real estate investing Archives - Page 2 of 2

Apr 2022

Commercial Real Estate: What’s A CAP Rate?

Charles Weinraub2024-01-06T12:48:49-05:00April 5, 2022|commercial property, real estate investing|

In the simplest terms a cap rate is the way that commercial real estate is valued, measuring the risk vs. return for a given property. You can compare a property with a low cap rate to a savings account – in a savings account there is essentially no risk of losing the money you’ve deposited but the return in the form of interest is very low. In contrast, a high cap rate property is more like investing in stocks – the potential returns are much greater but there is a real risk of losing the initial investment.

In general, high cap rate properties generate more cash flow and are less expensive to purchase, whereas low cap rate real estate generates less cash flow and is more expensive to purchase.

Cap rates also act as a multiplier which help determine property value. Imagine a property with a Net Operating Income (NOI) of $100,000. The NOI is defined as the gross income minus the vacancy rate and all expenses associated with maintenance and operation, excluding mortgages (if any). By dividing the property’s NOI by the cap rate of the market, the result is the value of the property.

For example:

$100,000 NOI in a 10-cap market, or 10% return: $100,000 is divided by 10% (.10), resulting in a property value of $1,000,000.
The same property, with the same $100,000 NOI in a 5-cap market: $100,000 is divided by 5% (.05), resulting in a property value of $2,000,000.

The same property, generating the same NOI, is valued differently based on the market and the associated cap rate. Since the cap rate acts as a multiplier on the NOI, every dollar the NOI for a property increases (for example by increasing rents or decreasing expenses) is multiplied by the cap rate percentage. With a 10-cap market, every extra dollar of NOI is divided by 10%, therefore adding an extra $10 of property value. In a 5-cap market, each extra dollar of NOI is divided by 20%, adding $20 of property value. Leveraging this multiplier effect at the right time is an important way that real estate investors can generate returns on their investments.

As a final note, familiarity with cap rates and how to use them to make money is a concept which carries over into other forms of investing outside of real estate and sell my house fast Long Island deals, and is very much worth taking the time to learn.

Apr 2022

How to Properly Structure a Real Estate Wholesale Deal

Charles Weinraub2024-01-06T12:48:45-05:00April 5, 2022|real estate investing|

Wholesaling is a great way to get involved in real estate investing. It allows you to negotiate deals while risking minimal capital. But it’s not as easy as just finding a deal, passing it off to someone else and getting paid. It’s vital that you properly educate yourself about the factors involved in wholesaling deals so that you’ll be able to negotiate deals which have a positive outcome for yourself, the seller, and ultimately the buyer. Before getting involved in any deal, be sure to understand the following:

Understand the local real estate market and have a solid estimate of what a given property can sell for
Understand the carrying costs that will be associated with a given property before it is sold (for example, property taxes and insurance)
Understand what it will cost to renovate the property
Understand the costs associated with financing the deal

Armed with knowledge about the above, you’ll be able to negotiate a deal where a real estate investor can buy a property, renovate it, and sell it at a profit while at the same time paying your fee for bringing the deal to them.

You’ll want to make sure you have a system to generate quality off-market leads so that any investor you work with can purchase properties at a low enough price to ensure they’ll be able to sell at a profit. It’s also vitally important to have an attorney or group of attorneys familiar with wholesaling deals (don’t just hire an attorney who has handled other matters for you!).

The ideal way to proceed is to get a contract of sale with an assignment clause. An assignment clause allows you to hand off the contract of sale to someone else (i.e., the real estate investor you’re working with) who will close on the sale in your place if you need to “sell my house fast Long Island“.

Let’s look at an example where you’ve got a property under contract for $190,000, and your investor has agreed to spend $200,000. The assignment clause in your contract allows you to assign the contract to a third party (the investor). You’ll make a down payment of $5,000 after which the investor:

Runs title on the property
Attends the closing and closes the sale in your place
Refunds your $5,000 down payment, and pays your fee (for example, $10,000)
Pays the seller their $190,000 selling price
Proceeds to handle the remainder of the project on their end (renovation, sale)

After this, both you as the wholesaler and the investor you work with are positioned to repeat the process with a new property. Using the system outlined above provides protection for all parties involved and helps to ensure that you all make money on your deals.

