><li>rent, laundry, parking, etc. </li></ul></ul><ul><li>Financing terms </li></ul><ul><ul><li>Interest rate </li></ul></ul><ul><ul><li>Percentage down </li></ul></ul><ul><ul><li>Type of loan (fixed rate, ARM) </li></ul></ul><ul><li>Expenses – Tax, utilities, insurance, etc. </li></ul>
  16. 16. What it tells you <ul><li>If the property will cash flow </li></ul><ul><li>Your tax savings </li></ul><ul><li>Potential appreciation </li></ul><ul><li>Return on investment </li></ul><ul><li>CAP rate </li></ul><ul><li>Net Operating Income (NOI) </li></ul><ul><li>All of the above help you make your decision </li></ul>
  17. 17. Example –S Minneapolis duplex <ul><li>$249,900 asking price </li></ul><ul><li>Income $23,490/yr </li></ul><ul><li>Expenses $6250/yr </li></ul><ul><li>Financing </li></ul><ul><ul><li>20% down </li></ul></ul><ul><li>Cash flow $4,360/yr </li></ul>3200 Blaisdell Ave S, Minneapolis
  18. 18. Example - Minneapolis Four plex <ul><li>$299,900 purchase price </li></ul><ul><li>Income $31,740/yr </li></ul><ul><li>Expenses $10,130/yr </li></ul><ul><li>Financing </li></ul><ul><ul><li>20% down </li></ul></ul><ul><li>Cash flow $3585/yr </li></ul>
  19. 20. Improving cash flow <ul><li>Get a lower interest rate when financing </li></ul><ul><li>Separate utilities – make tenants pay for the heat and electric </li></ul><ul><li>Ways to increase rent </li></ul><ul><ul><li>Buy a building with low rents </li></ul></ul><ul><ul><li>Make improvements to justify rent increases </li></ul></ul><ul><ul><li>Add bedrooms </li></ul></ul><ul><ul><li>Coin operated laundry </li></ul></ul><ul><ul><li>Rent garages </li></ul></ul>
  20. 21. Play with the variables <ul><li>Change the purchase price to fit your goals </li></ul><ul><li>Modify the income & expense numbers to match your plans for the building </li></ul><ul><li>See what a new interest rate or change in loan terms can do to help or hurt you </li></ul>
  21. 23. Owning and management <ul><li>Now that you own it what do you do? </li></ul><ul><li>Run a tight ship </li></ul><ul><ul><li>Watch all your expenses </li></ul></ul><ul><ul><li>Manage your tenants so they know the rules </li></ul></ul><ul><ul><li>Do what you say </li></ul></ul><ul><li>Maintain the property </li></ul><ul><ul><li>Nice clean buildings rent better and keep tenants happy </li></ul></ul><ul><li>It is a job, not just an adventure! </li></ul><ul><li>Don’t like doing it, hire a property manager </li></ul>
  22. 24. Protect your wealth <ul><li>Separate your investments from personal property </li></ul><ul><li>Put properties in corporation or trust </li></ul><ul><li>Keep up education on tenant law </li></ul><ul><li>Use the right paperwork – document everything </li></ul><ul><li>Track your financial position constantly </li></ul>
  23. 25. Exit Scenarios <ul><li>Typical investor keeps buying more properties </li></ul><ul><li>SF – MF – Apartments – Commercial </li></ul><ul><li>Use 1031 exchanges to defer taxes and increase returns </li></ul><ul><li>Buy and hold is best way to get rich </li></ul><ul><li>Build a portfolio that you can live off cash flow and keep building equity </li></ul><ul><li>Give them to your kids - trusts </li></ul>
  24. 26. Thank You for your interest <ul><li>I can send you a free copy of this presentation and cash flow spreadsheet </li></ul><ul><li>E-mail me at [email_address] </li></ul><ul><li>Or call me at 763-746-3828 </li></ul>

×