Ardmin Properties Real Estate Investment Group

Transcription

1 Ardmin Properties Real Estate Investment Group Due Diligence on your investments Chet Balder

2 Agenda Types of Investments What is Due Diligence Understanding of your investment Money Rules PPM Finding risks in Case Study PPM Case Study

3 Indirect Investments Stocks (Public) Bonds Mutual Funds Other

4 Direct Investments Real Estate Gas and Oil Promissory Notes Private stocks

5 Fee and Tax Implications Stocks (Public) Trading or Management Fees Long and Short term Gains Bonds Ordinary Income Mutual Funds Management Fees Little control with Taxes Other Options Puts Etc Real Estate Typically Long term Cash Flow off set by Depreciation Cost Segregation TIC or 1031 Exchange IRA - UBIT Consideration Gas and Oil % Deduction upon investment Long Term Capital Gains IRA Loss of deductions Promissory Notes Ordinary Income Private stocks Typically long Term Capital Gain

6 Direct Participation Programs In LOL Community Real Estate Single Family Homes Friends & Family Apartment Buildings Fractional ownership of Commercial Real Estate Syndicators of Residential or Commercial Real Estate Land Banking Gas & Oil Couch Oil Other Syndicators Private Business Company Franchise Opportunities Cash Machine Workshops Passive business investment opportunities

7 Direct Participation Programs Direct Participation Programs are publicly registered direct investment programs that include un-traded real estate investment trusts (REITs), limited partnerships and limited liability companies. The assets involved could be real estate, lease-backs, mortgage loans, oil/gas, equipment leases like shipping containers and even wireless towers.

8 Direct Participation Programs Investments in DPPs in 2007 surpassed $10.7 billion according to the Investment Program Association (IPA), the association for the non-traded DPP industry. While the non-traded REITs will account for 96% of these investments, programs with limited partnership and limited liability companies have accounted for more than a half a billion in new investments each year.

9 Accredited vs. Non-Accredited Investor Accredited: individual, or joint net worth (with spouse) at the time of purchase exceeds $1,000,000. Income in excess of $200,000 in each of the two most recent years or joint income with that person s spouse in excess of $300,000 Non-Accredited: Doesn t meet the criteria. Differences? Benefits?

10 Analyzing Risk & Reward Typically, the higher the RISK the higher the RETURN Create your Money Rules Create a personal Due Diligence Checklist Follow your Intuition

11 Investment Characteristics Liquidity Promissory Notes specific time frame DPP Real Estate 1-10 years Gas & Oil 1-2 years before 1 st check Suitability Accredited Investor Non Accredited Investor Diversification Key to any successful portfolio Several small investments

12 Assets 3 Key Concepts 1. Risk/Reward Relationship 2. Inflation 3. Due Diligence (knowledge reduces risk) 12

13 Assets 1. Identify all of your assets (Cash, equity, stocks, old 401K monies, IRA monies, etc.) this should have been done in your Financial Baseline and Gap Analysis 2. Identify all of your Lazy Assets they are lazy if they are not producing solid and consistent returns 3. Determine your Assets to invest 4. Begin to develop your Money Rules 13

14 Money Rule #1 (Pg. 203 Wealth Cycle Investing, Loral provides an example of a direct investing portfolio from her community) Cash 10% Gas & Oil 10% Promissory Notes 10% Businesses 30% *You may choose to invest in stocks, bonds, collectibles or many other potentially good investments, all of which may or may not be good for your situation. Real Estate 40% 14

15 Money Rule #2 Decide whether you want to be an active or passive investor Active investing means that you are involved in managing the Assets like in flipping properties or buying a Franchise Passive investing means that you invest your Assets with other people or in things that do not require your day to day attention like owning rental properties Pactive is the reality for Passive investing 15

16 Money Rule #3 Your cash flow situation should determine what is the goal of your investment If you need monthly cash flow, then you will need to find that kind of investment verses a long term appreciation type investment A cash flow investment would be a rental property that creates more monthly cash flow than its expenses An appreciation investment might be buying and holding land for 5 years Decide what percent of your monies to invest in each area 16

17 Money Rule #4 Decide what your minimum return on investment needs to be Look at many types of investments to know these general numbers, then decide on your requirements This number will help you determine where to invest your money if you choose a 14% minimum rate of return, then you probably will not choose Government Bonds for your investment 17

18 Money Rule #5 How quickly you can get to your money, if needed, is very important to your investing decisions If you need the money for your child s college tuition two years from now, then investing in a partnership that is building a condo project at the beach might not be the best use of those funds sometimes projects like that turn into 5 year ventures and then your child s college money is not accessible Determine your needs for liquidity over the next year or two before investing your money 18

19 Money Rule #6 You must know how each investment that you make will impact your taxes some investments can cause your normal income to be taxed at a higher rate Know how to use the tax laws in your favor, especially with Real Estate a qualified Tax professional can really help you in this area 19

20 Play to Win ASK for what you want! ASK others what they want! Here is what I need. How can you support me? What do you need? What if I don t know? How can I support you? 20

21 The Power of Team and Community TEAM CPA Bookkeeper Assistant House Cleaner Hire out COMMUNITY Resources Investments Partners Field Partners Utilize 21

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