Buying/Selling

Investment Properties

If You, Or Someone You Know, Is Considering Buying Or Selling Investment Properties:

Mike and his investment team's goal is to help his Investor clients achieve financial stability and eventually financial independence. Mike thoroughly analyzes properties to find the best possible combination of area, appreciation, rent rates, vacancy rate, Net Operating Income (NOI), Capitalization (Cap) Rate, price and property condition in your price range.

The current real estate market, with record-low mortgage rates and exceptional real estate values, offers today's investor incredible opportunities.

Historically, after every bust there is a boom. The timing is right to purchase investment properties now.

Experience: Let Mike put his 30+ years experience buying and selling investment properties in Southern California, to work for you - - his advice is based on 1^st hand experience.

Training/Knowledge: Mike underwent intense, specialized training to earn the prestigious CIAS (Certified Investor Agent Specialist) Designation, to identify the exceptional property values that can help secure your financial future.

In February 2011, there were less than 550 CIAS agents in the United States. By comparison, at the same time, there were over 3,000 Realtors in the South Bay Association Of Realtors alone.

By providing cash flow, stability, better tax incentives and leveraged equity, real estate has consistently proven to be a better long-term investment than the stock market.

Over the past 10 years, the S & P 500 has lost value, while the average home price has appreciated -- even with the latest housing crisis.

In the 40 years from 1969-2009, there were only 3 total years of negative appreciation in real estate values. During the same time frame, S & P stocks had 11 total years of negative appreciation.

What Is A CIAS?

Mike is a CIAS. A CIAS Is A Certified Investor Agent Specialist, Who Has Received Comprehensive Training And Tools To Streamline The Real Estate Investment Process To Help Increase Returns For Investor Clients. The Extensive Training Covers The Different Investor Types, And The Investment Opportunities, Financing Options, And Calculations Needed To Provide Solutions For Each.

As A CIAS Agent, Mike Will Assist You With:

Investment Strategies
Self-Directed IRAs
1031 Tax Deferred Exchanges
Leverage Options
Key Financial Calculations
ROI (Return On Investment)
Capitalization Rate
Average Returns
Cash Flow
And Much More

R(I)3 - Right Investment / Right Investor / Right Information

Mike uses a simple model with investors, R(I)3 - pronounced "R, I, cubed." Simply put, Mike provides the Right Investment, to the Right Investor, with the Right Information. Properties are chosen combining your type of investing, with your investment goals.

Advantages Investing In Real Estate

There is one fundamental principle that always ensures the value of residential real estate as an investment - - people need a roof over their heads. Investing in real estate is a solid financial decision and should be part of a balanced investment portfolio.

Cash Flow Opportunity

Cash flow is one of the most distinguishable benefits of investing in real estate. It's the rental income remaining after expenses and mortgage are paid.

Cash flow can be increased by reducing expenses, raising rents or lowering debt service. Once an investment is paid off, cash flow becomes a significant and steady income stream.

32% of Americans who rent, depend on real estate investors to provide them with leases. From 2006-2009, home inventory increased, home prices dropped, but rent amounts increased 16%, providing increased cash flows for investors.

Appreciation

Appreciation is the increase of the investment's value.

Historically, real estate values have consistently increased over time.

Leverage

For those looking to invest less in a down payment, loans are available to complete the purchase. Your cash flow may decrease, however doing so will increase the investment's return. This is known as leverage.

Leverage is largely unique to real estate investing and is a key benefit for those seeking larger returns.

In typical investment purchases (stocks, mutual funds, CDs), each dollar invested equals the equivalent amount of buying power. In a leveraged real estate purchase, each dollar invested can have 4 or 5 times the amount of buying power. With real estate, the value increases based on the total value of the investment, not just on the money invested - - the Investor receives a return on value borrowed as well as value invested.

Taxes And Deductions

A significant benefit when investing in real estate is the ability to deduct expenses when renting the property, such as maintenance, taxes and interest. These expenses include:

Advertising
Cleaning and maintenance
Commissions
Depreciation
Employees, contractors, etc. (wages for property managers, repairmen, etc.)
Insurance
Interest
Legal Fees
Local transportation expenses
Long distance travel
Professional services
Repairs
Utilities

For the most current list and information on expenses for tax deductions, go to: www.irs.gov or consult a tax accountant. Ask your accountant about the additional capital gains tax exemptions if a homeowner has lived in a property for 2 of the last 5 years.

1031 Exchanges

Section 1031 of the tax code provides tax deferrals for like-kind properties. In general, all real estate is like-kind property, except real estate outside of the territorial United States.

The primary benefit of the 1031 exchange is the deferring of capital gains taxes paid on the sale of an investment property.

