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As a real estate investor, it is important to note key demographic shifts that are happening in both the rental pool and also for your future buyers as part of your exit strategy!

Here was an interesting conversation I have had lately with a new investor. We were talking about the exit strategy in preparation for his purchase. I mentioned the importance of observing the demographic shift that may take place as his purchase was in the path of progress.

He looked confused. I explained how most people know that you make your money going into the deal. You then realize the gain as you exit. So when making a purchase you want to have your exit strategy (or perhaps 2 possible exit strategies) in place when you purchase.

So he asked what is this Demographic Shift and how does it relate to developing a real estate investing exit strategy? So I shared…

Demographic Shift Facts About Households That Real Estate Investors Need To Know
  • The size of families have been shrinking over the years. In fact, the numbers of households with no families (people living alone or without another family member, some still take on a roommate) have increased 5 fold in the past 50 years. From 7.9 million in 1960 to 39.2 million in 2010 (Source: Census Bureau). Meanwhile the number of actual households has increased dramatically from 45.1 million households to 77.5 million households.
  • The number of households occupied by Non Family units is now more than 50%. With the smaller family sizes and the increased cost to maintain the actual dwelling, people are looking for smaller homes. People have and still like to have their fair share of space, in fact home sizes have increased over the years reflecting this desire for space.
  • However, with the shrinking household size and the increased cost of utilities and maintenance, the smaller homes are becoming more and more desirable. 3 bedroom homes and less are becoming more and more sought after.
  • 3 bedroom homes of average size represent the sweet spot for today’s real estate investors. When purchased correctly, they can be sold to empty nesters sizing down or the first time home buyer (2nd largest home buying segment). Most importantly, you can use this exit strategy to reach the largest segment of home buyers – the single female. Yes, the single female alone makes up for 20 percent of all home purchases.
  • Now more than ever baby boomers are opting to rent and both baby boomers and coupled millennials are finding suburban living to be beneficial to them. Single people prefer the inner city lifestyle where public transportation is readily available, hint, hint. Investing near public transportation for those smaller 1 and 2 bedroom units is a big plus.

As these groups of people represent the buying audience, a diligent investor may consider this when they have tenants that fit the ideal buyer’s description. Many times the tenant can become your buyer when it is time for you to liquidate.

I personally have sold about 20% of my rental properties to my tenants.

You can create win win situations for you and for them by structuring a deal that benefits you both – and who does not like a win win? Cash Flow for you while they are your tenants, Capitol Growth for you when you sell to them. Low liquidation costs to you when you sell to them.

The tenant can acquire the property with low acquisition costs when you the investor thinks win win and structures the sale to help cover their acquisition costs.

If you would like to find out more about USA Real Estate Investing Strategies, make sure to click the link to sign up for our Free Real Estate Dashboard which is chock full of great information, including how to set up your Real Estate Investing Exit Strategy!

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I have had a LOT of questions lately about finding real estate investment property in the MLS. Mostly would-be investors who are upset that they are wasting their time looking at house after house that doesn’t make sense financially to buy as an investment property.

Interestingly enough, I got my real estate license 20 years ago primarily so I could have immediate access to freshly listed properties in the MLS (Multiple Listing Service).

Of course, as a Realtor, I could also learn more about the legal side or real estate which would be advantages as an investor. However having a license as an investor is a double edge sword. There are pros and cons to being licensed when investing, but that is for another post.

As an investor having access to the MLS (multiple listing service) seemed like the best way to get the deals before everyone else did. Early on in my investing career I bought properties that were listed on the (MLS). What I came to discover is it proved to be a struggle and a whole lot of work. I now had access to the latest properties before they were noticed by the thundering herd of buyers and investors. However it did not take long to learn that sellers of a property that was freshly placed on the market were not motivated to take low ball offers.

I was becoming frustrated searching hundreds of listings, and then crunching the numbers, only to narrow it down to a few worthy properties. I would then drive by the properties and crunch more numbers, occasionally writing an offer that would not be accepted and not make its way to contract just to start the process all over again.

