Investing@Cornell An Overview of the Investments InvestIng ...
The Door to Understanding Real Estate Investing Tom...
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www.TomWilsonProperties.com
Wilson Investment Properties
Tom WilsonPresident / Founder
Wilson Investment Properties
Saratoga, Ca408-867-1867
Highest Cash Flow Quality Turnkey Investments in the USA
The Door to Understanding Real Estate Investing
Wilson Investment PropertiesPresentation Agenda
� RE Investing Fundamentals� Tom’s Top Tips � State of the Real Estate Union� Investment Choices Methodology
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Wilson Investment PropertiesDisclaimer
� I’m an Investor� Not an accountant� Not an attorney� Not an agent or broker� Everything I share is a reflection of my own
experience and education� Seek professional assistance before
making any investment decisionwww.tomwilsonproperties.com
Path of One Investor - Tom Wilson� BSEE University of Delaware 1969� Silicon Valley 1969; 30 years Hi Tech�2 Start Ups, 7 Companies, 2 VP positions� 1st Prop 1971; 1st Rental 1975� 1998 Retirement Plan Wake up call�Year Business Plan Research� 1999 – Began 1031 Exchanges to DFW � 1999-2010; >$100M & >1600 units , 7 multifams,
3 condo conversions, 3 syndications� In 3yrs Cash Flow replaced W2; 3x Net Worth� Founded Wilson Investment Properties 2006�260 Props Rehabbed & Leased Props for Investors
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www.tomwilsonproperties.com
Wilson Investment Properties Team
Home Office
SaratogaCa
Jody Knauf
Operations Manager
Tom Wilson
President & Founder
Weegi Wilson
VP & CFO
Joe Hernandez
Acquisitions & Sales Manager
Some Key RE Investment Terms�CAP (Capitalization Rate)�ConC (Cash on Cash Return)�IRR (Internal Rate of Return)�ROI (Return on Investment)�Depreciation Tax Credits�GRM (Gross Rent Multiplier)�Rent Ratio (Rent/mo / Prop $)
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Types of Real Estate Investing�Buy and Hold� Income/Cash Flow� Appreciation
�1-4 Residential, Multifam, Commercial�Flips� Preconstruction speculation� Assignments� Added Value
�Land Banking�Development�Paper
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Real Estate Returns Outperforming Stocks Which Remain Volatile
9%19% 20%
13% 17%
63%
50% 54%
83%
96%
126% 127% 125% 128%
16%
0%
50%
100%
150%
S&P 500 Apartment Office Industrial Retail
1-year 5-year 10-year
Real EstateStill the BestLeveraged, sheltered & controlled vehicle for
cash flow & the accumulation of wealth
Tom’s Top Tips�Buy in Top Metros�High Returns�Low Risk�Buy in Best Submarkets &
Neighborhoods�Buy Good Products�Let time be your friend�Most of my purchases were near
market value & 20% down & have done very well thank you!
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Tom’s Top TipsBuy Simply for Best Reward/Risk Ratio
�Not emotion�Not fancy�Not live in�Not next door�Stock market analogy
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Tom’s Top TipsDon’t be a Landlord
Be an Investor
Always Think About Opportunity Costs
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Tom’s Top Tips
�Secure an Experienced Team�Don’t try to do it all�Delegate to experts you trust�Follow Success
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Use, & Don’t Underestimate Your Generalist Skills
� Market Analysis� Supervision� Communications� Marketing� Financial� Project Management� Management by Objectives� Delegate Responsibility &
Accountability
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Analyze & Compare Local and Economic Trends
�Different regions have different cycles�Submarkets can vary a lot from the averages!!
Asset ProtectionHolding Title & Insurance
Entities vs. Insurance� Entities really protect?� Economics� Entity Cost vs. Insurance� Gates prior to entity
protection� Event� Unresolved� Lawsuit� Lose or Unresolved� Insufficient Insurance
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� Joint Tenancy� Living Trust� LLC� LP� Corp S & C
Real Acquisition Cost Items� Rehab� Trash out� Flooring� Landscape� Paint� Kitchen & baths� Roof� Fixtures plumb &
elec� Appliances & HVAC� Windows� Staging� Garage door� Rehab surprises
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� Closing costs� Taxes� Debt service� Insurance� Utilities� Property mgmt� Advertising� Lease up fee
Often the Tortoise Beats the Hare!
