Showing posts from July, 2018

What Every Real Estate Investor Needs to Know About Cash Flow

"What Every Real Estate Investor Needs to Know About Cash Flow" By Frank Gallinelli   Frank Gallineli's book "What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures" is highly technical, but very interesting. I found it helped me by explaining the math behind the deals in plain English.   The book is divided into two parts. The first part covers the basics of real estate investing and an introduction to the concepts that need to be understood. The second part covers individual calculations such as compound interest, cash-on-cash return, and internal rate of return. It is best kept as a reference, so my notes are limited:   How to make money in Real Estate: * Cash Flow - also called "net spendable cash", this is the left over money each month after all of your bills are paid. * Appreciation - the growth in the value of the property over time. * Loan Amortizat

The Real Estate Rehab Investing Bible

"The Real Estate Rehab Investing Bible" by Paul Esajian   Tags: Flip This House, Paul Esajian, House Flipping, Investor Rehab, Finding Investment Houses, Fixing Houses, A&E   In "The Real Estate Rehab Investing Bible" Paul has created a seven stage system for finding, funding, fixing, and flipping homes that doesn't involve picking up a paintbrush. As he puts it "by getting your hands dirty, you slow down the opportunity to get your money back sooner." Instead, he teaches how to put your money to work to maximize returns.   One of his suggestions is to create a network of people involved in real estate.. This included mortgage brokers, agents, lawyers, contractors, investors, city officials, and others. You can meet them in person at auctions, REIA meetings, home builder association meetings, landlord association meetings, and home or trade shows. Online you can meet them at, Yahoo Groups, Fa

Principles of Real Estate Syndication

"Principles of Real Estate Syndication" By Samuel Freshman   Tags: Real Estate Syndication, Apartment Complexes   A real estate syndication is a collection of two or more investors that pool their money to purchase real estate. Typically, one party if the syndicate is active in the investment and the rest are passive. The active investor may received an override or management fee in addition to any cash return from her investment.   Freshman lays out seven reasons why people invest in real estate syndicates:   * Spendable Cash Flow * Tax Advantages * Gain from Equity Through Leverage * Hedge Against Inflation * Appreciation Capture * Low Risk * High Yields   The lead investor (Syndicator) can be involved in issuer functions "which involve acquiring control of the property and formation of the entity which is to own the property" and/or dealer functions "which concern the marketing and sale of

Nashville Capitalization Rates

"Nashville Capitalization Rates" by Casey Richards   I've been curious for some time about what factors go into determining the market cap rate for investment properties here in Nashville. When I first arrived in the city back in 2004 it wasn't at all unusual to see cap rates above 10%, but recently the rates have started to creep downward. Today rates on a duplex in the metro area will range from 7-9%. However, if you were to pack your bags and head just a few hours West, you could still achieve those double digit cap rates in Memphis. This lead me to dig deeper to figure out what factors drive the prevailing cap rate here in Nashville and across the country.   My research lead to me something called the derived cap rate. It ends up that you can dissect the cap rate using this approach which splits it into two parts. The two primary factors are financing and equity.   Most investment properties are purchased using a mortg

Investing in Duplexes, Triplexes, and Quads

"Investing in Duplexes, Triplexes, and Quads" By Larry B Loftis, ESQ   Tags: Duplex, Triplex, Quadraplex, Florida Real Estate   I don't usually read books published in 2006 because they are clearly outdated. Tax laws have changed at least twice and we had that little 2008 incident, but the title "Investing in Duplexes, Triplexes, and Quads" caught my eye and I figured I would give it a try.   The reasons Mr. Loftis gives for believing in the power of multifamily residential properties mostly still applies today, but it is interesting to hear him tell stories of appreciation in Orlando, Florida in 2006. Cheaper down payments is one benefit that still exists (if you live in the unit). FHA will allow an owner-occupant to put down 3.5%. Affordable purchase prices is also mostly still available. Right rent range, rent safety from vacancy, immediate cash flow, cash back at closing, economies of scale, fixed rate mortgages,

How to Make Big Money in Small Apartments

"How to Make Big Money in Small Apartments" by Lance Edwards   Tags: fourplex apartment, real estate investor, small apartments, multifamily apartments   This was a great book full of ideas for purchasing multi-family units centering around no money down strategies. He had many interesting ideas to raise fund funds or purchase properties to numerious to note. Here are a few highlights:   Rasing Private Money Formula:   Part I - Finding people predisposed to invest in real estate (seller, IRA, auctions, real estate clubs, etc)   Part II - Give the lender the ability to gain control if you fail to perform.   Part III - Use insurance like Key Man and Business Income Lose to make the investment low risk. You can also use the reputation of a management company to makeup for your lack of experience.   Part IV - Give them a high return through interest rate, equity, or a hybrid of both.   More information on this http

