Real Estate Investing Financing Truths - Part 1 of 2

Take an inside look at 'traditional' and 'creative' real estate investing methods and discover simple formulas to make the most of your real estate investments in today's marketplace. (Part 1 of 2)
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(p28 - The Lazy Investor's Guide to Real Estate)

Real Estate Investing Financing Truths - Part 1 of 2

Traditional Methods of Real Estate Investing

Through years and years of transactions, the traditional method of buying and selling Real Estate investments has evolved into a market of its own and has grown into a Real Estate ‘machine’ that circulates massive amounts of money through Real Estate Agents, Real Estate appraisals, Title & Escrow Companies, Banks, and Mortgage Companies.

These once-simple real estate investments have grown from a modest fee for a professional to keep the Buyer’s or Seller’s best interest in mind during negotiations, to now, traditionally, 6% (or more) of the total sales price being paid to Real Estate Agents (via Brokers who often take the majority of the money), another 3 – 5% being paid to Title, Mortgage and Escrow Companies for various fees, and then even more is taken for a real estate appraisal.

As if that weren't enough, then a huge amount of money is absorbed by the Bank, through the form of interest payments – usually over 15 – 30 years and totaling 2 – 3 times the original purchase price of the initial Real Estate investment!

Down Payments go to pay a variety of fees.

Now, don’t get me wrong, it certainly is possible to make money through these methods, but the ‘traditional real estate investment system’ is designed to simply ‘break even’ for the home owner in purchasing a home (the first, and perhaps, only real estate investment they will ever make) in this manner. It is really not designed for the investor, who, of course, wants every real estate investment to make money.

Traditional funding only allows the Home Owner to break even.

Example – Home Owner Financing:
(the numbers represented here reflect the methods, not necessarily the price structures of any given real estate investment market.)

List price on property (with Real Estate Agent)
$200,000

Bank loan available (owner-occupied, 100% @ 7% interest)
$200,000

Monthly payments (over 30 years)
~ $1350

Taxes, Insurance, etc. (per month)
~ $250

(This example is for an ‘average’ home in an ‘average’ neighborhood, for the ‘average American’ using an ‘average’ interest rate of 7% – of course, these figures do not apply everywhere.)

Therefore, the payment for this property is approximately $1600 per month for 30 years, to be paid by the home owner living in the property.

Now, the ‘traditional real estate investment system’ allows for this home owner to have a change in their lives and decide to purchase another (usually larger) home. They have the right, and often do, ‘rent out’ the first house and move into the new one with their family.

The owner will be responsible for any additional expenses (repairs, Home Owner's Association fees, etc.) as well as their desire to make a small cash flow from this endeavor.

Their previous home now becomes a true real estate investment where they increase their 'homeonwer's' monthly payment to the ‘renter’ by an additional $200 per month, for a total price to the renter of $1800 per month.

Reasonable enough – until/unless there are repairs to be made – or, the renter leaves and the new ‘landlord’ has to make payments on this vacant house. Then, this $200 positive cash flow per month real estate investment doesn’t look so good….

But, the “rent” has been established for that house – and the ‘comparable rent for the area’ can easily be calculated using this method;

STANDARD RENT CALCULATION - (Simple Method)

Total payment for the property (includes Principle, Interest, Taxes and Insurance – known as PITI at 100% loan at 7% interest)

+ cash flow for the ‘investor’ (usually $200 per month)

= ‘Rent’

Note: With several homes in the area of similar size and style, plus the fact that most homeowners in the area have similar loan structuring, we can estimate that whatever the average loan percentage is will create a ‘standard rental rate for X model real estate investment’ – in this case, $1800.

A simple (and LAZY) way to remember it is;

PITI + $200 = STANDARD RENT

If an ‘investor’ (one that seriously wants to make money from buying/selling Real Estate investments) wishes to purchase the same house in the same area and for the same amount of money, the ‘traditional real estate investment system’ doesn’t allow the investor to really make any money from the transaction.

Example – Investor Financing:

List price on property (with Real Estate Agent)
$200,000

Bank loan available (investor loan, 80% @ 8.4%)
$160,000

Monthly payments (over 30 years)
~ $1250

Taxes, Insurance, etc. (per month)
~ $250

(This example is for an ‘average’ home in an ‘average’ neighborhood, for the ‘average American’ with an ‘average’ investor interest rate of 8.4% – of course, these figures do not apply everywhere, but the formula is very similar.)

Therefore, the monthly payment for this investor-owned real estate investment is approximately $1500.

