Archive for Real estate investing Portland

Portland Real Estate Investing: Power of Know, Like & Trust

Wow, I had some great interaction directly with a seller that I feel is important to share with others involved in Portland real estate investing.

[dropcap color=”color-default” font=”arial” style=”normal” size=”scmgc-3em”]1[/dropcap]st  I got a call from Bill, who was referred to me by a friend. Bill is somewhat of a motivated seller. When I first talked to him over the phone, he started telling me of a rental that he owns not too far from Intel campuses in Hillsboro. He’s in the process of evicting the tenant.  

He starts telling me that he owes about $85k on a place that is worth no more than $120k.  Not too exciting, as his $1100 monthly rent, does not provide any true cash-flow above his $800 monthly payments, taxes and insurance. We only talked 2-3 minutes real estate at all.  I began asking him general questions, that got Bill talking about things in his life that have nothing to do with his rental or real estate at all for that matter.  

By the end of the 20 minute phone call I knew all sorts about his life.  He was traveling the following week to Vancouver BC and Seattle area to help with a civic-service organization that he has been active in for 38 years.  I specifically probed further in this area, as I could sense it was his true passion and this lead him to open up to me.

This made it very simple to find out more about his life, finances etc. He retired about 10 years ago.  His daughter took over the business that he owned in Tualatin that still occupies a building that he owns free and clear.  As tenant in his commercial building, Bill’s daughter pays him a nice monthly income that affords him to live very comfortably.  He owns his home free and clear. AND… next door to the rental we spoke of originally, he owns another identical rental, [highlighter color=”blue-vibrant” ]except this one is free & clear.[/highlighter]  

After setting the stage above, it was very simple for us to plan a face to face meeting after he returned from his trip.

[dropcap color=”color-default” font=”arial” style=”normal” size=”scmgc-3em”]2[/dropcap]nd We met at a Sherry’s restaurant last Friday for more of the same.  

This meeting was not to analyze the opportunity.  This meeting was to further my relationship with Bill.  We scheduled 45 minutes for this meeting.  A full 40 minutes of this meeting was filled with Bill talking further about his life, lead by a few key questions by me. This is not rocket science once you get the correct mindset.  So Bill continued more about his civic-service organization, his wife, all 3 of his adult children, his grandkids and more.  

With 5 minutes left in our scheduled meeting, I decided that we should talk a little about the properties.  As I did that, he started asking me about my kids, that’s how comfortable and in-the-flow Bill was feeling at this point.  We went about 5 minutes overtime, as I reviewed my original notes about the property with Bill and added to notes and understanding about the two properties.

I told him that I would do a drive-by of the properties and get back to him this week to talk further.

People tend to do business with those people that they know, like and trust. This is true in Portland real estate investing as in most any transaction.

One of the most famous and certainly simple books to read on this subject is “How To Win Friends and Influence People” by Dale Carnegie.  This is a must read for everyone and I highly suggest it to all.  Even if you have read it a few years back, read it again and review it often.  It is great input not just for business, but for life in general.

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Whether or not I end up doing business with Bill, this is already a successful relationship for me. I have further expanded my sphere of influence, as I suggest is the premier form of marketing in creative real estate.

Regarding the Properties 

My initial thoughts are to help him unload the leveraged property by selling it to me at about what he owes so that I can break even or hooking up with a realtor to sell it retail.

THE KEY is that I will help him get rid of the leveraged property, so that I can then purchase his free & clear one with seller financing that provides a clear positive cash flow. 

[box color=”blue-vibrant” type=”round” icon=”star”]I may then wholesale this property, clearing $7,500 from another local investor who is looking for this type of Portland real estate investment.[/box]

Any questions?

To Your Success!

John

Portland Real Estate Investing: Power of Know, Like & Trust

Real Estate Investing Issue: Weekly Wednesday Update 12/07/11

Real Estate InvestingReal estate investing is one of the most popular and profitable ways to earn a great income. Usually, this is preferably in the form of passive income from investing existing money into businesses or assets. Real estate is a relatively secure option for investment, especially compared to the more volatile practice of investing in shares. We usually expect the market value of property to change quite slowly, barring a huge unforeseen swaying force.

As an investor, it is important to research the location, history, and market predictions to ensure you are putting your money, time, and effort into the best possible investment. Over time, as you repay the loan you can consider a larger amount of the asset to be yours, while ideally collecting rent as the property grows in value.

