Februarynewsletter2015c

Newsletter

Association events and meetings - knowledge, contacts and results AlamoREIA.org

Please feel free to distribute copies of articles contained herein.

Page 1

Today is a fabulous day. Why? Well, your newsletter is here. It’s just jammed with great information.

If you’re actually reading this you should be super happy, because you are a member of the Alamo REIA. Hey,

you have access to some of the latest thinking in the real estate investment field. Second a whole bunch of the

stuff can be implemented immediately. And lastly, you’re getting something useful in the mail. It has to make for a

better day.

News – 1. The oil price has collapsed. Our tenants and buyers have more disposable income.

2. March is around the corner and it’s the very best month to move property. Yep, it’s when people can move their

children to new schools.

Event venue is the Double Tree Hotel (37 NE Loop 410, located at the corner of Loop 410 and McCullough Rd.).

Time 6:30 p.m. on February 12th 2015

The venue provides an outstanding pre-event dinner from 6 to 6:30 and Cash bar till close.

Contents: - Event speaker – Michael Plaks –

Immigrant and extraordinary investor. If he can make it so

can you – learn the simple lessons from Michael.

President Message

Cap rate

Musings from the Office

Gas price and what it means to property

What “one house can mean for your future – a must read

In this edition of the Newsletter

How to find rental properties – in last

month’s edition

How to find properties to rehab – in this

month’s edition

How to fix em up.

Huge Inconsequential Notice

1. We are working to get the MailChimp program

working and resume direct emailing to our

members and other interested investors.

Micheal Plaks

“What works and

what does not

work in RE

investing: the

hidden truths”

There are so many different ways to make money in

real estate. All of them work great – IF you believe

the gurus, the promoters and your fellow investors.

But should you believe them? Are they telling you

the truth? Who can tell? Michael Plaks can! Why? Because, as a real estate accountant, he sees what nobody else can see: the real numbers. You can lie on stage or to your friends, but you cannot lie to your accountant. After looking at the successes and failures of hundreds of his clients – all real estate investors – Michael acquired

The only San Antonio chapter of NATIONAL REIA

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This Newsletter is produced by the Alamo Real Estate Investors Association The Association does not purport to offer legal advice and you are encouraged to consult with an attorney about legal matters related to

property transactions.

Ideas only from Alamo REIA

unique insights into what does and what does not work in real estate. Some of the top 10 things that work well: narrow focus, buying subject-to, selling rentals with owner financing Some of the top 10 things that do not: “handyman specials”, out-of-state investments, 50/50 partnerships. Don’t you want to learn the rest of them and discuss the reasons? Of course you do! Do not miss this informative and controversial presentation.

“10 business habits that will save you thousands of

dollars in 2015” By now, most of our New Year resolutions are discarded. We will return to dieting, exercising and meditation next year. Right now, we are focused on making money. Michael Plaks will help us keep more of this money in our pockets and save time and trouble while running our real estate businesses. It takes some simple to adopt habits, such us utilizing phone apps for bookkeeping chores and verifying interest calculations. Let’s tighten our business practices and run our operations professionally and efficiently. Michael will show us how, so make sure to attend and take notes

President’s Message, February 2015

Happy February!

We have many events happening this month to help grow and achieve your business goals, plenty of opportunities for you to take advantage of. Michael Plaks, a Federally licensed Enrolled Agent (EA) with extensive experience helping investors with IRS audits and other stressful matters, is bringing his expert knowledge and his quirky sense of humor to our main meeting February 12, and showing us what “really” works in real estate and makes you money and what really does not work and why. You can lie to everyone else but you cannot lie to your accountant, they see your true numbers. After looking at the successes and failures of hundreds of

his clients – all real estate investors – Michael acquired unique insights into what does and what does not work in real estate. He will share with us on what works well: buying subject to, selling rentals with owner financing, and what does not work out: handyman specials, out-of-state investments, and 50/50 partnerships. He will also tell us 10 business habits that will save you thousands of dollars in 2015! If that’s not enough he’s graciously agreed to travel back to San Antonio and do a 2 day boot camp, February 28 & March 1, on Real Life Accounting for Real Estate Investors, You need this unique course if you are:

1. New investor ready to set up good bookkeeping practices

2. Experienced investor tired of lousy accounting and wasted money

3. Bookkeeper working with real estate investors

We’re not done yet, remember we have all of our Focus Groups happening this month: Ladies Focus Group, Landlord Focus Group and our newly formed Flip Focus Group! Make sure you join us on Meetup.com to get the latest

information on locations, dates, and times.

