Math, Math. (And only then, Location)
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Transcript of Math, Math. (And only then, Location)
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Math, Math.(And only then, Location)
Betty Kincaid, PMN
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Why work with investors?
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What can you do today to double your business?
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What’s different about working with investors?
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How much will it make?
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Rate of Return
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Tax Shelter
• Depreciation• Passive loss rules• Long-term capital
gain tax• Tax deferred
exchange
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Leveraged Growth
• Offers the ability to borrow large sums
• At fixed interest rates
• For long periods of time
• Compound growth
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Cash Flow
• Income• Appreciation• Gain in value due to
owner expertise• Loan amortization
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Disadvantages
• Lack of liquidity• Loss of value due to
market• Property hazards
• Management requirements
• Legislation• Unexpected expense• Liability
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What could go wrong?
• Liability• Vacancy• Repairs• Tenant Issues
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Make Your Money Going In• Below-market acquisition• Terms/Concessions• Stick to criteria• Investment policy• Keep emotions out of the
equation• There are plenty of fish in
the sea• Take action
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Types of Return on Real EstateEquity rises as debt is reduced and value increases
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Types of Return on Real EstateCash flow rises as debt decreases and rents increase
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Commercial Property
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Specialty Property
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Residential Property
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Buy and sell Cash rules
Know your numbers Be flexible Plan for contingencies
Buy and hold Long term
Maximum equity Increase net worth Appreciation & cash
flow
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When Analyzing Property
What rents and sells best
Realistic appreciation rate
Realistic vacancy rate
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When Analyzing Property
Reasonable fair market rent
Reasonable operating expenses
Realistic projected sales costs
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What do you need to know?
ObjectiveRisk vs. ReturnType of Property
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Capitalization rate
The rate of return the investor can expect to get from the property.
Not dependent on financing.
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Capitalization rate
Net Operating Income_________________
Sales Price
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Gross Rental Income-
Operating Expenses=
Net Operating Income
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Cash-on-Cash return
The rate of return the investor can expect on his cash investment
Completely dependent on financing
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Cash-on-Cash returnNet Operating Income
−Debt service payments
=Income before Taxes_________________Total Cash at Closing
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Property #1
4128 Story RockLas Vegas, NV 89115MLS# 1189472
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Compare Rates of Return
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Property #2
6027 Crumbling RidgeHenderson, NV 89011 MLS# 1147814
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Property #3
391 Umbria WayHenderson, NV 89014 MLS# 1131668
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The Millionaire Real Estate InvestorGary Keller
Rich Dad, Poor DadCash Flow Quadrant
Robert KiyosakiFlip: How to Find, Fix and Sell Houses for
ProfitRick Villani