Professional Documents
Culture Documents
VALUACION DE LA PROPIEDAD
VENTAJAS APPRECIATION
Leverage
A través de leverage tu puedes magnificar tu retorno y construir bienestar
de una manera más rápida que si pagas el 100% del efectivo de tu
propiedad. Pero laverage también magnifica el riesgo.
Leverage significa que usas a relativamente poca cantidad de efectivo para
adquirir o controlar una propiedad.
Ejemplo: Supón que quieres comprar una propiedad para rentar con valor
de $100,000 USD que produce un ingreso neto de operación de $10,000
usted al año (ingreso en rentas, menos gastos como son seguro,
reparaciones, mantenimiento e impuestos de propiedad). Si tu financias
esta unidad con $10,000 de enganche y pides prestado $90,000 (un múltiplo
prestado a valor del 90%), has hecho laverage muy alto para realizar tu
compra.
Bienes Raíces
LAVERAGE
Importance of Leverage
Leverage is important for investors because the less cash you put down on
each property, the more properties you can buy. If the properties go up in
value, your rate of return goes up exponentially. However, if the properties go
down in value and you have a lot of debt on the property, this can result in
negative cash flow.
Since real estate is generally cyclical, negative cash flow is only a short-term
problem and can be handled if you have other income or a cash reserve to
handle the negative. “Nothing down” investing is very attractive for the high-
leverage investor, but should be approached with caution.
If you are a long-term player, leverage will generally work in your favor if the
markets in which your invest appreciate in the long run and your income
from the properties can pay for most of the monthly debt service.
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LAVERAGE
Financiamiento creativo
ROI (retorno sobre lo invertido) = Ingreso (NOI) / Inversión en efectivo = $10,000 / $100,000 =
10%
ROI (retorno sobre lo invertido en efectivo) = Ingreso (CTO) / Inversión en efectivo = $5,596 /
$50,000 = 11.1%
Bienes Raíces
LAVERAGE
ROI (retorno sobre lo invertido) = Ingreso (CTO) / Inversión en efectivo = $3,394 / $25,000 =
13.6%
ROI (retorno sobre lo invertido) = Ingreso (CTO) / Inversión en efectivo = $2,073 / $10,000 =
20.7%
Con estos datos en estos ejemplos, el ejemplo leveraged más alto doblega el retorno sobre lo
invertido en efectivo al ejemplo donde se compra todo en efectivo. En principio, entre más
pidas prestado y el menor efectivo tu inviertas en una propiedad, más grande será el
retorno sobre lo invertido en efectivo. Por supuesto que la tasa de retorno que ganaras
depende en las rentas actuales, gastos, tasa de interés y el precio de compra de tu
propiedad. Vas a tener que trabajar sobre esos números al tiempo que vayas a comprar para
ver si puedes ganar (o perder) del leverage.
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LAVERAGE
Talk with your tax advisor and attorney before deciding which
type of business structure is best for you. There is no “right” or
“wrong” business structure. It all depends on your needs,
priorities, and current investment level.
Bienes Raíces
NEGOCIACIO
N
Haga infinidad de ofertas. Cuando quiero adquirir alguna propiedad, examino muchas, y
generalmente redacto una oferta.
Bien, uno no sabe cuál es el precio correcto hasta que aparece una segunda parte que quiere
negociar. La mayoría de los vendedores piden demasiado. Verdaderamente, es poco frecuente
que un vendedor pida un precio inferior al valor real de la propiedad.
El juego de comprar y vender es divertido. Es tan sólo un juego. Haga ofertas. Alguien puede
decir “sí”.
Usted debe salir al mercado y hablar con muchísimas personas, hacer una infinidad de
ofertas, contraofertas, negociar, rechazar y aceptar.
Necesitas ir de comprar, utilizar la fórmula 100:10:3:1 (Eso significa que analiza 100 propiedades,
haz ofertas en diez, tiene tres vendedores que dicen sí y compra una). La manera de hacerte
experto en bienes raíces es ver miles y miles de oportunidades de inversión. Hacer cientos
de ofertas para comprar propiedades, de las cuales muchas se reirán. Con cada propiedad que
veas y con cada oferta que hagas va creciendo tu conocimiento y experiencia sobre el
mercado de bienes raíces y la naturaleza humana.
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NEGOCIACIO
N
¿Qué hace cuando no tengas dinero? La respuesta es la misma ¡ve de compras!. Cuando
vas a un centro comercial, nadie te pregunta si tienes dinero. Lo mismo es cierto con la
mayoría de las inversiones. Ir de compras, hacer preguntas, analizar tratos es la forma en
que obtienes tu preparación. Lo que aprendes haciendo de compras no se puede
encontrar en un libro.
You must learn how to negotiate and how to sell people on the idea of
dealing with you, and on giving you terms when they are selling you their
property.
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NEGOCIACIO
N
Making an Offer
When you find a house that you decide is priced right because it has
good potential to be upgraded and improved, you make an offer. The
best deal for you is a small cash down payment with a first mortgage of
80% to 90% of the purchase price, and the seller agreeing to carry the
balance over 5-7 years at an attractive rate of interest.
Sometimes, for reasons that you don't know, the seller will accept a
ridiculously low offer, so always make a low offer to begin with. You
can always increase the offer later if it is rejected.
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It took the student four months to fix up and resell the property. During that time she had to pay the hard money lender 12
percent interest payments on the loan. But because she only needed the money for a short time, when she resold the property
for $220,000 she ended up netting $40,000.
Advanced Strategy 7: Use Private Money
Once you have a track record of proven results, you should start to establish sources of private money. Private money comes
from people who are willing to lend you money secured by a mortgage on a property, but at a substantially lower cost than a
sophisticated hard money lender would charge you.
Example: Two investor friends of mine recently bought a mobile home park. They borrowed roughly $300,000 from a person
they knew who wanted to get a good rate of return on his money without much risk or effort. My friends got the money for 10
percent simple interest with no loan fees or credit checks, and the lender was able to have his loan secured with a first
mortgage with over $500,000 of equity protecting the loan. A win-win.
Advanced Strategy 8: Use Graduated Payments to Protect Your Cash Flow in the Early Years
See if the seller will accept lower interest payments in the early years with built-in increases in the interest payments in the later
years of the note. For example, “Mr. Seller, what if we were able to pay you $300 per month for the first 24 months, and then for
the next 24 months we’d pay you $400 per month, and then for the final 24 months you’d get $600 per month?” There are no
rules governing this, so be creative. The key is to protect your cash flow in the early years. Who knows, you just may sell or
refinance the property before the interest or payment bumps up too high!
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NEGOCIACIO
N
The seller had bought a new house but hadn’t been able to sell his first house and was feeling the pressure of the double
payments. While they didn’t sign the deal on the spot, the investors followed up every few weeks and eventually, six months
later, the seller sold them the house. By this point the seller had refinanced out much of his equity with a new first mortgage of
$280,000. The investors gave the seller $100 down and bought the house for a price of $350,000. They agreed to take over the
payments on the existing $280,000 mortgage of $2,300 with the seller to carry back a $70,000 second mortgage with no interest
and no payments, due in full as a lump-sum payment within 60 months of closing.
