2012 Keller Williams Realty, Inc.

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2 The investment market has SHIFTED! 2 2

3 Challenges of the Market 1. Investment properties are harder to find. 2. Prices are moving up. 3. Interest rates are inching up. 4. Shortage of homes on the market. 5. Fewer forecloses and distressed properties on the market. 3 3

4 Advantages of the Market 1. Fewer investors in the market. 2. Interest rates are still LOW. 3. Banks are favorable with investment lending. 4. Rents are increasing. 5. Shortage of rentals in the market. (High demand for rentals) 4 4

5 There will always be available investment properties to purchase. Why? The Destruc>ve D s: 1. Divorce 2. Drugs 3. Downsize 4. Dependency 5. Death 5 5

6 Lets Talk Money I III Employee Business Owner LeP II Self Employment IV Investor Right 95% popula>on 5% popula>on Robert Kiyosaki- Cash Flow Quadrant 6 6

7 Truths 1. You can become a successful real estate investor, no mater which quadrant you are in. 2. Moving to the right provides more freedom of time and money. 3. Most wealthy people live on the right. 4. Most millionaires started on the left and moved to the right. 7 7

8 Job- Cash flow Salary Think of ways to increase income. (i.e.- second job, etc.) Less Daily, weekly, monthly EXPENSES 1. Mortgage Payment- Rents 2. U>li>es 3. Insurance 4. Car Payment 5. Credit Cards 6. Fuel 7. Etc. Family budget (Control your expenses) Disposable Income? MONEY TO INVEST Save INVEST (Know how much you need to make a down payment) (Create an investment account emergency fund) Read: Total Money Makeover by Dave Ramsey 8 8

9 Myths of Real Estate Investing It takes money to make money. Real estate is a get-rich-quick scheme. It s not the right time. It s too complicated. It s too risky. It s too much work fixing leaky faucets, running toilets. Tenants just wreck the property. 9 9

10 The Historical Real Estate Cycle _ Peak Prices _ Price Floor Price Floor Peak Prices Historically the floor is always higher than the last bust

11 What s Ahead? Next boom between 2020 to 2025 Gen Y s will be in their peak earning years Best time to take advantage of the real estate opportunity NOW! 11 11

12 Truths of Real Estate Investing Accessible Appreciable Leverage-able Rentable Improvable Deductible Depreciable Deferrable Stable Livable Do-able! 12 12

13 HOLD the Ultimate Wealth Building Strategy! 13 13

14 The Power of Leverage: Cash Flow Growth Cash flow is king

15 The Power of Leverage: Equity Buildup 15 15

16 Leverage a Great Team Attorn ey Contrac tor Proper ty Manag er 16 16

17 Leverage a Great Team Real Estate Agent: who invests in real estate CPA: who invests in real estate Property Manager: who specializes in real estate Lender: who invests in real estate Attorney: who specializes in real estate Financial Adviser: who invests in real estate 17 17

18 Five Key Elements of HOLD 1. Find 2. Analyze 3. Buy 4. Manage 5. Grow HOLD is a long- term real estate investment strategy to which every real estate investor should aspire. - HOLD Be an investor, not a speculator

19 1. FIND 19 19

20 1. Find Steps 1. Create your personal investment criteria. 2. Create your property criteria. 3. Prospect for property. Outcome: a list of qualified investment properties from which to choose 20 20

21 Our First Real Estate Investment No cash 2. Pay off debt 3. Weak credit 4. Only real estate we owned was the house we lived in (with a BIG mortgage) 21 21

22 Our First Real Estate Investment 1991 (cont.) 1. Found a property that seller wanted to sell fast; did not want to list. Seller asked if we knew of an investor who would purchase. 2. We knew it was a good deal. 3. House needed repairs. 4. Formed partnership with our builder. a. He put up money (got a loan) b. He did repairs c. We located the property d. We put our commission into the deal e. Sold the property f. We flipped the property for 15K profit 5. The rest of the story!! 22 22

23 McKissack s 1992 Retirement Plan Goal: Quit working in 20 years $240,000 yearly passive income or $20,000 monthly How? Purchase 20 single family rental properties Each to generate $1,000 cash flow per month Complete purchases in 5 years Finance each property on a 15-year note Put at least 20% down 23 23

24 McKissack s HOLD Formula for Wealth Building Buy Property at 10% or greater below market value Put at least a 20% or more down payment Be at a 70% loan-to-value ratio or less Cash flow a minimum of $200 per month after PITI and management on 15-year amortization Buy newer if possible (15-years or newer) Buy 3-4 bedroom brick or stucco (if possible) Buy homes in stable or appreciating neighborhoods 24 24

