12
Jan

5 Mobile Musts for Real-Estate Marketing

5 Mobile Musts for Real-Estate Marketing

Renters and buyers today demand on-the-go tools, even when it comes to selecting where they’ll put down roots.
5 Mobile Musts for Real-Estate Marketing

Image credit: Shutterstock

“Real estate is an inherently mobile industry which drives our mobile-first approach.”

That’s Jeremy Wacksman, Chief Marketing Officer of Zillow Group, explaining the one-for-one overlap between real-estate marketing and mobile marketing. Like any good buzzword, “mobile-first” is applied to everything these days: e-commerce, retail, software, entrepreneurship and even finding lost pets (seriously).

So why should you listen to Wacksman? Because if you’re in real estate, there simply isn’t a bigger player than Zillow — period. And not just in terms of market share and online traffic. As Zillow CEO Spencer Rascoff recently told Jim Cramer, “More people now type the word ‘Zillow’ into Google than the words ‘real estate.’ ”

As Wacksman explains: “More than two-thirds of our traffic comes from a mobile device and on weekends it’s more than 77 percent. In July, more than a half-billion homes were viewed on Zillow Mobile. That’s 270 homes per second.” In short, Jeremy concludes, “If you aren’t advertising on a platform that consumers are using to shop for real estate, you are missing a huge opportunity.”

Strong words. And that’s why I connected with Wacksman, along with six other real-estate and mobile marketing experts, to find out the real “mobile musts” for real estate.

1. Mobile design.

For the uninitiated, mobile design — also known as responsive design — means building web pages that automatically “respond” to the size of the device being used to view them. Commonly, this means resizing elements like text, images, buttons and navigation. However, it also can mean eliminating onsite content itself that can’t easily be viewed on mobile.

John Doherty, founder of GetCredo and a former senior growth manager at Zillow:

“As a current, older-millennial renter who is also considering a home purchase in the next year or so, if a site is not mobile optimized, I don’t go back and use it. I spend the majority of my time on my phone and often use it as a second screen while watching TV.”

“Give me a big tap target, an easy inquiry form, and remember my information. If your site isn’t prepared for mobile users, you’ll lose them to sites that are.”

2. Mobile ads.

Unless you’re Zillow, pay-per-click ads are the bread and butter of driving traffic to your real-estate site. These ads come in many forms: Google AdWords, Facebook Ads or display networks on other sites. Why should you go mobile-first with your ads?

Johnathan Dane, founder of KlientBoost:

“In today’s world, mobile marketing should be the number-one focus not only of traffic but also of predictable conversions. If real-estate buyers and sellers aren’t getting localized ads with images and calls-to-action designed specifically for mobile — like an easily clickable phone number — then you’re left with a broken marketing engine.”

“What you see now are savvy agents embracing the Facebook Live video movement for home-tour promotion and grabbing potential leads en masse with ‘ads in apps’ campaigns.”

Sujan Patel, co-founder of Web Profits:

“Buying a home is not the same as buying a laptop, but the trend holds: People explore on smartphones, convert at their desktops and then cross back over. With your ads — and especially with your leads and sales funnels — you have to make crossing that divide easy. If you’ve invested in a mobile app like Zillow, onsite tools like LinkTexting.com can get visitors to download it, and then the transition is seamless.”

3. Mobile landing pages.

Landing pages are standalone web properties that exist for a single reason: to drive action. The goal of your real-estate landing page has to be glaringly obvious and ruthlessly singular. Pick one goal and one goal only. After that comes mobility.

Trevor Mauch, CEO of InvestorCarrot:

“With both our company and our clients, nearly 60 percent of our leads are from mobile devices. Through optimization, we’ve learned to follow four rules. One, make your main CTA button no more than one ‘swipe’ down down the page so it pops up almost immediately. Two, add another CTA button at the bottom of your mobile landing pages too. People don’t want to scroll back up to find your opt-in form or phone number. Three, use big buttons. Thumbs are fat, so make them span the width of the device screen. Four, don’t wrap your phone number in an image. Ensure it’s clear, text based, and easy to ‘tap to call.’ ”

4. Mobile chat.

Messaging, or mobile chat, is the new email of real-estate marketing. Whether you use old-school text messages, Facebook Messenger or real-estate specific apps, mobile chat can sync up listings, manage customer relations and make communication native.

Aaron Kardell, CEO of Homespotter:

“It’s all about the human touch. Real-estate agents that are accessible via a messaging app help their buyers feel more comfortable and less overwhelmed by using the same channel they prefer to communicate with family and friends.”

“Messaging also allows you as an agent to appear more responsive. Even if you can’t break away from another meeting for a phone call, you can often provide quick responses to your clients by text. Finally, real-estate specific messaging apps can now save agents substantial time in performing their job on the go.”

5. Mobile amenities.

Going mobile with your marketing is non-negotiable. But if you’re in real estate, you can’t stop there. Millennials and nearly every other demographic demand a mobile experience that’s carried across your services and accessible in their homes and rentals.

Nathan Miller, founder and CEO of Rentec Direct:

“For properties, keyless entry, mobile-connected thermostats and USB chargers in outlets are musts. Likewise for landlords, setting up mobile payment options as well as being ready to deal with maintenance requests digitally and immediately are par for the course.”

“Perhaps the biggest ‘small’ thing you can do is to bring WiFi into all your properties to ensure new buyers or tenants have one less thing to worry about during the moving process. It’s staggering how much this tiny touch means to today’s always-connected crowds.”

Musts … or die.

Zillow’s CMO Jeremy Wacksman might sound like an alarmist. But he’s right: “If you aren’t advertising on a platform that consumers are using to shop for real estate, you are missing a huge opportunity.”