I knew there had to be a better way because most of these properties did not have any financial merits for investing at all. The formula to find investment properties worthy of buying is look at 100 properties online, narrow it to 2-3 and write offers and hopefully get one property.

I found the better way in unlisted properties:

While doing much research I learned of properties that were not listed. I ran the numbers on these properties and, wow, they worked much better, so I started buying them. I enjoyed this concept much better so I continued to search for more and more unlisted properties.

I indeed found the secret to great investing was in unlisted real estate properties.

(What I mean by unlisted properties, is they are not listed for sale through the conventional MLS system)

Why Non listed properties are better for the real estate investor:

The MLS system is retail focused:

They are intended to attract the retail buyer, a buyer looking to move their family in it and make it a home. Often a seller becomes skeptical when they find out their home (in which they raised their family) is being sold to an investor).

Sellers become further skeptical when they see an investor looking to buy their property for a profit. They feel they must be leaving money on the table. They are not interested in an investor making money on their property and saw most of them as low ball offers.

Non listed properties are like buying business in a box:

Sellers who sell non listed properties tend to market them toward a real estate investor.

They are fully aware of what an investor is looking for (a return on the investment with appreciation potential). The price structure tends to already be conducive for an investor to purchase and make a return on their investment; often these properties already have a tenant in place. These properties often tend to be a turnkey property that is already a performing asset.

Non listed properties:

Are purposefully marketed for sale to the investor looking for investment property. These properties are catered to the investor knowing up front that the investor wants to make money on it.

As these properties often have tenants in place, they do not make a good listings for the MLS system where buyers are looking to move into them because they are currently occupied by tenants.

Knowing this, these properties tend to be positioned within the investor advantaged micro markets that make the best financial sense for the investor. Most investors are looking for cash flow and or equity growth. Sellers who sell investment properties have originally purchased these properties within the micro market of a city that best represents a solid equity growth.

Non listed properties are typically promoted through different channels than the MLS.

Sellers understand that the typical real estate MLS channels are designed for the home buyers and sellers to buy and sell. Investors or rehabbers typically sell their buy and hold real estate through promoters who work with investors.

Real Estate Investors Buyer Group

I have been so intrigued by these non-listed properties that I focused the last decade of my life building a business around them. As I search for non-listed properties every day I compile them together and send them to my investors every week.

While you are busy doing what you do for a living I am busy doing what I do, (searching investor advantaged no listed properties.) If you too would like to be added to the buyers group list and receive these non-listed properties to your inbox every week, simply register to join the group.

Happy Investing

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Real estate investing is a very lucrative wealth building model that has become very trendy with the masses. An incredible interest has been drawn from the millennial crowd as well.

This is largely because real estate can be leveraged, allowing more and more investors to begin their investing career early on. With the introduction of the so called “reality” fix and flip and renovation shows, everyone is looking to get in on the action and are now looking for property.

The entry level affordable home has became a very highly sought after precious commodity that everyone wants. First time home buyers, empty nesters and of course investors are all squirming to get in on the action. With so much demand there are literally more buyers for these highly sought after properties than are available in most markets.

Finding great investment property can prove challenging

I always love the energy that some visionary investors have. I had been working with a young woman who was eagerly looking for a local investment and looking within Florida MLS website in search of good cash flowing investment property.

She was sharing with me that she looked at many properties on the MLS and followed the objective that she has often heard talked about. You have to look at a hundred properties to find two or three properties that made sense and after doing your diligence perhaps you could purchase one of those.

The search begins

After looking at a number of properties she narrowed them down to a few that may make financial sense and she hopped in the car to do a drive by. The ones that looked most promising she would arrange for me to show her the properties and study them for plausibility. The challenge was the drive by alone convinced her that these properties will need too much work to fix up and the added cost would now kill the deal.

Call to clarify

Frustrated by all the time she had spent already and virtually nothing found to date, she called me for help. She shared this story of her searches and drive-bys and since I do investment real estate, she wanted me to provide some clarity. What I first explained to her was “I could have saved you a lot of time (and I can save you money) if you called me first.”

Investment real estate is done much differently than buying a home to live in.

