Designed to give you the Confidence, Skills and most importantly, the Tools to be able to analyze, invest, re-invest and manage multi-family housing in your local area.
2. Don’t Have the Time
Don’t Know How to
Don’t Appreciate the Value of a JOB
3. Don’t Have the Time
Don’t Have the Time
Don’t Know How to
Don’t Appreciate the Value of a JOB
4. 5 Personality Types
People that do nothing
People that do nothing and over-analyze
People that do nothing and talk
People that simply do without any analysis
5. 5 Personality Types
People that do nothing
People thatBlended-Business
The do nothing and over-analyze
Personality
People that do nothing and talk
People that simply do without any analysis
7. Scalability
Business Scalability is the systematic (process-oriented) ability to
replicate or duplicate the desired economic outcome of an initiative over and over again
8. Don’t Have the Time
Don’t Know How to
Don’t Appreciate the Value of a
JOB
9. Cash Flow
Facts: 6-unit apartment building
Purchase Price = $360,000.00; Down payment = $72,000.00; Loan = $288,000.00;
Interest = 5% amortized over 25 yrs
10. Leverage
Facts: 6-unit apartment building
Purchase Price = $360,000.00; Down payment = $72,000.00; Loan = $288,000.00;
Interest = 5% amortized over 25 yrs
11. Tax Benefits
Facts: 6-unit apartment building
Purchase Price = $360,000.00; Down payment = $72,000.00; Loan = $288,000.00;
Interest = 5% amortized over 25 yrs
12. Cash Flow
Operating Expenses =
Total Revenue (Rents Received) = $24,700.00
$67,400.00 Net Operating Income =
Vacancy Loss = $2,700.00 $37,050.00
Economic Loss = $2,950.00 Mortgage Payments =
Adjusted Gross Revenue = $61,750.00 $20,203.00
Cash Flow =
$16,847.00
13. Leverage
Cash Available = $72,000.00
Choice = Stocks/CD or Rental Real Estate
Fair Assumption = 10% return on value for both the Stock/CD or Real
Estate
Return: Rental Real Estate Return: Stock/CD
$360,000.00 x 10% = $36,000 return $72,000.00 x 10% = $7,200.00 return
+ $72,000.00 original investment +$72,000.00 original investment
Year 1 Cash Out = $108,000.00 Year 1 Cash Out = $79,200.00
Purchase Price =
$360,000.00
Bank Financing = $288,000.00
Owner Down Payment =
$72,000.00
14. Tax Benefits
Benefit We Received = $16,847.00
(cash flow) + $5,938.00 (principal
Building Value = $360,000.00 -
$60,000.00 (Building Value = Purchase reduction) = $22,785.00
Price – Land Value) = $300,000.00
What we are Taxed on =
Depreciation of Building Value =
$300,000.00/27.5yrs = $10,909.00/year $26,141.00 - $14,265.00 =
$11,876.00
Potential Tax Liability = NOI =
$37,050.00
Depreciation Deduction = $37,050.00 -
$10,909.00 = $26,141.00
Mortgage Interest Deduction =
$14,265.00
23. Don’t Have the Time
Don’t Know How to
Don’t Appreciate the Value of a JOB
24. 5 Ways to View Your Job
1. Your JOB offers you the Dignity, Ability
& Stability (DAS)
2. Be the Entrepreneur at Work
3. If you Love your JOB – keep it!
4. Layout your Assets
5. Show them the Money
25. 5 Personality Types
Don’t Have the Time The Process Wheel
Scalability within your Process
Leading Your Success Team
Cash Flow
Leverage
Tax Benefits
Don’t Know How to The Buying Process
Perform Property Proforma
Manage your Property Manager
Secure a great Insurance Policy
Obtain aggressive Bank
Financing
Have your Real Estate Agent
show you properties that make
sense
Don’t Appreciate the Value of a JOB 5 Ways to View your Job
Editor's Notes
The JOB + REAL ESTATE = WEALTH Program is designed to give you the Confidence, the Skills and the right Gut feeling to be able to Invest in Real Estate while keeping your job in order to develop a stream of income.