Apr 2022

How to Make $120K a Year in High School

Charles Weinraub2024-01-06T12:48:41-05:00April 5, 2022|flipping houses, real estate investing|

Is wholesaling real estate a real thing?

If you want to make a lot of money while you’re still in high school, the answer is real estate wholesaling.

Wholesaling is a great way to make money in real estate, learn the business, take little risk, with minimum money out of pocket.

Here’s what you do: Drive around, walk, ride your bike, and look for distressed properties in your area. A distressed property might look like it needs a new roof. It might be run down and the grass on the front lawn is a foot tall and looks like it never gets mowed. It may look like there’s nobody living there at all. Maybe it’s been boarded up by the town. Even in the nicest towns, it’s common to find houses that are in rough shape.

When you find a house that looks like it fits the description above, write down the address. Back at home, hop on Google and search for “free skip tracing software”. Skip tracing programs allow you to find people’s names and contact information by searching the street address of a house. After you have their phone number, call them. It’s likely that they’re not going to want to talk to you the first time you call, they might even be rude about it. You might have to call 20 times before they’ll finally listen. But if you’re persistent, you’ll eventually find someone who wants to sell their distressed property.

When you find someone who is willing to sell the house, you’ll need the help of a real estate attorney. The attorney will draft a contract of sale that contains an “assignment clause”. An assignment clause allows the purchase of the house to be taken over by anyone you choose. That person (usually an investor) comes to the closing and closes in your place with their money. The wholesaler receives a fee at closing for putting the deal together.

Where do you find investors to wholesale properties to? You’ll want to use social media and other marketing tactics to build up relationships with a group of investors who are looking for these type of deals. You should build a network of different investors, because different investors are looking for different kinds of deals, and you never know what opportunities will present themselves to you while you’re out searching to sell my house fast in Long Island.

Apr 2022

5 Characteristics of a Good Fix & Flip House

Charles Weinraub2024-01-06T12:48:35-05:00April 5, 2022|flipping houses, house renovation, real estate investing|

Not every house available on the market is a good candidate for investment as a “fix-and-flip”. It’s important to bear in mind that there are numerous factors that need to be weighed when you decide to purchase a property for this purpose. In my years of real estate investing, I’ve identified the following five characteristics that elevate certain properties over others when you’re looking for a fix-and-flip project house.

The house in question should be in a desirable area. This is the one thing you absolutely can’t change about the property! The property should be in an area where demand for housing outpaces supply in order to ensure that you’ll quickly get offers when the house is listed for sale. If possible, also try to pick a property that isn’t on a busy road, next to industrial or commercial properties., etc., which can make the individual property less desirable even if the neighborhood itself is in demand.
The house should be totally vacant. If the house is vacant, there is no need to wait for anyone to relocate before you can get to work and you can reduce the overall time you have ownership of it, and therefore keep expenses like insurance and utilities to a minimum. If the house has any residents, even ones you might consider “squatters”, this can lead to great difficulty getting the ball rolling even after you’ve purchased the property.
The house should need significant repairs or upgrades. Essentially, this is the main way an investor makes money on a fix-and-flip; by finding a house that sells for below the average market value of comparable homes in the area, then performing repairs/upgrades that significantly boost the home’s value and selling at a profit.
The spread between the purchase price of the house and your anticipated ARV (After Repair Value) needs to be significant enough to ensure that you’ll be able to sell at a profit even after factoring the costs of repairs, insurance, and other costs related to owning the home while you work on it.
The price of the house has to be right. You don’t make money by selling the house; you make it by buying the house at the right price. Go in with a solid plan so you can purchase the house at the right price, perform the best value-add renovations within your budget, and sell the house quickly at a profit.

By keeping the above factors in mind when you are searching for a house to fix-and-flip you’ll greatly increase the chances of making a profit while minimizing your risk. It’s also important to have a very strong grasp of what your renovation costs, etc., will be before you start on any project so that you don’t wind up putting yourself in the red if you need to sell my house fast in Long Island NY.