Next the investors sold the house on a two-year rent to own for $400,000. They collected a $24,000 option payment and got
$3,300 a month in rent! All totaled, this deal netted the investors $65,000!
Advanced Strategy 13: Write Up a Zero Interest, Zero Payments Loan
Can you really do this, you ask? Yes! The simplest way to do this is to negotiate to pay off the mortgage the seller carries back
as a “lump-sum payment due in full” down the road. This is the prettier way of saying zero interest, zero payment loan.
Here’s the fancy way to say this in your purchase contract:
“The Seller shall carry back a second purchase money mortgage in the amount of $150,000 to be paid as a lump-sum payment
due in full within 60 months of closing of escrow.”
Advanced Strategy 14: If You Have to Make Payments, Pay Pure Principal
Obviously as an investor you would prefer a loan without payments and without interest. That’s why, whenever possible, you’ll
use the language of paying your seller a “lump-sum” payment due down the road. But if you have to pay them as you go, pay
them principal, not interest. Principal is money that goes towards the purchase price or loan amount.
Here’s the fancy way to say this in your purchase contract:
“Seller to carry back a second mortgage in the amount of $100,000 to be paid by Buyer in 100 monthly payments of $1,000
including principal and interest with the first payment of $1,000 due within 30 days of closing.”
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NEGOCIACIO
N
In these situations, the Big Money Cash Close is a powerful buying strategy to use. This technique means getting a new first
mortgage secured against the property to get the seller some cash at closing, and then the seller simply carries back a second
mortgage for the balance of his equity for a period of time.
Example: Imagine a $100,000 house. Using this technique you would bring in a new first mortgage of between $30,000 and
$50,000 and have the seller carry back the balance as a second mortgage. Because the bank you are seeking the first mortgage
from will have so much value protecting its money (after all, what banker doesn’t like to lend at 30 to 50 percent loan-to-value),
this is a fairly easy mortgage to secure. This strategy is a way for you to get the seller a large chunk of money at closing, but
having that money be borrowed rather than your own.
Using this strategy, it is important to note that the seller will need to be willing to carry a second mortgage for the balance of their
equity. This is because you will be getting a new first mortgage to give the seller money at closing. To do this you need the seller
to agree to subordinate his mortgage to second position behind the new financing you are bringing in from a conventional lender.
Here is exactly how to word your offer: “Mr. Seller, what if I were to bring in new financing and get you $30,000 or so cash at
closing, and then you were to carry back a small second for the balance. Obviously you wouldn’t want to have to wait forever for
the balance of your money, so we’d put a short-term balloon note of five to seven years on it.”
Notice you use the term “bring in new financing,” not “put $30,000 down.” Technically, if you say you are going to put money
down that means you are going to be using your money. That’s not what you want to do. You’ll be using the bank’s money
instead.
Let’s be clear on one critical item: Of course the seller will need to be very clear that their loan will be in second position. You are
not trying to pull anything over their eyes. The language you use is very important so that you frame the offer in the seller’s mind
the right way from the very beginning. You need to make sure the idea creates a good first impression on the seller. Later you
can go back over it to make sure the seller is totally aware of all the advantages and disadvantages of this type of deal.
Using this technique you are going to be 100 percent financing the property. The critical question on any 100 percent financed
property is, does it cash flow? If you pay market interest rates for the second mortgage that the seller is carrying back, it probably
won’t. But when sellers carry back seconds they don’t need high interest rates—at least, they don’t if they are motivated, and if
they’re not motivated what are you doing wasting your time talking with them?
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NEGOCIACIO
N
Cuando observas la tendencia en la población puedes planear tus inversiones en bienes raíces conforme a
ella. Puedes comprar un terreno poco costoso y esperar a que el pueblo crezca.
Una de las formas en que puedes hacer mucho dinero es teniendo control sobre
el valor de la propiedad que cambia, se modifica o mejora… algo que no puedes
hacer con acciones ni con fondos de inversión. Muchas veces, el simple hecho de
agregar una cochera o una habitación extra puede multiplicar en gran medida tu
ganancia sobre la inversión.
you to convert the equity of a single property into a property of at least double the value.
Here's how the technique works. Dean P. purchased a small duplex for $58,000. Then, using the techniques taught
in this course, he increased the value of the property to $67,000 within nine months. At the end of nine months,
Dean exchanged his equity of $9,000 for the down-payment on a four-plex valued at more than $120,000. The four-
plex was an excellent investment and carried its own weight in his investment portfolio.
Now Dean had the same $9,000 equity in the portfolio, but the assets of the portfolio were valued at over $120,000
instead of $67,000. With an 8 percent appreciation rate, the value of Dean's real estate portfolio was increasing at
approximately $800 per month, with the four-plex as the sole asset. (When the duplex was the sole asset, the
portfolio was appreciating at only $447 per month.)
Each investor must build his portfolio of properties around both short-term and long-term investment goals.
If your short-term goals are equity growth and capital appreciation, the properties you place in your portfolio will
generally be highly leveraged, high-appreciation properties with low cash flows. As the portfolio grows in size and
matures in age, you will buy properties that have lower financing and better cash flows.
Bienes Raíces
ESTRATEGIA
Using Options
The astute investor will always have "options" on his/her mind. An option allows you to gain control of a property
without having to purchase it until a later date. When you negotiate an option with a seller, you pay a certain sum
of money for the right to purchase the property for a designated price within a specified time frame.
For example, let's say that you locate a twelve-unit apartment complex offered for $360,000 and your analysis
indicates that the property would be an excellent addition to your portfolio. However, for financial reasons you
cannot swing the deal for at least eighteen months. What can you do to hold on to that opportunity? You can offer
the seller an option for, say, $3,000, to be exercised within eighteen months at a price of $400,000. The future
purchase price is something you guess would be appropriate at that time. If the seller accepts, he might be
guessing that his property might not quite appreciate that much in a year-and-a-half, or he might simply be betting
that you will actually follow through with the deal and he will have sold his property for an acceptable price. If you
do not follow through, then he will be $3,000 ahead of the game and have the use of that money for up to eighteen
months without having any tax liability for it until after the option is exercised or expires.
Meanwhile, you have "control" of the property in that no one else can purchase it during the option period unless
you decide to let it go. If someone does come along and make a better offer, you could always sell your right to
buy the property for a "price," which might be many thousands of dollars. To prepare for this possibility, you
should make sure that your option agreement contains wording that allows you the right to sell your option to
another party. Also, make sure that you record your option agreement with the county recorder so that the seller
cannot option is off or sell it to someone else in the meantime.
During the option period you have no management hassles or concerns with the property, since the owner has
not
sold it yet. You do not have to worry about taxes, either. It is a good way to have your cake and eat it, too.
Bienes Raíces
ESTRATEGIA
The simplest way to buy real estate at a low price is simply to ask. Just because
someone lists a home at $145,000 doesn’t mean he or she won’t accept something
less. Perhaps the seller needs to move in three weeks and he or she just wants to
get rid of the house as quickly as possible. Maybe the seller just listed the home
at a higher price in hopes of getting it, but realistically expects something much
less. If the property has been on the market for several months, the seller may just
want to get rid of the home because he or she is tired of waiting for a better price.
