Strategies for Growing Wealth 2012

8/2/2019 Strategies for Growing Wealth 2012

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Growing Wealth ThroughReal Estate Investment

Strategies for 2012


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Keys to Success

Understanding Value

Identifying The Opportunity

Managing Risk


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Step: 1Understanding Value

The Holy Grail of RealEstate Investment


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What Determines House Prices


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$$$

INCOME!$$$


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What factors affect abilityto spend income?


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Unemployment

0

12

3

4

5

6

7

8

9

10

2012

2007

2002

1998

1993

Weber County Seasonally Adjusted Unemplolyment

%


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Leverage and Debt Choices


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FACTOID:

The Federal National Mortgage Association(Fannie Mea) and Federal Home Loan

Mortgage Corp. (Freddie Mac) were created inthe 1930s.

Before that most home loans were typically for

10 year terms. A major portion were sellerfinanced at 6%-8% rates.


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Option Arm Loans and IO Loans Distort

Markets


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What Have House Prices Done?

$0.80

$50,000.80

$100,000.80

$150,000.80

$200,000.80

$250,000.80

$300,000.80

$350,000.80

$400,000.80

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

Value of $100K of Real Estate Purchased in 1979Weber County Utah


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Step 2:Identify Opportunity

Know Market Cycle

Invest Differently Based onWhere We Are In Cycle


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Money Making Models

Through 2007

Rent (2000-2006)

Lease Option to Buy (2003-2005)

Buy Low Sell High (2004-2006)

Buy High Sell Higher (2006-2007)


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What Have House Prices Done?

$0.80

$50,000.80

$100,000.80

$150,000.80

$200,000.80

$250,000.80

$300,000.80

$350,000.80

$400,000.80

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

Value of $100K of Real Estate Purchased in 1979Weber County Utah


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Real Price vs. Sticker Price

$0.00

$50,000.00

$100,000.00

$150,000.00

$200,000.00

$250,000.00

$300,000.00

$350,000.00

$400,000.00

Year

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Sticker Price

Inflatino Adjusted

WEBERCOUNTY HOUSE PRICES 1979-2011Inflation Adjusted Price vs. Nominal Price

Last DataJune 2011

www.OgdenInsights.Blogspot.com

1979 = $100,000


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If Real Estate Maintains the Same

Real Value Over Time, Why Is ItEven A Good Investment?


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Leverage:

The Wealth Building Qualityof Real Estate


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Income Property vs. Trees

Buying income property with a mortgage is likeplanting a tree. It requires patience for a time,but in 30 years the full rewards are realized.

Just like purchasing income property, the besttime to plant a tree was 30 years ago. The

next best time is today.


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$0.00

$20,000.00

$40,000.00

$60,000.00

$80,000.00

$100,000.00

$120,000.00

$140,000.00

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

Balance

-1

-2%

-4%

Property Value vs. Loan BalanceAt Different Levels of Deflation

www.ogdeninsights.blogspot.com


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Causes of Long Term Deflation

Population Decline (i.e. Russian, Belarus,Ukraine, Japan, etc.)

Monetary Changes (Gold Standard, Reductionin Money Supply)


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What is Utahs Population Trend?


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Our Money Supply Trend?


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So Where Are We Today?

Prices Have Reached or Over-CorrectedNatural Equilibrium

Rents Now Exceed Mortgage Payments Unemployment Has Peaked and Is Declining


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Real Price vs. Sticker Price

$0.00

$50,000.00

$100,000.00

$150,000.00

$200,000.00

$250,000.00

$300,000.00

$350,000.00

$400,000.00

Year

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Sticker Price

Inflatino Adjusted

WEBERCOUNTY HOUSE PRICES 1979-2011Inflation Adjusted Price vs. Nominal Price

Last DataJune 2011

www.OgdenInsights.Blogspot.com

1979 = $100,000


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$97,973.50

$100,540.48

$90,000.00

$95,000.00

$100,000.00

$105,000.00

$110,000.00

$115,000.00

$120,000.00

$125,000.00

WEBER COUNTYInflation Adjusted Price

1997-2011

www.OgdenInsights.Blogspot.co

1979 = $100.000


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Rents are Superior to Mortgage

Payments


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Unemployment

0

12

3

4

5

6

7

8

9

10

2012

2007

2002

1998

1993

Weber County Seasonally Adjusted Unemplolyment

%


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What Models Work In Todays

Marketplace?

