Boston - Investor - April 11, 2012

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Boston - Investor - April 11, 2012

  1. 1. Redfin’s Multi-Family Class March 1, 2012 Brookline, MA
  2. 2. A Little Bit About What We Do…Redfin is a brokerage that’s usingtechnology and a customer-service focus tochange the real estate game in theconsumer’s favor.
  3. 3. Working With Redfin is DifferentService – Advocates: salaries & client-satisfaction bonuses, not commissions – Transparency: reviews – good, bad and ugly – Best Agents: training, training, training… – Teamwork: professional support staffNo obligation – Tour on your schedule and paceThe Best Results – Service: 97% would recommend us to a friendRefund – You get up to 33% the commission
  4. 4. What We Have Accomplished…Redfin is a real estate brokerage that has helpedover 20,000 people buy or sell a home; 97%would refer us to a friend.• Freedom to tour at your own pace• All the reviews for deals: Good, bad and ugly• Get back up to 50% of the commission• No obligation
  5. 5. We Share Our Commission With You • We refund 15% - 50% of our commission to you (minimum home price of $120,000) subject to the approval of your lender and the home seller • Applied to closing costs • Refund is tax-freeConsidering… Looking… Buying…
  6. 6. How Our Team WorksAgent•Responsible for your success Field Agents•Writes your offer•Handles inspection •Assists with Tours•Handles negotiations •Assists Inspections •Answers Questions •Sees a lot of Homes You Coordinator •Schedules tours •Coordinates Agents •Answers QuestionsConsidering… Looking… Buying…
  7. 7. REAL ESTATE INVESTING 101
  8. 8. SUCCESS STORIESPETER the JOHN theLaw Student BARTENDERMulti-fam paid for Invests in property nolaw school. one else wanted and is now the #1 single entity property owner in Massachusetts.
  9. 9. Peter the LAW STUDENT
  10. 10. …….. makes good & pays off law school debt
  11. 11. John the Bartenderbuys his first Boston property. . .
  12. 12. . . . then buys a few more that “nobody else wanted”
  13. 13. …. then started a real estate company
  14. 14. . . . and bought some more!!
  15. 15. FOOD FOR THOUGHTWhat is the difference between Peter, or you, and John? •EDUCATION •SOCIAL STATUS •TIME •MONEY
  16. 16. The State of theMulti-Family Market
  17. 17. Cambridge Today• 11 Properties on the market today & but 4 of those have accepted offers• 7 units total = the same as one month ago• 18 Sold in last 3 months• VERY LOW SUPPLY = upwards price pressure + more bidding wars• Winning is all in the analysis –• Disengage from the list price
  18. 18. Cambridge1 year ago
  19. 19. Cambridge Sold – Last Year• 65 Sold vs. 64 Sold in 2010• Average Price roughly $900,000• 13 of 65 sold over the asking Price or 20%• 9 sold at either $60k +- variation on asking price = Major Price Fluctuations/ Errors
  20. 20. Listing Price vs. Sold Price ChartCambridge
  21. 21. Somerville Today• 31 Properties on the market –same as last month• Average price of $674,000 (up $150k from last month’s average)• 26 Sold in last three months• 3 months supply currently -- LOW SUPPLY = upwards price pressure + more bidding wars.• Winning is all in the analysis• Disengage from the list price
  22. 22. Somerville1 year ago
  23. 23. Somerville Sold in Last Year• 163 Sold vs. 130 Sold in 2010• 31 sold over asking price or roughly 19%• 16 at either $60k+- variation on asking price = Major Price Fluctuations/ Errors
  24. 24. Listing Price vs. Sold Price ChartSomerville
  25. 25. Why Income Property? Real Estate Appreciation: This is when the property becomes more valuable due to a change in the real estate market, the land around your property becoming scarcer orbusier such as a major shopping center going in next door, or upgrades you put into your real estate investment to make it more attractive to potential buyers or renters. Betting on quick real estate appreciation alone as when “flipping,” is riskier than investing for cash flow income. Cash Flow/Income: This type of real estate investment focuses on buying a real estateproperty, such as an apartment building, and operating it so you collect a stream of cash from rent, which is the money a tenant pays you to use your property for a specific amount of time. Cash flow income can be generated from well-run storage units, car washes, apartment buildings, office buildings, rental houses, condo’s, and more. Tax Benefits: This is a class in and of itself. The tax benefits are many, but briefly, benefits include capital gains tax deferment though like-kind exchanges otherwise known as “1031 Exchanges” & through tax reducing depreciation of the property.