However, before taking the leap into real estate investing, it is important to first consider some of the main positive and negative points involved. First, it is most often a safe, long term investment, so is popular with people who are not looking to take much risk as well as want a solid investment to carry into retirement. The second great thing is the ability to put tenants in your property and collect rent. Of course this carries risks of attracting bad tenants and property damage, ideally a large amount of your loan repayment can be offset by this income.

Another reason real estate investing is popular is the fact that it is a real, tangible asset that you can physically inspect, allowing for a greater feeling control. Lastly, there are many great options to claim tax deductions, thus increasing your overall cash flow. You can claim the interest on your loan repayments, costs in maintaining and traveling to the property, as well as depreciation on your asset.

Despite investing in real estate being quite an attractive idea, there are a few possible things to consider. Although it is true that properties are less volatile, if it did and you wanted to sell off your asset and make a loss, it still may take several months to find a buyer unless you are willing to sell significantly below the market value.& Secondly, it is a real possibility that you may for periods of time be unable to find tenants, meaning you have to be prepared to make loan repayments completely out of pocket, in addition to other expenses.

And, there is also the risk of bad tenants. Lastly, real estate investing is often an enormous investment and will encompass a lot of your resources. Therefore, if things were to go bad it would have a larger negative impact compared to investing in several different, smaller options. Lastly, in addition to repayments and interest, there are maintenance costs and insurance, and periods of vacancy where no rent is collected. You must be prepared to pay all of these out of pocket or risk financial repercussions.

In conclusion, although it can be quite a lucrative and safe investing option, there are some pros and cons to consider before you decide to take the leap into real estate investing.

Working with Realtors – Real Incentive to Wreck Your Deals

Working with Realtors - Charlie Brown: Realtor Charlie (detail)

Working with Realtors

In my free video “Seven Biggest Mistakes in Portland Real Estate Investing” I talk about the double-edged sword of working with realtors, because of what you need from them vs. what you have to be careful of. In this article, I want to give you two insights you may not have considered about why many realtors are subtly encouraged to undermine your deal evaluations and suck profits out of your real estate investing business.

If You Look Good, You Feel Good

Many realtors consider themselves very special people. After all, in Portland tens of thousands of home buyers are working with realtors every year, seeking advice and guidance on the biggest purchase many will ever make in their lives. Like doctors, lawyers, and politicians, sometimes that authority goes to agents’ heads, and inflates their ego. Many even lose the sense of themselves as salespeople, and begin to think of themselves more as professional advisors, when in fact only the most sophisticated realtors know even the basics of what the average investor learns.

What that translates into is an unwillingness to do anything they perceive as “salesy,” including making “lowball” offers. Many of these realtors feel that it is more important to look good, like they’re bringing only big spenders, than it is to actually generate the multiple sales that are inevitable when dealing with an active investor. These realtors will tell you that they cannot or will not present your offers, though they are required to. They will tell you that the offer will be refused, with no knowledge of the seller or their requirements. They will often require you to raise your offer, and new or hesitant investors often will. Imagine shaving thousands or even tens of thousands of dollars of safety margin and profit from otherwise good deals because of working with realtors of this type.

I Make Money if You Lose Money

This is perhaps the most insidious element of working with realtors more focused on their success than true win/win transactions. As I mention in the video, realtors have no skin in the game. They’re not paying to be part of the transaction, and there’s no risk to them if the transaction fails. But it goes one step further.

The realtor is paid a percentage of the purchase price. The higher the price, the higher their commission. If they can encourage you to increase your sense of the value of a property to where you are willing to raise the purchase offer by $10,000, they will increase their income by $150 to $600. It may not seem like much incentive, but if they do that for 20 transactions in a year, that’s an extra $3,000 to $12,000 in their pockets. Even the most honest person is going to be tempted by that kind of self-driven raise, right?

However, their raise translates to an increase in your buying costs (if all 20 of those purchase transactions were with you) of $200,000 in that year. A good portion of that pure profit income that you gave up. That could be the difference between barely breaking even and living the lifestyle you and your family deserve. See how quickly that can add up?

How Can Working with Realtors Benefit You?

The good news is, not all realtors are cut from the same cloth. In fact, some realtors are, have been, will be, or have the mindset of, investors. They understand that investors can reinvigorate a local community, increase property values, bring new residents and new tax revenue, and give potential home buyers a chance at the great American Dream. They believe in you and what you do.

And they also realize that even though they may not make the maximum dollar from every transaction, they will do a lot more transactions with you than the typical buyer or seller who does a transaction every two to five years. This translates into less work pounding the pavement and looking for listings or trying to find buyers for the listings they’ve got sitting stagnant. Everybody wins.