Feb 2022

How To: Make a Real Estate Agent Fall in Love With You

Glenn Haskings2024-04-19T09:18:32-04:00February 10, 2022|real estate agents, real estate investing|

When I’m dealing with realtors specifically, there are a number of things I do to create positive experiences for them that will encourage them to bring me deals in the future. To begin with, I always give the listing back to the realtor in question once I’m ready to sell the property. This gives them the opportunity to make money when I initially purchase the house, and when it’s being sold at the end of the flip. Additionally, I like to give the real estate agents I work with bonuses for quick sales or when they secure an especially good deal for me.

My entire business is built on this concept: No matter your business, whether you’re flipping houses or selling retail products, it is very important to create a positive experience for the people that work with you. For a real estate investor, this includes both your clientele and your referral partners. I always strive to go the extra mile to show my clients and my professional colleagues my appreciation and build a relationship that is more than purely transactional.

Another way I cultivate the positive experience for my real estate agents is to take care of a lot of the things: I pay for high-end photography of the property and write up the descriptions to be used in listings. I’ll install the lockbox for the keys (and include two sets of keys in it) to save them the hassle. I get everything ready to go, so all the real estate agent needs to do is put the listing online and wait for prospective buyers to get in touch.

Finally, I actively promote the real estate agents I work with. My in-house social media team creates content that helps to promote the real estate agents I work with. As an example, we have a show called Their Downtown where we feature agents in their local downtown, highlighting the ways they’re great at what they do and showcasing the benefits of living and working in their town. We also produce The Elite Agent, a program where we interview real estate agents to find out why they’re the best and how they’ve achieved their level of success. One additional piece of content we produce is a weekly podcast where we spend 45 minutes with a realtor, interviewing them, discussing their story: Where they’re from, what they like, what their struggles are, and what they’re passionate about.

All of these things, from offering financial incentives, promoting their business, and streamlining processes, create a hugely positive working experience for all the real estate agents that I work with. By providing so much extra value to them and showing them that they are important, I ensure that they’ll think of me when there’s an opportunity arising from a distressed property. If you can make the people you work with know that you value them, you can reap the same benefits.

Jan 2022

Why You Need a Business Plan for Flipping Houses

Glenn Haskings2024-01-06T12:37:44-05:00January 16, 2022|flipping houses, real estate investing|

A business plan is one of the most important documents a business owner can have. Convincing yourself to sit down and actually write out your business plan may not be easy; my mentor really had to push me before I finally got around to doing one myself! On top of that, when I was in NYU earning my master’s degree in real estate development, I had to write my thesis which was essentially a 40-page business plan. It wasn’t easy either time, but after going through the experience I was able to clearly see how important it is to have a fully developed business plan. Now I write a business plan for anything I set out to do professionally, whether it’s organizing a charity event, helping someone else start their own business, or for any business venture I undertake on my own behalf. I recommend that you do so for the following reasons:

A business plan acts as a road map for your company, and in the event that you’re trying to raise money from investors, it demonstrates your understanding of the market, your competition, your product, and more. Subsequently this shows that you have a firm grasp on exactly how much investment you’ll require for marketing, production, etc. This makes it a much easier decision for any potential investor to work with you.
For your own benefit, writing a business plan forces you to thoroughly consider every aspect of your business to help home owners to sell my house fast Long Island. It’s very possible that in the process of writing your business plan that you’ll realize the venture isn’t viable and you’ll scrap it before you make a more serious investment in time and money. You may realize that the market is saturated, or that the amount of capital you require to get started is far greater than you expected. Writing a business plan makes you scrutinize all the details, which will make you much more prepared, and far more likely to succeed.

A common misconception about writing business plans is that you need to have all the answers set in stone before you even start. But in reality, you should consider your business plan to be a living document that evolves alongside your business. It pays to go back on a regular basis and revise your business plan (at least every 6-12 months) and take the opportunity to evaluate what is working for your business and what isn’t.

Your business plan can be as detailed or brief as you desire, but there are things that need to be in it:

The Executive Summary: This is a one-page overview of the entire business plan. This should be the first page of your business plan, but you want to write it last so that you don’t inadvertently leave anything out that comes up in the process of writing the rest of the document.
Introduce yourself: Who are you, what have you accomplished, what are your credentials? Introduce your team: In business, nobody can be expected to know how to do everything, so you want to know (for yourself and for the benefit of potential investors) who you’ll turn to when challenges arise to make sure that you can meet your goals.
Outline your product/service or your investment strategy.
Perform a S.W.O.T. analysis (Strengths, Weaknesses, Opportunities, Threats).
Summarize the state of the market. Why is there a demand for your product or service? Describe your competition: Who are you competing against, what are they good at, and why are you better?
Marketing. How are you getting the word out about your products or services?

