Commercial Mortgage Estate Planning.

Financial Freedom Through Real Estate
My rich dad taught me early that real estate is the fastest way to build wealth. Real estate investing has created more millionaires than any other form of investing because of its many advantages. Whether you’re investing for cash flow or capital gains, your success is dependent on your education. Investing is only risky if you don’t know what you’re doing. The rich know the many advantages that investing in real estate offers and how they can benefit from them. If you were raised poor or middle-class, chances are that you were not taught the fundamentals you need to leverage the power of real estate and become financially free for life. By having a personal coach, you can take these principles and quickly apply them in your life. You’ll have the feedback and encouragement you need to get out of the rat race—just like my rich dad did for me.

—Robert Kiyosaki of Rich Dad, Poor Dad
Your Real Estate portfolio (even if it is just one property or soon to be one property) is substantial, easily hitting the hundreds of thousands of dollars. That means that one piece of research can impact your profitability to the tune of thousands of dollars, just by pointing you in the right direction, cutting through the emotions of the market and making sure that you aren't being 'sold' again.
There are always good deals in every market. Conversely, no matter how hot the market, there will always be properties that don't do well. The way you avoid owning one of these underperformers is to follow a proven investment system that forces you to ask the tough questions while ignoring market hype and misinformation-- This report provides you with the research you require.
It is important to note that current market conditions are not signs of what the future market will hold, only the economics supporting a market can tell you what the future potential is. Here is a list of questions investors need to ask themselves before making real estate decisions.
The following long term key fundamentals were analyzed in-depth:

• Is the area’s average income increasing faster than the provincial average?
• Is the area’s population growing faster than the provincial average?
• Is the area creating jobs faster than the provincial average?
• Does the area have more than one major employer?
• Is the area in the  Affordability Index Hot Zone (25% to 39%)?
• Will the area benefit from an economic or real estate ripple effect?
• Has the political leadership created an economic growth atmosphere?
• Is the Economic Development Office progressive and helpful?
• Is the area’s infrastructure being built to handle the expected growth?
• Are there any major transportation improvements in the works?
• Is the area attractive to Baby Boomers’ lifestyle?
• Is there a short term problem occurring that is slated to disappear in the future?
• Is there a noted increase in labour and materials cost in the area?

The answers to these questions provide a base from which to work while analyzing any region.  Especially during today’s market turmoil and mixed economic signals, this pure economic focus is critical.
What Are The Challenges Of Buying Property Outside Of Your Own State Or Area?

A: Investing in locations other than your immediate vicinity can bring up questions and issues to deal with in addition to the regular concerns. Some of them are the following:

• Distance: How do I close, maintain & manage my unit?
   
• Closing: Some people think that they have to close in the location where you make the purchase. This is not true! If you select a lender that is licensed appropriately, you can close in your own home town or even close by mail. Your Realtor can usually recommend one or more lenders that are licensed in all 50 states to accommodate you. In our electronic age all of these fine details have been simplified to go quickly and smoothly wherever you are.
   
• Maintaining: If you don’t live in the same location as your investment and needs repair or maintenance, how do you find and hire someone to do the work? The easiest and cheapest option is to make investments with onsite management already. But for any type of investment in any location there are companies who will manage your property for a fee. The fee is typically based on how much or little you want them to do. Then the fee will typically range from 6% on up, depending on the level of service selected.
   
• Management: having good management on site already in place is an excellent advantage when your property is not located near you. If you are selecting your own management company make sure to interview several or choose one with a good reputation and history already.

What Types Of Investments Are Best?

A: The two factors that make investment property valuable are:
1. The cash flow they produce and
2. The appreciation they produce
There is often a balance reached between these two factors based on immediate versus long term goals. We typically teach people to “buy and hold”. Whether your property is cash flowing or not, it will typically appreciate much better than most any stocks, bonds or mutual funds could ever do.

Choose your focus and choose your investments accordingly. Have your realtor or representative examine these factors for any investment you purchase. Ask them for their experienced and educated opinion.
What Is Typically Involved In Beginning Real Estate Investing?

A: Buying an investment property is no more or less complicated than buying your own home.
The process is basically the same:
1. Pre-qualify: your offer is a much stronger one if the seller knows your financing is ready to go.

2. Choose your investment: use the help of your team of experts to advise you, when needed.

3. Make an offer: if you are purchasing in a development, pricing may be pre-determined. But if you are purchasing a single family home, for example, there is some room to bargain. Don’t “low-ball”. Sellers may be insulted and not look at any other offer from you, just based on that.

4. Purchase Agreement: This is just a fancy name for the contract you and the seller will sign, listing out the specific agreements. Here are some common elements:

• $ amount of deposit/earnest money
   
• Specifically states you’re the price & terms of the agreement Proposed financing you have chosen (this is why it’s good to pre-qualify)
   
• Rescission period – the amount of time you have to change your mind for any reason. This is different from state to state and varies on the type of investment property you purchase. For example, for a condo or town home in Minnesota, you have 10 days from the date you receive your "Condo Docs" to withdraw and get your earnest money back. After that, the seller may keep your earnest money.
   