Buy Super Low Sell Low

Buy Super Low Fix Rent Sell High Rent


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What Models DONT Work In Todays

Marketplace? Lease Option (Tenants are still not flush with

cash yet)

Buy Low - Sell High (market times are long,appraisal issues abound)

Howeverthis will change in the future


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How To Acquire Investments

Cash 100% Down

Conventional Financing 20%-25%

Down

Seller Financing 10%-20% Down

Hard Money Purchase + Refi


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Financing Investments In Weber County


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How Does Seller Financing Work?


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Pure Note No Underlying Mortgage


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AITD Wrap

Existing Underlying Mortgage


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The Latest Hard Money + Refi Info

Wasatch Peaks Credit Union has refi product

Business Loan Not on personal credit

70% MAX LTV Post Fix Up Must be leased

Rehab must be finished

Must prove ability to repay (W2s or Tax Returns)

Rates Around 7%

Appraisal done before purchase with hard money


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EXAMPLE: 2854 Adams Ave.


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2854 Adams Ave.

2 Bed 1 Bath 1800 SQFT

Possible 3rd Bed In Basement

List Price: $74,900

Sold Price: $73,800 Seller Financed

Terms: 10% Down, 6.5% Rate, 15 Year Loan

Payment: $587.21Utilities: $70


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2854 Adams Ave.

RENTS: $800

TOTAL MONTHLY CASHFLOW: $142.71

TOTAL OUT OF POCKET: $7,380 ANNUAL RETURN ON INVESTMENT: 23%


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2854 Adams Ave.

Home will be free and clear in 15 years.

Rents will continue to rise with inflation

Owner can claim depreciation on taxes

Owner makes $1,700 profit today annually

Benefits To the Investor


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EXAMPLE: 459 20th St.


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459 20th St.

List Price: $45,900

Purchase Price: $37,500


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459 20th St.

Before and After


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459 20th St.

Purchased with Cash $37,500

Renovated for $35,000

Rented in 14 days on Market Rents: $695 + all utilities

Tenants want to purchase

Annual Return on Investment: 11.5%


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459 20th St.

Estimated Resale Value: $90,000

Total Sunk Costs: $72,500

Total Transaction Costs: $6,000 Potential One-Time Profit: $11,500

Potential One-Time ROI: 15.8%


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OPPORTUNITY: 2370 Madison Ave.


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2370 Madison Ave.

Duplex

3600 SQFT

2 Car Garage Private Back Yard

Basement Storage (refinishable)

Historic Arts and Crafts Era Home Could be restored to beautiful SFR


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2370 Madison Ave.

SELLER FINANCING! Price: $115,000

10% Downpayment - $11,500 Rents $1100 Payment: $525/mo. ROI 12% after ALL fees (PM, utilities,

etc.)


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OPPORTUNITY: 835 27th St.


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832 27th Street


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835 27th Street

Triplex

1 Bed, 2 Bed, and 3 Bed

Brick Construction 1949 New Sewer Main

New 30 Year Architectural Roof

Fully Rented


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835 27th Street


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835 27th St.

Conventional Purchase

Price: $149,900

Downpayment: $29,800 Rents: $1400 (about $175 below market)

Separate Metered

ROI 19% after all expenses and raising rents!


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OPPORTUNITY: 2621 Van Buren Ave.


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2621 Van Buren Ave.


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2621 Van Buren Ave.

Bank Owned

3 Bed 2 Bath 1590 SQFT

List Price: $59,900 Post Fixup Value: $95K - $100K

J1


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???

Q and A

???

J1J2


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Slide 59

J1 Jeremy, 4/27/2012

J2 Jeremy, 4/27/2012

Strategies for Growing Wealth 2012

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