What’s the Investor Opportunity Forecast for 2017?

What’s the Investor Opportunity Forecast for 2017?

Are we off to a Happy New Year America?  Things affecting our business could be changing big time in 2017.

For the real estate sector there are many areas likely to be affected by the new administration.  Residential and commercial construction, infrastructure projects, interest rates and legislation are all likely to see increased activity.  Which will have the greatest impact remains to be seen.

Residential construction will likely outpace commercial projects and eventually bring balance to many areas of the country.  Currently there is a seller’s market in many MSAs with brisk sales reported in many parts of the US.  According to the National Association of Homebuilders, there is only a 4.6 months supply.  A balanced market is usually reflected by about a 6-month inventory.

Things look promising for increases in infrastructure projects, which will create jobs, not low wage – fast food jobs but more skilled labor jobs with higher paychecks.  America’s roads, bridges, airports and tunnels need, in large part, a major facelift.  Infrastructure projects appear to be a priority for the new administration.

The elephant in the living room for most people involved in the housing markets are those pesky interest rates.  10-20 loans dating back to 2006 that haven’t been refinanced are now beginning to reset and will likely put a lot of properties at risk.  It might also create some excellent buying opportunities from sellers who will not be able to handle the significant increase in their monthly payments.

More importantly are the concerns that rising interest rates will dampen the robust seller’s market.  Interest rates are very likely to rise because there is nowhere for them to fall as they remain at historical lows.  With the growing reports of increased consumer confidence driving fears over inflation (which the Federal Reserve seeks to control with interest rate hikes) we’ve seen the first increase in an exceedingly long time.  More will follow, but remember this, at $20 Trillion in government debt, interest rates cannot rise too fast or our federal government’s interest only payments would cause a further decline to our nation’s debt rating and increasing a risk of recession.

Last, but certainly not least we are likely to see legislative reform involving the Wall Street Reform Act, commonly known as Dodd-Frank.  This legislation is not all bad but it has had negative consequences in the provision of liquidity for the residential housing market.  Over-regulation and a lack of accountability of the Consumer Financial Protection Bureau has in some ways hamstrung banks.

Dodd-Frank has also impacted the ability of investors across America to provide seller financing to underserved sectors of the population in a manner that makes it beneficial for all parties involved.  It remains to be seen what changes will occur but with the support of organizations such as National REIA and the National Association of Realtors there may be some relief in sight.

Price growth I continuing on along the east and west coasts and major inland cities.  The breadbasket and rust belt states are likely to see less price volatility while enjoying rent stability.  Both types of areas create opportunity for the disciplined investor whose exit strategies are guided by their acquisition methodology.

OK, so what do we as investor’s do?  Keep making offers; use good metrics on your real estate purchases, use positive leverage – don’t speculate and work within your sphere of influence.  While it is possible, even probable, for rates to rise in 2017 they do not rise vertically.  They rise gradually over time.  A 50 to 100 basis point increase could happen between now and year-end but what does than mean to buyers in real dollars and cents?  This is the key question not what the alarmist media broadcasts.

The payment on a $100,000 mortgage at 4% is $477.42 a month and at 4.5% it rises to $506.69 a month.  That is less than a dollar a day or about 1.6 Starbucks a week and an increase to 5% increases the payment to $536.82.  Yes, this can impact some families but if they are that tight on their monthly budget, they may be better off waiting to purchase a home.   And yes, that would diminish demand somewhat but by how much?

Many of the families that would potentially fall into this category will be buoyed by the improving jobs market and higher wages.  I don’t want to sound like a societal blasphemer but there are some families that do not and should not qualify for home ownership until they have a better financial position.  In many cases they need education to help them understand how to become a successful homeowner.

They need the financial discipline required to manage a household budget and the responsibility that comes with home ownership.  This is where rent to own and lease option programs can really serve families who want to achieve the American Dream, but aren’t fully ready, can benefit from working with investors.  They can become homeowner’s in training; learn the ropes, save for a larger down payment and clean up bruised credit that will qualify them for lower interest rates.

All told, these are my personal opinions and you are welcome to agree or disagree but know this, 2017 will have plenty of opportunity for those willing and able to get out there and take effective action.  Rentals will remain vibrant, as rents are likely to continue rising and fix and flip activity will serve those who buy right and deliver a quality product.
The clock it ticking so keep learning, keep growing and keep making offers!  It isn’t construction, legislation or  interest rates that will make 2017 a great year … it’s YOU!  So play full out and take effective action everyday!