And the other six experts are right, too. Real-estate marketing is about mobile design, mobile ads, mobile landing pages, mobile chat and even mobile amenities. The alternative isn’t very pretty. But the upside is staggering.

12
Jan

Buy a Rental Property Before Year-End: Why and How

Buy a Rental Property Before Year-End: Why and How

Entrepreneurs should consider rental real estate as an important part of their portfolio.
Buy a Rental Property Before Year-End: Why and How

Image credit: Getty Images | kbwills

This article is part of the End of Year Tax Tips Series from tax and legal expert Mark J. Kohler. 

I realize it may be unrealistic to purchase a rental property in just a couple months before year-end. However, I want to get you thinking about this strategy and encourage you to start shopping now and make it a priority next year.

As entrepreneurs find success with their primary business ventures, many search for the proper investments for their profits. With that said, after reviewing thousands of clients’ situations and tax returns each year, I am convinced that more entrepreneurs should consider rental real estate as an important part of their portfolio.

Now, you may shrug off the concept of owning a rental property and having tenants, due to the time and skills it may take to manage a rental portfolio. But let me list a few reasons that may change your mind:

1. The use of leverage. 

Real estate is one of the few investment vehicles where using the bank’s money couldn’t be easier. The ability to make a down payment, leverage your capital and thus increase your overall return on investment is incredible.

2. Tax deferred growth. 

Buying rental property based on speculation of its value is a dangerous tactic since cash flow is the key. However, appreciation over the long run is certainly realistic and at the least, you should be considering a tax-deferred strategy. In the future, you may even consider a 1031 exchange, charitable trust or installment sale to lessen your tax liability further.

3. Tax-free cash flow.

It’s no secret that because of depreciation and mortgage interest deductions (if you leverage your capital), your cash flow should be tax-free. That’s right! The far majority of the time, an investor will never pay taxes on their cash flow and can wait for capital gains on the sale of the property in the future.

4. The tax write-offs against your other income.

Having a rental property affords investors with another incredible opportunity to convert personal expenses to potentially valid business deductions. Also, depending on your classification as an Active Investor or Real Estate Professional and your income level, there is a good chance that your rental property will give you an overage of tax deductions that you can use against your other income. With that said, this is something you will want to discuss with your tax professional before investing so that your expectations are realistic.

5. Rental real estate is a forced retirement plan. 

Americans are terrible savers. We lack the self-discipline to put a monthly deposit into our IRA, SEP or 401k as small-business owners. However, buying a rental property is a significant commitment that you are required to commit to and maintain. You will always be grateful in the long run when you don’t give up on it and build future cash flow and wealth.

Based on this fact and the list above, I have consistently urged my clients to buy one rental property a year and already have clients with rental properties earning them money they never imagined they’d have.

YEAR END TIP: Start shopping now for a rental property, track your expenses and, even if you purchase the property in 2017, make the goal to buy one rental property a year.

Now, finding the right rental property for you in your situation can be a challenge.  Over the years, I have purchased rentals myself and also work with clients each week, if not daily, to structure their rental real estate with tax and asset protection benefits. Here are six strategies I have learned and applied over the years that can help you find the best rental property for you in your situation.

1. Buy local if you can.

Let me repeat the words “if you can.” That’s the key. Don’t get hyper-focused on buying local so you can “check on the property.” It’s okay if you don’t buy local. It’s far more important to buy quality rental properties, rather than local. But, if you are lucky, and you truly live in an area where there are good returns and rental markets, where the return on investment is legitimate without having to own it outright or put down a fortune …then consider yourself lucky. Gain some experience, put in some sweat equity and shop ’til you drop!

2. Learn to manage your property manager.

Unless you are a full-time real estate investor and one tough cookie, get a property manager! If you don’t have the temperament to be tough and start eviction proceedings three days after a tenant is late, have a personal intervention with yourself. You may not have the time, skills or system to be your own property manager, even if the property is local. Be a realist. Your time could be better spent looking for other rentals, doing the books and earning income with your day job or operational business. So with that said, always, and I mean always, put a budget in your rental property analysis for a property manager (approximately 10 percent of gross rents). Even if you have visions of grandeur and start managing, you will want the budget to add a property manager if that need arises.

3. Don’t use a shotgun approach.

I recently met with a client that had five properties in four states. They were great properties, but seriously? Look at the inefficiency of registering an LLC in four states, four state tax returns, four different property managers, four different trips to at least occasionally check on your rentals and four different markets to understand and follow. Now when you have 25-plus rentals and you can afford to make your full-time job managing your rentals and property managers, then tackle four or five markets. But if not, consider the alternative: Bundle your properties in one or two markets, maybe three. Get to know your property managers, get to know the areas and try to be efficient with your tax and legal planning. Save time and money with “bundling.”

4. Have a master rental property analysis spreadsheet.

Create an Excel spreadsheet to analyze any and all possible deals. That’s right — you’re not going to buy the first rental you see this year! Run every property through the gauntlet of your spreadsheet. Own your spreadsheet. Know every column. Start with fair market value, money down, improvements and mortgage/carrying cost, then move it through rental income and expenses, and wrap it up with a cash-on-cash return-on-investment figure. Base your decision on this key factor generated by your spreadsheet. This is why you took fifth-grade math — embrace it!

5. Remember, you are buying numbers.

Too many investors get emotional about their purchase and can even envision themselves living in the rental property they are analyzing. This is a terrible mistake. In these situations, the investor often over improves the property, investing far too much time or capital and blows their return on investment out of the water. You aren’t buying a property — you are buying “numbers.” Consider: What do your dollars get you in dollars and cents? Not, what cute neighborhood or yard do they get you?

