WELCOME TO REAL ESTATE INVESTING MASTERMIND: LEVEL 1, CLASS 2 With Expert Real Estate Investor and Mortgage Broker Athena Paquette, M.A.

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1 WELCOME TO REAL ESTATE INVESTING MASTERMIND: LEVEL 1, CLASS 2 With Expert Real Estate Investor and Mortgage Broker Athena Paquette, M.A.

2 OVERVIEW What is Your Goal: Start with the End in Mind. Drilling Down the Numbers: Current Financial Situation Income & Rule of 72 Risk Assessment

3 WHAT IS YOUR GOAL? We need to begin with the end in mind. Are you trying to create cash flow so you no longer have to work (get out of the rat race) or are you just starting and need to create capital?

4 HOW MUCH TIME DO YOU HAVE? Can you spend hours every week doing research and due diligence or just 15 minutes

5 WHAT IS YOUR TALENT OR PROFESSIONAL BACKGROUND? Are you a tradesmen or know a trade? Are you a good project manager? Are you good at analyzing numbers and quickly? Do you have connections to tradesmen?

6 WHAT IS YOUR PERSONALITY TYPE? Are you cautious or conservative? Do you jump into things right away? Do you tend to want to analyze a lot of information or data before doing anything? Do you follow the crowd or do you tend to do your own thing? Do you second guess yourself after making a decision or make it and never look back? Are you emotional about your money or are you detached and cerebral/mental game for you?

7 CASH FLOW WORKSHEET CASH FLOW TODAY (in monthly amounts) Item to be paid Amount to be paid Mortgage $ HELOC or 2nd mortgage $ propperty taxes $ HOA dues $ car insurance $ car upkeep/repairs $ health insurance $ life insurance $ long term cre insurance premiums $ visa/mc/discover etc TOTAL minimums $ child care $ children sports and activities $ groceries $ water and trash bill $ electrical $ cable/internet $ gas $ private school $ car loan 1 $ car loan 2 $ student loans $ entertainment $ gym $ travel $ gifts $ donations $ negative cash flow on rentals $ timeshare $ loans to? $ pocket cash $ Total expenses to be covered 0

8 SOURCES OF INCOME Income stream eligible in what year Monthly income Pension - $ Social security - $ VA pension or disability $ PERS - $ STRS - $ FERS - $ Royalties - $ Business income $ Room rentals $ Other $ Other $ Total $

9 ROI RETURN ON INVESTMENT & RULE OF 72

10 2 THINGS TO TAKE AWAY TODAY Rule of 72 ROI Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it. Albert Einstein

11 CALCULATING RETURN ON INVESTMENT (ROI) This is the money you make, banks call it yield Monthly Income x 12 = Annual Income Annual Income Divided by the Initial Investment AI / Initial Invest = ROI (Return on Investment) Initial Investment = Down Payment, Closings Costs & Repairs Expressed as yield, CCR, Cap Rate, or interest rate

12 RULE OF 72

13 RULE OF 72 IF I HAD A TATTOO THIS WOULD BE IT Calculating the Interest Rate received, how much TIME it will take for Money to DOUBLE! Divide 72 by the Interest Rate received 72/Interest Rate

14 RULE OF 72 THE VELOCITY OF MONEY Is your money sleepy, comatose or working as hard as you? If you only make 1% on your money you are losing money because of inflation! Now at 2.1% What will it be when you retire?

15 WHERE YOU PUT YOUR MONEY MATTERS! RULE OF 72 HOW LONG DOES IT TAKE FOR THE MONEY TO DOUBLE 1% 72/1 = 72 Years 1 Year Certificate Deposit 3% 72/3 = 24 Years 8% 72/8 = 9.0 Years Average mutual fund 10% 72/10 = 7.2 Years Personal Loan 12% 72/12 = 6.0 Years Hard Money Loan, tax liens 20% 72/20 = 3.6 Years Discounted Notes 24% 72/24 = 3.0 Years You want 21 percent risk free? Pay off your credit cards. Andrew Tobias

16 IT S ALL ABOUT CASH FLOW

17 WHAT S YOUR NUMBER? How much money will you need to retire? How much income will you need to retire? In retirement will you have enough income? 58% of Americans think that they will not 52% of Americans under 40 don t believe social security will be there for them Fewer companies offer defined benefit pensions

18 WHAT WILL RETIREMENT LOOK LIKE? Will you be less active or more? Will you need more money or less? Do you plan to take trips or stay home? Will you be able to help your kids/grandkids or not? What amount of money do you have to save to create that income? Is 401k and SS enough?

19 HOW MUCH CASH DO YOU NEED If you want $24,000 net income and are getting a 5% rate of return (conservative number since you now can t afford to take risk) then you need $640,000 in savings assuming no dips in the account s value. That s $2000 per month income. If you want $5000 income, you ll need 25% more than that to pay tax = $6666 x 12 = $80,000 per year divided by 5% (the interest or dividends earned). You will have to save up $1,600,000. This is assuming the market doesn t fluctuate and you don t touch the principal.

20 AVAILABLE ASSETS Checking $ Savings $ CDs $ Money market $ Stocks $ Life insurance with cash value $ Second car $ Second motorcycle $ Collectibles (trading cards, china, memorabilia) $ Coins $ Old bonds $ Old 401k $ IRAs $ Current 401k $ Mutual funds $

21 RISK TOLERANCE AND TYPES OF INVESTMENTS Investor Characteristic Conservative Moderate Aggressive Lots of Time to allot/schedule X X Little time X lots of Money X X X Little money Want to be hands off X X Want to be hands on Lots of Time until cash flow is needed X X X X X X Little time before CF is needed X Experienced in RE X X Not experienced in RE X

22 EXPERIENCE AND RISK TOLERANCE Quickly answer yes or no. I have owned a home before/now own Y/N I have owned a condo before I have owned apt buildings before I or someone I know has lost money in RE I have lent money to people and lost it I have lost money in the stock market I like to trade my own stocks I have worked in construction before I have experience with Excel spreadsheets I have been a project manager before I have done construction/remodels before I have a demanding job I have a lot of time off /flexible schedule I plan to retire out of state I have relatives who live out of state I have kids in school out of state My spouse / friend is in finance

23 NEXT WEEK: CREDIT AND QUALIFYING TIPS, AN INSIDERS POINT OF VIEW & MORE ABOUT LEVEL II AND III

24 SAVE THE DATE: JANUARY 23RD

25 ABOUT ATHENA In the Mortgage Industry Since 1990 years old Real Estate & Stock investor Owns Multi-family Apartment, Condo, Rental Real Estate, Invested in notes. Actual experience Former Government loan underwriter MA Master s degree in Psychology Financial Advisor - Series 7 and 66 Life and Health insurance licenses. Certified Retirement Planning Counselor*

26 REAL ESTATE INVESTMENT PROPERTY TELEWORKSHOP Athena Paquette Stratis Financial 3625 Del Amo Blvd. Suite 220 Torrance, CA NMLS # cell BRE # NMLS #321683