Real Estate Brokerage & Property Management Blog

Here you will find the latest real estate endeavor stuff I engage in on a daily basis.

Tuesday, October 20, 2009

Investment Analysis- "Victorian Mini Mansion"

Hi Prospects & Friends,

I noticed this mini mansion last weekend on the market and I will drive by it this weekend, because it's a beautiful home and also because it has nice home stats. It caught my eye due to the seller just reduced the listing price $50,000 and is including the furniture in the package. This is a subdivision I've studied over the years and many homes don't come available often. I did my analysis on this home so see the stats below:

Original Listing Price $349,900
Seller Reduced Just Last Week: $50,000
New Listing Price: $299,900
Year Built- 1982
Gross Sq.ft.- 4,294
Bedrooms- 5
Bathrooms- 3.5
Garage- 3 car attached
Lot- 12,100 sq.ft.
Yearly Taxes With Homestead Exemption- $6,252
Yearly Maintenance- $500
Proposed Insurance- $250/mth
Rent/last 6mths- $0.54
Price/sq.ft./last 6 mths- $81.15
5 Year S.M.A. Low- Occurred 11/30/04 @ $58.92/sq.ft.
5 Year S.M.A. Peak- Occurred 4/17/06 @ $87/sq.ft.

Market in last 6 months says this home is worth $348,458, seller has new listing price @ $299,900 including the furniture. So it is an enticing deal, but as a broker/realtor I have to put my hat on as a buyer/investor first. So for me this home needs to come down to my range of $$268,886-$284,643 for me to touch it, because of the recession and market trends I've studied for this subdivision. So I will use rates of 4.8% and 5.35% since the market is saying that's what rates are going for right now at this point. See equations explaining:

(4,294 sq.ft x $0.54=$2,318.76-$521-$42-$250=$1,505.76/5.29x1000=$284,643)
(4,294 sq.ft. x $0.54=$2,318.76-$521-$42-$250=$1,505.76/5.60x1000=$268,886)

So since my range is $268,886-$284,643 and seller originally had it listed for $349,900 and now it's listed at $299,900, and the low was $58.92 and high was $87 in past 5 years. I can conclude right now the price is perfect, but because I like to build instant equity, home needs to fall in my range to make numbers work for me. So seller isn't too far from my $284,643 since it's now listed @ $299,900 and if they continue to reduce the price who knows it may get as low as my other part of my range which is $268,886. The 5 year S.M.A. comes out to for this home see equation below:

4,294 sq.ft. x $58.92=253,003
4,294 sq.ft x $87=$373,578

So I can analyze from the 5 year S.M.A. this home will hit back around $373,578+ when the recession is over and max of 5 year trend from that moment, and I can also conclude this home could possibly wonder down to $253,003 if the recession still lingers, but in this case trying to see a $58.92/sq.ft in this subdivision won't be possible since the price/sq.ft. last 6 months is $81.15. So the only way to win in this case is to watch for sellers like this one and realize they are listing it at $69.84/sq.ft but it's really selling for $81.15/sq.ft as per the price/sq.ft. in last 6 months. Remember this home isn't a foreclosure, so these are rare deals when you find seller doing this. This home is already fixed up and remodeled, so buying this home from the seller right now at their price would be $81.15x4,294/sq.ft. =$348,458-$299,900=$48,558.10 of instant equity which isn't including your down payment if you homestead this home for 2+ years and didn't sell until the price/sq.ft. reverts above $81.15/sq.ft.