6. Do your research.

Let me say that again: Do your research and then do it again. Don’t look at a property as to Why shouldn’t I get this? Look at it as, Why should I get this property? Make the numbers prove it to you. Don’t assume you’re going to buy it unless you find something wrong with it. I love a positive attitude and glass-half-full approach, and thus, this has been one of my greatest learning experiences. I have trained myself over the years to be a lot more skeptical — at least when it comes to analyzing rentals.

The far majority of us will never get rich overnight. It takes long-term investing and a diverse portfolio to build true wealth. Bottom line, these are the key themes, strategies and approaches to real estate that my successful clients use. Don’t underestimate the power of real estate on your tax return in your portfolio of wealth.

12
Jan

10 Simple Ways to Increase the Value of Your Home or Investment Property

10 Simple Ways to Increase the Value of Your Home or Investment Property

Have you heard the one about an ‘Ikea bedroom miracle’?
10 Simple Ways to Increase the Value of Your Home or Investment Property

Image credit: Shutterstock

As a real estate investor, author and podcaster, I’m often asked if it is “too late” to buy real estate. After all, prices have climbed dramatically over the past several years, and many homeowners and investors are worried that they’ve missed their chance.

My answer is always the same: No, it’s not too late.

However, today, unlike the past, when almost every property was a good deal for buyers, you have to hunt for (and buy) only the best. And one specific way to do that is to purchase a property and increase the value significantly. That way, if home values do drop, you’ll avoid being “underwater.”

But how do you add value on a piece of real estate without spending tens of thousands of dollars? While there are potentially hundreds of techniques, here are my favorite ten methods for helping the value of your properties to increase.

1. Don’t buy stupidly.

While this first item technically does not require you to do anything special to the property, it is nevertheless the most important step in building quick value. If I buy a home for $20,000 less than it’s worth, I’ve forced an appreciation of $20,000. While I don’t need to go into detail explaining exact methods, just know that your profit is made when you buy, not when you sell.

2. Try out the ‘Ikea bedroom miracle.’

One of my favorite ways to quickly improve a property is to simply turn a “bonus room” into a bedroom. The best transformation involves turning a two-bedroom home into a three-bedroom one. Oftentimes. this can be accomplished for the price of an Ikea wardrobe, but can add tens of thousands of dollars to the value of the home.

3. Increase your property’s curb appeal.

It may be obvious but it is still shocking: the number of investors who spend thousands remodeling a home but neglect to do any more to the outside than a quick paint job. While fresh paint is a great way to add value, there are many more steps you can take as well to spruce up a home’s curb appeal. A nicely manicured lawn with well-defined landscaping can help achieve higher rent or a quicker sale — both of which can make the value climb.

4. Raise the rent.

If we’re talking about rentals — especially multifamily properties — raising the rent can be the key to increasing a property’s value. If your rents are low, a small increase can add significant value to your property. This is especially true for multifamily properties. Raising rent just $25 per month per unit on a four-plex can add $1,200 per year in extra income and (depending on your area’s cap rate), up to $20,000 in forced value overnight.

5. Rent out those nooks and crannies.

You may already be at the top of your rental price capacity, but that doesn’t mean you are getting all the income you can out of your properties. Are there any storage sheds, broom closets, garages or simply vacant land that you can rent out to increase your income? Mini-storage is a multimillion dollar industry, and you probably have more space to rent out than you realize. As happens when you raise the rent, additional income often means more value.

6. Increase your fees.

In addition to capitalizing on all the physical ways you can increase the income in your investments, how about the fees? Are you charging for background checks, late-rent fees, missed maintenance appointments or parking violations? How about your laundry facilities or paid parking? Are you getting all the fees you deserve?

7. Lower your expenses.

You are probably paying too much for too many things. As an investor, one of the “hats” you wear is auditor for your business. Perhaps you can negotiate a better rate for garbage pick-up. Perhaps you can transfer the water/sewer/garbage expense to your tenant. Perhaps spending a few hundred dollars getting all those dripping faucets can cut down your annual water bill by thousands of dollars. Whatever your strategy is, if you decrease expenses, you will be able to increase the value of a property.

8. Add a bathroom.

In the old days, one bathroom was standard in most homes. If you are remodeling a home and find this is the case, take note of where the plumbing is located and what extra space there is around, above, or below that plumbing. Oftentimes, you can add a small half bath for several thousand dollars and add tens of thousands in value in the process.

9. Tear down those walls.

As long as a wall is not “load bearing” (and sometimes even if it is), you can take down a wall (or half of one) in a matter of hours and create a much more “open concept” feel. This can help increase the desirability of a home and thus improve the value as well.

10. Paint the neighborhood.

One of the biggest detriments to your property’s value is not your property at all — it’s your neighbor’s home. A quick paint job, landscaping or simply a run to the dump can often be the best money you’ll spend, trying to increase the value on your own property. Obviously some tact is needed and many people are opposed to getting “charity,” but it’s hard to turn down a free paint job or yard clean-up.

So, that’s it: These are just ten of perhaps hundreds of ways you can use to quickly add value to any property you own. Don’t use the “I’m waiting for the market to improve” excuse. You can buy great deals — even in today’s market — if you take the previous steps to add immediate value.

12
Jan

Should You Sell Your House or Rent It?

Should You Sell Your House or Rent It?

Tenants. Taxes. Cash flow. ROI. There are lots of factors to weigh. This contributor tells you how.
Should You Sell Your House or Rent It?

Image credit: Shutterstock

Remember that old high school girlfriend — the one with the annoying laugh? You put up with her because she was nice enough, but one day you met that new girl, and she was everything you ever wanted. Best of all, your new romantic target showed definite signs of interest and wanted to date. But you had a problem: You still had the old girlfriend.

While this drama doesn’t take place in the life of every high school student, something similar does happen to most adults. But, rather than girlfriends . . . it’s houses.

