Sky is NOT FALLING

Ladies and Gentlemen,
The sky isn't falling. That's a fact.
The economy may be in a recession, but the sky is not falling.
The auto industry my be on the brink of bankruptcy, but still the sky is not falling.
The real estate markets may be crashing, the bank systems may be flopping, however THE SKY IS NOT FALLING!

How do I know this? Could it be because sweet deals are being made as I type this blog? I don't know.

I have read somewhere, that if you think with a success geared mind, you will be successful.
If you think with a mind of failure, you will be a failure. When this dawned on me, I was struck. This empowering shock took over. I cannot describe how I felt, but I felt it. I had never felt that feeling ever.

If you think the sky is falling, then you'd better buy a damn good umbrella.

The Monopoly Challange

Hello all,

The surprise today is how much people don't care about there financial education. I know this is a rant, however the number of people destroying their financial lives due to lack of financial literacy is STAGGERING.

Wondering how you are doing? Take the challenge.

1. Get out the old MONOPOLY game collecting dust.

2. Get some friends interested in playing a unique game of MONOPOLY.

3. Play by the NORMAL RULES (i.e. no money on FREE PARKING, auction properties not normally bought). You may need to consult the Internet if it has been a while.

4. Here is the challenge. Everyone starts with $500, and you collect NO MONEY when you pass go.

5. No matter how tempting, NO CHEATING. If you cheat here that should tell you how honest you are with yourself in real life.

If you think this is impossible, you are wrong. It's possible, but it's not easy. Get creative, hopefully you will be enlightened (financially speaking).

Recommended Reads!

Expanding your knowledge and implementing it is a cornerstone of life. Obvious? Why is it then people don't exercise this with their investments? I've had the chance to read some great books, and would like to share my thoughts.

Rich Dad, Poor Dad by Robert T. Kiyosaki
If you haven't read it, READ IT. This should be required reading in high schools across the country! Mr. Kiyosake has written many books on investing and his company provides outstanding financial learning tools. This is a must read.

Trump Strategies for Real Estate; Billionaire Lessons for the Small Investor by George H. Ross
If your like me, then you must appreciate Donald Trump and his style of business. This book takes some of the best deals Trump has made, and relates them to how a small investor can use those same tactics. Obviously not the first book you would pull off the shelf and read if you are new to investing, but is by far a very good book.

Trump The Art of the Deal by Donald J. Trump
Not so much about sharing strategies, this book accounts for the early deals Trump did, and goes on to explain his thinking. The reason I like it is because it gives you a bit of a chip on your shoulder when you read it. The negotiation techniques he discusses with his deals are admirable, and can give you a grin while reading it. Overall, great read.

Investing in Real Estate with Lease Options and "Subject-To" Deals by Wendy Patton
A very informative book, specializing in a special niche of investing. This is almost an instruction manual on how to do these deals, and comes with a flurry of information, including the upsides and downsides. Although this is something that I would not recommend a new investor to try first, reading this book does allow you to open your mind more concerning different ways to invest.

I Am America (And So Can You!) by Stephen Colbert
This has absolutely nothing to do with investing. However, I just finished reading it, and it is a very hilarious book.

I hope you take up my suggestions.

Grandma's Secret Ingredient for Apple Pie - Consistency

That's right!
The consistancy of your endevoirs will effect the final results of your goals. The right amount can result in the best results anybody could hope for. Now I understand that some of you may feel that all I am doing is simply stating obvious facts. I often feel that way also, however I feel it is important to reiterate the basics. These core fundamentals I believe are absolutely necessary. Yes, that's obvious.

Yet why is it when we look around and we look at ourselves, these core fundamentals are lacking? I want everyone to go to the store, and buy a cake mix. Add all the ingredients, DON"T MIX IT, bake it, then eat. Delicious? Why not? There was obviously no consistancy, nothing was the way it was suppose to be, and well, like some lives, everything was blindly thrown together and expected to work.

I think some do not understand exactly what consistancy is and do not have any idea what is needed to achieve optimum consistancy. The first thing you absolutely need are tools. These tools allow you to perform actions necessary to enable a cycle of events. How can anyone do anything without tools?

Now the second thing I believe is a part of consistancy is action. Yes, everything requires action and this should be obvious. However, this isn't as simple as you may think. Gathering up the strength and the motivation to make that phone call, to knock on that door, and to execute your actions is possibly the most difficult. The deeper you dig, the fears you encounter, the natural human "laiziness" to overcome, well this rabbit hole just gets deeper. Just go and do it, creat action, and assess later.

Third, repetition. Performing your actions only once and moving on, isn't going to cut it. Yes, I know, you knew that. Well why do people then quit on there New Years Resolution? The are definetly doing something for a bit, but no repetition. A habit is not establish, and failure instead of success sets in. Set a habit, and stick to it.. Motivate yourself and stay with it. Eventually whe success sets in and you are reaping the fruits of your labors, we can talk about outsourcing these habits to free your time for more activities.

Now my fourth part of consistency is this, reassess and critique. Make sure what you are doing is effective and worthy of your time. No matter what, you are important, and wasting your time is definitely not important. If something isn't working, change it. If you can improve the process, by all means, improve! This will fine tune your consistency, and over time your consistency of your business will be perfected, eventually to a point of being on an auto pilot.