And one of our biggest events we will be hosting this year is Ron LeGrand! Yes, we are honored to have the national real estate mentor of many successful real estate investors himself coming to Alamo REIA and hosting and all day event, if you are going to be real estate investing then you definitely need to know who this godfather of real estate investing is. We will have more information on this at the main meeting.

Lots of things to do this month, mark your calendars now, register, do whatever you need to remind yourself of all the great things to go to at Alamo REIA this month!

Happy Investing!


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“All people are self-made. Only the successful people admit it”. ~Ron LeGrand. Sharon Fernandez, President.

Cap rate

By Tim Herriage, Managing Director, B2R Finance The capitalization rate, or cap rate, is the rate of return on a real estate investment property based on the income the property is expected to generate. It is an important consideration for investors looking to

buy rental homes.

Let’s look at an example.

A three-bedroom/two-bath

single-family home is listed

for sale for $200,000. You’ve

done your research on the

neighborhood and have

determined that the home

can command a monthly rent

of $1,900. You’ve also viewed the home in its current

condition and you have estimated that your annual

expenses will be about $9,100.

In considering your annual expenses, you should take into

account these items: annual real estate taxes for the

property, property and liability insurance, any utilities that

you will be paying, repair and maintenance costs; HOA

dues, management fees and projected vacancy expenses.

In this example, we estimated annual real estate taxes at

$4,500, insurance at $1,000, vacancy costs at $1,100 and

maintenance expenses at $2,500 for a grand total in

annual expenses of $9,100.

To figure out the cap rate, we are going to take the income

that we expect the property to generate ($1,900 x 12 =

$22,800) and subtract our annual expenses ($9,100) to get

an expected annual net operating income of $13,700.

We then divide $13,700/$200,000 to get a cap rate of

6.9%.

Using the cap rate is a good way for a SFR investor to

compare multiple properties in a given market against one

another to see which one might offer the best rate of

return.

The higher the cap rate, the better the annual rate of

return. Based on the investor’s objectives, a home with a

10% cap rate might be a better investment opportunity

than a home with a 3% cap rate. Keep in mind that higher

cap rates can indicate increased risk as well. Investors will

have to decide for themselves the minimum cap rate they

are willing to accept. Is a 5% return sufficient or will a 7%

or 8% cap rate be your floor?

In our example above, let’s say you’ve decided that the

minimum cap rate that you are willing to accept is 7%.

Take your annual net operating income/cap rate or

$13,700/7% to get the amount you should pay for the

property you are considering.

In this example, you would need to offer $195,715 on the

listing to reach a 7% cap rate.

To review, the cap rate equation is yearly

income/purchase price. Remember to factor in expenses.

It’s also important for investors to realize that this isn’t a

fail-proof equation, as unforeseen expenses can occur or

your estimates can be off. Make sure you have a cushion

of funds after the mortgage is paid for unexpected

expenses that could cause your cap rate to be lower than

what you calculated.

Say, for example, the property sits vacant for longer than

you anticipated or that a tenant causes expensive damage.

It’s important that you consider your rate of return against

worst-case scenarios to make sure that you don’t end up

with a negative rate of return.

Cap rate isn’t the only thing real estate investors should

consider when investing in single-family rental properties,

but it is certainly an important one to recognize.

Musings from the office – 1

JARGON BUSTER

Gross rental yield = Annual rental income (weekly

rental income x 52) / property value* x 100

* Can be purchase or market value

In the below example the rental yield is 13.6%

Property purchase price = $75,000

Monthly rent = $850.00

(850 x 12) / 75,000 x 100 = 13.6%


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Whilst the gross rental yield is a simple calculation to

use it’s important to note that it doesn’t take expenses

into account. A property may have a high rental yield but

may also have high expenses making the rental return low

when taken into consideration.

If you do want to want a more precise calculation you

will need to know (or estimate) the total expenses of

property including both purchasing and transaction costs

(property purchase price, closing costs, legal fees, pest and

building inspections, any loan fees, let up expenses etc.)

and annual costs such as vacancy costs (lost rent and

advertising), repairs and maintenance, managing real

estate agent fees, home insurance, rates and charges etc.