You buy a house and it’s fine, but then you need to move on to another property. Maybe that’s by choice or work is forcing you to relocate. Either way, you have the same problem as that high school Romeo: What to do with the old house?

While trying to date two girls at once may prove difficult, owning two homes can actually work and be profitable if you rent out the previous home. By keeping the house, you can begin building serious wealth through cash flow and equity. But how do you know if that’s the right move?

Sell the house and move on? Or rent it out? As with most real estate questions, these are not universal “right or wrong” questions, but once you understand the options, you can make the best choice for your situation.

Here are five factors to consider when deciding whether to sell or rent out your house.

1. Will this property generate cash flow?

The first thing to look at when deciding whether to rent or sell your house is the math. I know, math was likely not your favorite subject in school, but luckily all you need is a fifth-grade mind to understand real estate investment math.

First, ask: Will this property produce positive cash flow?

In other words, when this property is rented out, and you deduct all of the associated expenses (mortgage, taxes, insurance, utilities, management, vacancy, repairs, HOAs, etc.), will the property produce a monthly profit or a loss? If it’s a loss, consider selling.

2. What about the return on investment?

Next, consider how much you would profit if you sold the property today, assuming you’d lose around 10 percent to agent fees, closing costs and other sales expenses. If you would make little or nothing, it may be advantageous to hold on to the property and wait for the market to improve over time. This is especially true if the property will provide positive cash flow in the meantime.

If you would make a profit by selling, consider your return on investment. For example, if you could make $100,000 in profit by selling your house and achieve only $1,000 per year in cash flow, that’s a 1 percent return on investment. Better to take that $100,000 profit and invest it in something else that could produce a higher return.

3. Consider the taxes.

The U.S. government does a lot of things I don’t agree with, but one thing it does that I absolutely love is the potential exclusion from paying capital gains tax that’s allowed on the sale of your primary residence.

Normally, if you sell real estate and make a profit, you have to pay capital gains tax on the sale, up to 20 percent, depending on your tax bracket. However, the IRS allows homeowners (sorry, investors!) to exclude the sale of up to $250,000 (or $500,000 if married filing jointly) of a primary residence if you lived in the home for at least two of the last five years.

Let’s look at another example where this might come in handy. Consider the fictional case of Bob and Marge, who bought their home in 1990 for $150,000. Today, they can sell the property for $500,000, clearing $300,000 after the sales expenses.

If they keep the home as a rental for, let’s say, five years and then sell, they’ll potentially owe $60,000 in taxes. But if they sell now, they can potentially keep that $300,000 in profit without paying any capital gains tax.

Of course, by keeping the property, there is always the likelihood that it will appreciate in value to a level higher than what the tax would have been, but there are no guarantees when it comes to real estate values.

(And I’m not a CPA, so to learn more about this possible capital gains tax exclusion, consult a tax advisor or read the IRS’ rules on the topic.)

4. Does the future look bright?

Another important factor to consider when deciding whether to rent or sell your house requires gazining into your your crystal ball for the future. What do the next five, 10, 20 years look like for your home’s location? Are things improving? Will your neighborhood decline in value? If the future looks dark, consider selling now to avoid problems later on.

Of course, we don’t have crystal balls, but trying to gauge where the market’s going is not impossible. Take a look at the growth of your city — is it moving away from you or toward you? Are businesses moving into your area? Are homes being fixed up or left to rot? You can’t know with 100 percent certainty, but by analyzing the current trends in your market, you can make a more informed decision on whether to hold on or sell now.

5. Can you handle tenants?

Finally, ask yourself: Are you willing to be a landlord? Because, honestly, many people are simply not cut out for the life. While some tenants are a dream to manage, others require significant time and patience to deal with. Last week, I had to deal with the eviction of a “garbage hoarder.” It wasn’t pretty.

Luckily, landlording is a skill that can be learned and improved upon. All new landlords make mistakes, but if you are the kind of person who is willing to learn, you’ll do fine.

Also, just because you own rental properties does not mean you have to be the person dealing with the tenants. Professional property management companies exist in nearly every city, and if you can find a great manager, he or she can cut the stress of rental property ownership down to a minimum (for a fee, of course!).

So, once again, should you rent or sell your house?

Unlike what happens with high school girlfriends, real estate allows you to keep both the old and the new. But deciding whether to rent or sell is a choice only you can make after weighing all the options.

If you are trying to make that decision right now, take a look at the five factors outlined above and make the choice that works best for you, your family and your financial future.

Brandon Turner is a real estate entrepreneur and the VP of Growth at BiggerPockets.com, one of the web’s largest real estate investing communities. He is also the author of The Book on Rental Property InvestingThe Book on Investing in Real Estate with No (and Low) Money Down and several other books. Buying his first home at the age of 21, Turner quickly grew his real estate portfolio to over 40 units using a variety of creative finance methods. He and his wife Heather live in Grays Harbor, Wash.

12
Jan

Should You Buy or Rent Your Place of Business?

Should You Buy or Rent Your Place of Business?

Here are three things to consider when deciding if you should invest in commercial real estate.

In this video, Entrepreneur Network partner Peter Esho goes over what you should be thinking about before you decide to invest in commercial real estate.

There are three things to consider when deciding between paying off a mortgage or renting: your company’s ability to adapt, its financial standing and the cyclicality of commercial real estate.

It’s essential to factor in the element of change — your business and the world are constantly changing. To remain relevant and consistent, your business must be able to be flexible and adaptable. When you commit to purchasing commercial real estate, you could be investing in something that will tie you down in the long run.

Financially, commercial real estate is a major investment and requires a large deposit — much more than that of residential real estate. So if there’s somewhere else you could be spending your money, such as hiring or new technology, consider those options.

