Investors Being Prepared for a Changed Market Today’s Presenters • Judy Yriarte – Prudential Real Estate Professionals • Rosi Green – Ticor Title • Dina Schmidt – Reliance Mortgage Prosper from a down market Many of the greatest fortunes in history were made during tough times. In fact, most savvy investors, business people and wealth builders actually prefer tough times and a tough market because they know everyone else is running scared. They know others are fearful of taking action, so what do they do? They DO take action, while everyone else “waits for things to settle down.” Who is the investor? • They have liquid assets and they’re interested in the opportunity that this market offers. • They have a change of attitude about this investment, looking for stable long term gain, want to pay off/down the property for future income flow. What do they want from you? • They want to feel like you have access to ALL the information from Foreclosure to Short Sale. • They want to know that you’re constantly looking for these opportunities and prepared to act quickly on their behalf. • They expect you to be an EXPERT. Know your market statistics and inventory. Understand 1031 and finance options… Where do you find them? • Start with your sphere • People with multiple properties • People with higher incomes looking for safe investment When will they make the investment? • At the time they are convinced this is a great opportunity for them Why would they make this investment? • Because they believe that the time has never been better to purchase. • They are rethinking their investment portfolios and they see that distressed property is an advantage for them. • You have helped them see why now is a good time to buy. Two important documents that you must become familiar with • Buyers Broker Agreement • Short Sale Addendum OREFonline.com Conversations to have with investors The Rule of 72 • Divide your rate of return into 72 and that’s how long it takes your money to double. • For example if you get 6% on a savings account it will take you 12 years for your money to double in value. • 72 divided by 6 equals 12 The Rule of Leverage • Real Estate can be leveraged by getting a loan on the property. • If you purchase a property for $100,000 cash and it goes up by 5% you have earned 5% on your money. • If you purchase this home with a 20% down payment and an $80,000 loan your rate of return will be 20 times greater or 40% Remember • You’ve had a 5% increase in value and you divided that by your actual investment of $20,000. You have a 40% return on your investment. What if there is no return the first year? Why would you purchase? • Cash flow when the property • Tax Savings – write off expenses. becomes free and clear. • Appreciation over time - the property historically appreciates • Leverage you can control in value $100,000 investment with $20,000 down. • Debt reduction – Real Estate is one of the few investments where someone else will make your payments. Looking at the long term investment Example based on averages 10 year investment: 1998 Purchase $115k 2008 Sale $210k Profit $95k Change of Perspective • The Realtor must be willing to see that a huge change has been made with a large section of our potential buyers. • They’re investors and they have the cash. • They perceive an opportunity to make money in their future because of low prices and interest rates. The investors perspective has changed • For the first time in a decade they see that with their 20% down a property can potentially carry itself financially making it more interesting to them than it has been. • Additionally an old way of thinking is emerging, the idea that if you can purchase correctly and have someone pay off your property it will eventually be a cash flow opportunity. Tips for creating wealth with Real Estate • Buy residential • Don’t wait to buy Real estate. Buy Real estate and WAIT! • Purchase mainstream • Know your limit • Don’t buy with partners • Work with knowledgeable • Believe in the long run people • Take care of your property • Purchase properties that can carry themselves Example • 236 Steelhammer $149,000.00 • 20% down at $29,800.00 • Loan Amount $119,200.00 • Principal/Interest $753.00 • Taxes/insurance $140.50 • Total Payment $943.57 • Rents for $975.00 5 major benefits to owning this house • Cash Flow $31.43 times 12 equals $377.16 • Leverage you own $149,000 property with $29,800 down. • Debt Reduction $1,182 in principal reduction the first year. $1,182 divided by down payment of 29,800 equals a 4% return on that portion of the investment. • Tax Savings- Approximately $3,000 a year in depreciation