In real estate, you never know the seller’s motivation.
If you offer to pay a lower price, many buyers will refuse. It doesn’t cost you
anything to ask for a lower price and if the seller won’t negotiate, then you walk
away and look for another home.
As a real estate investor, you don’t need a particular home; you just need a home
that you can buy at a wholesale price.
It may take several weeks or even several months to find a bargain home, so you
may spend long amounts of time with no immediate profit. But all you need is one
great deal and you’re immediately ahead of the game.
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BUENAS
OPORTUNIDADES
To speed up the process, the more offers you make, the greater your chance of
success. A very successful friend of mine uses what I would call an almost mass-
marketing approach. He’ll do a little research on multiple properties and simply
submit lowball offers where he can’t go wrong. Because he’s making so many
offers, he picks up incredible deals that most investors would never get because
they’re afraid of offending the seller. Remember, it never hurts to ask.
Besides asking for a lower price, another popular way to buy real estate at
wholesale prices is through probate. When people die, they often leave behind
property they lived in or owned. In many cases, the inheritors don’t live near that
property and probably have never seen it. When multiple people inherit a
property, they can’t divide a house into several pieces, so the first thing they want
to do is sell it, usually as quickly as possible.
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RECOMENDACIONES
TIP—CONSIDER A FIXER
You should also at least consider a fixer-upper, a home that is selling for
less because it needs repair work. Sometimes you can find a sweet deal.
TIP—YOU NEED TO FIRST FIGURE OUT WHAT YOUR PRIMARY INVESTING OBJECTIVE
IS:
i) Quick cash / equity,
ii) Cash flow,
iii) Capital growth,
An investor focused on growth probably has a relatively long time horizon with no
immediate or likely immediate need to use the money being invested.
An investor focused on income probably has a shorter investment horizon and an
ongoing need to use money generated by the investment.
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RECOMENDACIONES
Conoce tu comunidad. Tienes que conocer los edificios, cuanto valen, quien
es dueño de ellos. Identifica tendencias, o patrones en tu mercado local.
Puede ser que vallan a construir un centro comercial dentro de tres años y
puedes comprar tierras alrededor muy baratas, que dentro de unos años van
a costar una fortuna.
Conoce la planeación urbana, los requerimientos de las zonas, las reuniones
de los inversionistas, y cámaras de comercio.
Lee, lee y lee todo hacer sobre los bienes raíces comerciales. Debes de
entender la industria de cerca y de fuera para tener éxito.
Bienes Raíces
COMERCIALE
S
5: Professional inspection
However, before you close any real estate deal, you have to perform a professional inspection of the
property in order to find any potential problems that may affect your plans/profits. It is recommended
to hire a professional to do that. Even the most experienced real estate investors cannot find
everything, especially if problems are deeply hidden.
6: Closing
If the inspection goes well, it is time for you to close the deal. For the agreed price you will become
the owner of the property.
7: Improving the value
A quality rehab is crucial for increasing the profit of every real estate investment. Unless you are
really good at it, you should leave this job to hired professionals. It takes up your precious time and
there is always a chance that you won’t be able to fix everything right, which will cost you more
money than you save in the long run.
8: Marketing campaign
When the renovation is over, the property is ready for sale. It is time for you to start your real estate
marketing campaign, find a buyer and then finalize the real estate investment by SELLING THE
PROPERTY!
If you do it step-by-step always remembering about the final goal (selling the property for a profit),
your chances for the success grow. On the other hand, if you decide to skip or swap places of any of
the phases, you will fail 9 times out of 10.
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CONCEPTOS CLAVE
Equity
Does the property you are purchasing have equity? Equity can take a
number of forms, such as:
A discounted price,
A potential fixer upper
A rezoning opportunity
A poorly managed property
A foreclosure
There are many ways to create equity, but buying into equity is your best
bet.
Find a motivated seller who wants out of his property and is willing to give
up his equity for less than full value. Or, buy a property that needs work
that can be done for 50 cents on the dollar or less.
In other words, if the property needs $10,000 in work, make sure you get a
$20,000 discount on the price or better.
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CONCEPTOS CLAVE
Appreciation
Buying in the right neighborhoods in the right stage of a real estate cycle
will result in appreciation and profit. However, timing a real estate cycle is
difficult and is speculative. If you buy properties without equity or cash flow
solely for short-term appreciation, you are engaging in a very risky
investment.
Buying for moderate, long-term (10 to 20 years) appreciation is safer and
easier. Look at long-term neighborhood and city-wide trends to pick areas
that will hold their values and grow at an average 5% to 7% pace.
Combine this tactic with reasonable cash flow and buying into equity, and
you will be a smart investor.
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CONCEPTOS CLAVE
Risk
Risk is a consideration that too few investors consider. Now ask yourself,
“What if my assumptions are wrong?” In other words, do you have a
“plan B”?
If you bought for appreciation and the property did not appreciate in value,
can you rent for positive cash flow?
If you buy with an adjustable rate loan and the rates go up, will this put you
out of business? If you have a few vacancies, can you handle the negative
cash flow or will it break the bank for you? Expect the best, but prepare
for the worst.
And remember, whenever you look at a property to purchase, think
CLEAR: Cash flow, leverage, equity, appreciation, and risk.
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Find the Right House
Good schools—Check test scores available at the district office. ¿close to schools?
Low crime rate—Check with the police department’s public affairs officer for crime
statistics by neighborhood and block.
Pride of ownership—Check to see that all the homes are well kept.
Balance—Look for a mix of homes, apartments, condos, and townhouses. That
produces diversity—a good place to live.
Anchored—Look for a neighborhood that has few homes for sale and no detracting
new influence (such as a commercial or industrial park coming in nearby).
Check out public facilities —Look for libraries, fire stations, police departments,
and hospitals as well as malls and grocery stores. Are they convenient and well
located?
Extras—Look for parks, wide streets, tall trees, cul-de-sacs. Proximity to movies,
drugstores, dry cleaning, hardware stores, gas stations, churches, ball fields.
Good access to main arteries.
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Find the Right House
If you’re going to be driving on a thruway or freeway, wait until rush hour, then try it
yourself. Use a watch to determine just how long it takes you. (You may be surprised!).
Once you’ve winnowed down the areas even more on the basis of items you
discovered (above) by driving around, stop, park your car, and start walking. Talk to
anyone you meet. Ask about problems in the area, about schools, about bad neighbors.
Don’t be the sort of person who shops by car. Probably the biggest mistake that buyers
make when checking out an area is not walking it. Nothing substitutes for shank’s mare
when it comes to discovering the kind of neighborhood you’re in.
Buy a less expensive house in the most expensive neighborhood you can afford. If you
do, you multiply your chances for making money later on when you resell.
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Find the Right House
People who buy a home that is most likely to please others have an easier time reselling and
selling for more money. When you buy, do so with an eye toward later reselling.
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TIP—IT’S NOT HOW MUCH YOU PAY, IT’S WHEN YOU BUY AND SELL
Markets go both ways. Sometimes the most important thing is knowing when to take your profit
and when to hang on.