Lastly, commercial real estate is very cyclical and varies from market to market. So if the market’s not too hot, you may find yourself stuck with a tricky investment.

12
Jan

How to Buy Real Estate With No Money Down

How to Buy Real Estate With No Money Down

Actually, you can’t but you can do it with other people’s money.
How to Buy Real Estate With No Money Down

Image credit: Westend61 | Getty Images

I think that we all find ourselves getting stuck finding money, I mean we all think we have a good deal, we all think that we have the knowledge, but when it comes to the money we find ourselves short. Our friends and family are telling us no, the banks tell you no, and most of all you say no to yourself. Without a target, you won’t get anyplace. You look at your first deal based on the money you have, and many of you give up on the real estate game because you don’t have any money. When you get started you don’t have any money, right?

Let me tell you there is no such thing as no money down. No bank will lend you money with no money down, and no seller will carry a note without you putting some money down even if it’s a promise to do money in the future. There is no such thing as no money down because the money is going to come from somewhere. It’s money down if you’re going to have to do something if you have to exchange something with the person giving you something. If they’re going to give it to you for nothing, then trust me, you don’t want it. So the question becomes, how would you raise money if you don’t have any money?

The first thing I say, and I say this over and over, is that the deal is what matters, not how much money you have. I say it doesn’t take money to make money, it takes guts and courage. The thing you should be chasing is the deal, not your budget. Most people make decisions on how much money they need based on their job and on how much money they spend, but this is backward. You should make the decision on how much money you want regardless of how much money you spend. This is why people never get ahead. The deal is senior to the amount of money you have.

The secret is called OPM — other people’s money. It’s going be somebody’s money. Somebody’s money is going down because there is no such thing as no money down. How do you get the money from other people? Finances are about playing offense, not defense. Don’t chase your budget.  Instead of chasing a $200,000 deal, chase a $2.5 million dollar deal. Do not buy less than 16 units, because without 16 units you cannot have a manager. If you can’t have a manager you’re either not going to have your attention on the property or your property will become your full-time job.

Go to investors, people that have $100,000 each, $20,000 each and give them a good deal. You’re going to have to offer a good deal because people are taking a chance on you. Who would you go to first — mom, dad, uncle, brother, sister? You can go look for investors in your local area, maybe a real estate investment club because those are the people who maybe don’t have enough time but want to put $50,000, $100,000, $200,000 into it. There’s a lot of people out there right now that have money sitting in the bank.

You’ve got friends and relatives giving their money to Wall street right now, and they don’t know anybody in that place. They are putting it in mutual funds, IRAs, and 401ks. You need to convince them to go in with you. Their money has been reduced to little digits and it’s backed by nothing. Money basically represents an idea backed by confidence. You need to raise money.

I want to look at bigger deals, and if I want to look at bigger deals, sooner or later everybody runs out of money. I don’t care how rich somebody is, sooner or later you run out of money. You’re buying a business so get creative. There’s nothing set in stone. If you want to get into the game, you either go out and tell your mom, your dad, your uncle, and find others to go in on a deal, or you find a guy like me and ride his deal. Either way, you will have to raise money.

I suggest you don’t invest until you can learn how to make enough money on your own to save at least $100,000. If you can earn enough to save that, it shows that you are ready to begin multiplying your money. Until then, rather than worrying about real estate, concentrate on increasing your own income. Get skills so that you can make enough to save rather than living paycheck to paycheck.

I’m giving lifetime access to Cardone University right now, and it’s a lot cheaper than any real estate. It will teach you how to start increasing your income so that one day you will have money to put down on a piece of property. If you want to do real estate with no money down, you will have to sell others on you. Cardone University is the #1 sales training platform in the world and will help you in any industry, in any town, and in any country.

Be obsessed or be average.

12
Jan

Solar Energy Has Big Apple Potential But New York Real Estate Entrepreneurs Haven’t Seen the Light

Solar Energy Has Big Apple Potential But New York Real Estate Entrepreneurs Haven’t Seen the Light

New York developers have been reluctant to embrace solar, despite big cost savings and beautiful new designs. That creates opportunity for the bold.
Solar Energy Has Big Apple Potential But New York Real Estate Entrepreneurs Haven't Seen the Light

Image credit: grandriver | Getty Images

I love New York. I can walk outside, look up and get a lesson in history just from looking at its buildings. Not only is it the birthplace of the American dream, its skyline is an icon of industry, capitalism and our intention to always go bigger and do better. As a local contributor to that skyline, it’s personal, but this home of mine is slower in keeping up with the sustainability Joneses than a city of 8.4 million people should. Meanwhile, smaller cities in California and Arizona are saving money big time by installing solar panels on large commercial buildings — something that NYC lacks.

Don’t get me wrong, New York State is one of the top 10 “solar states”, but when you break it down per city, per capita, medium-sized cities like Phoenix and Denver are ahead of NYC, and you can’t blame it on sunlight either. Indianapolis, which gets less sun than New York, ranks higher. In larger cities like NYC, the arguments against solar panels are starting to fall short, especially because solar panel installations have become “ridiculously cheap” according to Bloomberg New Energy Finance, and the price continues to decrease.

Chart from: CleanTechnica

 

With Mayor Bill De Blasio’s ambitious goal for NYC to hit 80 percent renewal by 2050, why is New York still seemingly behind the times?

I have a couple of educated guesses:

The cost factor.

Currently, while there are a slew of federal incentives to promote sustainability, state-level credits vary dramatically. California gives an investment tax credit (ITC) that comprises 30 percent of the total system cost, on top of an existing 30 percent  federal tax credit. New York isn’t quite there, but does offer a close 25 percent in tax credits.