This is a complicated process. Mike is happy to refer a qualified intermediary or accommodator to guide you through the process.

Depreciation

Another tax benefit of real estate investing and it is how you recover the cost of income producing property (does not apply to primary residences).

This is done by subtracting some of the cost of the building (not the land) each year on your tax return. The reasoning behind depreciation is that property suffers from wear and tear over time.

For more information on residential real estate and depreciation schedules, refer to IRS publications 527 and 946 and consult a tax accountant.

Using And Leveraging Retirement Savings (Self-Directed IRAs)

SDIRA allows investors to choose the types of investments for their retirement, including real estate.

The benefit is having control over your financial future AND being able to invest with tax deferred income.

If you choose to invest through a SD IRA, Mike can refer you to a qualified custodian to assist you through the process and answer any questions you may have.

A self-directed IRA (SD IRA) can purchase real estate all cash, leveraging with loans, or partnering with another investor, trust or partnership.

Loans provided to the IRA are often non-recourse, which means in the event of a default or foreclosure, the investor's personal assets are safe.

The cash flow of the property goes directly into the SD IRA, increasing the return on the asset and the appreciated value.

Real Estate Vs. Other Investments

Non-financial assets (real estate, business equity, vehicles) account for 66% of stored wealth - - with real estate accounting for over 64% of non-financial assets.

Stocks - from January 2000 to July 2010 the S & P 500 Index dropped from 1469 to 1027 - - a decrease of 30%. Stocks are a more volatile asset, because of daily appreciation and depreciation of value.

Bonds - function as loans that companies pay back over time, with interest. Rate of return is fixed, they don't appreciate, can be more stable than stocks, returns are generally lower than other assets.

Mutual Funds - investment decisions given over to money managers. Dividends (cash flow) are not paid to investors.

Certificates of Deposit (CDs) - similar to savings accounts, except fixed term. Virtually risk-free, fixed rate, fixed term, do not appreciate in value

Real Estate - nationwide, the average sales price for single family residence increased over 30% from the beginning of 2000 to 2010. This means a $100,000 home in 2000 was worth $130,000 in 2010, despite the recent housing crash. Unlike stocks and bonds where your return would be 30%, assuming you put 20% down on the home in 2000, your ROI (return on investment) was actually 150% ($30,000 profit on $20,000 invested).

Real Estate	Stocks	Bonds	Mutual Funds	CDs
Gradual changes in value (stable)	Immediate changes in value (volatile)	Does not change in value	Immediate changes in value (volatile)	Does not change in value
Pays income (cash flow)	Can pay income (dividends)	Pays Income (interest)	Does not pay income	Pays income (interest)
Investor Control	No Control	Fixed Return	No Control	Fixed Return
Tangible Value	Conceptual Value	Purchased Debt	Conceptual Value	Banked Funds
Manageable Risk	High Risk	Low Risk	Mid-High Risk	Low-No Risk

Investor Types - Which One Are You?

1^st Time Investor

Never purchased real estate for investment -- may have purchased a home to live in.

Move Up Investor

Either owns a home outright, or low enough payments to support becoming a rental property that cash flows at market rent.
Rather than sell their current home, they rent it out -- can be an incredible wealth building opportunity.
Can build a portfolio over time.

Portfolio Investor

Purchases an investment property every one to three years.
Conservative, but understand the benefits of real estate and have incorporated it into their long-term investment plan.

Performance Investor

Purchases at least one investment property to hold each year.
Understand the value of real estate portfolios and have refined investment goals.

Rehab & Resell

Purchase property for rapid improvements and quick sales.
Purchase one or two properties per year.
Highly experienced - generally not interested in holding properties.

Common Investor Fears & Solutions

Fear: Real estate won't offer the same rate of appreciation as stocks, bonds or mutual funds.

Solution: Real estate offers cash flow, leverage, and tax benefits. Over time, properly leveraged equity can far outpace stock appreciation.

Fear: Real estate is difficult to buy, sell and maintain.

Solution: With his experience and CIAS knowledge, Mike is available to streamline the process and make it simple. He is a specialist in finding and analyzing the right property for his clients. He does the legwork -- you simply evaluate the decision. Not all properties require repairs and maintenance, but Mike has a team of responsive professionals available if services are needed. A house is only 5 systems: HVAC (heating, ventilation, air conditioning), foundation, structure, electric and plumbing. An inexpensive home warranty can be purchased as insurance for many common repairs.

Fear: I'm unsure about committing to the cost of a second property.

Solution: There are many ways to invest in real estate. Self-directed IRAs allow you to use IRA funds to buy and sell property. Properties can also be leveraged so that the tenant actually pays off the mortgage while equity is built. In addition, today's prices are down and interest rates are at historic lows.