At first glance, seems very good, as the investor will have a ‘cash flow’ of $300 per month – more cash flow per month than the homeowner-turned-investor.

However, the difference is that the 'Investor’ (the one serious about making a profit from this real estate investment) has brought in cash (out of pocket) of $40,000 – UP FRONT!

Plus, the investor has to pay a higher interest rate (in this example, I have included 1.4%, while a bank may charge several percent for investor loans – those identified as being purchased solely for the purpose of being a real estate investment - check with your lending institution on their policies prior to finalizing your loans)!

Now, I don’t know about you, but I don’t know too many people with that kind of money for 1 property – not to mention the fact that this person expects to make several real estate investments, repeating ‘what works’ several times.

Not only does the investor have to come up with $40,000 up front (every time they decide to make a real estate investment), but how long will it take (at $300 per month) to make enough to purchase a second investment property at this rate?

10 YEARS!! (presuming there are never any repairs, the investor never takes out a penny of the cash flow for their own use, etc)!

Investors and Homeowners get different rates.

Not what I call a ‘wealth path’, not what I teach – and certainly not any way to run a business.

END Part 1 of 2

Steve Majors - The Lazy Investor
Profit from Real Estate Investment articles, real estate investing information and news from one of the most creative investors on the planet ~FREE MEMBERSHIP & real estate training course~ http://SteveMajors.com

The Lazy Investor is back on his feet - well, almost....

GREAT NEWS!

I have now been going to the thearapist (yesterday and today) and he has 'ok'd' me to begin actually STANDING on my foot!

YEAH!

Yes, he pushed, tugged and twisted, and now feels like my foot has healed enough to begin putting some pressure on it ('toe-tap' only...)

But, it is a step (pun intended...)

Now, this guy, I like - he's a 'get it done' kind of guy and believes in making it happen as soon as possible (although he firmly believes in proper precautions and not pushing into something that you aren't ready for - heck, he thinks a lot like me and real estate investing!)

So, I've taken a few steps and actually have been 'walking' around the house as much as possible (walker-assisted, of course...)

I've even been out doing some investing work (one of my mentoring students wanted me to lock in a property for them as part of their one-on-one time) and we be going to a local Real Estate Investing Club tonight (be sure to support yours, too...), so I'm getting around pretty well.

My shoulders are a bit sore, but that will pass soon enough (and, hey, I'll be 'buff' for the Boot Camp.... ;)

The therapist is working on my foot, as well as the left shoulder (it got fractured in the fall as well as my left heel, but I couldn't handle two surgeries on the same side at once.....)

Be sure and get your seat reserved at the Boot Camp - you may never get another chance to see me so trim (and sexy... ;)

Happy Investing

Steve Majors - The Lazy Investor

The Groundhog saw his shadow...

Yeah, even in September, it seems, there is something about
it...

To follow up on my '5 days and counting' email last week, I
went to the doctor and it was obvious that he had gotten up
that morning, stepped out the door - and saw his shadow...

I know that because he told me "6 more weeks before you can
walk on it..."

SIX WEEKS! Now, that certainly wasn't the news I wanted!

Well, he did backtrack a bit on it and told me that I could
work with a therapist 2-3 times a week for that time and
MAYBE (I guess if I was 'good'...), if the therapist
reports progress, I may be allowed to put some pressure on
it in a week or so more.

But, for the time being, it is still wheelchair or walker...

Sure am glad I am a LAZY real estate investor - I've done a
couple deals this last week right from my chair - didn't
even need to get up to make them happen - and still made
more than I ever did at any job I ever had! (I really love
this business!)

So, I guess I'll still be on the walker for the Boot Camp -
so be it...

Heck, I'll still be able to do a full 'brain dump' and teach
everything I know about real estate - folks don't come to
watch me walk around, they come to learn all the secrets of
LAZY investing!

You still have time to get your reservation - and a DISCOUNT
on the package (even though I'm already going to PROVE this
system works by offering you to take the training fee from
DEALS YOU WILL COMPLETE from learning this system)...

For a very limited time, you can get full training
(detailed in full at http://TheLazyWayToBuyRealEstate.com -
including the 100% ~NO~RISK~ ~GUARANTEE~) plus you'll get a
CHECK from me for $200 to offset any expenses you might
have in getting to the Boot Camp (hotel, meals - slot
machine play... - whatever) - it's yours to do with as you
please!