Augie Byllott is a full time real estate investor, trainer, speaker and coach.  He is also the author of the Financial Freedom Formula now available on Amazon.com.

Check our upcoming events calendar here http://www.creatingwealthusa.com/

Practice Makes  Perfect? Well, Not Exactly…

Practice Makes Perfect? Well, Not Exactly…

Practice Makes Perfect? Well, Not Exactly…

When I first began investing in the early 1980’s I did what I thought were all the right things. I read books, listened to tapes and gurus, but for some reason even with all that education behind me I found that I didn’t close as many deals as I thought I should have. Have you ever felt that way?

As I think back, I learned many important lessons in my life, but some of the most important ones came from professional sports. Back in 1983 I had the opportunity to attend my first professional golf tournament, the Doral Open in Miami, Florida. I was the guest of AT&T, one of our corporate vendors, (yes, friends, I had a real job back then) and I have to say, I was impressed.

They did it all first class; a hospitality tent, gifts for all the guests, cocktails and gourmet food. I had never experienced anything like it! It was all a bit intimidating for a junior executive just starting out.

P110905sc-0250dh President Bush presents PGA champion Jack Nicklaus with the Presidential Medal of Freedom Wednesday, Nov. 9, 2005, during ceremonies at the White House. White House photo by Shealah Craighead

During the second day at the tournament I came face to face with one of my all time idols, the Golden Bear; none other than Jack Nicklaus. I was nearly speechless but at least had the presence of mind to wave my pairing sheet under his nose for an autograph, which he graciously provided.

So how does any of this relate to real estate investing or closing more deals, you ask? It doesn’t, but here’s what does, the next morning I arrived at the course early, 6:30 am and there were at least 10 pros on the practice tee and they were hitting ball after ball after ball. By 7:00 am there were 20.

Over on the practice green there were another dozen or so professionals putting ball after ball after ball. That afternoon after they finished, many headed right back to the practice tee or the practice green and again they would strike ball after ball.

Jack Nicklaus…Ball After Ball

These were top professionals, the best in world, yet they practiced before the tee off and again after the round. They didn’t show up unprepared when the money was on the line. They were as prepared as they could possibly be. Can you make the same claim when you are talking with a seller, a buyer, a realtor, banker or contractor?

Are you always ready for the big game?

What I have learned that helps close more transactions than anything else is to be prepared for the big deal. When that motivated seller calls and needs to sell quickly, do you have the ability to analyze the opportunity quickly and correctly then get it closed? Do you see more than one way to make the deal? Can you see multiple exit strategies?

Perfect Practice is the Key

We’ve all heard the old expression, practice makes perfect but it is untrue. Unfortunately just plain old practice won’t help you get better. However, perfect practice does make perfect! What I failed to mention about many of the golfers on the course that day were that they were there with their coaches. They had objective feedback to help them make those subtle swing changes that might serve them well next time a $500,000 prize is on the line.

The goal of this blog is to provide you tools and ideas to help you achieve that “perfect” practice ability. If you do it wrong and continue to practice it the same way day after day you’ll just get better at doing it wrong and keep a low batting average. But if you start developing and sharpening your skills the right way, you’ll be hitting them out of the park in no time!

As a good southern buddy of mine puts it, “even a blind squirrel finds an acorn every now and then.” Don’t be a blind squirrel, practice, study, learn and grow! You’ll find enough acorns to grow a forest!

To Your Success,

Augie

The Secret to Massive Wealth

The Secret to Massive Wealth

What is the Holy Grail of Real Estate?

water-1149131_960_720When I work with new investors I find that most of them are looking to me to provide them the Holy Grail, the single source key for the mother lode.

They ask, “What is the absolute best way to generate leads, or the best script to use. How can I go from broke to filthy rich in 30 days or less?

What is the one secret that if I learn and apply it untold wealth will be mine?”

They say, “I know it must be there because I see these guys on late night TV, I know because I’ve been to a seminar, I know because I bought these CDs….”

Living in Florida makes this even more entertaining because long before the Pilgrims landed on Plymouth Rock, a Spaniard named, Ponce de Leon, was roaming through the Florida swamps looking for the fountain of Youth. I actually visited it last year and even had a sip of this rather vile water, I honestly didn’t feel any younger and now a year later, my grey hair remains. Anyway, back to the story.