Jan 2022

How To: Properly Setup an LLC for Your Real Estate Business

Glenn Haskings2024-01-06T12:37:40-05:00January 10, 2022|real estate investing|

When it comes to incorporating, you’re going to want the guidance of both legal and accounting professionals to make sure that everything is done properly. Everyone’s business will be different: you may plan to scale up your business in a particular manner, your available assets will differ, and regulations vary from state to state. But based on my personal business experience, I can offer some food for thought and share what has worked for me.

It’s important to have the help of an accountant who understands real estate transactions and associated concepts like appreciation. Additionally, you need to work with an attorney that also specializes in real estate. It’s better if both professionals are specialized further in the types of real estate deals you’re going to pursue. For example, if you’re going to do a lot of fix-and-flip work, an attorney or accountant that works mostly with commercial development isn’t an ideal choice. You also want your chosen accountant and attorney to be able to communicate effectively with each other to keep things running smoothly.

Many people open their corporate entity immediately when they set out to start investing in real estate. An LLC is a good choice for real estate investors, but it’s my recommendation that you don’t open this LLC until you have your first accepted offer. This might seem like doing things in reverse; a natural assumption is that you should have your LLC open so that you can hit the ground running. But consider that having an LLC has costs associated with it, including tax liabilities. If you open your LLC before you have your first accepted offer, there’s a chance that you’ll be spending money on the LLC before you have any “sell my home fast Long Island” deals justifying its existence.

One possibility is to get a property under contract in your own name, with the ability to reassign the contract to an entity of your choice (in this case, your soon-to-be-open LLC) at a later date. At this point you can open your LLC. Be sure to follow the proper protocols. For example, in NY, you need to publish. Be aware that opening an LLC is a little bit more expensive than forming other types of corporations. It can cost anywhere between $800-$2,000 depending on who executes the incorporation for you and what the fees are.

As your operation increases in size, you may want to layer your corporations. For example, I have an S-Corp holding company from which I draw my weekly salary. This S-Corp is the owner of all the LLCs that I own. These LLCs are specialized for different areas of real estate investment: Some own rental properties, others are for fix-and-flip deals, etc. The point of all this is that as an individual I own nothing, for both liability and tax reasons.

LLCs can be a crucial part of ensuring your sustained success, just remember to have a trusted accountant and attorney to work with in order to be sure that everything is executed properly.

Jan 2022

Why Professional Investors Have Mentors

Glenn Haskings2024-01-06T12:37:34-05:00January 7, 2022|real estate investing|

Professional mentorship comes in both paid and unpaid forms. Either is one of the fastest ways to help develop your skillset and hone your investing instincts regardless of which industry you’re investing in. The common objection raised to the idea of paying someone for mentorship is “If the person charging money for their mentorship is so good at doing what they do, why aren’t they doing it themselves? Why are they charging to teach me to do it?”

There’s a little merit to that line of thinking, but here’s where it goes wrong: It focuses solely on the profit motive and disregards passion. Many people, including my primary mentor Carl Schiavone, love to teach and to pass on their knowledge in order to help people. These are the kind of people who, after long and successful careers of their own, are looking to give back and help others find the same level of success. A little due diligence goes a long way if you’re considering paying for someone’s mentorship. Some research should help you figure out who is the real deal and can be trusted to provide you with the guidance you need.

Paid or unpaid, when you work with a mentor what you’re doing is speeding up the process of learning the ins and outs of your industry. What could take you many years to learn on your own solely through experience and self-study, now takes far less time with the help of your mentor. I spent 4 years with my mentor before doing my first deal, and as a result of that training I’ve completed over 400 successful deals in the last 5 years.

Working with a mentors for real estate investors does represent an up-front investment of time, patience, and money in the short-term. But for the long term, working with a mentor is one of the smartest things you can do when you start your real estate investing career to help distressed sellers to sell my house fast Long Island.

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