Net rental yield = (Annual rental income – Annual

expenses) / (Total property costs) x 100

HOT TIP: Increasing the yield of your property (by

increasing rent) will not only increase your cash flow but

also potentially increase the value of your investment.

Musings from the office- 2

On being late

This could be quite close to the bone for many. It may

be a little old-fashioned because it is nothing to do with

“fashion” or “generation”, it’s got everything to do with

basic manners and respect for other people.

How is it okay for people to be late for everything?

It seems to me that if the meeting is set to start at 9

AM, for some people it’s in the general vicinity of that time

and it’s more like 9:30 for example.

People drifting anything between 9:10 and 9:20. They

smile warmly at the waiting group as they unwrap their

breakfast sandwich and are apparently totally

unconcerned that others have been here since 5 to 9

preparing for the start. The fact that they’ve happily kept

10 or more people waiting for 20 minutes while they

selfishly detoured via coffee shop wasting 20 or more

minutes.

Let’s extrapolate. 10 people are being kept waiting

for 20 minutes. That’s a total waste of 200 minutes. Oh

how I wish I could send a bill to those late comers.

But it extends even further than this, people invited

to a dinner party let’s say at 7:30 and think it is fashionable

to arrive at 8 or 8:15. No consideration is given to the host

and hostess who have prepared the meal to make it the

very best and now it is ruined by being kept in the oven for

these late stragglers.

This is just rude and totally inconsiderate behavior.

Which brings me lastly to the doctors. If you were to

keep your doctor/dentist waiting for 50 minutes as they

have done for years it makes want to just walk out and

literally say to the receptionist that when the doctors

ready for him to call you.

The usual excuses that the doctor is “busy”. What?

You mean I’m not busy? How would it be if I were to send

you a bill for my time?

End of rant.

The Gas price and what it means for property in

South Texas.

The price of gasoline dropping is going to have a

major impact on the property market in South Texas.

A new oil wells takes about two years from concept

to production. With the price of gas dropping so radically

it’s highly unlikely that additional exploration will occur.

Because no exploration occurs employment in the industry

is going to drop off precipitously. The businesses that cater

to the exploration industry are going to go bust. The

applies to not only to the exploration companies but also

to the corner grocery store, gas station, hotels and of

course the landlords renting out leverage property.

It seems probable that much of the rental in the entry

will be coming back to market as repossessed stock. With


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the decimation of the transient population one can expect

a huge number of vacancies and without doubt a

depressed real estate market.

The question to ask is, how will this affect me as an

investor?

We will see vacancies occurring very rapidly in the oil

profit dependent cities, Houston being the prime example.

San Antonio will not be spared.

With this large number of properties becoming

available and the lack of the population’s ability to make

the monthly rental payments downward pressure is going

to be evident.

How to rehab a house.

If you have never rehabilitated a house, then it is

imperative to hook up with a mentor.

A rehab starts with imagining in your mind’s eye what you

would like home to look like after it has been completed.

To build the “Taj Mahal” in a 50,000 thousand dollars

neighborhood is not a good idea. Temper your imagination

to the neighborhood.

Outside the house the first thing to do is look at look curb

appeal. Often it’s easy. Clean up the yard, cut back the

overgrowth and paint the house.

Let’s look at the inside the first thing to do is to walk

around and look at everything below knee level. Make a

note of what needs to be repaired and replaced or

upgraded. Now walk around the home again and look at

anything above knee level and do exactly the same thing.

We now have some idea of what is required and you

can start to make a list of the necessary bits and pieces to

put it together.

The areas to concentrate one’s efforts are 1. The

kitchen. 2. Bathrooms. 3. The rest of the house, in that

order.

Where do you get ideas? Talk to people within the club

and go and visit some of the rehabs in progress. Ask,

many of us have projects going all the time. It’s quite easy

and a huge amount of fun. Do it.

WE ARE ON FACEBOOK AND MEETUP.COM!

Looking for a place to post deals, find deals, ask about contractor referrals, ask real estate investing advice, etc.? You now have a place to communicate with your fellow members online! Join the group now, it’s FREE and part of being a member!

www.facebook.com/alamoreia www,meetup.com/alamoreia

The Focus Groups are up and running. We have a Woman’s Meeting once a month – talk to Sharon Fernandez. The Landlords

Focus Group is run by Harold. Don’t mess about get involved.