Go, right now and get your seat reserved - before they all
fill up!
http://TheLazyWayToBuyRealEstate.com/TakeAction.html

Seats are limited (I keep it small to keep it personal), so
hurry and get yours before they are all gone.
http://TheLazyWayToBuyRealEstate.com/TakeAction.html

See you at the Boot Camp - Oct. 14-16, 2005
(I'll be there - wheelchair, birthday cake and all... ;)

Happy Investing,

Steve Majors - The Lazy Investor

P.S. If you get your seat reserved for the Boot Camp by
Sept. 19th, I've got an ADDITIONAL BONUS for you - You'll
receive the complete version of 'The Lazy Investor's Guide
to Real Estate' - a $497 value - absolutely F~R~E~E~!
http://TheLazyWayToBuyRealEstate.com/TakeAction.html

5 Steps to Massive Profits - A Business Marketing Tip

A Quick, Informative Business Marketing Tip for Maximizing Your Profits.
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Here's a business marketing tip to gain maximum profit from
any product or service in your business marketing lineup,
and how you will gain extreme profits when you follow these
5 simple, LAZY steps;

1. Look not at what you are offering through your business
marketing efforts - look at WHO WILL BUY your
product/service. Make a picture of your 'typical buyer' -
who they are, their age, what they like to do, etc.

This is often known as the 'target market prospect', yet,
the more detailed you define this 'target' in your business
marketing, the better.

I've even gone to the point of giving this 'target market'
person a name and put a picture up on my computer monitor
(find a 'friendly face' on the Internet somewhere and 'tag'
it as your target market prospect) - get your business
marketing centered around every aspect of your target - the
more you know them, the easier it is to chat about what they
need.

2. Develop a list of your target market prospect's likes and
dislikes as it would relate to a product/service similar to
yours. (You'll get a 'third party' look at your competition,
as well as some inside looks at their business marketing
efforts.)

Consider some questions they would have, or some typical
objections to buying this similar product/service (this may
come from your previous research, or you may have to simply
do some).

One way to personalize the business marketing research of
your 'target market prospect' is to 'role play' - think
about your prospect as a good friend that you are having a
picnic with (or even a co-worker at the water cooler, etc.)
and in passing, your friend brings up that 'similar'
product/service.

What do they say about it?

What are their questions/concerns?

Is there a 'running joke' about the competition's
product/service that defines a hole in their business
marketing? (i.e., "Did you hear about the lady that used
X?")

All these things need to be addressed, and documented.

Let your mind be creative and wander, but keep it to a time
limit - about 15-20 minutes per business marketing 'play'
session. Think of nothing but this 'conversation' during
this creative (often fun) time.

It might even be helpful for you to say everything that
comes to mind out loud during these business marketing
planning sessions(as silly as that sounds, it works...) and
record it, as some of the best business marketing ideas get
overlooked when you are trying to write them down quickly.

Listening back for those 'nuggets' might even trigger other
'bits of business marketing gold' for you to work with.

3. Figure out how your product/service and business
marketing plan is similar, yet different than the
competition. Just how does your solution overcome all the
questions, concerns and yes, even 'jokes' from your target?

If you can't answer these questions for yourself, how would
you expect to answer them from your prospect?

The beautiful part about this business marketing exercise is
that, if you go through it with commitment, you will already
know the answers to the prospect's questions BEFORE they ask
them - which quickly eliminates any fears you might have
about talking with them.

4. Continue this simple exercise - every couple days for a
week or so. Giving 15-20 minutes of serious thought to your
business marketing plan and role playing every couple days
will stimulate your conscious mind, as well as keep your
unconscious mind actively thinking about it.

You'll be surprised at the outcome of taking these steps
seriously.

But be forewarned - you will very likely have a very
different outlook about your prospect after one week of this
simple, yet extremely effective business marketing, 'target
market' finding tool!

You will know them as well as you know yourself, so you will
be able to talk with them about things quickly, simply and
with the best, consistent results of your business marketing
efforts.

5. Now, take a look at your product/service and business
marketing plan - through the prospect's eyes (now that you
can clearly see through them...)

Does it fit your prospect's needs?

Does it answer their questions and eliminate their fears?

Is it priced right for your target prospect?

Is there a market for your product/service other than your
personalized target market prospect? (This step is vital as
a 'reality check" - and one that many business marketing
planners miss)

When you follow these five steps faithfully, you will have
credibility, knowledge and successful long-term
relationships with your customers (who used to be simply
'target market prospects' before you understood the power of
this business marketing tip!).

Steve Majors - To-the-point training and coaching for business and
wealth creation through creative Real Estate investing. Known as
"The Lazy Investor", with courses and training sessions to
slingshot your success. http://SteveMajors.com

Finding, Fixing, Financing and Flipping - The Short Course

Discover a quick system to gain maximum profit from your real estate investments.
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Most people get involved in Real Estate investing to make money.