Like Ponce de Leon, investors looking for the one and only secret to success are fooling themselves.

There are many excellent techniques for buying, selling and holding properties; for dealing with lenders, contractors and tenants, but the fact is this, each technique is merely a tool. In many cases an extremely valuable tool that if used correctly or in conjunction with other tools/techniques will yield very profitable results. By using these tools over time you can indeed build massive wealth. Wealth creation should be systematic, planned, intentional and progressive. If it comes by accident, it could just as easily go the same way.

We have all seen the TV commercials. We have all wondered, can anyone really do that?

The techniques that I will share with you are actually techniques that are great for real estate but many can be applied elsewhere in your wealth creation and investment plan. Some techniques are no money down techniques, some are not. The techniques that I am  going to share with you can be used individually or in a combination of two or three techniques together because no two real estate transactions are exactly the same.

You may need two or three techniques to get the transaction completed and maximize your profits. By reading this blog you will learn ideas and techniques that when integrated into different combinations create hundreds of different techniques that you can use to transact good and profitable deals no matter where you live in this country.

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Start a Intellectual Toolbox of Techniques

So, I just want to share with you right now that the first thing you need to be aware of is that many of these techniques are just simply that. They are just techniques; tools for your intellectual toolbox. As I said a moment ago, no two real estate deals are quite the same.

And so, because there are no two deals that are the same, you can’t universally apply one single technique across the spectrum of opportunity that will cross your path. You can’t rely on applying two techniques or even 10 techniques to every single deal and have maximum results.

I have watched newbies try to apply one technique to every deal that comes along. They get frustrated and want to give up. They feel as if they are doomed to failure. Occasionally they do find an opportunity – a property – where they can employ the one technique that they have and they do a deal.

I encourage you as you read these posts to think about how many techniques and tools you can add to your tool box that are going to help you recognize and profit from every single opportunity. Tools and techniques that will allow you to deal with virtually every property that comes along.

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Starting Now You Will Have the Tools

When other investors don’t know what to do, you will be able to pull a different tool out of your toolbox, a different technique, a different combination of techniques, and you will be able to be successful where they weren’t.

And as you employ these techniques and combinations of techniques, employ intellectual capital with creativity!

To your success,

Augie

5 Key Steps To A Becoming a Successful Real Estate Investor

5 Key Steps To A Becoming a Successful Real Estate Investor

5 Key Steps To Becoming A Successful Real Estate Investor

Success in Real Estate is not based on luck, family connections, or natural talent. There are no genetic or biological factors that will guarantee success in this business. BUT! You CAN be successful. Here’s the good news:

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What Are You Already Good At And How Did You Get That Way?

We all grow and profit as investors in much the same way we would become successful in any other industry. When leading skill development workshops on Negotiating Skills, Deal Structuring, Creative Financing or any of our Investor Quick Start programs I often ask the attendees to think about something they have been good at or had success with in the past, be it a talent like playing the guitar, a sport or a hobby.

What made you good? What separated you from others?

The responses are always similar. They understand the specifics of what they were good at, they were focused, had a good plan, executed it, surrounded themselves with like-minded individuals who shared a similar passion, and were coached by a successful, experienced person.

As a youngster, I learned to play the trumpet. I took lessons in school with all the other kids. What helped me to excel and eventually play professionally were the hour and a half weekly private lessons with a professional musician. He helped me see the music differently; develop practice drills and a plan for effective practice.

Enjoying a successful business in Real Estate is no different. Virtually every successful, wealthy agent, broker and investor I know became wealthy because they took the time to educate themselves on different options and opportunities, have laser sharp focus, execute a well thought out marketing plan, surround themselves with a strong, experienced team, and have a coach or mentor.

Feel free to use this image, just link to www.SeniorLiving.Org This microstock required lots of post processing to get the blue tint. I also needed a bounce card to get more detail in the glasses.

1. Understanding Requires Core Knowledge

What is going on with the market now? What will the market be like a year from now?

In order to have a long, profitable career, you will need to be familiar with multiple ways to purchase properties and multiple ways to sell.

The strategy you utilize in a sellers’ market will most likely be different than the strategy you utilize in a buyer’s market. If you aren’t flexible and prepared to adapt to the changing market conditions, then you will be left behind. When the market changed from red-hot to ice-cold a few years ago, many agents and investors stubbornly kept the same marketing plan. They simply failed to respond to new conditions. After all, it had worked well in the past, so why change? Many of those folks are no longer in the business.