TIP—CHECK FOR THE ORIGINAL PRICE
By talking to those who bought six months ago in the same tract, you should be able to establish
what the original pricing was. Thus you can determine if the builder has raised the price to pay for
your buy down.
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Inversión en sociedad
Partnerships
In a real estate partnership, two or more individuals form a shared business enterprise to buy, manage, and sell
properties.
A partnership lets you leverage your way into properties that are larger, more expensive, and potentially more
profitable than you could afford as a sole proprietor. Partnerships promise other benefits, too. If you are not well
informed about certain areas of real estate investing, you can partner with people from whom you can learn.
Your partners will benefit from your expertise, too. This is one reason why real estate partnerships are often
made up of people with complementary experience, such as a construction professional, a lending expert, and
a skilled property manager.
Of course, there are dangers in partnerships. If one partner wants to sell a building and the other partners do
not agree, frictions arise. If one partner wants to invest money to fix up a building or invest in additional
properties, conflicts can start. Finally, if one partner decides to leave the business, difficult negotiations often
take place about how he or she should be compensated.
The best prevention is to know a great deal about your partners before entering into a partnership and to hire an
attorney to spell out your partnership agreement. This legal agreement should cover how one partner can buy
his or her way out of the partnership since that is the time when conflict often arises.
Another area of potential conflict concerns the terms under which you and your partners will sell your business if
that becomes a possibility in the future. Suppose, for example, that your partner wants to sell her half of your
business to a big real estate development firm and you want to keep your half. How would such a deal be
structured? How would each of your halves be given a dollar value? Such questions point up the necessity of
structuring a partnership with the help of a smart attorney.
Bienes Raíces
Inversión en sociedad
Partnerships (continuation)
Never enter into a real estate partnership without first talking in detail
with your prospective partner about differences that may surface later.
Do you both want to acquire properties at about the same rate? Do you
want to invest similar amounts in fixing up the properties you share? The
more differences you can put “on the table” before entering into a
partnership, the lower the chances that significant frictions will upset your
partnership later.
Bienes Raíces
Inversión en sociedad
Sole Proprietorships
When you acquire buildings without a partner, a corporation, or any other business entity behind you, you
are functioning as a sole proprietor.
You are in the driver’s seat, making the decisions, taking the profits, but also incurring the risks.
Being a sole proprietorship offers the following advantages:
• You make all the decisions yourself. No one can show up at your door with a load of kitchen cabinets
that you didn’t order. No one can rent an apartment to a tenant you wouldn’t approve, or undersell your
property.
• Your business is relatively easy to run. Keeping records is not complicated. If you track your expenses,
profits, depreciation, and other basic statistics, you can probably manage your business with only the help of
an attorney and a tax accountant. You also enjoy one of the basic freedoms we have in the United States:
the right to conduct business as an individual.
• You can treat your holdings the same way you treat all your personal property. If you want to give
some of your buildings to your children or set them aside in a trust for them to inherit after you die, you can.
• You are personally liable for expenses, penalties, and legal liabilities. If your building sits vacant for a
year and no one rents it, you will be the only person who suffers the damage of negative cash flow. If
someone slips on a patch of ice in the driveway of your building and gets hurt, you are the person who gets
sued.
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Inversión en sociedad
• You don’t enjoy certain tax advantages. All income and expenses are reported on your personal tax
return. If you die, your spouse and heirs may have to pay a lot of inheritance tax instead of inheriting all of
the money you worked so hard to accrue.
• The rising value of your properties can become a liability. If you divorce, for example, the “on paper”
value of your holdings can become a real asset to which your former spouse can lay claim. If you decide to
sell properties for a great deal more than you paid for them, you will probably pay capital gains taxes. (You
can get around paying capital gains taxes by like rolling your profits through investing in other properties.
Consult with your attorney or tax advisor.)
These advantages and disadvantages should be balanced against other options for structuring your
business.
Bienes Raíces
Evaluación de
Rendimiento
Rental income
rents will tend towards reimbursing with a “normal” profit, the marginal cost of new
building, which may or may not keep pace with the general level of inflation.
So long as this situation persists, land will always be cheap. With technological
progress in building, commercial properties risk becoming a commodity, something
that individuals or corporations who need to use real estate (for homes, offi ces,
industrial or retail space) must decide whether to own, rent or lease on the same basis
as other financial decisions. So although rents, and the cost of land, will move with
changes in supply of and demand for properties, there is no inexorable tendency for
them to increase faster than inflation. Rents can lag behind inflation for a long time.
Bienes Raíces
Evaluación de
Rendimiento
Rental income
There is no assurance that rents will keep pace with inflation, and little reason to
expect them to increase in line with the rate of growth of the economy.
It follows that investors rely on rental income, rather than capital appreciation, as the
principal source of investment performance in real estate investing.
It is not clear how much premium return over government bonds should be expected
by financial investors in real estate in the long term. This required premium is reduced
by the diversification benefits that real estate brings to a balanced investment strategy.
Government bond yields as the benchmark for real estate investing
Using government bond yields as the benchmark for assessing real estate investments
is helpful in several respects.
First, it focuses on the only legitimate reason to move away from safe-haven investing:
to achieve a superior return which more than compensates for the risk of a
disappointing result. The prospects for superior returns will largely be determined by
the state of the market in that location and for that type of property.
Bienes Raíces
Evaluación de
Rendimiento
Second, it allows focus on the quality of the contractual income stream to
be earned from a property, which will be influenced by the creditworthiness
of the tenants.
Tenant credit risk
A property with a government agency as a long-term tenant will be directly
comparable with government bonds, although some allowance should be
made for the illiquidity of the real estate investment as well as the likely
existence of options to break the contract.
More normally, the required spread over government bond yields needs to
allow for the credit risk associated with its tenants. This is the risk that the
tenant will fail to honour the terms of the lease, and that there will be an
interruption to rental payments as well as costs associated with attracting
new tenants, and that a new tenant might be attracted at less favourable
terms than the existing one. The costs involved will be directly influenced
by the state of the market – in a buoyant market replacement tenants can
be found more quickly and at less expense than in a depressed market.
Bienes Raíces
Evaluación de
Rendimiento
Corporate credit ratings can provide a guide to the credit risk spread that investors
should demand from tenants, but it is unclear whether the spread should apply to the
entire rental stream expected from the client.
Property obsolescence
The required yield spread over government bond yields needs to allow for the
expected rate of depreciation of the property, which may be a very different cost from
the actual outlay on property maintenance. This rate of obsolescence will be a major
determinant of the rents that will be earned on the property in the future. Obsolescence
is partly a matter of physical deterioration, but it is also accelerated by changes in the
pattern of demand for particular types of building or location. Standard depreciation
schedules rarely reflect actual experience, which is what matters for market investment
values. Obsolescence is always subject to uncertainty, but it is uncertainty of a kind
that can affect whole parts of a diversified real estate portfolio. This is why it is
appropriate to allow a material risk premium.
Bienes Raíces
Evaluación de
Rendimiento
Here’s a good formula to determine whether a potential real estate
purchase is a deal.