So here is the big punch. Becoming an investor is about leaving the habits of a 40 hour, back breaking work week. When you look at the consistency of your business, and you are putting in huge amounts of active time, and you call you self an investor, then we need to reassess your consistency. Nothing is wrong with running your own business, but be sure you are doing what you want to do, not what you dug yourself into.

JP

Your Health and Your Business

Why in the world is a Realtor talking about health? Let me tell you. If you are unhealthy and unable to get up and be productive, your business will crumble. I can vouch for this because of the degree of difficulty I am going through.

I recently had ankle surgery and now sort of house bound. I am currently unable to drive, and this is affecting my productivity. I am doing a lot at home, but seriously there is only so much you can do.

Point being, your health is important. Take care of yourself, keep being healthy. If you believe that your time is money, well then any downtime you have recovering from injury and/or illness is money lost. Don't feel greedy about being healthy. It only takes one fall to put you out of commission.

Exercise and a good diet can go a long way. Increased energy from a good exercise program and a decent diet well again give you more productivity, obviously. However, your new elevated mood will be noticed and your work will reflect your new found attitude.

I am by no means a health nut. I too am a proud owner of a beer belly. I junk out on fast food just like everyone else. But there is a point of moderation that everyone needs to bear. Start slow, and build up your healthy lifestyle instead of jumping into it. Instead of dramatically changing your life, and then slowly changing back try changing a little day by day, and eventually becoming a new and improved you!

Being successful and wealthy is a lifestyle change. No matter how much you think money is involved, reality proves money isn't even half the battle to being on the road to wealth. The change is with you and how you live your life.

JP

Keeping up with Real Estate Investment - Some Good Indicators

Today I want to go over some typical investment criteria I take into account when looking at investments. If you are starting out, or a long time investor, there is no doubt that everyone should utilize these crucial indicators.

The first and most popular I find is called CAP RATE. This can be defined as net cash flow divided by purchase price.
i.e. Cap Rate = Net cash flow / Purchase price

A cap rate is an important indicator of the overall performance of a property. Obviously there are other indicators that will take into account how well a property performs, but the cap rate will give you a quick snapshot on where the property stands.

If you are looking at a property will a lower cap rate, there are some factors you can change to improve your conditions. First, you purchase price. A discounted purchase price will definitely raise your cap rate due to lowering the denominator of the equation. Second, raising rents and therefor increasing net cash flow. However, this may affect your third factor, vacancy. The more vacant a property has, the lower your net cash flow. Raising rents may not exactly help vacancy, but if you are creative in your marketing and good with management, your vacancy should never be a huge issue. Fourth, your operating expenses. Keep them in check. Sometimes people selling property may advertise a great cap rate, but when you look deeper you find they "forgot" to mention there utility bill is three times what it should be.

A good cap rate would be something above an 8. I would be very skeptical with anything above 15, as this usually could be something too good to be true.

Next I want to talk about CASH ON CASH RETURN. This is calculated by taking net annual pretax cash flow divided by total cash invested.
Cash on cash return = Annual Pretax cash flow / total cash invested
This is also a great indicator as it determines what your personal return on an investment would be. This can give a quick snapshot of how a property is doing. Very similar to cap rate, this indicator however would be greatly affected on how you finance the property. A good way to compare this indicator is think of it as what your ROI (return on investment) would be.

Speaking of financing, the last item I want to talk about is DSCR (Debt service coverage ratio). DSCR is simply a ratio of net operating income to your debt service. Lenders will look at this to determine if financing this property would make sense. Obviously, anything less than 1.00 isn't covering the debt service, so why would a lender finance? A good DSCR would be something above 1.25. If you stay above this, you should have a good chance of getting financing.

There are plenty of other factors to talk about, but I feel these three are pretty important and are the three I look at before I look any further. You should not base an investment on these alone, but do weigh them heavily.

JP

Are you recieving JP Sherwood's HOT SHEET?

Are you an investor looking for some hot deals? Then why are you not receiving my exclusive HOT SHEET? Don't miss out on my exclusive HOT SHEET of absolutely great cash flow deals. This weekly report of properties I find are scrubbed and filtered through a conservative set of requirements to ensure quality picks. Join the dozens of people who are already receiving my exclusive HOT SHEET.

To sign up, email me at jpsherwood@cox.net and say you want to receive my HOT SHEET!

Developing resources

It's not what you know, it's whom you know. That is the absolute truth. The more you network yourself out, the more you converse with people and tell them what your trying to achieve, the better your business will be for you. The best part about it, this theory works with ANY business.

I can definitely vouch for this. What you have to understand is that meeting people and conversing with them will help you more that you realize. People share knowledge, and lots of it! Don't be too proud to take in someone’s advice. Cherish it because it can be the difference in making a thousand dollars and ten thousand.