“Subject to” Focus Group is looking for a night to meet as is the “Note buying and trading Focus Group”. Please contact

[email protected]

mailto:[email protected]


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WHAT "ONE" HOUSE CAN DO FOR YOUR FUTURE Editor’s note: - Please make a copy and give this to your children A landlord recently made the following comment in response to a new landlord getting started with just one rental home,

"Bothering with one house 90 miles away from your home...Why bother?"


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A long time landlord who has lived to see the value of "one" house responded. Thanks Robert J(CA) for sharing! Do you know what one rental house will do for your future? When I turned 16, instead of buying a new car for myself, I saved my money and on my 18th birthday purchased my first rental home. Here's what that one home did for me: 1) During the first 10 years I was able to get enough rent money to pay all expenses and save a little towards emergency repairs or vacancies. I was also able to take several tax deductions, as an investor-landlord, which saved me $3,000 a year on taxes on top of the positive rental cash flow. 2) During the next 10 years I was able to slowly raise the rent and double the income, making me $1,000 a month positive cash flow and paying down the mortgage. 3) During the last 10 years I paid off the property, received triple the original rent, and now pocket $2,000 a month in positive cash flow and have an asset worth half a million dollars. So one rental property gives me $2,000 a month income, makes my net assets rise by 1/2 million dollars and provides a nice supplement to my retirement. In 30 years, think of how the property will be paid off and make you a great income.

Thanks – MrLandlord.com.

Support our vendor members.

ISB Capital, LLC. – Private Money

Lydia Herrera

141 Danube Suite 102

San Antonio , TX 78213

210-447-9129

[email protected]

www.isbcapital.com

R.E. Capital, LLC – Hard Money Loans Mitch Stephen 11207 Perrin Beitel, Suite 303 San Antonio, TX 78217 210 669 4020 [email protected] www.Loans2Go.net.

Longhorn III Investments – Hard Money Loans 13750 San Pedro Ave, Suite 810

San Antonio, TX 78232

T: 877.420.7346 - : - M: 713.409.6386

Contact: Scott Fleming & Chris Jameson www.longhorninvestments.com

Value Funding, Inc

Fix and Flip Lender

210 649 8807

www.valuefunding.net

Property Maintenance

Birdy Maintenance Web : WWW.birdymaintenance.com Office # (210)314-5110

Alamo Area Virtual Tours LLC 210 325 2675 www.alamoareavirtualtours.com.

Elite Star Inspections 210 719 1282 www.elitestarinspections.com

Alamo Lawn & Landscape Recovery “Has your lawn gotten away from you? Let us RECOVER it!” Call 210 689 6289 Cell 210 605 3280 [email protected]

http://www.birdymaintenance.com/

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Your advertisement here next month

Angela Marrero, Escrow Officer Providence Title, 700 E. Sonterra Blvd., Suite 1215,San Antonio, TX 78258 Off: 210-495-0396, Fax: 210-495-8018 [email protected] www.protitletx.com

Got a House to Wholesale? Experienced investor looking for inexpensive properties on the South, East and West sides of town. Call Alma at 858-9862

Need to advertise our business? Members are entitled to a free two line classified ad in our future issues of our Newsletter – cutoff date for

all submissions – 15th of each month –

publishing date 20th of the month.

As a member we are entitled to

discounts and/or cash rewards at Home

Depot, Office Max and Sherwin

Williams. Do not forget to register. This

is our association working for us.

Real Estate Investing for Dummies – Ralph R Roberts – from Barns and Noble

Your practical guide to scoring cash to fuel your real estate investments

Want to be a smart, successful real estate investor? This no-nonsense guide contains everything you must know to make the right choices about financing your investments — from the various options available and the impact on cash flow to the tax implications and risk factors involved. You also get tried-and-true tips for surviving a down market and using current investments to finance future ones.

A crash course in real estate financing — understand standard terms and concepts, learn the various sources of investment capital, and gather all essential facts and figures

Weigh your options — decide which type of financing is best for your circumstances and incorporate it into your real estate investing plan

Finance residential properties — evaluate residential loan programs, navigate the loan application and processing, and handle the closing

Invest in commercial properties — know the different property types, choose the one that meets your

investment goals, and discover unique sources for financing

Tap into unconventional sources — discover the pros and cons of "hard money," capitalize on seller financing, partner to share risk and equity, and invest on the cheap with no-money-down deals

Open the book and find:

Real-world advice on financing without tying up all your capital

How to get prequalified or preapproved for a loan

Questions to ask your lender upfront

Ways to avoid common beginner blunders

How to protect your personal assets from investment risks

Bargain-hunting hints for low-cost loans

Strategies for surviving a credit crunch

Ten pre-closing steps you must take

Please read it. Editor – Peter Michael ––

[email protected].