meaning that your income from this property will not be subject to tax. • Potential Appreciation. When this house goes up in Value you will calculate the rate of return on your initial investment. Let’s say it goes up 5% or $7450. remember if you divide that by your initial investment of $29,800. you will have a 25% return on your invested money. Let’s apply the Rule of 72 • At a 5% increase in value. We’ve established that our money has increased by 25% • If we divide 25% by 72 it would take 2.88 years for the investors money to double if the property continued to increase by 5% a year. As an Agent for Investors • Be acquainted with the Buyer Brokerage Agreement • Be able to convey that you have access to all information concerning foreclosures, short sales etc. • Be able to discuss the rule of 72. Leverage, and the new opportunity that a property can now pay for itself, creating wealth in the future. Investors Prospecting for Investors Providing Unique Value to Investors Before you start to prospect… • Create a profile of the real estate investor – Who are they? – What makes them tick? – What are their motivations? – What are their information resources? – Do they think they can do it on their own? – Create specific individual profiles / goals / strategies • What do YOU have to offer? – What is the unique value that you bring to them? – How can you meet their needs? – What are your goals and strategy to secure this business? Value Ideas Give them what they want… • Investment Opportunities (NODs, Bank Owned, Listing Alerts, Neighborhood Prospecting, MLS notifications) • Be THE resource to find motivated sellers for your investors • Provide a “hot buy” notification to potential investors consistently • Neighborhood Evaluations • Windows of Value • Specific Home Values • Estimated net sheets • Education • Consulting / Expertise / Counsel • Strategy Assistance • Financing Ideas / Credit Scores (partner up) • Network with them On-Line Resources • Notice of Default Report Foreclosure Library • Federal Reserve Foreclosure Resources for Consumers HUD Foreclosure Resources DJCoregon.com DJC Portland posts the actual NOD daily under the PUBLIC NOTICES section on their site for Clackamas, Multnomah, and Washington Counties. Visit their site to subscribe. • BuyBankHomes.com Cyberhomes.com Trulia.com ForeclosurePoint.com Free registration at the site allows users to search for properties by state, county, city and ZIP code area, and to specify property details such as property type (including residential, commercial, industrial and vacant land, among other categories), square footage, number of bedrooms and bathrooms, foreclosure filing date and a range for a home-value estimate supplied by Zillow. NorthwestTrustee.com Northwest Trustee's handle many of the foreclosures in the Pacific Northwest. You can search properties that have NODs posted and are scheduled for auction by signing up for a free account. Ocwen.com Search REO and VA homes for sale by state. HUD homesforsale.gov Find homes for sale from HUD, VA, IRS, US Marshal and more... Homesales.gov Current information about single family homes for sale by the U.S. Federal Government. ReconTrust.com Great source of NOD leads with basic filing information, Trustee#, sale date and site address. USA-Foreclosure.com User friendly Google map based search for homes in foreclosure. USA-Foreclosure.com is the nation’s largest non-subscription based Web site publicizing property scheduled for foreclosure auction. NETRonline.com Real estate public records and research information portal for property information, deeds & mortgages, tax records, parcel maps, assessment records, and public records nationwide. RealtyTrac.com Search pre-forclosures, auctions, and bank owned properties by state, county, city, zip code. ForeclosurePulse.com RealtyTrac's ForeclosurePulse blog was created for those of you in the trenches of buying, selling or investing in real estate. Find the latest foreclosure trends and comment or ask questions based on your experiences with the foreclosures market. Residential Transaction Study •Study specific areas •Cost per square foot •Average sales price •Market inventory by assessed value range •Sales in the last 12 months by assessed value range •Sales price as a percentage of the total assessed value •Average property characteristics •Length of ownership status •Owner Occupied / Non- Owner Occupied stats Residential Transaction Study Windows of Value This is a one page summary of all the data from the Residential Transaction Study. ERealInvestor.com • Provides agents and/or investors with instant analysis of current and prospective