Given that New York is a highly developed state with world-class economic, social and political institutions, it is surprising that it lags ever-so-slightly behind California. After all, not only is it easier and cheaper to install solar panels than ever before — it’s untapped money. Our West 42nd Street Atelier property, for example, recouped the installation cost of our solar panels within two years. Clearly, there isn’t just a “green” environmental dimension; there’s also a “green” financial one as well.

To complicate the discussion further, the outcome of the recent presidential election has thrown the future of the solar installation program into jeopardy. According to the analysts at S&P’s Global Platts division, we could see a cut in the solar installation ITC under the Trump Presidency:

“Trump’s possible efforts to end incentives for alternative energy development would boost near-term demand for fossil fuels,” said a report by analysts at S&P Global Platts. “A potential cut in the Investment Tax Credit to 10 percent from the current 30 percent would slash solar installation demand by 60 percent.”

In other words, the cost factor, which wasn’t much of an issue in 2016, may become the decisive factor for developers in 2017. For now, it’s too early to tell, and developers don’t like the unknown.

The aesthetics factor.

The general consensus is that solar panels are ugly right? Wrong. The dynamic and unique thing about New York is that it is always frenetic, always modernizing which has its challenges when working within the infrastructure of established sacred ground. But New York is great at adapting, and beautifying solar is currently in a New York state of mind, especially for me when we were planning the installation of solar panels in our Atelier project.

We made sure the Atelier’s solar panels would add a complementary sleek and modern feel to the structure, adding instead of taking away from the aesthetic value of the original edifice.

Image Credit: The Real Deal

The “eyesores” of yesterday have gotten facelifts and are fast becoming the high-tech structures of now. Travel farther East and you’ll find the antithesis of the “solar is ugly” argument in Spain. Its Gemasolar Plant is extremely efficient and startlingly beautiful.

Image Credit: Wikipedia Germany

States Santiago Arias, technical director of Torresol Energy, the entity that runs the station: “[…] the plant produces 60 percent more energy than a station without storage capacity because it can work 6,400 hours a year compared to 1,200-2,000 hours for other solar power stations.” Continues Arias, “The amount of energy we produce a year is equal to the consumption of 30,000 Spanish households.”

In case you’re wondering, that breaks down to around 30,000 tons of CO2; and did I mention it runs 24/7?

Image Credit: TechCrunch

Then, there’s Tesla. No one combines tech and sustainable like Elon Musk. Musk’s announcement of Tesla’s new solar roof tiles and spare Powerwall 2 battery for homeowners may be the most effective means of taking the perception of solar panels from awkward to “good-looking”. And his beauty has some bite. According to Elon, Tesla’s materials — terracotta clay, slate tiles, and high impact resistant glass — will hold up to more than just sun and rain, or even hail. With this “fashion statement”, Elon Musk reveals his intrinsic understanding of the public: Build it, they will come. Make it beautiful on top of that, and they will flock.

Though this speaks more to the homeowner than the big project developer, I would consider the “solar panels are ugly and inefficient” theory properly debunked.

So why aren’t real estate developers moving in droves to install solar panels on all commercial properties in New York City? Even if Trump cuts the federal ITC for solar, state tax incentives will remain intact — still a very compelling incentive. But even in our ultra-modern city, those attached to the purse strings of these projects can play it a little safe. Best answer may be that it just hasn’t happened yet, and that more and more “safers” will come around.

Until then, I’ll continue to urge real estate developers and investors to do their part; they’ll have to if we plan on getting to 80 percent renewable by 2050 (which I have all the faith in the world we will). We are in plans to continue incorporating solar panels and other sustainable initiatives in our properties. I’m hoping that our success in saving and making revenue because we use solar panels will be the best form of convincing.

12
Jan

Buying a House Is for Suckers

Buying a House Is for Suckers

Should you own a home? Unless you have 20 million bucks in the bank, in cash, you have no business buying a house.

People think the only way to save money is to buy a house. Suzy Orman thinks you have no way to earn any real money for yourself, so she advises you to buy a house as the only way to get your money. You will get your home paid off when you are old. Who wants to wait until they are old to have money?

A home is not an investment because it doesn’t pay you every month.  In fact, you have to pay it every month. That’s why a house is not an asset, it’s a liability. Nothing is a good deal if you have to feed it constantly.

People ask, “Why would you pay rent when you could buy?” Because you can’t leave. Who wants to go to jail for 30 years? You can be mobile and nimble if you rent. Mobility is a great thing in today’s world. Why settle down? Invest the money in yourself or your business. Your money needs to be free!

I have been investing in multi-family real estate for over 25 years. If you want a great opportunity to create income for yourself, realize that America is becoming a nation of renters. How many reasons do you need to buy multi-family real estate? Apartments offer high cash yield, build equity, give tax advantages and let you use leverage. A $400K purchase can be bought with 25 percent of the price allowing you to leverage $100K to control 4X the value in physical property. Stocks or gold can’t touch that!

The house, much like a college education, has been fed to you as the American dream. Really, it’s a middle class myth perpetuated by outdated thinking, politicians and mass media. Buying a house may have worked for previous generations but old ways of doing things aren’t viable in 2016. We are not in the 1950’s, things have changed and people refuse to adjust.

A house is not an investment.

I want to give you three tips to making true investments.

1. Invest In yourself.

I do a weekly talk show called Young Hustlers where I talk to millennials about all things money, career and sales. I always emphasize the need to invest in yourself, no matter what your age. When I was 25 I made a $3,000 investment to buy a sales program for the purpose of becoming better at my job. Becoming a better you will never fail you.