Classified ad section.

Pablo Uresti, Attorney - Licenciado 2302 N. Zarzamora Street,SA, TX 78201

210-736-6800//C 210-262-6945

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Peter is looking to buy

financially up-side down

houses:

Call 210 523 9990 right now

Your ad here next month


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Four ways Alamo Real Estate Investors Association pays for itself

1. Home Depot 2% rebate. Shop at the Home Depot? Get a minimum of $50 a year off your Home Depot

purchases with your Alamo membership. You don't have to apply for a credit card either! Just register the

card/s you already use and Home Depot will send you a check twice a year.

2. Free shopping savings. Save as much as 30% off paint and paint sundries at Sherman Williams, 20% off

your Rentals.com listings, 20% off your Constant Contact membership and up to $100 off a year with Roto

Rooter. There's always a discount available to you at OfficeMax.

3. The National REIA business builder provides.... All the tools you need to run and market your real estate

business including website, hosting, property management automation, lead generation, foreclosure

tracking, squeeze pages, all deeply discounted for membership... All of which is needed and a

requirement to start your real estate business.

4. It will soon possible to by Notes (First Mortgages) directly at a huge discount.

This is a package that is now included as part of your membership.

Joining Alamo REIA is a no-brainer

Other benefits:-

Local contact with the very best and successful real estate professionals. Structured networking. Regular market reports. Meet the finest real estate trainers in the country Find partners to one or more deals while learning. Easy to find sources for your real estate funding.

Your best resource for real estate investing success is a group of other investors in your area who are already

successful. In his book, "Think and Grow Rich," Napoleon Hill spoke of the "Mastermind Group" necessary to achieve your success.

AlamoREIA is your mastermind group. Whether you need a partner, funding for a deal or just the security of knowing that "this stuff works," the Alamo Real Estate Investors Association is a vital part of your success plan, but please consult with your often neglected partners, you attorney and accountant, before you set off on any investment path.


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Back Page Tip # 1 Save yourself time and worry when flipping at a retail level. The buyer agent is going to ask for 1. A

survey and you are going to pay for it. Get it done before listing. 2. This is really where the worry part get banished. Have the inspection done by your tame inspector. He will tell you what needs fixing. When the buyer’s agent comes to ask for the property to be inspected, Voilà! you have it to hand. If the buyer’s agent dose proceed with a second inspection, yon hand the report to the new inspector and guess what? He/she is not going to find too much wrong. He/she is not going to argue with a fellow tradesman. Oy, peaceful sleep.

Back Page Tip # 2 Want to rent a property fast? We all do. List it on the MLS and offer half the first month’s rent to the

agent. Seems expensive, but try a vacancy in comparison. You will in all probability be offering more than anyone else and that means your house gets shown. Further you do have to talk to the prospective tenants, going through all the same old story so many times a day. Then the agent does the showings. They go out and wait for the prospects. You do not have to worry about being there at any time and the no show prospect is NOT YOUR PROBLEM. Lastly you control the application process through the agent and it insulates you from the hassle factors and sob stories. Oh, yes the MLS auto lists your rental on Zillow, Truili and Realty.com. This is just the very best advice EVER.

Back page Tip 3 The amount of money required to build a viable rental portfolio can be daunting. The jump from

relatively easy credit for up to 4 rentals to the next level, $500,000 asset value, will stress most. The solution is to learn about Equity Holding Trusts and use this vehicle to buy ‘subject-to’ without all the agro (Americanizes – aggravation) such as credit, violation of any acceleration clause in a regular loan/mortgage document and reduce the maintenance issues involved. .

Wow, this is not normal junk mail. HAPPINESS. It’s not an account, a window envelope, a demand for money, a heartfelt charity letter or a

solicitation. It’s just solid information that can be used immediately. This is your very own copy of the monthly newsletter.

That’s why today is a brilliant day.

Februarynewsletter2015c

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