Why good investment properties are not found on the MLS

While some investment properties are acquired through the MLS (Multiple Listing Service), the majority of investment property is not listed there. The MLS system is designed for retail priced home buyers and sellers.

Investment properties are sold through different venues than the retail outlet that makes up the MLS system. Most good investment property is not listed. Primarily because good investment property are either fix and flip properties which means the properties are distressed. Meaning they will not sell retail pricing so these are bought and sold privately to Wholesale buyers.

Then there are the performing asset properties that already have a tenant in them. These properties are basically little tiny businesses that you buy with an income stream already in place. Typical buyers within the MLS system are looking to buy a home to live in, so this retail outlet is not a favorable place to list performing asset real estate.

How To Find Investment Properties

Investment groups who understand investment real estate are the “go to place” where you will find the best real estate deals. While the MLS system is a great tool to buy retail houses to live in, Investment Real Estate Groups are where you want to turn to buy investment real estate. This is a whole different venue of properties for sale that are not listed on the MLS and represent the best investments available.

You can go to wholesale distributors to buy fix and flip properties. Wholesalers search out distressed properties that have challenges that do not allow them to sell to the end user. These properties need to be renovated and they sell these properties cheap to the person who wants to do fix and flip real estate.

Then there is my favorite, the “turnkey investment properties”, Houses that already have tenants and professional property management already in place. These properties have good SUSTAINABLE cash flow with good SUSTAINABLE equity growth. Your best investment potential of course is found in certain geographic locations around the country known as emerging markets.

These emerging market locations must have certain attributes to them, such as:
  • Undervalued Markets: In the U.S. the national average price of a home is able to be purchased for 1/3 of the area’s median income. In markets where it takes less than 1/3 of the median income to pay for a median home price is considered undervalued.
  • Job growth: The area must have consistent job growth.
  • Job diversity: Should an industry falter or business fail, the area must have enough job diversity to sustain the market in a positive growth.
  • Population growth: When population expands housing needs demand grows, causing increased pressure on pricing.
  • Vision plan: Emerging markets have a local government with a 5, 10, or 20 year vision plan. A road map as to how they plan to attract businesses to the area. When this happens a market is much more likely to grow and expand.

Within these best markets you want to find properties that are located within the sweet spot of the market. This is the area where home values are matching the median home price for that market, areas with highly rated schools and price points that reflect a price that an investor can purchase, rent and make a nice ROI.

Easier than you may think!

While this made great sense to her, she found this to be a whole lot of work as well. How does a new investor track and analyze all this and how does an investor find the properties? She was surprised to hear (as most are) there are businesses that do this every day. Turnkey marketing companies, such as mine, are to the investor as the MLS system is the retail home buyer.

The turnkey business model

There are businesses who find sweet spots within emerging markets, then buy these properties as distressed properties at large discounts using economies of scale leverage to buy low. They rehab them with their own construction company, further leveraging economies of scale. And finally place tenants with their own property management companies, again providing economies of scale efficiencies.

Finally they sell the (now performing asset) to investors. This gives an investor the ability to know what all income and expenses truly are up front.

Of course she was very impressed to see this very complex process simplified to where she simply could look at turnkey properties that already have been turned into a mini business. She was thrilled to have the guess work removed and all she had to do is to look at and understand the Pro-Forma.

How Do You Buy Turnkey Properties

The last step in the process for the turnkey companies is to sell the homes. These homes rarely, if ever, go “on the market”. Instead they work with turnkey marketing companies like us, How To Buy USA Real Estate, who already have a pool of investors ready to cherry pick these good deals. A newbie investor like our gal wouldn’t have access to these investments at all unless she joined an investment club like How To Buy USA Real Estate.

The neat thing is that the turnkey companies pay us as marketers so there is no cost to join and get access to these turnkey real estate deals.

Sign up today for free!

You will receive a weekly email showing the hot properties that are available as well as getting the latest real estate news and info right in your inbox.

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Perhaps the most common question any real estate professional gets asked is, “How is the market?”