Cash flow
“Will this property cash flow?” Well, that depends on a lot of factors, such as the
strength of the local rental market, the interest rate on the financing, and how much of a
down payment you make.
It also depends on whether it is a single-family or multi-family dwelling. All of these
factors considered, ask yourself, “Will this property provide income?”.
Then ask the question, “How will this property cash flow compared to other potential
properties?” For example, a $150,000 house that rents for $1,000/month has a better
income potential than a $300,000 house that rents for $1,600/month. A four-unit building
that costs $400,000 may bring in $3,000/month in the same neighborhood.
Now, of course, whether the property will provide income to you begs the question
of whether income is important to you. Is it? Do you earn other income? Do you
need more income now, or is future equity growth more important? There’s no
right answer to these questions, but are all factors to consider when looking at a
potential purchase.
Bienes Raíces
Evaluación de
Rendimiento
2. Vacancy & Credit Loss – This is potential rental income lost due to
unoccupied units or nonpayment of rent by tenants.
Example: $46,800 x .05 = $2,340
3. Gross Operating Income (GOI) – This is the gross operating income,
less vacancy and credit loss, plus income derived from other sources such
as coin-operated laundry facilities.
Example: $46,800 – 2,340 + 720 = $45,180
4. Operating Expenses – These are the costs associated with keeping a
property in service and revenue flowing. This includes property taxes,
insurance, utilities, and routine maintenance but does not include debt
service, income taxes, or depreciation.
Example: $18,525
Bienes Raíces
Evaluación de
Rendimiento
Top 21 Real Estate Analysis Measures & Formulas
James R Kobzeff
5. Net Operating Income (NOI) - Net operating income is one of the most
important measures because it represents a return on the purchase price of
the property and, in short, expresses an objective measure of a property's
income stream. It is the gross operating income, less the operating
expenses.
Example: $45,180 – 18,525 = $26,655
6. Cash Flow before Taxes (CFBT) - Cash flow before taxes is net
operating income, less debt service and capital expenditures, plus earned
interest. It represents the annual cash available before consideration of
income taxes.
Example: $26,655 – 19,114 = $7,541
Bienes Raíces
Evaluación de
Rendimiento
Top 21 Real Estate Analysis Measures & Formulas
James R Kobzeff
7. Taxable Income or Loss – This is the net operating income, less mortgage
interest, real property and capital additions depreciation, amortized loan points and
closing costs, plus interest earned on property bank accounts or mortgage escrow
accounts. Taxable income may be negative as well as positive. If negative, it can
shelter your other earnings and actually result in a negative tax liability.
Example: $1,492
8. Tax Liability (Savings) – This is what you must pay (or save) in taxes. It's
calculated by multiplying the taxable income or loss by the investor's tax bracket.
Example: $1,492 x .28 = $418
9. Cash Flow after Taxes (CFAT) – This is the amount of spendable cash
generated from the property after consideration for taxes. In brief, it's the bottom
line, and is calculated by subtracting the tax liability from cash flow before taxes.
Example: $7,541 - 418 = $7,123
Bienes Raíces
Evaluación de
Rendimiento
Top 21 Real Estate Analysis Measures & Formulas
James R Kobzeff
10. Gross Rent Multiplier (GRM) – This provides a simple method you can use to
estimate the market value of any income property.
Formula: Price / Gross Scheduled Income = GRM
Example: $360,000 / 46,800 = 7.69
11. Capitalization Rate – Cap rate (as it's more commonly called) is the rate at
which you discount future income to determine its present value.
Formula: NOI / Value = Cap Rate
Example: $26,655 / 360,000 = 7.40%
12. Cash on Cash Return – This represents the ratio between the property's
annual cash flow (usually the first year before taxes) and the amount of the initial
capital investment (down payment, loan fees, acquisition costs).
Formula: CFBT / Cash Invested = Cash on Cash
Example: $7,541 / 110,520 = 6.82%
Bienes Raíces
Evaluación de
Rendimiento
Top 21 Real Estate Analysis Measures & Formulas
James R Kobzeff
13. Time Value of Money - This is the underlying assumption that money,
over time, will change value. For this reason, investment real estate must
be studied from a time value of money standpoint because the timing of
receipts might be more important than the amount received.
14. Present Value (PV) - This shows what a cash flow or series of cash
flows available in the future is worth in purchasing power today. It's
calculated by "discounting" future cash flows back in time using a given rate
of return (i.e., discount rate).
15. Future Value (FV) - This shows what a cash flow or series of cash
flows will be worth at a specified time in the future. It's calculated by
"compounding" the original principal sum forward at a given compound
rate.
Bienes Raíces
Evaluación de
Rendimiento
Top 21 Real Estate Analysis Measures & Formulas
James R Kobzeff
16. Net Present Value (NPV) - This discounts all future cash flows by a
desired rate of return to arrive at a present value (PV) of those cash flows,
and then deducts it from the investor's initial capital investment. The
resulting dollar amount is either negative (return not met), zero (return
perfectly met), or positive (return met with room to spare).
17. Internal Rate of Return (IRR) - This model creates a single discount
rate whereby all future cash flows can be discounted until they equal the
investor's initial investment.
18. Operating Expense Ratio - This provides the ratio of the property's
total operating expenses to its gross operating income (GOI).
Formula: Operating Expenses / GOI = Operating Expense Ratio
Example: $18,525 / 45,180 = 41.00%
Bienes Raíces
Evaluación de
Rendimiento
Top 21 Real Estate Analysis Measures & Formulas
James R Kobzeff
19. Debt Coverage Ratio (DCR) - This is the ratio between the property's net operating
income and annual debt service for the year. Lenders typically require a DCR of 1.2 or more.
Formula: Net Operating Income / Annual Debt Service = Debt Coverage Ratio
Example: $26,655 / 19,114 = 1.39
20. Break-Even Ratio (BER) - This measures the portion of money going out against money
coming in, and tells the investor what part of gross operating income will be consumed by all
estimated expenses. The result always must be less than 100% for a project to be viable (the
lower the better). Lenders typically require a BER of 85% or less.
Formula: (Operating Expense + Debt Service) / Gross Operating Income = BER
Example: ($18,525 + 19,114) / 45,180 = 83.31%
21. Loan to Value (LTV) - This measures what percent of the property's appraised value or
selling price (whichever is less) is attributable to financing. A higher LTV means greater
leverage (higher financial risk), whereas a lower LTV means less leverage (lower financial
risk).
Formula: Loan Amount / Lesser of (Appraised Value or Selling Price) = LTV
Example: $252,000 / 360,000 = 69.22%
Bienes Raíces
TAMAÑO DE LA
CASA
The size of your home needs to be compared to others in the area, especially in your
community. As a general rule, you do not want to be the biggest or the smallest in the
neighborhood. I like to be in the upper 25 percent for size.
For return on investment, using quality materials and a cohesive design provide
the best returns on a home upgrade. Bathroom and kitchen upgrades add the most
equity. For return on investment, the best home renovation is to upgrade an old
bathroom. Kitchens come in second.