25 1. Find Steps 1. Create your personal investment criteria. 2. Create your property criteria. 3. Prospect for property. Outcome: a list of qualified investment properties from which to choose 25 25

26 1. Find (continued) Create Your Personal Investment Criteria Location Property type Economics Condition Features and amenities 26 26

27 1. Find (continued) Create Your Property Criteria Define your mission and vision. Determine your time frame, rate of return, and risk tolerance. and stick to it! 27 27

28 Free downloads from HOLD at hip:// hold 28 28

29 2. ANALYZE 29 29

30 2. Analyze Steps 1. Understand the numbers. 2. Calculate the expenses. 3. Analyze the property. Outcome: An investment property that meets your financial criteria It isn t personal, and the numbers maier most

31 2. Analyze (continued) Build a Property Analysis Worksheet Free downloads from HOLD at hip://

32 3. BUY 32 32

33 3. Buy Steps 1. Arrange financing. 2. Write and present the offer. 3. Close the purchase. Outcome: a profitable property to add to your portfolio 33 33

Listed MLS $119,900 Actual market value $110,000 Rent $1250 Expense $1020 Cash Flow per Month

34 McKissack s HOLD Property Analysis 3 bedroom 2 bath Built sq. P. Listed MLS $119,900 Actual market value $110,000 Rent $1250 Expense $1020 Cash Flow per Month $230 Purchase Price $100,000 Down Payment $20,000 Financed Amount 15 6% interest $80,000 Payment (Principle and Interest) $675 Taxes $210 Insurance $50 Property Management $85 Total Expense $

35 4. MANAGE 35 35

36 4. Manage Steps 1. Find good tenants. 2. Increase value. 3. Run it like a business. Outcome: a sustainable investment property for your portfolio 36 36

37 Free downloads from HOLD at hip://

38 Free downloads from HOLD at hip://

39 5. GROW 39 39

40 5. Growth Steps 1. Manage to your goal. 2. Follow models to grow. Outcome: an investment portfolio that funds the life you want to live 40 40

41 Leverage Current Properties Steve Chader Paid $49,900 $4,000 down payment Assumed ARM Held 14 years Sold $56,000 Net equity $36,000 Exchanged 1031 Saved $12,000 in tax 41 41

42 Leverage and Grow $56,000 $246,

43 Steps to Get Started 1. Determine retirement/lifestyle needs. 2. Get out of debt. 3. Control wants and don t waste. Convert income into assets. 4. Maximize retirement contributions. Maximize employer contributions. Invest tax-deferred. 5. Save for a down payment and reserve fund

44 Steps to Get Started (continued) 6. Gather your expert HOLD team and create your plan. 7. If you already own property Determine if you should upgrade. Pull out equity and buy more. Check your options for refinancing

45 Seven Rules of HOLD Real Estate Investing 1. Be an investor, not a speculator. 2. Cash flow is king. 3. It isn t personal, and the numbers matter most. 4. Learn the magic of leverage. 5. Cultivate relationships. 6. Keep learning. 7. Give to others

46 Wrap Up Invest in what you know, understand, and can somewhat control. Use HOLD as your guide. Determine your goal and criteria. Get your investment team in place. Discuss investing with your sphere

47 Investment Best Reading List 1. HOLD Jim and Linda McKissack, S. Chader, J. Doty 2. Millionaire Real Estate Investor G. Keller 3. Flip R. Villani and C. Davis 4. Cash Flow Quadrant R. Kiyosaki 5. Rich Dad Poor Dad R Kiyosaki 6. Richest Man in Babylon G. Clason 7. The Millionaire Next Door T. Stanley and W. Danko 8. Think and Grow Rich N. Hill 9. Good to Great J. Collins 10. The One Thing G. Keller 11. Building Wealth One House At A Time J. Schaub 12. Total Money Makeover D. Ramsey 13. Thou Shall Prosper D. Lapin 47 47

Connect with Linda and Jim Website: www.lindamckissack.com Facebook: www.facebook.

48 Connect with Linda and Jim Website: Facebook: Linda Jim 48 48

Financial Wealth. (fĭ-năn shэl, wĕlth) n. The unearned income to finance your life mission without having to work.

Financial Wealth. (fĭ-năn shэl, wĕlth) n. The unearned income to finance your life mission without having to work. Financial Wealth (fĭ-năn shэl, wĕlth) n. The unearned income to finance your life mission without having to work. The Millionaire Real Estate Investor is dedicated to the men and women who have a passion