  26. 26. What are your Investing Options?BUY AND “FLIP” BUY AND “HOLD”• Renovation property • Income Property – the holy• Under-valued property grail of real estate investing• Condo-conversion property • For the average investor,• Often a market bet this one of the very best• Many more potential variables paths to wealth than buying income property.. accumulation in the USA.• The goal if you buy and flip , unless you plan to work at doing that full time, is to accumulate more cash for . . .
  27. 27. 5 Most Common Mistakes that Newbie Investors Make1. No cash reserves2. Treating real estate investing as anything OTHER than a business3. Stock market “day trader” mentality4. Investing blind –a friend or family member talks you into parting with your $$ to be part of a really good deal5. Listening to TV and Internet Real Estate Gurus – focus on seductive ways to get your money – promote forms of finding unsophisticated sellers and using convoluted real estate schemes to take advantage of their lack of sophistication – have you hunting for things which do not exist in any quantity to make you money (e.g. defaulted private mortgages)
  28. 28. WHERE TO STARTREAL ESTATE AGENT MORTGAGE LENDER• Market knowledge • Huge opportunity today for• Analytics Investors to take advantage• A REDFIN Agent and of historically low interest REDFIN.com offer you the rate loans = more best investment research opportunity to “make the sources in the industry. numbers work.”
  29. 29. Get Pre-Approved• A pre-approval letter is a letter from a bank or a lender estimating how much theyll lend a borrower• Help you establish how much you can afford and makes offer process go faster• Information needed: – W-2, two pay-stubs, tax returns , bank statements• The process only takes a few days while banks get everything verified• The approval is good for 90 days, depending on lender• Redfin asks that you get pre-approved before your third tour
  30. 30. Facts on Getting Pre-Approved• Applications are free, no one should ever take money from you to get pre-approved• If you get multiple credit checks from multiple lenders within a 30 day period, this will only count as one credit check against your credit score• You will get a better idea of any other action items you need to complete before you can buy• Gives you a chance to discuss different financing options• Your pre-approval stays valid as long as your financial situation doesn’t change.• Being pre-approved is required by sellers to consider offers
  31. 31. Review your Debt• Pull credit report, look for errors• Pay down balances to 1/3rd of credit available• Don’t open any new lines of credit• Don’t buy any big ticket items
  32. 32. Organize Your Assets• Get ready for the down payment • Cash accounts (liquid funds) • 401(k), stocks, other investments • Gift funds? (Max. allowed varies) • Move funds around before you start shopping
  33. 33. Conforming Loan Limits• Single Family $417,000• 2 Family $ 533,850• 3 Family $ 645,300• 4 Family $ 801,950
  34. 34. Current Average Rates Type of Loan February 2, 2012 February 9, 2012 30-Year Fixed 3.87% 3.87% 15-Year Fixed 3.14% 3.16% 5/1 ARM 2.80% 2.83% 1-Year ARM 2.76% 2.78%Considering… Looking… Buying…
  35. 35. Debt to Income Ratios• Down payments• Lender will use 75% of rental income for other units• Debt to Income Ratios ( 45% )• Must be Owner Occupied
  36. 36. Start Shopping for LendersCompile a list of 3 Mortgage LendersGood sources include:• Redfins partner lenders• Referrals from friends, family & co-workers• Banks or credit unions you have accounts with• A large, national bank with an advertised rate• Your real estate agent
  37. 37. Comparing GFE Results• Gather Good Faith Estimates (loan quotes) – Compare similar loans • Program (FHA, conventional) • Timeframe (same day)• Compare costs side-by-side – Discount & origination points – Interest rates – APR (interest rates + fees + points + PMI)
  38. 38. RUNNING THE NUMBERS PRO FORMA ANALYSIS By ADAM WELLING
  39. 39. Next Steps•Check out our agents and their reviews• Study the inventory and houses in your areas• Go out on Tour with us, no obligation• Ask a lot of questions and see a lot of houses• Email me: peter.phinney@redfin.com• Check the events page for upcoming classes•http://www.redfin.com/buy-a-home/classes-and-events

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