If you use my range of $268,886-$284,643 & wait for the subdivision to peak back @$87+/sq.ft. it will calculate to 4,294/sq.ft x $87=$373,578 & instant equity ranging from $88,935-104,692. You would need to at least stay in the home and not flip, to gain this subdivision investment rewards, since it goes through troughs and ridges. I would stay @ least 5 years then roll equity over into another one like this till I landed $500,000 in equity and proceed with next project or till I'm satisfied with what I want. Some of you are thinking how can she get $500,000 in equity? Well lets just take a refresher course, my range is $268,886-$284,643, and seller has already marked property down from $349,900 to $299,900. The $299,900 isn't too far from my range of $268,886-$284,643 which equates to $88,935-$104,692 in equity. So once I see the seller lower close to $284,643 I know I already I got $88,935 in instant equity sitting pretty for me when I sell when the peak reaches back to $87+/sq.ft. Remember right now the price/sq.ft is $81.15 in last 6 months, not $69.84/sq.ft. which is what the seller is wanting right now. So understanding all of my analysis stats in advance will further you alot quicker. So yes finding 5 sellers like this one will land you $444,675 in instant equity ($88,935x5=$444,675, and that is just the high end part of my range for this house. Low end will equate to $373,578-$268,886=$104,692 in instant equity which is $104,692x 5 sellers=$523,460, and also remember I haven't factored in down payments. So if the house alone is giving you between $88,935-$104,692 imagine just adding a measely down payment of 3%+ to all that instant equity you already got? So lets use reverse psychology, my range of $268,886-$284,643 with a down payment of 3% which equates to a down payment range of $8,067 -$8,539, says: my analysis stat range of $268,886-$284,643 will only cost you as little as a down payment range of $8,067-$8,539 to gain a range of instant equity of $88,935-$104,692, which then equates to instant equity range of $97,002-$113,231 (down payment + the instant equity)

So for this to work you have to have the subdivision investment analysis already factored, and then the sellers are the "Jewels" when they do stuff like this in these kinds of subdivisions.

P.S. If you add this article with my "Investment Analysis- Fourplex" you could actually be quite wealthy, because the seller over at that article is doing the samething, but difference is this is a home you would homestead to live in, and the fourplex would be an investment property you rent out to generate monthly income.


Wednesday, October 14, 2009

Investment Analysis- Fourplex

Hi Prospects & Friends,
I came across a property I've been watching mid of this year and wanted to share the investment analysis to understand why I'm still watching it. Currently the Fourplex is listed for sale and see stats below:

Listing Price- $279,900
Gross Sq.ft.- 5,832
Fourplex Components- Has four 2br/2ba on each side
Year Built- 1984
Yearly Taxes- $6,017
Projected Insurance- $275/mth
Price/sq.ft last 6mths- $54
Rent/sq.ft. last 6 mths- $0.54
Calculate- 5% for reserves
Misc- Location A+ (Has main drag & inferior to schools/restaurants/parks/malls/churches/etc)

Market says property should be worth $315,000 ($54 x 5,832 sq.ft.)
Market says rent should be worth $3,149 or $787 per unit ($0.54 x 5,832 sq.ft. /4=$787)

Current Owner/Landlord is renting units at $695 & $625 with long term tenants in signed lease contracts. So $695 x 2 + $625 x 2=$2,640/mth in contract rent. Well since the market in last 6 months says this property is worth $54/sq.ft. & owner has it listed for $47.99/sq.ft I still will not settle for $279,900. Price needs to come down to my investment analysis range of $215,155-$235,967, because yes as a broker/realtor the $54/sq.ft is enticing since it's really worth $315,000 and seller is listing it for $279,900, but trick is my investor hat is on right now and not the broker/realtor hat (that hat will be put on when I sell). My investor hat says see investment analysis below:

Ignore the market rent at $0.54/sq.ft, since the current owner has tenant signed contracts at $0.45/sq.ft. (by law you have to honor lease contracts, until they expire) So I will work with the $0.45/sq.ft instead knowing I know as a broker/realtor the market rent is really $0.54/sq.ft in last 6 months. So I will demonstrate at a 8% and 9% since rates are higher on investment properties, and no points were applied/involved/factored ($2,640-$501-$275-$132/7.34x1000=$235,967)

