Archive for Discount Equity

The Five Profit Centers on the Strait Path

Jun 17 | by | Cash Flow, Discount Equity, Down Payment, Interest Rates, lease option
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MONEY%20TREE The Five Profit Centers on the Strait Path

The interesting thing about Strait Path real estate is that even though profitability is one of six factors considered for every deal, the Strait Path system is still far more profitable than other forms of investing. In other words, the Strait Path system is still the best even when profitability is an investor’s sole or primary focus.

This is because the system offers five profit centers, wher

eas others offer only one or two. The five profit centers include 1) discount equity, 2) cash flow, 3) down payment, 4) appreciation, and 5) tax benefits.

1. Discount Equity Discount equity is the difference between the market value and the purchase price of a home. Our finding system helps us secure properties with 15 percent equity or more. Depending upon the size of the home and its discount purchase price, you may make more on one purchase than you make all year in your current job. For example, if a home is worth $275,000 and you can purchase it at a 15 percent discount for $233,750, you’ll make $41,250 on the purchase alone.

2. Cash Flow Cash flow is the monthly amount you receive from your tenants less your monthly mortgage payment. In short, it’s the difference between your mortgage payment and what your tenant pays you each month.

$200/mo cash flow

3. Down Payment The technical term for this is “option consideration,” which is a fee paid by tenants to secure their opportunity to purchase the home within a specified period of time. This is nonrefundable, and we receive on average $5,000 down per house.

$5,000 down payment

4. Appreciation Appreciation is the rise in value of a property over time due to increased demand. What’s notable about Strait Path real estate is that we don’t rely on appreciation to turn a profit, though we do account for it when it occurs.

10% additional profit

5. Tax Benefits Tax law allows homeowners to deduct mortgage interest from their taxes. This is a huge advantage in Strait Path real estate, since the goal is to purchase as many homes as possible

With a fixer-upper, investors receive the first profit center and, if they’re lucky, the fourth. But they have no cash flow, they do not get a down payment, and capital gains taxes often wipe out any earnings. With rentals, investors enjoy tax benefits and sometimes benefit from property appreciation. They receive no down payment, however, and they’re lucky if they get a good deal up front and receive a positive cash flow. Once again, the Strait Path system offers investors all five income streams.

Taking advantage of alternative financing

May 21 | by | Discount Equity, Down Payment, lease option, Some food for thought
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If you don’t have the money to invest directly in real estate at this time, you can still make a ton of money by taking advantage of some programs out there that are not being widely publicized.

Let me give you one example:

My brother just bought a large house from Fannie Mae. It’s on a corner lot in a good area, and includes a studio that can be rented separately. At the peak of the market, it sold for $335,000. The county currently has it appraised at $181,000. My brother bought it for $80,000 cash. It’s an amazing deal. The rental value is $1,750 a month, or $21,000 a year. It will produce about $5,000 in free cash flow a year.

As I said, my brother bought this property for cash — but it could have been done with just 10% down through Fannie Mae’s HomePath program. That means an $8,000 down payment would have gotten you in. If you then sold the property for just half its former peak value in a few years, you’d be selling it for $167,500. That would be a capital gain of $87,500. More than a 1,000% return!

And that ignores the $5K a year in free cash flow or the few thousand you’d pick up in amortization (the reduction of a loan balance over time) — money you could have applied to closing costs and initial repairs.

Taking advantage of the now

May 20 | by | Discount Equity, Interest Rates, lease option, Mortgages, Real Estate
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Here’s what’s happening in our market and why real estate makes sense.

An excerpt from Michael Masterson’s Journal:

Taking advantage of real estate prices that are as low as they’ve been in 20 or 30 years

It is impossible (and foolish) to try to predict the bottom (or top) of this (or any) market. But, by any measure, we have just gone through one of the biggest real estate recessions in the history of the United States.

In South Florida, for example, you can find properties for less than half of what they were selling for at the peak of the market. More important, you can buy these properties with 20% down and start enjoying positive cash flow from month one. (Four and five years ago, you couldn’t get positive cash flow out of rental units with 50% down.) So today’s prices make sense from a businessman’s perspective.

My real estate partner Peter and I have been buying homes in the $120,000 to $130,000 range (after closing costs and renovations). We are getting monthly rents of $1,300 to $1,600 on these. I am financing our deals at 4% (which is good for me). At that rate, we are making about 6% to 8% on our money, not counting appreciation.

My brother is buying up residential properties and apartment complexes in lively downtown areas, beach areas, and areas targeted for “stimulus money” renovation. He is buying at such deep cash flow prices that he is able to pay his investors (including me) minimum guaranteed yields of 7.5% plus equity participation. Because of this, he has raised a considerable amount of money in the last few months, and he is using the money to do some very impressive deals.