The past 5-7 years buyers have been like a kid in a candy store. There have been plenty of properties to choose from and it has been pretty easy to find deals that make sense. Now with prices rising along with rising rental rates the candy shelves are sitting pretty empty and the remaining candy is running stale. Yes, like the candy shelves the good real estate deals are picked over and the deals that remain are not making a lot of financial sense.

Find real estate with a long shelf life

Having coached several hundred of investors over the years what I find over and over again is investors having just short term investing criteria. Investors want a particular rate of return on a nice property. Sounds reasonable right?

While that sounds like a great and fair goal it only looks to the short term return of a property. The missing link that most investors overlook is identifying if a property has sustainability. In other words if you are looking for a cap rate of 10% return are you looking to see if you can maintain this 10% return over time. If not how do you know those returns will stay strong and not dwindle in time as markets shift.

Markets rise and fall

Everything in this world is cyclical, what goes up must come down. Like a pendulum on a clock the markets will rise till it hits a peak point and then reverse order to start its decline. When you buy an investment property that performs at your desired 10% rate, what measures have you addressed to insure you are able to sustain the return and perhaps the rise of the economic prosperity of this investment. Do you know that this investment is not at its peak value and about to reverse order?

When the pendulum begins to swing the other direction often the returns will reverse order as well. rental rates tend to go hand in hand with market conditions. If a property stalls out in growth it will most often stall out in your return on investment as well. Your best way to insure your investment is sustainable is to invest in under valued markets

Undervalued Real Estate Markets and How to Determine Them

The Median Home Price to a particular location is important to know when making investing and buying decisions: However it is important to use the information correctly.

To take a deeper look, we want to look at the market (city) as a whole, we know a market is said to be a good investing market when the median home value will easily be paid for by the area’s median income.

For example the typical lender will want you to apply only one third of your household income (33%) to your mortgage. If one third (33%) of the median income will easily pay for the mortgage of the median home’s value, then that market is said to be a balanced market.

When you can purchase a median priced home in a market that takes only say 20 or 25% of the median income to pay for the property then the market is said to be an undervalued market. The opposite holds true if indeed one third of median income will not pay for the mortgage of the median home price, this area is deemed to be an overvalued market.

As many of you may know there are markets such as most cities in California where it takes as much as 50% to 70% of your median income to buy a house. These are very much over-valued and unsustainable. There are also markets in the Mid-west where you can invest in property where you can buy the median priced home for 20% to 30% of the median income.

Knowing this, which markets would you like to invest your investment dollars into, which markets do you feel have the best chance of offering long term sustainable returns?

Top Tips For Researching An Undervalued Market

Investors do not want to purchase over valued property, so watch median incomes in the markets where you are looking to purchase investment properties. Your equity growth and appreciation depends on finding strong markets and undervalued markets will offer you the best opportunity.

Market information is a moving target, so watch closely. You can read many reports that talk about the median home price going up or down, month over month (this has no real merit) this is too short of a time to gain any perspective whether the market is improving or not. Simply put, it shows that for a variety of reasons the value to the homes purchased over the past month was either higher or maybe lower than the month before.

This can happen for many reasons. Maybe a different segment of buyers bought one month over another month. Maybe interest rate changes prompted a slightly different purchase price. There can be a number of factors that play into this. To understand whether a market location has an increasing or decreasing median home price you need a minimum of 3 to 6 months trend to see if indeed it is trending up or down or is it just short term market fluctuations.

When indeed a Median Home value is trending downward the market is becoming better suited for the investor. When it appears to hit bottom and stabilize for a duration of time it is a strong indicator that that market’s location is bottomed out. (Note: this one indicator alone is not sufficient evidence of a great time to buy) it does however give strong appeal to look further into the location and how that location is positioned for the investor to capitalize on it.

When a market is considered undervalued you will then need to see if the market has strong, diverse employment.

When a market is undervalued and indeed also creating jobs, you are wonderfully positioned as an investor to ride a wave of upward moving values. As jobs are more and more plentiful, the supply of workers for these jobs diminishes. When this happens, salaries rise. When salaries rise, median incomes rise, when median incomes raise the properties values can now easily and safely raise as well. This lends to a longer sustainable growth period for the real estate (property investor) or homeowner.