So my investment analysis range of $215,155-$235,967 on a property currently being listed for $279,900 and really worth $315,000 is a good real estate endeavor to understand and learn to apply to your investment properties. Since seller already has property marketed below market why not wait for seller to continue to reduce your "Jewel Investment Property" to your range? You cant loose in this investment scenario, because seller already has 4 plex listed at $279,900 and it's really worth $315,000. I like to build instant equity so that's why I like to use my investment analysis range equation, while I also apply these rules:

Depreciation Factor- 27 years maxium for this investment property
Maxium life Expectancy- 40 years (it can go beyond this if it's been well cared for with the plumbing & electrical)

Building is already 25 years old, so that leaves me to work with 15 years if I was to buy it now in 2009, and if it falls in my range of $215,155-$235,967 (I would keep it at least 2-5 years out of the 15 years, for capital gain tax rules and market subdivision trend analysis conclusions). So since I already know it's got $35,100 in equity (based on the $279,900 minus market) and can factor in the repairs once analyze the inspection report with inspector/contractor/electrician/plumber I wouldn't want to touch the $35,100. So if I'm told it will cost $15,000 to update the 4 plex eventually with repairs then you can see why my range makes since of $215,155-$235,967 from the beginning of analyzing the 4 plex. My range is also actually saying in hidden numbers if seller lowers to my range I can earn in equity a range between $79,033-$99,845 & that's not including my down payment, instead of the $35,100 which is based on the $279,900 which is already below market, but not below enough for me to touch. I've bought 7 properties using this investment analysis equation and it does build your equity faster if you apply your numbers correctly from very beginning. Also since I'm a broker/realtor and represent myself in my transactions I just take the commission and apply it to any needed repairs and deduct it as an expense against my salary for managing the property, as well as the maintenance expenses for the property. I will write a book in detail about this soon. Till then check out my "Create Wealth From A Foreclosure Homestead" book & ebook on right currently for sale.

Sunday, October 11, 2009

Real Estate Endeavor Tip "Qualified Crafted Tenant" Equation

Hi Prospects & Friends,

I wanted to share with you all a preview video I created about one of my real estate endeavor tenant tips. The video talks about my equation I use for tenants. Enjoy and have fun, I've listed the links below and you may also subscribe to my Youtube Channel.


Journal Preview "Video"

Hi Prospects & Friends,

I wanted to share with you all the video I created for my journals I have listed for sale. Links are listed below, and you all may subscribe to my YouTube Channel also.


Flip Mino & FlipMino HD Camcorder Preview "Video"

Hi Prospects & Fans,
I wanted to share with you all the preview video I created on my YouTube Channel concerning my camcorders I created for sale. Enjoy and have fun, sites are listed below.


Creating Wealth From A Foreclosure Homestead "Video"

Hi, Prospects & Friends,

I wanted to let you all know I decided to create a YouTube Channel, that offers my previews and real estate endeavor tips on my stuff I engage in. Visit link belows and join me by subscribing. I look forward to making new fans!

Visit my YouTube Channel @ http://www.youtube.com/AchEmpire


Thursday, October 8, 2009

Why You Should Use A Realtor

Hi Prospects & Friends,

I wanted to quickly address how important it is when you're dealing with real estate, to not go solo. As a Texas licensed Real Estate Broker, and a Realtor I don't think it is a good idea to try to engage in real estate without a licensed real estate professional. Ask yourself:

Would you practice medical on yourself without a Doctor?

Would You draw up contracts with out an Attorney?

Would you clean your teeth without your Dentist?

If you said no to any of my examples above then, why would you engage in real estate by yourself, without a licensed real estate professional to help with your assistance?

In some cases it makes sense to cut out the middleman and save money like in my post "Cutting Out Middlemen" I addressed back in July 2009. I mentioned how I cut out my Accountant friend who was going to charge me $80/quarter for consulting, and I decided to use the IRS website instead for free since you can call and speak to a rep for free and also be able to print free tax forms up to 1,000 per small business. Or how I mentioned not using a stock broker to manage my broker account, and decided to do it myself. Some things make since to go solo, but real estate I would advise is not. See the "Why use A Realtor" article below from HAR.com