investment properties. This software program can calculate the return on investment information that clients need to make informed buy, sell or hold decisions. • This tool can be integrated into your website to highlight your investment opportunity listings. E-Real Investor E-Real Investor CyberHomes • Homepage foreclosure widget: enter a market area and track. • Advanced search > Refine by sales type • Local statistics > Local Economics etc. • The report feature • Custom comps selection in “Change My Value” CyberHomes Recognition PC Magazine… • December 2007 article - Cyberhomes was included in a “Best of the Internet,” article by Jennifer L. DeLeo. • May 2008 issue - Cyberhomes was one of eight “Best Real Estate Sites,” offering “all the tools you need to buy or sell a home, like interactive maps, community stats, and powerful search tools.” • November 2008 award – Cyberhomes was voted “Top Websites of 2008” TicorAGENT TicorAGENT PITI in seconds •Limited data entry •Users don’t need to memorize a single formula •No internet connection needed •Create net sheets in 10 seconds •Save, e-mail or print •Branded to you •Built in manual •Available for handheld devices, laptop or desktop Education / Networking • Attend classes to become an expert • Offer classes to potential investors as a value • Join or create a local club – www.reiclub.com (National) – http://www.nationalreia.com (National) – www.northwestreia.com (Portland / Salem & surrounding area) – http://www.oreig.com/ (Eugene / Lane County & surrounding area) – www.creonline.com (100’s of investment articles) – www.biggerpockets.com – Google it to find more! JUST A COUPLE CLASS IDEAS • Short Sales / Foreclosures – Rob Lowe • IPX1031 – Teresa Furer • Financing / Cash Flow / Credit Scores – Your Lender Partner IPX/1031 Education Marketing to Investors (for Realtors) Instructor: Teresa Fuhrer 1 hour An A-Z approach to targeting and creating long-term relationships with real estate investors. Learn how working with investors with multiple properties can be an efficient way to increase your commissions and garner you more repeat and referral business Timing the Real Estate Market (for Realtors and their Clients) Instructor: Teresa Fuhrer 1 hour No one can predict when to sell and when to buy real estate, not even Warren Buffett, but there are certain fundamentals that affect real estate cycles. Learn the seven major trends that affect pricing. Learn the differences between momentum buyers and contrarian buyers. There are pros and cons to each approach and each has its appropriate time. Learn the mistakes that even the most savvy investors make so you can avoid them. How to Have Your Cake and Eat It Too Instructor: Toija Beutler/Teresa Fuhrer 1-3 hours Do your clients know that their investment rental property can be eventually sold tax-free given some long term strategic planning? How about investment opportunities for principal residence and surrounding land? Learn tax savings techniques that combine the §1031 tax deferred exchange and §121 principal residence tax free treatment making you a hero in the eyes of your real estate clients. Spotting the Exchange Opportunities Instructor: Toija Beutler/Teresa Fuhrer 1 hour Failure to spot possible §1031 exchange opportunities can result in lost listing and sales opportunities. Find out what investors don’t know and realtors need to know. How to Have Your Cake and Eat It, Too Instructor: Toija Beutler/Teresa Fuhrer 1-3 hours Do your clients know that their investment rental property can be eventually sold tax-free given some long term strategic planning? How about investment opportunities for principal residence and surrounding land? Learn tax savings techniques that combine the §1031 tax deferred exchange and §121 principal residence tax free treatment making you a hero in the eyes of your real estate clients. IPX/1031 Education Spotting the Exchange Opportunities Instructor: Toija Beutler/Teresa Fuhrer 1 hour Failure to spot possible §1031 exchange opportunities can result in lost listing and sales opportunities. Find out what investors don’t know and realtors need to know. War Stories Instructor: Toija Beutler 1-3 hours “Toija’s Law: Whatever can happen, will and we have the War Stories to prove it”. Learn what not to do when working with a client utilizing a §1031 tax deferred exchange transaction. Anecdotal stories on every-day missed exchange opportunities. Ten Stupid Things Smart People Do to Mess Up Their §1031 Exchanges Instructor: Toija Beutler 1 hour Learn about the ten common errors that even savvy investors and real estate professionals make so you can avoid the