How to Create Lifetime Cashflow through Multifamily Properties

"How to Create Lifetime Cashflow through Multifamily Properties" by Rod Khleif   This book was informative and free! You can download it online and it has way more information then what is contained in my notes, but this is what I wanted to remember the most:   * Business Structures: - Keep each property in its own LLC. - Create a holding company for those LLCs. - Create a LLC or S-Crop to manage the properties. - Create an S-Corp to act as your general contractor for fix and flips. Check the laws in your state for laws regarding acting as a General Contractor and be sure to buy liability insurance.   *Multifamily 2-4 Unit Financing: - Fannie Mae and Freddie Mac limit mortgages to ten. - The first four have easier qualifications. - Many banks limit you to four for this reason. - Fannie Mae's 5-10 Property Financed Criteria is: 1) 25% down for single family. 2) 30% down for 2-4 unit properties. 3) 30

Creative Seller Financing

"Creative Seller Financing" by Chuck Sutherland   Tags: seller financing, second mortgages, SAFE act, appreciation loans   "Creative Seller Financing" is the first book in a series of real world real estate technique manuals published by Chuck Sutherland. It is a real meat and potatoes book with real life examples of the techniques he has employed to creatively finance investment properties.   His techniques are based on his "fundamental principles of creative real estate" which operate as guidelines for each transaction he participates in. They are:   1) Embrace Problems and Create Solutions 2) Get All of the Facts 3) Work with Motivated People 4) Create Net Benefits for Everyone Involved 5) It's About the People, Not Just the Property 6) Employ Qualified Professionals.   In the book he goes into detail about putting these principles into practice. His website is CreativeRealEstateNetwo

Creative Down Payments

"Creative Down Payments" by Chuck Sutherland Tags: down payment, residential real estate   In "Creative Down Payments", Chuck suggests that it doesn't take cash to make a down payment. Options include real property, building supplies, financial instruments, professional services, trade credits, personal property, or anything of value. He explores several strategies for accomplishing this technique. My notes are as follows:   * House as a Down Payment   "A House is a marketable commodity" and as such it can be traded and the equity in the property can become the down payment. This is useful when you have a property that doesn't meet your investment criteria, but might help out the seller. See book for example.   * Land as a Down Payment   Land has value, but you might not have a buyer, so why not use it as a down payment. If the seller rejects the offer, you could make the purchase contingent o

Build a Rental Property Empire

"Build a Rental Property Empire" by Mark Ferguson   Tags: Become a Real Estate Agent, house hacking, REO investing   One of the first things that stands out in "Build a Rental Property Empire" is the formulas for vacancy and maintenance calculations. Mile Ferguson has it down to a science with vacancy rates of 5% for SFR and 10% for Multifamily. On maintenance he suggests using 5% for newer properties up to 30% for old properties (50+ years old) in bad condition. There is an investment calculator on his blog which looks at these and other factors.   Mark also compares low prices rentals to moderate priced rentals. He explains why the great ratios with cheap properties may not pay off. You must also consider higher turnover, more maintenance, less appreciations, less equity capture, and the difficulty of getting a loan. Although many homes are available in the Midwest for less than $50,000 that rent for

Advanced Creative Real Estate Financing

"Advanced Creative Real Estate Financing" by Chuck Sutherland   Tags: joint-ownership, sale-leaseback, real estate   This is the third book in the Chuck Sutherland Series. The following are my notes on his strategies:   * Sale-Leaseback - Sell the home to raise cash, but lease it back from the buyer.   * "Must Take" to Obtain Loan - sometimes the seller will be willing to provide seller financing if you agree to also take a problem property away from them.   * Property Plus Cash Equals Notes - if the seller wanted to get top dollar, but doesn't need cash, they can provide a loan in exchange for buying the property secured by another property. (Confusing... see example in the book).   * Reducing Debt by Selling a Property to a Lender- Under this method, you sell a property you have to a private lender you currently own in exchange for a loan forgiveness.   * Substitution of Collateral - If you find a

"The Millionaire Real Estate Investor" By Gary Keller

"The Millionaire Real Estate Investor" is one of my favorite books. It (along with the sister book FLIP!) are must reads and I will be keeping my copies close because they are filled with useful information and charts.   Keller speaks of five models to get started and "buy a million." which are of interest for beginners. They are the net worth model, financial model, network model, lead generation model, and acquisition model:   1) Net Worth Model: * Learn the Path of Money - Money has a path and you must guide it to the places that will yield the greatest financial growth and most substantial net worth.   * Budget for Investments - Stay on the path, differentiating between what you want and what you need. Make a personal budget.   * Track personal net worth - Keep a household P&L and balance sheet to track net worth over time. Examine in often (Note: I have started doing this and it is very inspiring!)   2)