You need to know where to invest your money because certain features of a home
sell it, and other features will not kill the deal. Make your home a good value through
careful selection of the features and upgrades in your home. You’ll be able to save
money on things that are generally less important to most home buyers. You can
make money by spending money where it counts and saving every possible dollar
where it will not be missed. This translates to cash in your pocket when you go to
sell the home. Your home will be priced comparable to the surrounding homes, but
yours will cost less to build. YOU KEEP THE DIFFERENCE! The trick is to select
the items in the house that “will not kill the deal,” and save money on them. These
are the items that may not be top of the line or may not be as costly as similar items
in neighbors’ homes. However, they are items that would not prevent your average
buyer from buying the home anyway.
Bienes Raíces
EN QUE PARTE DE LA CASA
INVERTIR MAS DINERO
The profitable way to select options in a house is to limit your choices to those
options that will sell for more than they cost.
If the person buying your house is willing to pay $5000 more for your house because
it has a fireplace, the decision to install a fireplace was a good one. Let’s do the
math:
Cost of fireplace: $3400
Value to buyer: $5000
Profit: $1600, which is a 47 percent profit margin
If the person buying your house is willing to pay $2000 more for your house because
it has cherry hardwood floors throughout the first floor, the decision to install it was
NOT a good one:
Cost of cherry floor upgrade: $7000
Value to buyer: $2000
Profit –$5000
Bienes Raíces
EN QUE PARTE DE LA CASA
INVERTIR MAS DINERO
I have learned this lesson over and over again working for builders. When a builder
builds a house for a customer, any option selected by the customer is profitable for
the builder because he just adds his profit to the cost of the option selected.
You can avoid it by not “overbuilding.” Do not choose options that are extravagant or
unusual in the community. Stick close to what everyone else is selecting. There are
plenty of inexpensive ways to add a WOW factor to your home.
Bienes Raíces
EN QUE PARTE DE LA CASA
INVERTIR MAS DINERO
1. Limpia la propiedad.
Unidades de renta que no son limpiadas meticulosamente alejan a los clientes
de calidad. Ellos van a buscar a otro lugar, y en su lugar, aquellos inquilinos que
aceptarían bienes con vidrios y lámparas sucias, alfombras manchadas, estufas
llenas de cochambre son más probable que traten tu propiedad como un
muladar.
2. Moderniza los colores, estampados y accesorios.
Rápidamente puedes volver más atractivo a tu inmueble con colores modernos,
o pequeños cambios como son molduras, espejos, plomería lujosa, accesorios
de iluminación, o losetas de piso. La regla es no caer en un gusto muy particular
o volverse loco, pero agregar solo la cantidad correcta de actractivos que hagan
tus inmuebles sobresaliente de la competencia.
Bienes Raíces
EN QUE PARTE DE LA CASA
INVERTIR MAS DINERO
Networking.
Periódicos u otras publicaciones.
Llamadas a dueños.
Agencias de bienes raíces.
Internet.
Bienes Raíces
ENCONTRANDO GANGAS
You must study the economics of the city and the neighborhood
where you are thinking of investing.
Some cities and some neighborhoods are in a state of decline.
These are risky choices for real estate speculation. These are
primarily the places where you can get homes with no money
down. What you are looking for cities and neighborhoods that
are growing and that are therefore good choices for investment.
3.Trend in Employment.
Examine changes in the employment and income sources for the
community. Is industry or business moving in or out? Are there government
offices moving in or out? Where are the jobs coming from, and where are
the jobs going? The level of employment will have an enormous impact on
rental rates.
4.Study Population Trends.
You must understand the trends in population growth or decline. Here is an
important formula. Real estate prices increase at twice the rate of population
growth and/or three times the rate of inflation. What does that mean? This
mean that if there was no inflation, and the population was growing 3% per
year, real estate prices would grow at to times 3% or 6% per year. If the
population remained stable, but inflation was growing at 3% a year, home
prices would increase at three times that, or 9% per year. If an area is losing
2% population per annum, real estate value will decline at 4% in that area.
Never try to buck the trends.
Bienes Raíces
LOCALIZACION
Bienes Raíces
RENTAS Y VENTAS
Ask yourself.
What types of units rent the quickest, i.e., one or two
bedrooms, one or two baths, with or without covered
parking or community center?
How do vacancy rates differ among various
neighborhoods and communities?
Do some types of buildings or units enjoy waiting
lists? If so, what are their features and locations?
Bienes Raíces
RENTAS Y VENTAS
What about rents, are rents steady or increasing? What about rent concessions, are
property owners giving concessions to attract tenants, and if so, what are they
giving away?
Watch for foreclosures in your area. Homeowners who lose their homes become
renters, in turn causing a shortage of apartment units that results in increased rents;
thus, higher property prices.
What about interest rates, bear in mind that low interest rates means that many
tenants who are one pay check away from buying a home vacate the rentals, and
vice versa. Of course, in our current economy, with lenders tightening their loan
qualifications, this rise and fall in interest rates might be less telling. Nonetheless,
interest rates should be monitored.
Bienes Raíces
USO
Grasp the idea that use may be the ultimate deciding factor in the
purchase of a property, and that it may even be the sole reason for its
value to a specific user. Keep in mind right from the start, not all
properties can be used for every possible use.
The key insider secret to investing in real estate is use and in the long
run use governs profit.
The most important aspect of any property is the allowed use. This
aspect comes in several packages. First, what is the use the buyer
intends for that property?
The word use must be viewed as referring to the possible uses that
the local zoning and other restrictions will allow. In essence, what will
they let you put there?
Your first choice may be to find a good location, but you need a
location that allows the use that you need.
Bienes Raíces
USO
Valuación de propiedades
Los inversionistas de propiedades normalmente valúan las propiedades generadoras de ingreso
de acuerdo a la siguiente formula:
El ingreso neto de operación es igual rentas obtenidas menos los gastos de operación (tales
como reparaciones, mantenimieto, impuestos de propiedad, seguro).
Taza de capitalización es la taza prevaleciente de retorno para un tipo de propiedad. En
estados unidos la tasa de capitalización enda entre 6 y 12 porciento.
Bienes Raíces
Valuación de
propiedades
Bienes Raíces
Valuación de
propiedades
Bienes Raíces
Valuación de
propiedades
Bienes Raíces
Valuación de
propiedades
Bienes Raíces
Valuación de
propiedades
Bienes Raíces
APPRECIATION
The factors that affect the value of real estate are generally
obvious once they are at work, causing real estate to rise or fall
in value. It’s important to understand exactly what those
factors are and how they can cause the value to move
either up or down.
The key to success in real estate is to use this knowledge in
determining when and what to buy, and how to maximize
your profit on a sale.
By understanding the six factors, you will learn to recognize
how to take advantage of a situation when it arises, as well as
how and when to avoid potential problems that could diminish
the value of a property you are about to purchase.
Bienes Raíces
APPRECIATION
Community Planning
Nearly every community has some form of community planning. Within
cities this may come in the form of a planning and zoning department
that deals with matters such as “How is this city to be developed?” The
county is further controlled by broader mandates from the state, which
requires that each county adhere to standards of building and
development to fit the scheme of things that the state legislature has
decided. The federal government gets its fingers into the pie through its
federal matching funds that local communities vie for—funds for road
development, bridges, tollways, airports, schools, and countless other
federal projects.