Don’t be in too big of a hurry
Doing it right is better than doing it fast
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Be Careful What Persons with Influence Tell You
“We’ve never had a decline of housing prices on a nationwide basis. What I think is more likely is that house prices will slow, maybe stabilize. I don’t think it’s going to drive the economy too far from its full-employment path, though.”
Ben Bernanke
July 29, 2005
Delinquencies vs. Foreclosures Trustee Sale Progression
Source: LP
S, F
oreclosureRadar.com
, and The N
orris Group.
1.3%
1.7%
2.4%
3.4%
4.2%
5.1%
5.9%
7.3%
9.0%
9.7%
10.0%
11.3%
11.0%
10.50%
0.2%
0.3%
0.4%
0.6%
0.8%
1.1%
1.2%
0.7%
0.7%
0.8%
0.8%
0.8%
0.8%
0.8%
1.2%
1.5%
1.8%
2.1%
2.6%
3.2%
3.4%
3.5%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0
%
12.0
%
Q1-2007
Q2-2007
Q3-2007
Q4-2007
Q1-2008
Q2-2008
Q3-2008
Q4-2008
Q1-2009
Q2-2009
Q3-2009
Q4-2009
Q1-2010
Q2-2010
Delinquent %
(LP
S)
Foreclosures S
old %
Trustee
Sa
le Progression
Get a Grip: The Appreciation / Speculation Game
is Over!So What Do You Do?
1.Wait until everybody knows everything is going back up ?
2.Invest in a location that soared and crashed, hope it doesn’t go down much more & hope to catch the next wave ?
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Cash Flow & IRR Sensitivity
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0
20
40
60
80
100
120
Rep Ins Occ PropMgmt
Tax Int Rate RentRatio
CoC
IRR
% Bottom Line Change for 20% Changein Income & Expenses
3Br/2Ba $125,000 home, $1250 Rent, DFW
So You’re Looking for Cash Flow?Look no further……..
High Rent Ratio
=High Cash Flow
Monthly Rent $Market Value of Investment
Monthly Rent $Or Total Invested $$
$1000/mo rent = 1% $100,000
SFR Rental San Jose vs. DFWSan Jose$600,000
$2000 Rent(.33% Ratio)
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DFW
6 X $100,000 = $600,000
6 X $1000 Rent
$6000 Rent
(1% Ratio, X300%!)
Future Performance & Risk Indicators
�Historical & Projected Home Prices �Employment Growth & Diversity�Population Growth�Historical & Projected Rents &
Occupancy�Negative Equity & Foreclosures�Government Stability & Intervention
For All Types of InvestingShort Term or Long Term:
What Direction Will Prices Go in the Region I’m Considering Investing In?
Market Direction Indicators•Historical Trends•Affordability Index•Inward Migration•Negative Equity
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www.tomwilsonproperties.com
Quality PropertiesPrice : $123,000
Rent : $1295 4/2.5/2Sq Ft : 2400
Year Built : 2005
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Dr. Doug DuncanVP & Chief Economist Fannie Mae
“If anyone tells you that they know how this
market is going to play out, run like heck!”
WIP Investment ConclusionsThe Good News………!
Shadow Inventory & Government Intervention
Are Giving the Well Educated & Careful Investor
Great Opportunitieswww.tomwilsonproperties.com
WIP 2012 RE Investing Conclusions�Cash Flow Now is King�Best Cash Flow is Still Out of State�Speculation for Appreciation is Risky –
Expect Long 5-20yr Recovery�Be Honest About True Cost of
Acquisition�Get an experienced team or Provider
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www.tomwilsonproperties.com
“A crisis is a terrible thing to waste.”
Paul Romer, Senior Fellow at Stanford University