"The Magnolia Story" By Chip and Joanna Gaines

Summary: A review of my favorite flipping couples first book "The Magnolia Story". This book documents how the famous husband and wife team from Fixer Upper got their start and built the company that is at the center of the show.   Main Blog: When I picked up "The Magnolia Story" last night I had no idea that I wouldn't be able to put it down. A memoir about two reality TV personalities doesn't feel like it would be a page turner, but it is! The story of how they built their mega real estate and design firm from humble beginings to the center of the hit HGTV show "Fixer Upper" is inspiring and entertaining. I found myself often laughing out loud as I turned page after page. I began reading last night at 7 pm and by 9 am I was done.   For me personally, Chip and Joanna are role models. There story is what I hope Max's and my story will be. Just replace the word Waco with Rutland and you have what I hope to b

A review of "The Landlord Entrepreneur: Double Your Profits with Real Estate Property Management" by Bryan Chavis

"The Landlord Entrepreneur" is a fairly detailed book about starting a property management company. It details out many of the processes involved from what entity type to choose for your company to how to deal with a non-paying tenant. It also contains a collection of forms, contracts, and an owner's operation manual for distributing to the owner's of rental properties you are renting.   Since I am more likely to use a management company than own one (at least in the near term), I was most interested in his outlining of the fee structures for management companies:   "A well-built property management company will generate monthly income from the following sources:   *Application fees: Through the Landlord Academy's partnership with TransUnion's Smartmove, you can charge prospects an addition fee over and above the hard cost to complete the tenant screening process. For example, if the average screen of a prospect

"The Ideal Team Player"

Summary: "The Ideal Team Player" is a book about finding people who will thrive in a team environment. This is useful material for assembling your real estate team.   Body: "The Ideal Team Player" by Patrick Lencioni is listed in the Wall Street Journal's list of the most popular business books which is what drew my attention to it. It is about hiring people that will work well in a team and would be useful in business or real estate.   The book describe the ideal team player as having the following three virtues:   * Humble - "Great team players lack excessive ego or concerns about status. They are quick to point out the contributions of others and slow to seek attention for their own."   * Hungry - "Hungry people almost never have to be pushed by a manager to work harder because they are self-motivated and diligent."   * Smart - "A persons common sense about people. They have good jud

"The Energy Bus"

Summary: A delightful parable about a bus driver that forces positive thinking on her unsuspecting riders. This book introduces the 10 rules to fuel your life, work, and team with positive energy.   Blog:   In the introduction of "The Energy Bus" Jon Gordon says "there is an abundance of new research that shows that positive people, positive communication, positive interactions, and positive work and team cultures produce positive results", but I don't need research to tell me that. The basic lesson in this book is to be positive in everything you do in life and others will pick up on that positive energy which will result in positive results for yourself and your company. This message is delivered through a parable about a bus driver that teaches people how to live positive lives. Posted on the front of the bus is these 10 rules "for the ride of your life":   1. You're the driver of your own bus. 2. Desi

"The Book on Investing in Real Estate with No and Low Money Down" by Brandon Turner

This book is published by Bigger Pockets... so it should be easy to find.   Biggest Takeaway: Master Limited Options (MLO) are a great way to purchase real estate without a down payment. Secure the purchase price using a MLO (you pay all expenses from the property), improve the property, rent it, and exercise the option once significant equity has built up. Alternatively, sandwich the MLO with a lease option renter at a higher price.   Casey Richards Rutland, Vermont

"Run Your Own Corporation" by Garret Sutton, Esq.

"Run Your Own Corporation" is from the Rich Dad Advisor series. I have always found these books to be useful, detailed, and very specific. Sutton goes over business deductions, government audits, paperwork required to maintain a LLC, personal liability projections, and how to avoid threats to the piercing of the corporate veil.   Like his other books, this one was great, but there was just to much information to retain much. I will probably just end up hiring him to handle the LLCs for my investments since handling them myself seems foolish. I noticed his website ( is now being promoted by Think Realty Magazine. Obviously they are targeting the real estate investor market.   Biggest Takeaway: LLC origin location is critical. The best state is Wyoming (or Nevada) and the worst is California. If you have property in California very specific steps must be taken in order to try to protect that property and a professional