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

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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