2. Focus on Income.

Whether you have a house or not is irrelevant to how well you are or, will be, financially. So many people are concentrated on savings but their real problem is they just don’t make enough money. I encourage the millennials on my Young Hustlers show to spend their energy on this one thing — getting their incomes up high enough where they can actually make a real investment.

3. Invest in something that pays you.

Only after you have enough income can you start to think about investing. As I mentioned earlier, buying a home to live in is not going to pay you. Whether it be multi-family real estate or something else, a true investment will not cost you money. There are so many real estate agents out there giving false information. A home needs to be fed, it won’t feed you.

If you start investing in yourself, focus on growing your income. Put that growing income into an investment that will pay you, then you will be living like the rich do, not like the middle class.

Most Americans have been made to believe the myth that getting rich is almost impossible or not important. If you look at the world you will see that the only group of people that are safe are the rich. The rich didn’t get rich “buying a house”.

Blame them, hate them, resent them, but they are safe and everyone else is at risk. They will be able to survive inflation, housing busts, tight credit, high unemployment rates and whatever else is thrown at them. They have investments that pay them.

The middle class idea of just “being comfortable” is a risky venture in 2016. If your hope is in a house, you will be disappointed. I’m all for education, but how many people have gone to college and into massive debt and found themselves unemployed? How many of them are paying that debt back for 10, 20 and 30 years?

Don’t get caught in the idea that a house is your ticket to wealth. A house, along with a college education, has been fed to this country as the way to financial prosperity. It may have been true in the past, but today it’s all a myth.

12
Jan

The 7 Tips Entrepreneurs Need to Know Before Investing in Real Estate

The 7 Tips Entrepreneurs Need to Know Before Investing in Real Estate

The 7 Tips Entrepreneurs Need to Know Before Investing in Real Estate

Image credit: Lars Plougmann | Flickr

Why should entrepreneurs invest in the first place? The answer is: to have enough money to live on when we no longer can or wish to work. To put that money aside, however, we have to accumulate enough to offset inflation and the taxes that erode our savings. And for that purpose, real estate is an excellent solution.

The great thing about real estate is that even in a bad economy, it will usually fare better than stocks. Land, after all, is a finite resource. People need a place to live, work, shop and play — so real estate is really just a matter of supply and demand.

What’s more, real estate will continue to appreciate despite occasional slow-downs in the economy. In fact, it’s proven to be the best way to create wealth, and an investor need not be a genius or a millionaire to succeed. Here are some tips, then, for entrepreneurs on getting started and succeeding in real estate investing:

1. Do — plan your financial goals.

Before you buy that first property, or do your first analysis, determine what you expect from your investments. What are your financial goals?  We often discuss the “time vs. money” concept: The more you have of one, the less you need of the other to reach your financial goals. This means that you shouldn’t shy away from taking the time to understand your goals and make sure each investment is a step toward achieving them.  If you are unsure exactly how to create financial goals, meeting with a financial advisor is an excellent first step.

2. Don’t — spend a fortune on books, tapes and seminars, then just put all that information on a shelf.

You absolutely do need to learn some basics before venturing into investing. So, be sure to do some studying, but don’t let “buying and collecting” information become your endgame. Again, having goals in mind will make the process much more straightforward. It’s easy to get so tied up in the “research” phase that you never actually take action. Instead, write down specific questions you want answered or goals you want to meet before delving into the latest book/seminar/etc.

3. Do — look at plenty of properties.

Don’t just grab the first property you look at. Too many investors buy properties because they “look nice,” or the investors don’t want to put the work in to look at what’s really out there. Remember, you won’t be living there, so don’t make your investment decision based on your personal preferences. While you shouldn’t fall into the trap of analysis paralysis, make sure you are thorough in looking through properties. Give yourself a wide range of options, then narrow them down based on the criteria (goals) you have set for yourself.

4. Don’t — postpone starting your investment program because you’re waiting for that perfect “unicorn” deal.

That’s the flip side to number 3, of course. Plenty of beginning investors suffer from “a-better-deal-may-be-just-around-the-corner” syndrome. This can backfire in a big way, and you could potentially let a great deal slip just because you’re holding out for something better. Your task may feel difficult if this is your first property, but you must realize that the “perfect deal” rarely (if ever) exists. Better to execute on a deal that meets most of your criteria than wait for another that may never come.

5. Do — a thorough financial analysis.

Be realistic. Look at different alternatives to determine which makes the most financial sense. And never buy property at a higher price or on less attractive terms than your analysis says made sense. Be wary of sellers that try to over-estimate the value of the property through pro-forma (estimated) data. While you can certainly use a pro-forma to start the conversation, make sure you know the real numbers before closing. Look at previous years’ tax returns, property-tax bills, maintenance records, etc. to get a good idea of the real income and expenses.

The most important figures you should know are:

  • Net income (income/expenses)
  • Cash flow (net income/debt financing payments)
  • Return on investment (cash flow/investment)
  • Cap rate (net income/property price)
  • Cash-on-cash return (cash flow/investment)
  • Total ROI (total return/investment)

In each case, “investment” refers to how much you invest in the property. “Debt financing” refers to any loans you may have to take out to buy the property. And “total return” refers to cash flow, equity accrual (i.e., equity gained from your tenants paying their rents), appreciation and taxes.

Once you have understood these figures, you should have enough information to determine whether or not acquiring the property fits with your financial goals.

6. Don’t — try to buy property that the seller is not motivated to sell.

If the seller is motivated to sell, you’re not likely to get the price best aligned with your financial goals. So, how do you know if a seller is motivated? Look at the asking price. For example, If the property has been on the market for a year for, say, $200,000, with little-to-no price reduction, the seller is clearly not very motivated to move the property. However, if that same property has been on the market for a year and has had its price moved down considerably, the seller most likely wants to do whatever it takes to get the property off his or her hands. Of course, this raises the question of how to find motivated sellers. There are many approaches, and not all of these will work for you, depending on what property you want. But a few trusted methods include:

  • Attending open houses
  • Looking for vacant/unattractive properties that are for sale
  • Spreading the word about yourself and what properties you are looking for — truly
  • Going the old-fashioned route and looking in the classifieds of your local paper

These are just a few ways to find sellers, but there are potentially dozens of other methods, depending on what type of property you’re looking for.

