income investing
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If you need to know how to invest into cash flow investment real estate then check out this presentation. Email me at [email protected] to request the video that further explains these slides.TRANSCRIPT
Income Investing 101Income Investing 101
Why Are We Here?Why Are We Here?
Value investing is at its core the marriage of a contrarian streak and a calculator."
- Seth Klarman
Value InvestingValue Investing
EXPERIENCED Invested in over $15 million of Northern New Jersey since 2008 Buy & Hold Investment in Section 8 and Student Housing
EDUCATIONMBA- Finance Real Estate Instructor License Masters in Real Estate Finance (NYU)
My ReasonsMy Reasons
1) Personal Investment Plan
2) Find Your Deal
4) Analyze the Deal
5) Checklist for Site Visits
6) Presenting an offer
7) Due Diligence Stuff
8) Asset investment plan
9) Sources of Capital
10) Closing Table- Now What
11) Getting Money Out!
Income Investing?Investing into instruments that provide repeat cash flow with diminishing effort
Investing Instruments
Multifamily
Student Housing
Tax Liens
Discounted Notes
Commercial Assets
I. Investor Type
II. Investment Strategy
III. Capital Availability
IV. Return on Equity Requirement
V. Risk Tolerance
VI. Target Hold Period
Investor Type Investor Type
Return on Equity:
Return you want to make
on your invested cash!
Beat My Return on Equity?
High Risk
Medium Risk
Low Risk
"We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely."
- Warren Buffett
Online
Realtor.com
Loopnet.com / Showcase.com (Commercial Asset Specific)
Auction.com
MLS Public Sites
Offline
Signs/Marketing
Bankruptcy Attorney
Real Estate Brokers/Agents
Cash Flow? NOI? CAP Rate?....Ahhhh
Gross Income
-Vacancy
-Rent Loss
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Adjusted Gross Income
-----------------------------------------
Fixed Expenses: -Property Taxes
-Property Insurance -Fees and Permits
Variable Expenses: -Utilities
-Maintenance -Professional Fees
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Net Operating Income (NOI)
-----------------------------------------
Key RatiosKey Ratios
TYPE OF RATIO FORMULA IDEAL RATIO RANGE
CAP Rate (ROA) NOI/Purchase Price 6-11%
Return on Equity (ROE) Net Cash Flow/Equity 10-20%
Break Even Ratio Debts + Expenses/GPI 60%<
Loan to Value Debt/Asset Value 80%<
DSC Debt Payment/NOI >1.25
Back of Envelope AnalysisBack of Envelope AnalysisAssumptions
ROA 10% (Cap Rate)Vacancy Rate 10%Management Fee 5%
Asset Case Facts:Total Units: 4Purchase Price: $200,000Gross Income: $40,000Operating Expenses: $20,000 NOI: $Market Rent/Unit: $1,500
Analysis & Legal ToolsAnalysis & Legal Tools
Prospect DealProspect Deal
Checklist Items
Location
Asset
Tenant
Littleton Investment- FactsLittleton Investment- Facts
Asset Facts
Asset Type: 3 Family Asset
In-place Rents: $ (What is the number?)
Expenses: $12,000 (As provided by Seller)
Sale type: Short Sale
Deal Source: GSMLS
Debt Sources -Mortgage
-Preferred Equity -Bridge Financing -Mezzanine Capital
Equity Sources -Self Directed IRA
-Syndicate Capital -Operator Equity/Cash
EQUITY + DEBT = CAPITAL STACK
Littleton Investment- CAPITAL TABLELittleton Investment- CAPITAL TABLE
Investor Facts
Re: 10%+
Risk: Moderate to High
Capital Source: Equity & Debt Combination
Legal agreements to learn:-Letter of Intent-Purchase & Sale Contract-Option Contract
Home Inspection
Environmental Inspection
Municipal Inspection
Financial Analysis
Market Analysis
Asset PlanAsset Plan
Investment Target Strategy Asset Current Financials Value Add Opportunities Stabilized Financials Exit Plan
HUD Statement
Mortgage Document
Note Document
Title Report
Insurance
Get Your Cash Out:
Open Market Sale
Auction Sale
Rollup Sale
TIC Sale
Seller Financed Sale
@Ankit_RER
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