Happy Investing

To get the latest information on sustainable investment markets give us a call 941-718-7761 or sign up for our free Real Estate Investor’s Dashboard Report!

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I always love a good ah ha moment, lately I have been having several of them all centered around one thing. I have found myself in the past few months being inundated by an investment vehicle that is proving to be the real estate investor’s best untapped resources. Real Estate Investing from within Your IRA.

My Ahha

Now investing in Real Estate using funds that you the owner of the IRA is not a new concept, It has been around a while now. What the Ahha is that the vast majority of people who own an IRA do not know that they can self-direct where the IRA invest its funds. Yes instead of your funds being invested in the latest unknown tech stock or companies that you do not know or perhaps do not believe in, you can actually dictate what the IRA invest in, pretty cool ha. I am thinking how can it be that such a powerful investment tool is such a secret to the majority of people who has them. Savvy investors have been doing this for years and making some huge profits for their IRA. So let’s remove this secret and introduce to the masses where savvy investors are making bigger returns for their retirement funds.

How to utilize Your IRA for Real Estate Investing

Millions of people have been working over the years where your employers have been contributing money into your retirement account. Often you could place a percentage of your paycheck or a chosen dollar amount and contribute that money into a retirement account. Better yet many companies offered you a matching dollar amount to contribute into you retirement account. These retirement plans are controlled by your employer as long as you are employed with them. So what happens when you are not yet at retirement age but you have left the company?

This is where the magic happens

As you leave a company that you have a retirement account with last thing the company wants to do is be responsible for your funds. So they guide you in moving these funds into your own retirement account. Here you have a variety of options as to where you can send that money. There are rules that need to be followed to make sure that you do not personally take possession of this money (after all it is in place for your retirement). You can send the money into any number of retirement brokerage accounts to manage these funds for you and keep the money in compliance with IRS rules and regulations. One of these options is the Self Directed IRA

Self Directed IRA

When you move your funds into a self-directed IRA you are basically moving it into an account where you have a company playing the role of a custodian. They take care of handling all the paperwork to keep your IRA (Self Directed Retirement account) in legal compliance with IRA rules and procedures. You then can decide what you want to invest in. for the millions of people who want to invest in real Estate you indeed can do that. In fact there are a number of investment vehicles that you can invest in. precious metals, Real Estate Notes, Mortgages, Buy and hold real estate investments, wholesale real estate investments. Fix and flip investing as well as many others. The point is it you have some basic or perhaps thorough knowledge of real estate or maybe just a passion for real estate you can join the millions of savvy investors who control their own financial destiny be investing their retirement accounts into real estate.

Who loves your moneys growth more than you yourself?

Do you know that many people who invest in stock market are actually investing in real Estate. Yes even wall street understand that real estate investing is one of the best and safest investment vehicles around. So when you go to an investment broker they take your money and often a large portion of your dollars ends up investing in real estate. So by eliminating the middle man who wants to make the lion’s share of the profits you may indeed put your investment dollars on steroids.

Example of a Self Directed IRA Investing work flow

Now for the purpose of this illustration we are going to keep this simple. The illustration is not listing every income and expense in owning a property but instead providing a basic outline:

  1. Roll your retirement account into a self directed IRA account. Let’s assume you have 200,000 dollars in your account.
  2. You find a house that you want to invest in. Let’s say you buy a house for $100,000.
  3. You buy the house by writing a contract in the name if the IRA. So the IRA is actually the buyer and you are the owner of the buyer.
  4. Assume you have $1000 per month in cash flow after expenses. Your property manager sends the $1000 back to the IRA company and this $1000 goes back into your Self directed IRA. So after 100 months of consistent deposits into your account you essentially now have $100,000 returned back to your account. Now you have the same as you started with and each additional deposit the funds grow beyond that point. Meanwhile the IRA still has the house which now has grown in value and is also an asset to your IRA.
  5. When expenses arise, the bill gets sent to your Self Directed IRA custodians and they pay the bills from your account on your behalf after you approve the bill
  6. When you sell this house the funds also go back into you IRA.
  7. The nice thing is all the funds and accounting is done by the custodian of the IRA for fixed fees and often can be thousands or tens of thousands of dollars less than paying brokerage accounts for typical investment trades.