7. Do — know the difference between real estate investing and the business of real estate.

As an entrepreneur, you already have a business, and real estate investing is best used to support that business, not replace it — unless that’s your intention. In other words, don’t get so caught up in executing transactions that your core business falters. If that happens, you’ll be facing a bumpy road to get back to stability. Unless your business is itself real estate, or you’re looking to get into the business full-time, always remember that pursuing these deals is a means to an end, not an end unto itself.

So, if you’re interested in staying ahead of taxes and inflation while building security for the future, real estate investing may be for you. What are you waiting for?

12
Jan

4 Powerful Ways Real Estate Can Make You a Millionaire

4 Powerful Ways Real Estate Can Make You a Millionaire

4 Powerful Ways Real Estate Can Make You a Millionaire

Image credit: Unsplash

Sometimes a team can accomplish far more than a group of lone individuals. For example, cyclists in the Tour de France take turns riding at the front of their group, decreasing the wind for those behind them. Wolves hunt in packs to take down animals 20 times their size. And for those of us who were children of the ’90s, we all remember Ducks Fly Together.

This brings up another team that can accomplish amazing things — not a team of people, but a team of benefits which, when combined, can help you achieve your greatest financial goals. Specifically, I want to talk about real estate.

I’m a real estate investor, and I firmly believe that real estate is the best traditional investment on Planet Earth today. However, just because you buy a piece of real estate doesn’t mean you’re going to make money.

As I explain in The Book on Rental Property Investing, big wealth is built through real estate investing by capitalizing on something I call “the four wealth generators of real estate.” Alone, each of these benefits can help you make more money, but together they’ll make you rich.

1. Cash flow

Cash flow is the extra profit left over after all of the expenses have been paid on a property. For example, if my rental property produced $2,000 in income and my expenses came to $1,700, my cash flow would be $300 that month.

Now, I know a lot of you are saying, “Three hundred dollars is not going to make me a millionaire.”

Probably not. But remember, we are just talking about one of the wealth generators. There are still three more to go!

Additionally, that $300 might be from just one property. If I owned ten similar units with the same cash flow, that’s $3,000 per month. If I owned 100 units, that’s $30,000 per month. This cash flow can go a long way toward helping you quit your job — or helping you save for a future big purchase, or retire wealthier.

2. Appreciation

When I talk about appreciation, I am not referring to how much I like you (though I do appreciate you!). I’m referring to the natural rise in value that real estate experiences. For example, if you purchased a property for $200,000 ten years ago, and today that property is worth $300,000, the appreciation made you $100,000 richer!

Of course, appreciation doesn’t cause values to increase every year (consider 2007!). However, historically, real estate prices have appreciated over the long term. So, again, appreciation alone is not likely going to make you a millionaire, which is why I don’t recommend that people purchase bad deals hoping that appreciation bails of them out.

However, appreciation is combined with the other “members” of the wealth generation team, powerful stuff can happen.

3. The loan pay-down

When you purchase a rental property with a mortgage, each month you make a payment to the lender. That payment includes two parts: principal and interest. Interest is the profit for the lender, but the principal is money you are paying down the loan with.

For example, if you purchased a house five years ago for $100,000 and obtained a $80,000 mortgage (we’ll say it was a 30-year mortgage with a 5 percent fixed rate), today you would owe only $74,000. Ten years from now, you would owe only $65,000. This means that every year your equity increased (equity is the difference between what a property is worth and what is owed on it), you’d gain value, as long as the property value didn’t drop.

Of course, if you paid all-cash for a property and didn’t obtain a loan, you would forfeit this wealth generator. This is something only you can decide.

4. Tax benefits

Finally, the fourth wealth generator in real estate is the tax benefits the U.S. government gives to investors. These benefits are numerous and realized in several distinct parts of the real estate process.

For example:

  • Unlike most businesses, the government doesn’t look at cash flow or appreciation as self-employment income; thus no self-employment tax is typically due.
  • The income tax that is due is often offset entirely by a deduction known as depreciation.
  • Additionally, when you sell rental properties, the profit is taxed at the long-term capital gains rate, if at all.
  • You can often defer any tax using a 1031 exchange offered by the government as a way to trade up into bigger or better properties.

The bottom line: If you make $100,000 per year from your job, your mom earns $100,000 per year from a business she owns and I earn $100,000 per year from real estate, who do you think keeps more? That’s right, I do.

Of course, I’m not a CPA, so you should definitely consult with one before making any financial or tax decisions.

Putting it all together: an example

As I mentioned, each of these wealth generators can be powerful in itself. However, putting the four together can make you exceedingly wealthy because of the synergy among them.

For example, you might purchase $1,000,000 worth of multifamily real estate with a $200,000 down payment. Let’s assume this property produced $30,000 per year in cash flow, but it also might be increasing in value at 5 percent per year. This means that after 10 years, it could be worth $1.6 million, and you would have earned another $300,000 in cash flow.

On top of that, after those 10 years, that initial property could be paid down so that you owe only $650,000, giving you $1 million in net worth on that one property alone.

And to top it all off, the tax benefits during that decade would help you keep far more of that profit than had you earned it any other way.

Real estate is not the only way to get rich today, but it certainly is a simple one to understand, thanks to the four wealth generators of real estate.

Now that’s a team I want to be a part of.