Each of these elements of community planning will impose something
that may affect the value of your property so that you win or lose value
because of it.
Bienes Raíces
APPRECIATION
Departments of Transportation
Each level of community planning may have a Department of Transportation.
This is a powerful factor in controlling development, because development
doesn’t flourish unless there is good traffic flow in the community. So what
goes on in your city will be greatly affected by the planning that is going
on the departments of transportation.
Once you understand how transportation planning functions, you will be able to
avoid most of its potential bite and reap most of its benefits.
First of all, understand that decisions and plans of departments of
transportation are slow to evolve. Their future plans take years to draft, and
years longer to implement. New roads and bridges, and revamping, expanding,
and even resurfacing old roads are very expensive undertakings, and when
something is expensive it takes a lot of yeses along the way to get final
approval.
Keep in mind that transportation is not just about cars; it includes
pedestrians, trains, planes, and ships.
Bienes Raíces
APPRECIATION
Lack of Concurrency
Having concurrency means that your property meets all the current
requirements to enable you to develop the property more or less as the zoning
might allow.
If you do not meet concurrency, or if you lack concurrency, then your property
may not be developable until you take steps to bring the property into
concurrency.
Bienes Raíces
APPRECIATION
Building Moratoriums
When there is a rash of development going on, things might be progressing at such a fast pace
that the level of services available to the people who live in the area is being outstripped. This
happens most often when new roadways have opened up vast areas of vacant land for new
housing development. Developers rush in and, before you know it, there are thousands of new
residents living in the area, with thousands more likely to follow. Traffic can no longer be handled
on the new road, and more are needed now. Schools don’t even exist yet, and forget about things
like shopping, fire department and police services, water and sewer service, and so on.
When this kind of situation starts to get out of hand, there are two things the local government
can do. It can make the determination that none of the undeveloped property meets concurrency,
so it cannot be developed until something is done to remedy that situation; or it can impose a
building moratorium. The building moratorium halts the issuance of a building permit in the area
chosen until the city planners have been able to sort things out and, at the same time, to slow
down the pressure on existing services. Building moratoriums and concurrency issues are difficult
to predict, so it is essential that investors of developmental property take them into consideration
in their acquisition proposals. The way you do this is to include provisions in your offers to
purchase such properties that can protect you as much as possible against the potential delay or
reduction of development you will ultimately be allowed on the tract of land. You will do this as a
buyer and if you are a seller you will anticipate that a buyer will want to protect himself against
such an imposition.
Bienes Raíces
APPRECIATION
Changes in Infrastructure
General Comments: A change in any infrastructure can have a rippling effect on the value of real
estate. I have already used several examples of this kind of valuechanging factor, such as new or
expanded roadways, or bridges that bring traffic, good or bad, to an area. A new stadium, a
playhouse, a new park—all these things will have an impact on the value of some real estate.
Some will go up in value while others will decline.
Effect on Value: Because this factor is long in planning, the real estate insider will have ample
time to consider how the change will affect the surrounding area, or to decide whether another,
more distant area will benefit more from the change. The beauty of this factor is that the results
from infrastructure changes are very predictable. What happens to the surrounding property when
a mega shopping center is built? Where do the values go in any neighborhood that suddenly gets
a university or a big expansion of the downtown government center? New roads, bridges, airports,
schools and whatever else that has happened in the last few months, or has been announced as
planned in the near future, will have an effect on property values. The key is to know which values
will go up, which will go down, and why. To ascertain that, all you have to do is check out what
happened elsewhere in similar circumstances. History will repeat itself—of that you can be sure.
Bienes Raíces
APPRECIATION
Changes in Infrastructure
How to Take Advantage of the Situation: You will be able to take advantage of a
situation only if you have become aware of it. This is a dilemma with most of these
factors. They can slip past you and by the time you know what is going on, it is too late
to get the maximum benefit from the situation. You learn about changes of
infrastructure at the same governmental offices where you find out about zoning and
the city fathers’ approach to future development. Remember, nothing happens with
respect to changes in any infrastructure within a city that has not followed a process of
public meetings. Anyone can keep informed by attaining these meetings.
Pitfalls to Watch Out For: Government changes too. Appointed members of boards
resign and the faces of everyone you ever saw sitting on the dais at one of these
meetings will eventually be replaced. Not only are they gone, but there may be
newcomers who have ideas and approaches different from those the former members
had. This means you have to play it close, meet the new members, and learn which
way they lean and how they are apt to vote when it is your turn to seek their approval
for a project.
Bienes Raíces
APPRECIATION
Economic Obsolescence
General Comments: It is one of the major factors that causes slums and brings
about urban renewal. Traffic flow goes to pot, the inner city starts to get run down,
and people begin to move to the suburbs, leaving the downtown area even worse off
than before as the spiral of devaluation increases.
Economic Obsolescence
How to Take Advantage of the Situation: I just gave you one answer. Economic
conversion may be the best solution, but it is not the only one. In economic
conversion you turn to our good friend, the zoning that is applied to the property, and
review all the possible uses that can be put on that property.
Bienes Raíces
APPRECIATION
Maintenance Procedures
Effect on Value: It’s a downhill trip for the property that is not being well maintained, unless there
is a good reason for the lack of maintenance. For example, when you buy a property with the idea
to remove the existing buildings in ten years or so, it might be easy to let the property deteriorate
while getting every dime of rent you can. However, this may initiate a downward turn for the
neighborhood, which will adversely affect your future development. Poor maintenance under any
circumstance is not a good idea. I would recommend that you protect the surrounding values by
at least keeping a good face on the property. If you don’t, you may not be able to stop that
downward spiral for the surrounding properties.
How to Take Advantage of the Situation: Whenever I see a property that is slipping down the
maintenance hill, I make a point of checking with the owner to see if they want to sell and at what
price. You will be surprised at the reasons people let well-located properties go into such a state:
no money, out-of town or -state owners, so deep in debt and so out of shape that even the bank
doesn’t want the property, and so on. Often the property is owned by someone who just doesn’t
have the time or patience to deal with it. Interestingly, this same owner may not even want to deal
with the process of selling the property. Root them out and you might get the buy of the year.
Pitfalls to Watch Out For: A run-down property, especially one with roof leaks, may have that
problem. It can be dealt with, but the remedy is expensive, so the new use for this property has to
be a good one.
Bienes Raíces
APPRECIATION
Effect on Value: Why were they so motivated? marriage, a health issue, job
problems, debt up to their ears, or the bodies buried in the backyard.
How to Take Advantage of the Situation: For the potential buyer who might be faced
with paying too much, there are some fine tactics that can help with that situation. “I’ll
pay your price if you accept my terms.” Sometimes the situation requires some hard
negotiations to take the phantoms out of the picture. Who are the phantoms? They are
all the other people the seller is telling you are out there trying to buy the property. If
you know you are being asked to buy at a price that you think is too high, then put your
lower offer on the table and give the seller a “take it or leave it” proposition. You can
always say, “I was only kidding.”
Bienes Raíces
MANAGEMENT
This occurs because an additional price of $30,000 will be justified because of the
added $3,000 of cash flow.
