508: Trailer for Season 6 - Case Studies
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Episode Transcript
00:02
Welcome to Episode 8 of Season 5 of the Growing Empire Show. Today we're going to recap season five, let you know what to expect for season six, and I'm going to share some success stories from our investors that have recently sold some investment properties. So stay tuned.
00:20
Welcome to Growing Empires — hosted by real estate entrepreneur and trusted investment advisor Jennifer de Jesus. Growing Empires provides insight to building wealth through passive income producing real estate investments. For those who want to build and manage a more profitable real estate portfolio.
00:39
Well, season five is wrapping up, and I hope it did not disappoint. This season, we talked about selling your investment property and everything that you need to know to be successful at doing so. We talked about how to squeeze out every penny, how to make the most profit, and exactly what you need to do with your building to prepare your property for sale. We talked about marketing tricks that you need to know and we talked about the famous phrase “as is” and what that means to your investment property sale. We talked about how to navigate problem tenants as well as how to make a decision on what deferred maintenance you should take care of before you sell your property as well as any capital improvements that you should consider or not consider when selling your investment property. In our marketing trick segment, we talked all about all the tools that you need to be successful at selling your investment property. We talked about a rent roll, an “OM” or an offering memorandum and what that means to your investment property sales what was included in that. We talked about the need for professional photography and videography. We talked about the need for an expert in the marketplace to make sure that you get the most out of your investment property sale. We had a nice question and answer segment in Episode Six and I hope you did not miss that episode. There was some great questions presented by my listeners. And then we went into what to do with that money once you sell and when you should consider if you want to defer the capital gains with a 1031 exchange. So let's talk about some investors that won the money game as far, as I'm concerned, with their investment properties by picking the right time to sell. When I talk to investors about the time to sell and whether it's the right time or not, it's commonly very much like the stock market. You've got to know when is the right time to buy, when is the right time to hold, and when is the right time to sell. And although you may go into a property thinking that I'm going to hold this property for five or 10 years, this is going to be my retirement plan. The market may dictate something different to you. In this particular case, our market, as you've heard me say it's been very hot, and it's forced some people to sell. Because the profit or the equity that the investors had built up in these properties was just so good that it made sense to pull it out and reinvest it. Now you don't always have to sell a property to pull out your equity, or to pull out what your building has appreciated. You can also do a refinance. And typically when the market is in great demand and sales are good, interest rates stay low. So it could also be a very good time to pull out money just based on a refinance of your property. In either case, you've got to know what to do with that money. But I want to talk about some of the case studies of things that we've done over the last couple of years that have been super successful for investors and things that I want you to know that you can actually mimic. So we had a seven unit property that was purchased for $560,000. That property was held for two years. The first year they made $28,000 of profit, the second year they made $33,000 of profit. They made modest improvements to the property in the way of just turnovers and cosmetic improvements when the units had turned over. They increased the market rents and they sold the property in about their second year, just shy of their third year. And they made $660,000. So $100,000 of profit, plus over $60,000 worth of profit from the cash flow each year. Not a bad hold for a two year strategy. That property was purchased with a 20% down financing and that investor really did a great job of making some money and knowing when to pull out. The next property was a single family home was purchased for $70,000. Renovation costs were just under $21,000. So all in we're about at 91,000. That property was purchased, rehabbed, and sold within six months for $160,000. So again, not a bad return on investment. The next one I want to tell you about is a three unit investment property. This property was purchased for $95,000. And again, had tenants in place there wasn't a lot of renovations that were required. So modest maintenance and improvements as units would turn over. The first year, the building made $6,000. The second year, the building made $7500. The third year the building made $13,000. And then when the building was sold, it was sold for $178,000. Again, not a bad deal. Now we have a 15 unit investment property purchased for $565,000. Renovation costs were $250,000, all in costs $825,000. The first year was obviously a lot of renovation. So there wasn't really any profit made, it was all renovation costs. By the second year they had made $60,000. The third year they had made $63,000, the fourth year they made $65,000. That building today is worth $1.4 million.
05:54
The episode will continue in just a moment To make the most out of your investment property sale, you will need a team that understands the market fluctuations and how to capitalize on that demand. Knowing the market trends and forecasting economic changes is critical to your success. Having an expert by your side to help you buy low and sell high is the only way to create true wealth. When you need help analyzing your portfolio to maximize your return on investment, there's only one person you need to call and that's me. I will help you analyze your portfolio and increase your profitability year over year and that's my guarantee. Schedule a call with me today at growingempires.com, that's g-r-o-w-i-n-g-e-m-p-i-r-e-s.com. And I'll help you create the life that you desire with passive real estate investing.
06:41
Now lets talk about some properties that maybe didn't need any renovations. 14 unit, purchased for $755,000. That building was purchased with the intention of just holding steady. It was a really good deal on a really large building. All the rents were under market rates, but they didn't want to really risk any turnovers. First year they made $48,000. Second year they made $94,000. Third year they made $76,000. That building today is worth almost $2 million and clearly is still in a hold pattern because it's such a great profitable building. Another hold strategy was a seven unit $475,000 was the purchase price. The first year they made $26,000. Second year they made $31,000. Third year they made $20,000. That building today is still being held and it is worth roughly about $650,000. Now these were all value add place. Some were made to buy and hold for long periods of time. Others were bought just to improve and then sell. And then there was one that I explained to you was a flip property. But I could go on and on about these types of deals. The thing that I need you to know is that, when we're talking about profit, we're talking about net cash after debt service. We're talking about net operating income. And we're talking about the actual cash flow of the building. These were all value add plays. So in some cases, we had to put a lot of renovations in. Sometimes those renovations were needed up front. Sometimes those renovations were needed over a period of time. And it's really important that when going into an investment property that you have a plan in place for what the expectations are. But you also need to have a backup plan in the sense that, when you're buying a property with tenants in it, there's really no guarantee to know what's going to happen. You would hope that the tenants would stay, in some cases, and you would hope that they would pay an increased rent. And you would hope that the repairs and maintenance on the buildings would be somewhat stable. But that's not always the case when you're going into a value add proposition or a building that is occupied with tenants.
08:47
Next season, we're going to talk about purchasing investment properties and what to be leery of. We're going to go through a high level step by step overview of the process. We're going to talk about how to protect yourself from buying the wrong property. We're going to go into the importance of the right team and how to make sure that you have everybody set up ahead of time. Time is money. So you want to make sure that after you've bought your investment property, your plan is already in place. You don't want to wait to you own the property to go set up and get estimates and find contractors because all of that downtime is going to be very costly to you. So we're going to talk to you about the importance of the right team and how to get that team set up in advance. We'll go through our question and answer segment as we do every season and we'll talk about due diligence time. What exactly should you be looking for? How to protect yourself. When to know is it time to turn away from the deal or terminate the deal and when is it time to move forward? What should be your tolerance threshold on each deal and how to know when it's just not a good deal any longer. So we'll talk all about due diligence time. I think you're going get a lot out of season six, so please make sure that you stay tuned and until next time, take care
For more information about how Jennifer can help you plan, develop, and manage a strong real estate investment portfolio, visit growingempires.com