Rehabbers who failed to adapt have since lost their jobs had to find new careers. Recognizing when to focus on short sales, lease options, subject to, selling with owner financing, or buy and hold strategies is important.  Mastering the different strategies required to adapt to a changing market will allow you to maximize your profits.

2. Possessing Laser Sharp Focus Is The Secret

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Mastery of anything has a number of requirements but none is more important than one’s ability to focus. When are you at your professional best? It’s when you know exactly what you want and exactly what you are required to do in order to achieve your goal.

When do most mistakes occur? When uncertainty exists. Uncertainty is the opposite of focus. When you are focused, you complete tasks. People who lack focus tend to procrastinate and/or make unnecessary and sometimes costly mistakes.

There is no doubt that knowledge, or lack thereof, plays an important role in focus, as does our next step; having a detailed plan.

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3. Your Marketing Plan

You can have all the knowledge necessary to close any real estate transaction, but if no one knows what you do, then how will you close any deals? If you are not generating leads and connecting with people, you will not have any opportunities for transactions.

So how do you attract motivate sellers? A good marketing plan will identify a number of different strategies. I recommend a minimum of 3.

Note – if 3 is good more are better!

When planning out your marketing strategies remember to budget your time as well as the financial requirements. It does you no good to have a goal mailing 500 letters a week or distributing 1000 flyers if you don’t budget time for this activity as well.

So what works best for attracting motivated sellers? When done properly, a targeted direct mail campaign is the most successful form of advertising. Incorrectly implemented is can also be a great waste of money. It is important that you work with an experienced company that has a solid track record and the right mailing list.

If you have no marketing dollars then you have to make marketing time to spread the word. Whether it is door knocking, gum-flapping or handing out business cards or flyers in front of a supermarket (I don’t recommend this) you must get the word out! Sometimes other people can help with this.

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4. Build Your Dream Team

We’ve all heard the expression, “No man is an island.” It is true and you cannot do this business alone! Even if you are an extremely capable person that doesn’t require assistance from anyone else to buy, fix and a house, you will still require the services of another contractor, a lender, a title agent and attorney, CPA or other professional.

Why do you need all this help? What would you do if while you’re working on a project and another great deal falls in your lap? Leveraging others allows you to focus on your business and build your wealth faster. The assistance of others will lead to more transactions and more profits.

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5. Leverage a Coach or Mentor

Think of one well known, highly successful person who is at the top of their field. It doesn’t matter if they are an athlete, actor, business tycoon or famous personality, they have one thing in common: a coach.

Coaches have experience in areas that you do not, can guide you, help you avoid major blunders, and drive you to do more than you ever thought possible.

It doesn’t matter how many books you’ve read or cds you’ve listened to; your first few deals will throw something at you that you’ve not seen before or even anticipated. When this unexpected and sometimes frightening situation occurs, it’s good to have someone who’s been through these situations before guiding you through the transaction.

To summarize, while virtually anyone can have success in the real estate business, not everyone will have success. If you seriously wish to be wealthy, then do what other wealthy real estate professionals do. They commit themselves to being life-long learners and never stop expanding their knowledge base.Screen Shot 2016-03-04 at 2.26.32 PM

Successful investors are extremely focused; they plan and execute diligently. They surround themselves with other successful professionals, and are coached by someone who will help them continually achieve more and do it in less time.

We are now accepting applications for our new and improved 12 month Personal Action Coaching and Transformation Program (PACT). This session starts in January! Learn more from our information and videos at www.PACTProsperity.com. To your success…..

Why Real Estate is the IDEAL Investment

Why Real Estate is the IDEAL Investment

So… Why is Real Estate is the I.D.E.A.L. Investment?

The first thing I’d like to discuss with you before we even get into the techniques of real estate investing is why should you even bother with real estate. What is it that makes this such a great way to become wealthy? Real estate has been called the IDEAL investment because what it produces spells the word…IDEAL.

Investment real estate gives you: Income, Depreciation, Equity, Appreciation and Leverage.

screen-shot-2016-11-30-at-12-21-17-pm“I” is for INCOME

Real estate entrepreneurs enjoy income in the form of cash flow created by rents, lease payments, option fees, pet rent (yes, rent for Rover), extra-resident rent (Uncle Joe), and even mortgage payments when we provide seller financing. In addition to recurring income streams we also enjoy income in lump sums; some large, some small. These include sale proceeds, option fees, down payments, and balloon payments.