Fear: Unsure about taking on a second mortgage.

Solution: If properly evaluated, the rent from the property will cover, or come close to covering, the second mortgage.

Fear: I don't know how to be a landlord.

Solution: If you prefer, as part of his investment team, Mike can refer a professional property manager to you. They will find and screen tenants, maintain the property, and collect rent. If you manage the property yourself, Mike is happy to share his referral network of service professionals, tools, systems and 30+ years of experience with you.

Fear: I don't know how to find the right property.

Solution: As a CIAS and investment property owner for over 30 years, Mike specializes in finding exceptional property values, and explaining the benefits and drawbacks of these properties. He has systems in place for finding and evaluating many different types of properties, and he is available to help guide investors through the process.

Fear: I want to flip properties, but I don't know how.

Solution: There are many ways to invest in real estate. Many people favor a buy and hold strategy and benefit from collecting rent year after year while building equity. Rehab and resell can be lucrative if the right team is in place for you. Mike's investment team is experienced and is available to assist you.

Fear: Real estate investment is only for the very rich.

Solution: The median income of the real estate investor in 2009 was $87,200, as opposed to $72,900 for those buying primary residences. 78% of investors were married couples.

Fear: Real estate investment is for the middle aged.

Solution: Only 22% of real estate investors are 45 to 55 years old. 50% are less than 45 years old. 28% are over 55 years old.

International Investors

Mike Can Provide Domestic Financing Referrals For Foreign Investors
- International Investors Accounted For $41 Billion Of US Residential Property Transactions (April 2009-March 2010)
51% Of International Investors Surveyed Are Interested In US Real Estate, Because It Affords Them The Best Opportunity For Capital appreciation

Important Ratios

Mike calculates the following ratios (when relevant expense numbers are available) for all properties he recommends to his clients:

Net Operating Income (NOI) - the net revenue from a property, not including debt service (mortgage payments).
Cap (Capitalization) Rate - rate at which an investment property earns money, depending on the value of the property. Cap Rate is an important calculation used when evaluating the financial performance of a property.
Cash Flow - the amount of money an investor earns at the end of a month / year after all expenses and debt service have been paid.
Cash-On-Cash (CCR) Return - a measurement of cash flow based on an investor's initial investment (down payment and closing costs). This lets the investor know how well the investment is performing.
Debt Service Ratio (DSR) - also known as Debt Service Coverage Ratio. Lets investors know if their mortgage payment will be too high for the property to be a good investment.

Mike's Real Estate Investment Team

Mike's investment team of responsive professionals will provide you with expert advice, ongoing support/information, and an extraordinary experience. Mike's team consists of:

Attorney - if needed, to review documents and complex transactions. Someone who understands investor issues.
Accountant/Tax Advisor - provides information regarding depreciation, expense write-offs, capital gains, 1031 tax exchanges, retirement income, self-directed IRA benefits, etc.
Loan Officer/Mortgage Broker - finds the best possible loan rates and terms for your specific purchases.
Qualified Custodian For A Self-Directed IRA - sets up IRA to invest in real estate.
Qualified Intermediary/Accommodator For A 1031 Exchange - sets up exchange for deferring taxes.
Appraiser - understands trends - used mostly for cash clients and international investors.
Inspector - performs thorough inspections in a timely manner, followed up by an inspection report.
Title Officer/Company - search for liens and easements on the property.
Insurance Professional - understands investor-specific policies - provides liability, loss of rental income & property insurance, as required.
Contractor - provides accurate estimates for work to correct repair issues found by inspector, and future work, if needed. Insured, bonded and licensed.
Handyman - useful for quick, easy, inexpensive repairs, where a contractor is not necessary.
Property Manager - if needed, they will manage repairs as needed, find/screen tenants, collect rent & communicate with you regularly.
Cleaning Service - prompt and thorough - used after rehabs/before showings and after move-outs.
Landscaping & Lawn Maintenance - if needed - 1^st impressions are important.

Self-Directed IRA (SD IRA)

If you choose to invest through a SD IRA, Mike can refer you to a qualified custodian to assist you through the process and answer any questions you may have.
A self-directed IRA (SD IRA) can purchase real estate all cash, leveraging with loans, or partnering with another investor, trust or partnership.
Loans provided to the IRA are often non-recourse, which means in the event of a default or foreclosure, the investor's personal assets are safe.
The cash flow of the property goes directly into the SD IRA, increasing the return on the asset and the appreciated value.

Exit Strategies

Exit strategies refer to how an investor will sell a property based on stated goals for that property.
Mike prepares his clients with exit strategies and contingency plans to accomplish their stated goals.