So how can you find and start working with realtors of this variety? Ask around. Check with other local investors who are successfully working with those types of realtors. Look for them in local investors’ clubs. They’re there, and chances are, they won’t be hard to find. And when you find a good realtor who understands investing and is willing to support you, treat them as the true asset they are, and you will find that your business blossoms along with theirs, and you will make the money you want and create the lifestyle you dream. Take action and prosper.

Working with Realtors – Real Incentive to Wreck Your Deals

Business Structuring – Making Money? Now Cover Your Assets

WARNING: DO NOT READ ABOUT BUSINESS STRUCTURING UNLESS YOU HAVE COMPLETED AT LEAST TWO SUCCESSFUL TRANSACTIONS

Business Structuring at IBM/Tabulating Machine Co. organization chart

Business Structuring Follows Profit

I’m not trying to be mean with the warning. I just don’t want you to waste your precious time focusing on things in the wrong order. Try dialing a phone number where you dial the area code AFTER you’ve dialed the 7-digit local number and see what happens. Order counts. I’m mentioning this topic now because chances are, once you’ve started actively investing, you’re going to start hearing horror stories of loss due to lack of preparation in business structuring.

So, let’s take a look at a few ways to structure your business to protect your family and personal assets from legal and financial liability, and to minimize your tax burden. Please note that I’m not a licensed CPA or attorney. I’m just sharing some of the things I’ve become aware of in my time as an investor. When you’re ready to CYA, I strongly urge you to get qualified help from a good local lawyer, accountant, and financial planner who understand Portland laws and tax structures. Here they are.

Business Structuring Types

  • Sole proprietorship
  • Partnership
  • Limited Liability Company
  • S Corporation
  • C Corporation

Sole Proprietorship

This is the most common, and cheapest, form of business structuring. It allows you to use a legal business name, and that’s pretty much it. There is no financial or legal protection of any sort. If there’s a problem, it comes down on you, your savings, your home, your car, your boat, and any and every other personal and real asset you own. However, you can start writing off business expenses, including a home office.

Partnership

Two or more people come together and share in the risks and the rewards of the business. Many single-property projects that are called joint ventures are in fact partnerships built around a single property. This is one of the reasons why you will see numerous investors who are in completely separate joint ventures with other investors. Each property is inside its own partnership agreement or other corporate entity.

Limited Liability Company

Many people mistakenly refer to this as a “limited liability corporation” but in fact an LLC is more like a partnership than a corporation. LLCs have become very popular in recent years for real estate investors, as they are less expensive and often require less administration than corporations, but still provide excellent liability protection.

S Corporation

The S corp is the “Small” version of the C corporation. It’s simpler to administrate than a C corp, but harder than an LLC. Similarly, the financial tax benefits kick in at a higher revenue level than an LLC.

C Corporation

The Daddy of all business structures, the C corp has the highest administrative burden, but generally provides the greatest legal and financial protection. Of course, you need to be generating something like $100K a year before this even becomes an option for most investors.

The best way to determine the business structuring right for you is to ask yourself a few key questions and share the answers with your mentor, attorney, CPA, financial planner, and marketing team or consultant (believe it or not, how you set up your business can affect how well you get found in Google, and how you market your services). After you’ve gotten all their feedback, then you can weigh the information and make the best decision for you.

Here are a few questions to consider, in no particular order (remember to invite input from your professionals as well):

  • How good are you at maintaining records?
  • Will your properties ever be occupied by tenants?
  • Will you be joint venturing/partnering with other investors, and if so, how often?
  • Will you be working from home, or from an office?
  • Do you own your own home or any other significant personal or real assets?
  • How much will you make from investing this year?
  • Will you be using your own funds to invest, and if so, what financial vehicles are the cash in?
  • Are you looking to get found online by prospective sellers or buyers?
  • Will you be engaged in construction or remodeling, personally or through subcontractors?

Proper business structure is only one side of preparation. In my free video “Seven Biggest Mistakes in Portland Real Estate Investing” at HowToInvestInRealEstatePortland.com I also talk about the members you want to have on your real estate investing “dream team.” So make sure you’re making money in real estate first. Then get your business structuring in order, make sure you are surrounding yourself with the best teams to protect your assets and to take your business forward, and you will enjoy peace of mind as well as wealth of household. Take action and prosper.

Business Structuring – Making Money? Now Cover Your Assets