PDF of the book
the-abcs-of-real-estate-investing-ken LifeFeeling.pdf
pg 3
“All you need is a good real estate deal that makes sense - one that has profit potential and is based on solid financials. The deal was the hero; it was so good that people wanted to be a part of it”
“once you have located a real estate opportunity, the task is finding investors who are looing to earn a good return on their money. The first deal you do, granted is the most difficult, beceause you are an unproven entity”
All things are difficult before they are easy
You can go for big deals, usually SFH are tied to a persons worth but the big deals they have their own legs to stand on
pg 4 “Mortgages on smaller proeprties like SFH are amost always guarenteed through buyers own personal earning potential and wealth. You may be surprised to learn that larger invesemnt property loans are secured by the asset itself. In others words, instead of the $2 million building riding on your own wealth, it is riding on its own valuation
Let’s look at the previous example. The condo I purchased for $116,000 with a $20,000 out of pocket down payment was 100% my responsibility from mortgage to management. The $9M projeect htat I owed 10% offer no out of pocket cost was actually less risky because I had no cash invested and the proeprty was professionally managed. The other property was mine, all mine. 5 yeras later, I sold the condo for $121,00 a gain of $5k. Recently we refinanced the 182 unit building, which we had owned less than a year. Its newly appraised value was $11.3M, more than 2M above what paid for. And since I own 10% of the project, I made over $200k in less than a year. —>—> a testament to hte power of buying and managing right and managing well.
*This example also demonstrates risk related to **valuation.*When you buy a house or condo and rent it out, appreciation of the property rests solely on the appreciation of the surrounding neighborhood. You better have bought in the right neighborhood, because there is little you can do to increase the value of your property. Remember, SFH are run using comps.
By contrast, appreication in commercial property like apartment buildings, is based on the cash flow of the proeprty itself. The more money it makes, the more money it is worth. Now youre in control! When cash flow increases so does the value of the property. Manage your proeprty right and you’ll increase the value. Don’t manage it right, and the value with stay the same or go down.
Another way larger properties are less risky relates to occupancy. When a SFH is rented, its 100% percent occupied. When it is empty, it is 100% vacant, and you are covering the mortgage out of your own pocket in its entirety. In a larger property, even an eight unit building, if one resident leaves, you still have seven residents paying rent. Your exposure related to occupancy is greaty reduced the more residents you have.
Pg 6-7