Bienes Raíces
MANAGEMENT
Keys and locks It's always a good idea to change locks each time you
have a turnover in tenants. This adds security for you and your new
tenant.
Learn the laws about eviction Know what you must do to evict a
deadbeat tenant even when you don’t think it might be necessary. The
last thing you want is to have a deadbeat tenant hanging around any
longer than necessary.
Keep accurate books and records Maintaining a good income and
expense history is vital to your rental property business and the
cornerstone to the profitability of your real estate investment.
Bienes Raíces
BECOMING EXPERT IN
YOR BACKYARD
You also must be sure that the tenants are the type of people you want. The easiest
way to find them is to hand the whole job over to a firm of estate agents who’ll
manage your property, find tenants, interview them, and take security deposits.
Bienes Raíces
The Three Investor Levels
Level One
Level One investing is about belief. It’s about proving to yourself that not only does
real estate work for other people, but it works for you! How do you prove this to
yourself? By doing a few deals and making a significant profit. Yes, you know you still
have a lot to learn, but you’ve seen for yourself how lucrative and possible it really is.
The key for Level One is getting yourself into action.
Level Two
Level Two is all about mastering the five core skills of real estate investing and
building an investing business to support your real estate portfolio. At first Level Two
is about building your knowledge base of investing strategies, tools, and techniques,
but later it’s about building a real estate investing business.
Why is this so important for you? Because ultimately, if you don’t learn how to
leverage yourself through building a strong business infrastructure of systems and
people, you will be limited in two critical ways. First, you will be limited in the scale of
projects and profits you can earn. You just can’t do big deals without the infrastructure
there to make the deal stand. Second, unless you build an investing business, you’ll
be limited in your potential to create the time and freedom you truly want. That’s why
it’s so important to learn to build an investing business.
Bienes Raíces
The Three Investor Levels
Level Three
Level Three is about mastering the art of building an investing business that works so
you don’t have to. If Level Two investors are the heart, pumping the business forward,
Level Three investors are the brain, directing the big picture of the business and
enjoying the consistent profits from that business, without getting caught up in any of
the day-to-day activities for the business. Imagine having built your real estate mini
empire in such a way that you earn massive income without having to be involved in
the day-to-day oversight of the business. Level Three investors earn at least as much
as Level Two investors, but they do it passively. This means Level Three investors
work less than 10 hours per month. Their property portfolio and real estate business
works without them needing to be there to run things.
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The Three Investor Levels
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Annual Property Operating Data
Remember, your agent, while he wants to do his best for you, is fundamentally incentivized to make sure the
deal gets closed, any deal. Most agents have learned that part of their job is managing their client to help
them complete the deal. I recommend that you never tell your agent anything you wouldn’t want him to
convey to the other side of the negotiation. While your agent would never intentionally tell the other side
confidential or costly information, very often your agent will inadvertently give away a crucial piece of data,
either by directly saying something foolish, or indirectly through body language or tone of voice. The key is to
share information with your agent on a need-to-know basis. If you don’t tell, neither can he!
Here are the five questions your real estate agent will probably ask you that you should never answer, along
with your scripted response to handle each question.
One: Your buyer’s agent asks you, “How do you feel about the house?”
“I’m not really sure yet how I feel about this house. The most important thing for me as an investor is to
make sure the numbers work out so I am making a smart business decision when I choose to buy. I won’t
ever fall in love with a property like other people you work with might. For me, it’s just a matter of will I make
a conservative profit if I buy the house or not.”
Two: Your listing agent asks you, “Why is it you wanted to sell your property?”
“I’m not totally convinced yet that I do want to sell it. I would like to see what you can get me for the house in
a reasonable period of time looking for the right buyer. I guess I’m lucky because I don’t have to sell the
house, so if we don’t find someone who is willing to pay what we are asking for it, then we can either keep it
on the market longer, or maybe I’ll just take it off the market.”
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Five Questions Your Real Estate Agent
Will Ask That You Should Never Answer
Three: Your buyer’s agent asks you, “What’s the most you’d be willing to pay for the house?”
“That’s a great question. I’m not really sure what would make sense as an investment property. Rather than
give you an amount to work with as the most I’ll pay, I’d rather you take this offer we just wrote up to them
and do your best to get them to agree with it. I think it’s a real reasonable offer, and if for some reason they
feel they need it to be different, you do the best you can do to get the lowest counteroffer you can. Then I’ll
make a decision of whether it’s even worth spending more time on it or not. If they accept our offer like I am
hoping, then we’ll close on the property right away because it’s a fair deal all around.”
Four: Your listing agent asks you, “What’s the lowest offer you would accept?”
“That’s a great question. Rather than even thinking about that right now, what I’d prefer you do is to use all
your skill and talent to get me the very best offers you can, and I’ll talk with my partner and see if we’re
willing to accept one of them or if the buyer will have to do better before we’ll consider accepting.”
Five: Your listing agent asks you, “What concessions are you willing to give to a buyer to make the
house sell faster?”
“I’m not sure I’d be willing to make any concessions. Quite frankly, I don’t think I’ll need to, considering how
fairly we’ve priced the house. If you find a serious buyer who asks you about this, get her specific request
down in writing, and also get very clear on what she is willing to give me in return for these concessions, and
I’ll certainly be willing to consider it.”
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Three Questions to Ask Every Lender or
Mortgage Broker You Work With
It’s essential that you shift every front-end “originating” lender or mortgage broker you work with to be
scrambling to earn your business. It’s also key to convert them in the process to being your champion within
their organization so that your loan sails through the approval and underwriting process much easier. This
means befriending them, but it also means cultivating within them a deep commitment to seeing that you get
your loan. Notice how these three questions each layer in another key shift or commitment step on the part of
the mortgage lender or broker you are dealing with.
Question One: “As you know, I’m in the process of interviewing several lenders to see which of them I want to
select for me to give my business to. If you were an investor like me, why do you think your company is the
one you would choose to work with out of all the hundreds of lenders in town and through the Internet? What
lending programs and services do you have that would make you a dream for me to work with?”
Question Two: “If I do end up working with you, I’d want to be one of your preferred clients who does business
with you again and again. Would you mind sharing with me what extra incentives or perks you give to your
preferred lending clients? What are the preferred rates you give them or the lowered fee scale you give them to
keep your preferred clients coming back to you again and again?”
Question Three: “One last question for you, [Insert their name] . If I do choose you to work with, are you going
to be willing to commit to do what it takes on your side to be my champion within your organization to make
sure I get a great deal on my financing package? It’s really important to me that I establish a partnership with
my lender so I feel comfortable and have fun working with them over time. You are? Great. Well, as someone
who’s really savvy as to how your company works with its approval and underwriting process, I’m going to rely
on your help to make sure that my preliminary documents are presented in just the right way so that my loan
sails through. Can I count on your help and experience to help me do things the right way? I thought I could.
Let’s take a moment and brainstorm out the pieces of your company’s approval process so that together we
can make sure we make it easy for them to pass the loan through. After all, your time is valuable too, so let’s
make sure we get it right the first time. Are you up for it?”