Pretty self-evident – or, is it?

What would you say if I told you that everything you have been taught about Real Estate investing and making money ‘rehabbing’ your real estate investments is wrong?

Well, at least, much of it… Let’s take a look at something that all too many people don't think about in their real estate investing - something that seems to be a secret formula to bringing in the most cash from your real estate investments…

While it is often true that the total price of a property that has had a lot of work done on it is more than one that hasn’t, what has that ‘price difference’ really cost you, the Real Estate Investor?

With enough time and effort, we could go through dozens of scenarios to figure out just what a loss of time, money and effort it is to go through a house and ‘rehab’ it, but let’s keep it short and talk about some things that really happen in real estate investments – a ‘reality check’ if you will...

I like to be sure to get everything out of a real estate investment that is possible, but, there is a balance between the Time, Money, Effort and Appreciation the customer will get out of what you put in, as opposed to what they would rather do themselves...

And they are willing to pay you for the privilege!

I call this the ‘M-E-A-T’ of a real estate investing deal, and it is a simple equation you can apply to all your real estate investments.

In the table below, look at the M.E.A.T. result for each Function.

____Function____
_M_ _E_ _A_ _T_ _Total_

Painting (full)
_2_ _5_ _5_ _6_ __18__

Kitchen Redo
_7_ _4_ _3_ _6_ __20__

Bath Redo
_6_ _6_ _3_ _4_ __18__

Landscaping (full)
_4_ _6_ _4_ _4_ __18__

Painting (L.A.Z.Y.)
_1_ _2_ _4_ _3_ __10__

Landscaping (L.A.Z.Y.)
_2_ _2_ _4_ _3_ __11__

You can see from these figures, the appreciation factor of the customer is often the same – whether you put lots of time, effort and money into this real estate investment or not.

The reasons for this are as varied as the people looking at any given house, but how many times have you heard of people going into a house – just after it was fully ‘rehabbed’ and they turned right around and put the paint they liked throughout the place?

So, why did you waste your M.E.A.T. on doing it yourself?

Because you thought it would be prettier?

That you would get more money from it?

Because you think that's what real estate investing is all about?

I challenge you to think about this - every time you get involved in any real estate investment...

Just how much more M.E.A.T. did you really get from your real estate investment - your total return? The cash you got was more – maybe - but so was the WORK.

You can sell houses just like you get them – and get 90% or more of the price you will after all that effort, even without ever seeing the place!

When you use the L.A.Z.Y. way, you put very little extra into any given real estate investment, but raise that return by another 5% (which means that it brings in almost the same total as you get otherwise – without the added cost and work!

So, who makes more profit from their real estate investments?

Those that do less work! Plus, there’s more time, energy and money available to put into the next real estate investment – while those other folks are still remodeling their last deal!

In a year’s time, you can do 30-50 houses this way – by yourself!

How many can you rehab in a year – by yourself?

Now, where is the bigger profit?

By now you can see just what I meant by the training you had before being 'wrong'...

You've been taught to ‘fix and flip’ your real estate investments – but, unless you are doing the fixing directly at the request of the end user, you are likely wasting your time, money and effort for no additional appreciation factor, so, overall, you are wasting it for nothing.

You are throwing away the M-E-A-T of the deal!

Just how much did painting that living room in your last real estate investment cost you? Since you missed another deal that might have $20,000, $30,000 or more in it, I would suggest you spent a LOT on it!

Think about this before you start your next real estate investing ‘rehab’ project – just how many other deals will you do if you don’t put all your time in on fixing? Then, add on the energy (effort) that it saves you.

Most people think about the money part of real estate investing, but leave out the rest of the equation when calculating the total value of their real estate investments.

I think that is a big mistake.

When you can get 90% or more of the same price from any given real estate investment, but do 1% or less of the work, keep 95% of the energy for other projects and 95+% of the money it would cost you – why would anyone want to do any ‘rehab’ job – ever - in their real estate investing business?

Now, there may be times you find a house you want to live in that needs some work. That is a fine time to consider doing a ‘rehab’ job - you aren't doing a real estate investment (other than for appreciation), but any time you are working your real estate investment business, take a serious look at the M.E.A.T. of the deal – before committing to spending all your time, money and efforts.

Steve Majors - The Lazy Investor
Profit from Real Estate Investment Articles, Real Estate Investing Information & News from One of The Most Creative Investors On The Planet
~FREE MEMBERSHIP & FREE Real Estate Training Course~ http://SteveMajors.com