It just may take the seller a little longer to arrive at that conclusion. I walk away from most deals at this critical point. Surprisingly, every man's common dream of owning a house directly connects to the real estate industry. Can you see the problem with this? With this information, the owner is telling you that the total rent for the eight units on this property is $4,000 per month based on the rents as listed in the “Total Rent” column. Take detailed notes for your management plan and operating budget. As your business grows you can bundle all your properties under a bulk insurance program, which generates substantial savings. This property came back around to us three months later when the first buyer couldn’t get financing and we later put the property into escrow. Unlike the income calculation where our goal was to be 100 percent on the money in terms of accuracy, with expenses the goal is to get reasonably close. You’ll determine the actual condition of the personal property and get a feel for the extent of major rep.airs Look for : • Clues about the lifestyles of the current residents. $22,368 ÷ 0874 percent = $255,926 The offer should be no more than $256,000. This must be a relationship of mutual respect and clear accountability. Again, this is a relationship business and if the company was doing a good job, they know you’ll seek them out on the next property you purchase. Management companies also ensure that all residents are treated the same, in other words, that all have read and signed the required paperwork and are apprised of their rights as tenants and of your rights as the landlord. Discuss these with yo ur seller or broker before the due diligence period ends. How do you do that? For years, every time we thought we had everything on the list, we’d encounter a property that would throw us a curve. It means fixing what needs to be fixed. A good property management company will help you by creating value if they know the goals of the ownership. Property management companies typically have agreements with companies they can count on at a favored rate based on volume of work. Download The ABCs of Real Estate Investing - Ken … This is called a variance analysis and I do them monthly. It is not a complicated document. • What if I installed energy-efficient lighting? Using the net operating income of $22,368 and subtracting the loan payment of $20,010, the projected profit on this property is $2,358. There may be some hostility on the part of the seller, who thinks the property is worth far more than you’ve shown it to actually be; that happens often. The seller will review the offer and the terms and will usually counter the offer and adjust some of the terms. It’s scary but it happens. Typically your real estate broker will prepare letters of intent and you will verify and approve them. A property management company will operate just as I do with no gray area when it comes to collecting rent. Do I really know my property so that if an unusual expense shows up I recognize and can flag or investigate it? You absolutely want to meet your deadlines. He has had to quickly assemble a team, learn another market, actually multiple markets, visit numerous potential properties, all while working at another job. • Security deposits that match the amounts reported to the escrow agent. Now, as the seller, you’ll want to demonstrate the lowest possible operating expenses. Guide To Real esTaTe invesTinG introduction 1 hrough real estate investing, many individuals just like you have been able to increase their net worth substantially, obtain the things they always wanted to have, reached their financial goals faster than they thought possible, and preserved their wealth for their retirement and/or their It was a long time coming, from initial market evaluation, to property search, to selection, to property evaluation, and finally to developing an operating budget. Before you start a rumor that Ken McElroy is a broker hater, know that on the bottom of every sales brochure I’ve ever seen are these words: This brokerage company makes no warranty or representation about the content of this brochure. You want to attract the right residents. And The ABC’s of Real Estate Investing is available in the eBook format or pdf format on the Stuvera website where it is available easily and for free Now it is time to convince the seller to sell the property to you. He owns apartment buildings, we manage them, but he does all his own painting. We weren’t alerted to this by our criminal and credit background screening company who processed the application. I’ve compiled a list of questions I ask when I’m hiring a property management company. • Use the numbers on the pro forma to calculate your offer price. Income  Seller Pro Forma Gross Scheduled Rent $48,000 Less: Vacancy 7% $(3,360) Net Rental Income Plus Other Income $44,640 Total Income $480 $45,120 Take a look below at what happens to our total income when we insert the real rents in the projected column. There are two basic methods. How about the next line in our expense table: Seller Pro Prior Year Our Per Unit Forma Actuals Projected Real estate taxes $425 $3,400 $3,400 $3,400 Real estate tax expenses are simple to determine with almost pinpoint accuracy. To me 60 percent is too little, and if I wait until I know 90 percent, someone has either already beaten me to the punch or I fall into the trap of never having enough information to make a decision. A champion and advocate for entrepreneurs and real estate investors, Ken has spoken worldwide at top industry events. Expenses Just as you created a new line for each income opportunity for your property, you’ll create a new line item in your spreadsheet for each expense. This deal threw his life into total upheaval. Not the kind that will land you in a white-collar-crimes prison, but the kind that makes you reassess your business model. The washers and dryers were there. This video assumes familiarity with the Smart Investing Strategy For Beginners guide—that is also widely referred to as Boglehead Investing and as Common Sense Investing.It’s the best strategy for 98% of all investors of every age, every level. Work closely with your attorney and your broker to make sure you receive the items promised in the agreement on time. Here are our totals: Expenses Seller Prior Year Our Per Unit Pro Forma Actuals Projected Repairs and Maintenance $838 $6,700 $8,010 $8,010 $3,273 $3,273 Utilities $409 $3,273 $3,400 $3,400 $1,000 $1,200 Real Estate Taxes $425 $3,400 $1,200 $15,683 Insurance $125 $1,000 $17,083 Replacement Reserve $150 $1,200 Total Expenses $1,947/unit $15,573 $2.88/sq. • What if I plan to adhere to the lease agreement? In Real Estate Investing in Canada, you will discover how to cut through the hype and emotion of any real estate market and accurately assess the inherent risks and rewards. INSURANCE This is an important line item expense and it’s a critical one. You might not require more epoch to spend to go to the book opening as with ease as search for them. What can I personally do to save money? Before you do one on your own, be sure you know your rights and the resident’s rights. This is another area where your team of pros can help you. Find more similar flip PDFs like The ABCs of Real Estate Investing - Ken McElroy ( PDFDrive.com ). I assess the current management company and determine whether they stay or go. But if you chose the latter, your one bad choice can have far-reaching effects. First, let’s compare the seller pro forma income number with the prior year actual income number. • What if I need to attract new residents? Using a conservative capitalization rate of 10 percent, divided into the $8,400 in cash flow left on the table, you would experience an $84,000 reduction in your purchase price. As you can see, there are lots of ways to increase income and reduce expenses. It lists the number of units, the type, square footage, and rent. That language is as follows: • Purchase price: What is the total price? As the seller, you want to sell at as close to retail as possible, even at the expense of occupancy! Format : PDF, ePub That means you’ll want to sell your property at the highest price possible. File Size : 25.28 MB Download The ABCs of Real Estate Investing Free Ebooks in PDF format. The data is usually available on the Internet in most areas. Follow Through Follow through. PAYROLL Payroll covers the salaries and wages you pay yourself or your staff. To calculate cash on cash, divide your profit of $2,358 by the down payment of $25,600.