Open: HIGH ENERGY INTRO: typical intro (corporate elevator speech) vs. simple introduction. Point 1 to write down: Personally don’t like the term “elevator” but for lack of a better term - Keep your “elevator” speech simple and real – it will create intrigue and prompt conversation. My typical “elevator” introduction is my name is Francis Fernando and I am a RESIDENTIAL PROPERTY MANAGER (I stress and embellish on the RESIDENTIAL) that manages other peoples apartment buildings so they do not need to deal with the headaches of tenants, rent collections, leasing/showing and maintenance. And…….I really s-l-o-w d-o-w-n when I say Residential Property Manager, that manages other peoples investments. Always prompts the response……”I’ve always wanted to get in to Real Estate”……..so why haven’t you……..I don’t have the Time and quite honestly, I Don’t know how to. And…..I add this……..they Don’t Appreciate the Value of their Jobs
In my business travels, here are the “Business Personality Types”People who do Nothing – Angie @ VerizonPeople who do Nothing and over analyze – Paralysis by Analysis! Foster re: Pearl St Property. Signed non-disclosure, site visit, engineering/architectural study, interview with all residents, interview with economic development, feasibility study…..but no proformaDo Nothing & Talk – Mark – each time I meet him it’s a different idea – ranging from acting in CA, to developing commercial property in NHPeople that simply do with no analysis – Devon & the Salvage Title Car example! Can be a source of inspiration or could cripple your next step NOTE: Common thread amongst all 4 – they did not respect or regard time…..hence they claimed they had no time Blended Business Personality - - Has the right amount of Faith (start with faith – I’m man of God), the right amount of Confidence, the right amount of Analysis (have the spreadsheet & business plan) and the right amount of Gut feeling Point 2 to write down: To be a Blended-Business Person, I need the right amount of Confidence, the right amount of Analysis and the right Gut feeling
Here’s how we manage ourselves so we respect Time…….by thinking like an Engineer. Introducing the Mind of an Engineer. They Identify a problem, develop an Execution strategy, Measure that Strategy, and seek out a Support Infrastructure. Use Tony Roxo example.
Process and Scalability and synonymous. You can’t really have a scalable system unless you have a Process. And a successful Process should be infinitely scalable. My Lack of Scalability Plan when working at VZ and buying buildings…..it is what started TOSPM (so I don’t totally regret). TIM FERRIS EXAMPLE OF HOW I WAS BOTTLENECKING DECISIONSPoint 3 to write down: Think Like an Engineer: Identify, Execute, Measure, Support and be able to Scale your Project
Before we talk about How To………let’s answer the Question of Why Real Estate?
There are the obvious: 1. The markets great and interest rate are low. Then there’s the psychic: 2. Nation of renters/demographic changes and finally there is the Age Old Time Tested: 3. Cash-Flow; Leverage; Tax Benefits
Example of my office asking me to cover the Cigna 5k race!
Leverage Definition is the Mechanical Advantage of using a Lever – as you can tell, I’m an Engineer. Example of car manufacturers provided wheel wrench
HIGHLIGHT – the tax benefit is Cash Flow Generated + Principal Reduction vs. What you Pay Taxes OnPoint 4 to write down: The time tested reasons to invest in Real Estate as an additional stream of income is for Cash-Flow, Leverage and the Tax Benefits
We all know the sayings that advise us to surround ourselves with the smartest people or develop the team by identifying the needs of your business and bringing in the brightest and smartest. Some even go the extent of stating that they are only as smart as their team. Use how I trust my smart TOSPM team……..except I have learned to skills to Lead my Team. . It sounds trivial, but when you lead, you are not led down the wrong path. If your business strategy is not sound, you may lead yourself down the wrong path, but that would be your own doing, not as a result of relying on another person.Point 5 to write down: By learning enough about your success team you will, not only surround yourself with the right team, but also learn to lead them.
Conventional Buying Process
Conventional Buying Process & Recommended Buying Process
Proforma Structure
LEARN to ANALYZE TIGHTER THAN A BANK: Focus on utilizing Capital Expense Budget in your negotiation. Not using the sellers price as the basis.What is going to affect your Capital Expense Budget: Three things:Break in Income – vacancy – negotiate that inInsurance Items that your adjuster will come back at post their inspection = electrical systems/plumbing systems/roofs/items that were on the clue reportDeferred maintenance items – such as the possible unit that will be vacant
Focus on additional sources on income such as laundry and parking. And where you can - - make it redundant. Example of Sara Pagano and Laundromat. Also focus on vacancy and economic loss – regarding if evicting, chances are they are not paying – occupying and utilizing resources of building – worst case.
Focus on big ticket items where a value-add could be performed. Maintenance and Repair if less than 5% of GPI, then 1 of 3: new build; owner performs maintenance and does not value his/her time; owner is lying
Focus on DSCR; Cap Rate and CoCPoint 6 to write down: DSCR is NOI/Debt Service: Amount of cash left to service the debt after all operations expenses have been paidPoint 7 to write down: Cap Rate is NOI/Purchase Price: Your return on investment by getting involved in this assetPoint 8 to write down: Cash on Cash Return is Cash-Flow/Down Payment: Your return on the amount of cash you have invested in to this asset
Sort of a cryptic statement – don’t appreciate the value of a JOB. The proliferation of shows such as flip this house etc….showcase people making millions by leaving their jobs and creating a real estate empire or fortune. MOST if NOT ALL of these cases, the source of that wealth can be traced back to a JOB and the business acumen to create an additional stream of income
The Dignity, Ability & Stability to meet your Success Team and say, yes, I have a job, therefore, I have the means and I’m stable. If you can’t be an entrepreneur at work, how can you exist in the business worldWhy leave your job to “create” another job - - if you love it – keep it.Layout your assets – create assets while working. Don’t spend on useless things. Think back and say, what can I show for working this longLayout your cash-flowPoint 9 to write down: Your job offfers you the Dignity, Ability and StabilityPoint 10 to write down: Be the entrepreneur at work