Do you want to learn more about IRA investing? Contact us for a complimentary strategy call!

Happy investing

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As a real estate investor, it is interesting to see that many of us had the urge to invest starting at an early age. Here is a great investing competition as well of the back story behind my and my partner’s beginnings. 

I woke up as many do each morning, sipping on their cup of coffee and reading the news highlights of their industry. Today was a special day of news. Instead of the same old drudge and mayhem being reported an article jumped out at me that is a true story of education, possibilities and inspiration, I will touch on why this touched me so later but first I want to share this incredible story.

The report showed how multi-millionaire actress, Jennifer Lopez, and a multi-millionaire former athlete, Alex Rodriguez, were taking time from their busy schedules to help support children in their efforts to gain financial literacy and invest in Real Estate.

Their objective is to teach kids how to amass a Real Estate Fortune

Project Destined

Project Destined was a competition that screened kids to participate in and receive the kind of training that would not only benefit most people, but would be welcomed education for many investors and wanna-be- investors.

Lawyers, Bankers, Mortgage Companies and Real Estate Brokers all participated in an intensive education toward the subject of Real Estate investing. This is not just a theoretical instruction but an educational process such as an apprenticeship opportunity to partake in an actual investment.

Alex Rodriguez | Project Destined The Bronx 2018 - YouTube

A Chance to buy a building worth over 1.5 Million

The team that takes their lessons and comes up with the best business plan gets to actually partake in this large stake investment in the Bronx and develop it.

They not only get to develop it, but actually share in the profits.

Why this resonated with me and why it may resonate with you too.

Would you have loved an opportunity like this as a child? To be educated in financial literacy is the paramount to building a sustainable investment portfolio worth owning.

I got to thinking of how my partner Karin Rosarne and I could have used this education early on. We both developed a passion for real estate early in our careers. We both made our first real estate investment at an early age, but we did it out of a perceived passion rather than education and knowledge.

Karin Rosarne is an immigrant who arrived in the United States at age 18, with $200 in her pocket. The Immigrations Office instructed her that she could lawfully babysit and clean houses to make a living. So she did. By the time Karin turned 20 years old she had saved up enough money to buy her first home.

“The United States is the Land of Opportunity, not the Land of Guarantees,” says Karin. “What is so exciting is that anyone can make it in this country, if you are willing to roll up your sleeves and work hard. The way anyone can own and hold title in real estate is also quite unique.”

Karin’s first acquisition sparked her love of real estate investing, and she is still at it today, while also handling other people’s transactions as a successful real estate broker.

Some of you know may story and how, at the age of 15, I used money I made from mowing lawns to buy my first investment property. I invested in one of those lots that I mowed. The local real estate developer had plotted off a new subdivision at the North end of the town I was living in at age 15 (in Waseca, Minnesota) it got me thinking. If I bought one of these lots I could watch houses go up around me and as the properties were being built and the supply of lots would run low.

I could ride that wave of prosperity forward and sell for a profit. In the meantime my monthly payment would serve as a savings account for me. With my father as a co-signer to make things legal (as I was a minor) I purchased the lot for $6,700 dollars. I made my $70 monthly payments which helped me create accountability and then I sold it 3 years later for $10,500 and I put $3,800 (56%) profit in my pocket and bought my first duplex at the age of 18.

Financial Literacy is a Path from humble beginnings to abundance

You can now see why this project called Project destined resonated with us so much. Karin and I both started on our own with humble beginnings and were pulled into real estate at an early age from just the thrill of the deal. We went on to do self-education and became investors and learned to navigate the financials, the pro-forma’s, the deal making and all that is involved in building investment portfolios strictly driven by passion for real estate investing.

Imagine how these young kids with their expert tutorage will be able to thrive. Do you think this will become a passion of theirs? Funny how making money can become a passion.. We are so thrilled to see these opportunities exist and look forward to follow their stories. Anyone can create abundance all you need is a little drive and the willingness to learn.

Happy investing

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