He just bought a 14-unit building across the street from the beach for $725,000! Think of that. Each beach-view, one-bedroom unit cost him only about $50,000 — and this apartment complex could be worth several million in the not-too-distant future. He also now controls three properties in the heart of a rapidly growing downtown, zoned commercial and residential. And even though they’re in a prime spot, he is generating yields of over 8%.

Whether with Peter, through my brother, or by myself, I will continue to invest in real estate so long as prices are low. If they go down further, I’ll buy more aggressively. I have no risk of losing money, because all the properties I’m investing in are making money on a monthly basis. Even if rents drop, I won’t be losing money. The 4% to 8% yield I’m enjoying will cover me even if rents go down another 25%, which is highly unlikely.

I get immediate income from these deals. Instead of getting 0% on my cash, I’m getting a minimum of 7.5% fully secured guaranteed yields by loaning it to my brother, and additional yield from the “after-debt” cash flow.

But the real opportunity is in the appreciation potential. As I said, I fully expect to make an extra $10 million in appreciation in the next five to 10 years as inflation pushes up real estate prices. I might make as much as $30 million, but I’m trying to be conservative.

There are some who say that real estate prices won’t inflate with the rest of the economy, but I think they will. Here’s why. Buildings are built with core commodities… lumber, copper, aluminum, concrete, steel. Labor is another big expense. You can’t have inflation without a rise in those costs.

Plus, as my brother points out, properties in many areas are selling for less than replacement value. In some cases, even if you got the land for free, you couldn’t build these homes for what you can buy them for today. That’s even after taking depreciation into account.

Last but not least, in many instances, it’s already far cheaper to buy than it is to rent. Eventually, this will turn the tide toward buying. It’s just a matter of time.

So that’s my first inflation-beating recommendation: Start buying undervalued, quality rental properties now. Don’t wait for the market to bottom. Just find properties that will give you a net cash flow of at least 4% to 9% after all expenses (including property taxes, maintenance, fees, etc.).

All About REO’s

Apr 22 | by | Discount Equity, Mortgages, Real Estate
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We know you’ve heard all about REO’s. You know that “90% discounts” you hear on the radio and see all over our videos, websites, seminar presentations and blog posts. Well, last week, in MSNBC.com’s Real Estate section, there was article all about REO’s. Check this out from the article:a23639c5f5d24140a91db16726cb50d8 All About REOs

“The number of homes entering REO status (short for “real estate owned” by a bank) climbed 35% to 257,944 — the highest quarterly total ever — from 190,543 in the first quarter of last year and 9% from the previous quarter, according to real-estate data firm RealtyTrac.”

Pretty interesting stuff. But the more interesting part, is about how many REO’s the banks have and how many are available on the MLS. Keep reading!

“Just how many foreclosures move through the foreclosure process and when banks sell them will be key factors in how much more real-estate prices could fall before they recover.

Most of these bank-owned properties are not making it onto multiple listing services, analysts and brokers say, despite banks having more of them to contend with.

“We have about 860,000 REOs in our database, and only about 30% of them are available for sale on the MLS,” Sharga says. “That means you have another 550,000 to 600,000 that have yet to hit the market.”

So if banks have all of these REO’s and are selling only 30% of them and have very limited time to get the toxic assets off of their books, how do they get rid of them? These aren’t available to the general public. But that’s where our “90% discounts” come in to play. Come to an REIC seminar to learn more about how REIC is participating in purchasing the 550,000 to 600,000 homes that have yet to hit the market.

Meet The Team: Josh Nuttall

Apr 21 | by | Discount Equity, lease option, Meet the team
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I am very new to the REIC team. In fact, until three weeks ago, I had only heard the name REIC once or twice on the radio and had a vague idea that they did something with real estate. Having some previous interest in real estate investing, and investing in general, I was intrigued. But I, like many others, have had experiences in real estate that turned me off to the idea of ever “investing” in real estate.

My paradigm of real estate investing had been soured by bad experiences with real estate agents, an economy in the dumps, an almost complete lack of time (because I have had to work so much to keep the bills paid), and the word “landlord.” I know for a fact that I would never make a good landlord. And I have no desire to find out otherwise.

I began looking into REIC when their Human Resource Department contacted me regarding a position I had applied for. The interview process started with a phone interview, and being the good interviewee that I am, I looked at their web site for more information about the company and what they are about. Five hours later I had to take a break and begin processing all of the information I had just taken in. I began to ask myself if this was just another scam. Can such huge returns happen in a down real estate market? During a phone interview, I asked for more information about the company. One of the questions I asked was about the growth of the company over the past year. The number I was told was astounding: over 300 percent. And this growth was experienced during a down economy. So I continued with the interview process and became successful at becoming one of the newest REIC employees.

All of this took place about two weeks ago. Based on my experiences with the people of REIC, I am confident that REIC will be around for a very long time and will help people make a lot of money in real estate—including me.