liability and tax consequence of a failed exchange. Thirteen Pitfalls of §1031 Tax Deferred Exchanges Instructor: Toija Beutler 1 hour Learn how to avoid common pitfalls that can cause your client’s §1031 exchange to fail and create undesirable tax consequences. Current Developments in Like Kind Exchanges Instructor: Toija Beutler/Teresa Fuhrer 20 minutes - 1 hour It’s difficult to stay current on all the tax law changes affecting real estate investors. Attend this class to be ahead of your competitors on issues that could save your clients taxes. Now that you’re an expert… …and have a box full of value to offer your clients – let’s talk about prospecting: • Always, always start with a plan • Work your sphere! The warmest and best ROI prospecting there is. • Call your title company to get a list of current investors in the area • Call your title company for a non-owner occupied list in the area and market the owner • Go to www.prospectsplus.com to get a list of high income people • Utilize the many Notice of Default and Foreclosure websites and title company resources (don’t pay for reports!) • Use your MLS (expired, hot list, multiple price reductions) and consistently share “motivated seller” leads to potential investors • Enhance your presence on the web (ActiveRain, LinkedIN, Blog, Retaggr, Postlets, CraigsList – Services/Real Estate & Housing/Real Estate For Sale… drive investors to you) • Leverage your e-mail with a Retaggr card. Visit retaggr.com Finally… Have a goal, be a resource, be consistent, be relentless Rosi Green Business Development Specialist email@example.com www.ticorweb.com 11/2008 Investors Finance Options Non Owner Occupied Loan Guidelines • Maximum Number of Properties Financed: 4 • Minimum Down Payment: 20% • Seller Concession Maximum: 2% • Six months of PITI in reserves • To offset the mortgage payment with the new rental income the investor will need to be: • A Real Estate Investor for 24 months Investment Property Loan Calculations • Purchase Price $149,000 $149,000 • Down Payment 20% $29,800 25% $37,250 • Loan Amount $119,200 $111,750 • Interest Rate* 7.125% 6.500% • APR 7.506% 6.873% • P&I $803.07 $706.34 • Taxes $105.50 $105.50 • Insurance $35.00 $35.00 • Total Payment $943.57 $846.84 • Loan Fee ** 2% 2% • *This interest rate is for a borrower with a credit score of 740+, a single family residence and a loan amount greater than $110,000. • ** Loan Fee could be paid thru Seller Concessions When qualifying your investors here are few questions to consider: • How many mortgage loans do they currently have? Fannie Mae allows a maximum of four loans in the borrower’s name. • Are there adequate funds available for at least 20% down and six months of PITI? • Do they need to use the new rental income to offset the mortgage payment? • Are they a seasoned Real Estate Investor? Lenders require 24 months proven thru tax returns. Why Wait? Opportunity is Knocking… Don’t Lock the Door Prepared by Dina Schmidt Source: Time and Real Estate Tidbits The only reason to buy should be centered on your ability to pay. But if you are thinking prices are only going to get lower so you want to play the waiting game then you should consider this……Finance costs will rise as the economy recovers, so trying to time real estate might not pay off. The time is now if you are emotionally ready to be a homeowner, have good credit, plan to stay put for five years and you have been waiting for the perfect entry point. It’s time to get serious—before an inevitable rise in interest rates wipes out your advantage. Consider a typical home that sells for $149,000. You put 20% down and get a 30-year-fixed-rate mortgage at a rate of 6.0%. Monthly principal and interest come to $714.66. Let’s say that 12 months from now the same house goes for 10% less, or $134,100. But by then the recession is history and the Fed is jacking up rates to stem inflation. If mortgage costs rise a point to 7.0% your monthly payment would be $713.74. So your savings are minimal….$.92 a month. Meanwhile home prices might steady and then sellers become less willing to negotiate. Now you have spent a year living someplace you’d rather not be, you’ve probably paid out at least $12,000 in rent that went no where and received no mortgage interest deductions. TODAY COST IN 12 MONTHS $149,000 Home Price $134,100 Put 20% down and get a If prices drop an 30-year-fixed-rate mortgage additional 10% 6.0% (APR 6.199%) Interest Rate 7.0% (APR 7.126%) Current Interest Rate Recession ends and the Fed starts to raise rates $714.66 Monthly Payment $713.74 So what are you waiting for?
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