Real estate generates two types of income and each is taxed differently. Ordinary income is income generated from flips, quick turn rehabs, and any property not held for investment longer than 12 months. Rental properties generate passive income which is exempt from self employment tax (currently 15.3%).

The key to passive income is the intent to rent the property and the holding period exceeding 12 months. Talk with your CPA to understand the tax implications of your transactions…it can make a massive difference to your financial future.

When selling properties, I like to use the lease option or lease purchase technique because I’m blending the sale of some rights. One is the right to purchase the property at an agreed price at a future date using an option.  The other is a rental agreement which generates passive rental income.

“D” is for DEPRECIATION

This benefit is unique to anything in the finance world because depreciation is a deductible expense created by investment property. Depreciation allows you to deduct an amount equal to 1/27.5th per year against the income produced by the property. However, if the deduction exceeds the income, the depreciation may be taken against other income or carried forward.

To fully understand this benefit I strongly encourage you to consult your tax adviser. I assure you it will be worth the conversation!

There are many strategies and techniques involving entity structuring that will help you to maximize the tax benefits afforded entrepreneurs who own a business and do not act as a sole proprietor.

“E” is for EQUITY

Equity is that amount of a property that is not pledged as collateral for a debt. The simple way to look at it is if you have a property valued at $150,000 and it has a $100,000 mortgage on it, then you have $50,000 in equity that could potentially be used as collateral for additional financing.

One important thing to note is that many sellers confuse equity with the amount of money they’ll walk away with after a sale. (They seldom consider things like closings costs, commissions, and other seller concessions.) We’ll discuss this in another post.

“A” is for APPRECIATION

I just love appreciation; where else can you make money while you sleep? When things go up in value without any effort on my part that is a good deal! Real estate is cyclical. So, remember friends; it will not go up in a straight line, but over time it always does go up.

Even though the current market is flat in some areas and receding in others we know that over time our real estate will increase in value .However this is not why we buy real estate.

To good investors, appreciation is just a bonus because we make our money when we buy either with great terms or because we buy at below market process. We cannot always predict when or by how much a property will appreciate, so if we buy right, but timing doesn’t allow for appreciation… we still make a profit.

If, however, we do benefit from appreciation, we still make our profit and we get a bonus too! People who buy looking for appreciation are not really investors, they are speculators…they are the dot.com bubble people of real estate.

“L”  is for LEVERAGE

If I’m a new investor just starting out and I go to my stock broker and tell him I want 1000 shares of a $100 stock he’s going to ask me for $100,000. If I don’t have the $100,000, I’m done and there’s no deal.

But let’s say I have a big account of say $500,000.  He may let me margin the securities, which means he’ll lend me some of my own money (about 50 cents on the dollar) to buy the stock.

In this example, I can buy the stock with only $50,000. So looking at the stock market I can get no leverage if I buy 1000 shares for $100,000, BUT, I can get 2 to 1 leverage using a margin account. I could use $100,000 to buy $200,000 worth of stock.

In real estate many lenders will allow me to purchase a property valued at $100,000 with only 10% down. This means that I’d put only $10,000 down and the bank would finance the remaining $90,000.

screen-shot-2016-11-30-at-12-20-36-pmThis would suggest that with $100,000 cash I could control 10 PROPERTIES valued at $1,000,000!

THAT’S RIGHT, $1 MILLION DOLLARS!

If each of these investments appreciated 5% in one year who would have the best return on their investment?

Stock Purchase without leverage $ 100,000 x 5% = $5,000

Stock purchase with leverage 2 to 1 $ 200,000 x 5% = $10,000

Real Estate with leverage of 10 to 1 $1,000,000 x 5% = $50,000

The power of leverage with real estate is unmistakable.

Let’s say you played this out for 10 years. The numbers would be staggering. While there are interest expenses and carrying costs, these will be paid by your tenant. Additionally, your equity would increase as they pay down your mortgage.

It gets even better when you learn techniques like buying with “Seller Financing” or by using existing debt and buying the property “Subject To” both techniques which are near and dear to my heart which will be covered in a future post!

So, are you ready to start making I.D.E.A.L. investments?

To Your Success,

Augie