~Josh Nuttall

Investment Property Purchased

Apr 6 | by | Discount Equity, From the Coaching Corner, REIC Testimonials
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I want to take a few minutes today and talk about my experience of purchasing an investment property with REIC. I started looking at homes with my transaction specialist and together we looked at at-least seven or eight homes. Some of the homes I just hated, some were ok and other REIC clients may like them but I personally didn’t feel like I wanted to buy them. All of the ones we looked at were found by REIC.

Being a little overly enthusiastic I actually searched on Craig’s list and KSL but about ever day with new properties that I thought were a great deal. Every single time, my transaction specialist would review the property and find some reason, that I couldn’t find, that showed me that it wasn’t really a great deal.

It really helped me to appreciate all that the research department goes through and how difficult it is to find a legitimately good deal. I ended up making four offers. One was a bit out of my price range so I made a low offer and it was rejected. Two were short sales and there were others with offers ahead of me… short sales are kind of a slow game. One of the offers was accepted!!! I had an inspection done on the house and it didn’t pass perfectly but the sellers were willing to spend a little bit of time bringing it up to our expectations.

I really liked the house. It had been completely remodeled inside so it had brand new carpet, paint, doors, windows, bathrooms, kitchen and even a brand new electric stove. To be hones my wife was a little jealous especially of the new windows and stove. We have pretty old windows on our house that let in a lot of cold air and she seriously would have swapped out the stove if we had gas hookups in our kitchen.

Obviously the coolest part is that the day I bought the house my net worth increased by thirty thousand dollars and it will continue to grow from this house from now till the time I sell it. Another cool part is that I will make money through helping people. It is such a great feeling knowing that I will actually help empower people and help them purchase the home from me rather than being stuck renting and never making any headway.

~Tony Purcell

REIC Member Success Story: Rodney Beacham

Dec 2 | by | Cash Flow, Discount Equity, Down Payment, REIC Testimonials
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I grew up with Kris Krohn, and we attended BYU together.

I knew he was getting started in real estate yet, but I was cautious about anything “un-salaried” because my dad had been self-employed most of his life and had not had a steady income.

So after graduation, I started a full-time IT audit job in Seattle in April 2005. After one year I knew that would not produce financial independence nor would it satisfy all of my passions.

I contacted Kris and he said I needed to be in Utah in order for him to help me, so I avidly started looking for the right job, and finally I found something that fit and moved to Salt Lake in February 2007.

On the first day of training at my new job, Kris and his team had already found me the perfect home just 10 minutes from my work. It was in perfect condition, 5 bedrooms and 2 bathrooms (so easy to rent out to roommates), in a perfect neighborhood, etc.

It also had $40,000 of equity, but I didn’t know what that meant at the time.

I just knew the seller was desperate and was very grateful I was able to help them get out of the mortgage. An elderly couple, they had bought the home over 20 years earlier and had raised their children there. Unfortunately, the wife had fallen down the stairs due to her age so it wasn’t safe for them to have a multi-story house anymore.

So they had ordered a single-story manufactured home to be on leased land in a retirement community, and didn’t think to list their old home for sale until just one month before they were ready to move.

So their Realtor advised them to list their house really low so that it would sell quickly.

They listed it on Friday, February 16, and I put an offer on it on Tuesday, February 20 (Monday was President’s Day); by Wednesday we were under contract.

So I had it locked in for a good deal, before better offers could come in (which would take longer to close anyway since the seller was desperate).

The seller was very grateful I was able to lock in and close quickly, and even brought their grandkids over to trick-or-treat – we had a good relationship forever afterward.

At this point I didn’t know enough to really understand all the numbers or the REIC system. I just knew the seller was really happy because I was helping them, and Kris’ team told me I was getting a good deal.

Being single, I rented out the extra rooms in my house for at or below rent market rates, and was able to cash flow well above the mortgage payment, even while still living there myself.

I couldn’t believe I could actually be PAID to live in a house!

Later I bought a second home and repeated the process. The old roommates took good care of my house so I let them stay there (they’re still there now), and I got new roommates for my new house.

Again I cash flowed well above the mortgage. Between both homes I enjoy a passive cash flow of $700!

At this point I was ecstatic. I didn’t know everything about REIC, but I knew it was going really well for me.

I also knew the appraisals on both my homes were $20,000 – $30,000 above what I paid at the time I bought them, so I must be getting a good deal.

I had friends buying fixer-upper homes for $5,000 below appraisal thinking those were good deals, and so by comparison I knew I was getting an amazing deal.

That enthusiasm attracted partners – others inquired about my success and some requested to be my partners – so now I have three investment partners after just owning 2 homes.

That enthusiasm grew and grew, and I started introducing more and more people to REIC, and soon my job was getting in the way of my real estate passion, so I quit my job and started working with REIC full-time, and I’ve never been happier.

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