If you are having trouble with meeting people, I suggest you joining Meetup.com. Participate and talk to people, you will be amazed!
Thanks,
John

My Curiosity

Hello everyone!
I want everyone to be honest here, who is planning on buying a property in the near future? I'm curious to know. I have a survey set up on this page, so please participate.
Thanks,
JP Sherwood

Being the Smart Investor

Let's face it, times are changing. The Fed just cut rates again, and buying property looks even more lucrative. Not doing your homework, or in the industry "Due Diligence", will kill a deal faster than you think.

Now you may think the usual, like checking your property's background, physical integrity, and other pertinent stuff. This is all great, and should be a usual.

Now ask yourself a question, have you conducted any due diligence on yourself?

Check your money, does this make sense? Can you afford this, and does it really work for you? When I go out and look for perspective cash flow deals, often times there is a whole lot of misleading information. Let's face it, advertisement is meant to lure you in. Many will write an ad to make you think you can afford something, or try to persuade you to think a deal make sense.

Run the numbers on your own. Get the gross scheduled income; calculate what the cap rate should be. Be very careful if the annual expenses are low. I wont deny good deals, however when the expenses advertised are lower than what they should be, check it out!

Remember, "Management, Taxes, Maintenance, Insurance, and Utilities". Those five are key expenses with cash flow property operation. If the operating expenses are unusually low, something with those five is off, find it!

Check your money, check your system. Is your support system supporting you? Is your team reliable? This should be a no brainer, but it is often overlooked. My biggest pet peeve is integrity. If you can't trust someone, why do business with them. Making a quick buck isn't always worth it.

JP Sherwood

Hurry up and Buy!

Yeah yeah, prices are still falling.
And yes, interest rates are pretty low.

That's still not an excuse to go and buy something. I haven't heard of anyone benefiting with "keeping up with the Joneses".

Now I don't want anyone to get the wrong idea. Improving your assets by buying property is great.

However buying a property and having to dump it off two years down the line because you didn't do you homework isn't so great. Due diligence is key!

If you going to buy right now, that's great. Do it for the right reasons. Do it for your reasons.

Let me know what you think.
John

For Sale By Owners

Hello,
If you are thinking of selling your home without a Realtor, make sure you are prepared! There are a lot of papers, rules, inspections, and disclosures that occur in a deal. And although you may think that by not paying a commission you are passing on the savings to the buyer, keep in mind that those savings you give now may haunt you later!

Let's talk about this pet peeve: Disclosure! A lot of disclosure occurs, and from the last time you were in a real estate deal, do you remember what needed to be disclosed? It can be pretty confusing, and stuff could fall through those cracks!

Does the buyer have a Realtor? As I'm sure there are a bunch of good hearted Realtors in the industry, I'm not so sure that they would work for free. Now that "savings" you are passing just got reduced by half, or more!

How is your marketing? I'm sure that some of the online classifieds, such as Craigslist.com are being utilized. However are you listed in your regional MLS? Are you hosting any Open Houses? Have you checked the comparable properties to see if your asking price is too high (or to low)?

There is a lot of talent out there with Realtors, and there are a lot of people convinced that they can do the job themselves.

I like examples, so I am going to use one. If you were on trial for murder, and were innocent yet there was a stack of circumstantial evidence against you, would you represent yourself to save a few dollars?

Let me know what you think.
John

Mistakes of an uninformed Buyer

Hello,
I talk to a lot of people about real estate. I keep hearing the same thing over and over again; "I am just going to wait six months for the market to come back".

STOP!

Don't wait. I will guarantee, when you do wait and decide to get behind the eight ball, you'll be behind everyone else too! Good thinking you! Really knew when to strike when the iron was hot!

1. The early bird gets the worm. Prices may keep falling, yes, but really how much more? We have seen a lot of falling, and yes I will agree that they probably will fall some more. But ask yourself two things; One, do you know when they will bottom out? And two, can you finance right now?

If you answered yes to the first one, congratulations, you are psychic and should tour in Las Vegas. If there was a yes to the second question, and you haven't purchased yet, help yourself out by taking your right boot off and tap it against your head!

2. Would you pay a little extra for a sure thing? I sure as hell would. Why gamble with an unknown when you can have security for a little extra. This is just common sense! I don't even know why I am talking about this, but people, would you leave your front door unlocked on the chance you WOULDN'T be robbed just so you can open your door more conveniently?

Do yourself a favor, help the economy a little, and buy something! A house would be great, because those who can finance right now will be the foundation for what's ahead.

Let me know what you think.
John

Personal gains and finding good deals.

Hello again,
I don't think I need to remind everyone, but finding a good deal is always worth it. The other day I found a great deal on a brand new bed. I'm also working on a deal for a place that could be a good deal too. The problems, although apparent, can be smoothed out. But bear in mind, a good deal will always profit. Let me know what you think.
John

Keep you properties up!

Hello,
I would like to make a suggestion, to all those who are looking to sell there homes. I know the market is tough, and with the growing trend of foreclosures and short sales, a little elbow grease goes a long way to a prospective buyer! You would be surprised on how appealing a home looks with a few minutes of picking up the trash. Best of all, it's free.
Let me know what you think.
John

My First Blog.

Hello,
This the very first blog I have published for JP Sherwood Realty. The site went up last night, and I am very excited.