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Understanding Investment Property

Understanding Investment Property. Real Estate Does Not Go Out Of Business. OPPORTUNITY IS ON THE SIDE OF REAL ESTATE AGENTS WE ARE BECOMING INVESTMENT ADVISORS. MARKETING. Send a letter to your farm and sphere regarding letting them know incredible investment opportunities now exist.

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Understanding Investment Property

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  1. UnderstandingInvestmentProperty

  2. Real EstateDoes Not Go Out Of Business

  3. OPPORTUNITY IS ON THE SIDE OF REAL ESTATE AGENTSWE ARE BECOMING INVESTMENT ADVISORS

  4. MARKETING • Send a letter to your farm and sphere regarding letting them know incredible investment opportunities now exist. • Give them an invitation to call you to discuss what is involved in buying investment property. • Let them know of your own successes or clients success with investment property • Remind them “Real Estate does not go out of business”. • Get on the phones, they will be very happy to hear from you regarding these opportunities!!!!

  5. ACROSS THE GENERATIONS • The stock market blue chip stock casualties of recent, will have a generational long term effect. • Everyone needs to invest their money. Leaving your money in the bank will never grow your wealth the way real estate can.

  6. Think about the reasons why someone should own investment property • Someone else pays off your mortgage for you. • The property always increases in value over time. • Think of older people who are wealthy; they usually receive their income from rental properties they own free and clear.

  7. Reseda • Purchase price of $300,000 • Square Feet 1200 • Down Payment of 20% • Interest Rate of 7.00% • Monthly P.I.T.I. $2009 • Monthly Rent $2050 • Monthly Profit $41

  8. Reseda • Purchase price of $340,000 • Square Feet 1750 • Down Payment of 20% • Interest Rate of 7.00% • Monthly P.I.T.I. $2151 • Monthly Rent $2200 • Monthly Profit $49

  9. Granada Hills, West Hills • Purchase price of $350,000 • Square Feet 1300 • Down Payment of 20% • Interest Rate of 7.00% • Monthly P.I.T.I. $2327 • Monthly Rent $2200 • Monthly Profit ($-127) • At 25% Down the monthly profit is $33

  10. Granada Hills, West Hills • Purchase price of $450,000 • Square Feet 2000 • Down Payment of 20% • Interest Rate of 7.00% • Monthly P.I.T.I. $2814 • Monthly Rent $2700 • Monthly Profit ($-114)

  11. Winnetka • Purchase price of $340,000 • Square Feet 1200 • Down Payment of 20% • Interest Rate of 7.00% • Monthly P.I.T.I. $2151 • Monthly Rent $2050 • Monthly Profit $101

  12. Winnetka • Purchase price of $390,000 • Square Feet 1800 • Down Payment of 20% • Interest Rate of 7.00% • Monthly P.I.T.I. $2582 • Monthly Rent $2400 • Monthly Profit ($-182)

  13. Northridge • Purchase price of $400,000 • Square Feet 1500 • Down Payment of 20% • Interest Rate of 7.00% • Monthly P.I.T.I. $2814 • Monthly Rent $2200 • Monthly Profit ($-614)

  14. Porter Ranch S&S • Purchase Price of $500,000 • Square Feet 1800 • Down Payment of 25% • Interest Rate of 6.75% • Monthly P.I.T.I. $3053 • Monthly HOA $150 • Monthly Rent $2800 • Monthly Profit ($-403)

  15. Porter Ranch • Purchase Price of $600,000 • Square Feet 2500 • Down Payment of 20% • Interest Rate of 7.00% • Monthly P.I.T.I. $3918 • Monthly Rent $3100 • Monthly Profit ($-818)

  16. Lake Balboa • Purchase Price of $365,000 • Square Feet 1200 • Down Payment of 20% • Interest Rate of 7.00% • Monthly P.I.T.I. $2423 • Monthly Rent $2100 • Monthly Profit ($-323)

  17. Lake Balboa • Purchase Price of $400,000 • Square Feet 1500 • Down Payment of 20% • Interest Rate of 7.00% • Monthly P.I.T.I. $2646 • Monthly Rent $2300 • Monthly Profit ($-346)

  18. Understanding Multiple UnitsUsing The Example of 4 Units • A residential loan is on 1-4 units • Down Payment requirements differ between 1-2 units and 3-4 units • The Down Payment required on 3-4 units non-owner occupied is 25% down with a current interest rate of 7.25% • The Down Payment requirements for non-owner occupied 1-2 units is 20%, with a current interest rate of 6.75%

  19. Lets Take a Look At a Sherman Oaks Fourplex • 5550 Allott $800,000 • Gross Monthly Income $5,700 • Annual Gross Income $39,240 • Gross Rent Multiplier 11.69 • Cap Rate 7.07 • Cash Needed to Purchase $200,000 (25%) • Monthly P.I.T.I. $5,126 • Monthly Profit $574

  20. Understanding 5+ Units • 5 units or above is a commercial loan and typically require 40% down, and have short term fixed rates, with amortization over 25 years • Investors are concerned with the cap rate and gross rent multiplier

  21. Understanding Gross Rent Multipliers • Gross Rent Multipliers are the number in which the gross rent was multiplied by in order to find the asking price of the property. • $5,000 per month gross rent($1,000 per month on 5 units) • $60,000 per year gross rental income • $60,000 x 10 (gross rent multiplier)=$600,000 asking price • $60,000 x 14 (gross rent multiplier) =$840,000 asking price

  22. Finish Strong • We are in the last quarter of 2008. Now is the time to make things happen!!

  23. Next Weeks’ Meeting – Are You Having Problems Getting Your Offers Through?We Will Have Solutions…

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