• State the intended closing time that you and the seller agree upon.

5. Closing: On this date you will finalize your purchase and officially “take title” to the property. At this time, the balance of your arranged down payment will be due. For example you and your lender agree that putting 10% down is the best option for you and you put 2% down for your earnest money already, you will need to bring a cashiers check for the additional 8% to closing. Your lender will give you the exact amount plus any closing costs you are paying for upfront.
Once I Purchase A Place, How Do I Go About Getting It Rented?

A: There are actually a lot of facets to that question.

The short answer is get it ready, get it listed in good local advertising, get a good lease to use in your state and follow up with every inquiry.
 
How Much Will I Need To Come Up With To Start Out?

A: With new Federal Government rules, the actual down payment is typically  20%. If you want to start out with a $150,000 property for example, plan on at least $ 30,000 down as a good place to start.
 
Why Invest in Real Estate Now?

A: Baby Boomers are just at the leading edge of beginning to retire. Appreciation in popular retirement destinations will typically be favorable. Check with a trusted Realtor for area specifics. Also, there are still very attractive mortgage products available with rates still at an unusual low, allowing you to qualify for more property that the historical average.
Also lenders have more flexible guidelines to get you approved. Also, the population is still growing. With interest rates no longer sinking, many people who would otherwise buy are now back in the area “rental pool”.
Lastly, our significant aging population puts a significant amount of seniors back into the rental pool, as they often no longer want to care for a house and yard but still have the disposable income from their retirement plans.
 
What Is The Difference Between Being Rich And Being Wealthy?

A: There are several ways to look at it. We’ve chosen one of the more popular definitions: The rich are defined by their jobs. They earn a lot and often spend a lot on their lifestyle. If they lose their job, they soon lose their riches.
Financial wealth can considered as not related to a job. It is wealth that produces a combination of appreciation and cash flow no matter what type of job you hold, if any. Building wealth, therefore is about gathering un-earned income. We teach property ownership as one of the methods of long term wealth building.
 
Should I Invest In Single Family Homes Or Condos?

A: Focus on single family homes for the following reasons:
1. Liquidity: personal residences are quick and easy to sell, if needed

2. Higher grade of tenant: more stable, less vagrant, higher quality

3. Equity gain over time: long-term appreciation is typically the greatest

4. Easiest to acquire financing for

5. Easiest to rent out

6. No association or management fees (Condo fee) = increased cash flow
Focus on condominiums regionally for the following reasons:
1. Liquidity: personal residences are quick and easy to sell, if needed

2. Lowest price points: easiest to acquire for beginners or multiple units for intermediate investors

3. Easiest to acquire financing for

4. Onsite management & association = least personal time invested
If you are considering diversifying your investment portfolio, you may want to consider both of these options. It is a great way to balance cash flow with appreciation.

Why Should I Invest in Real Estate?

Compared to other investments, real estate can provide much better yields.

By James Kimmons, About.com Guide
When you purchase a company's stock certificates, you're looking for appreciation in the stock value, and perhaps dividend income if it is paid by the company. With bonds, you're looking for income yield on the interest rate paid by the bonds. With a real estate investment property, there are more ways in which to realize a superior return on your investment. Learn the ways in which your real estate investment can increase in value, as well as provide good cash flow.
1. Cash Flow from Rental Income
As with a stock that pays dividends, a properly selected and managed rental property will provide a steady stream of income in the form of rental payments. Historically, this percentage of return has exceeded that of dividend yields on average.
The real estate investor has a bit more control over the risks to that cash flow also. Though there are downturns in real estate prices and homes sold in some years and areas, generally those renting property in which to live will continue to rent and without a corresponding decrease in rent amounts.
2. Increases in Value Due to Appreciation
Historically, real estate has shown to be an excellent source profit through the increase in investment property value over time. Of course, one cannot predict that this trend will always be true, and it varies significantly by area.
3. Improving Your Investment Property - More Value at Sale
While it's providing rental income cash flow, your property can also be improved in order to garner a better price and more profit when you do choose to liquidate it as an investment.
Upgrades to the appearance and functionality of a real estate investment property can significantly increase value. As trends and styles change, keeping the property interesting to renters will at the very least help you to retain value.
4. Inflation is Your Friend When it Comes to Rent
Though your fixed mortgage will remain constant over time, inflation that drives up home construction costs will also drive up rents. Population growth creates housing demand, again driving up rent prices if supply cannot keep pace.
5. Paying Off Your Mortgage
As you pay down your mortgage, the increase in equity can be used for other purposes and investments. Though it's frequently accessed by selling the property, a real estate investor can also take out equity loans if the terms are right and use those funds for more investing or other purposes.
6. You Could Just Find that "Steal of a Deal"
This is the last item, though it's one of the first ones many investors think about. There are opportunities to buy below market, but the other advantages above will probably be what the average investor experiences most of the time.
Should you be fortunate enough and have the experience to locate a value-priced property, this is an immediate way to increase your net worth and the value of your investment portfolio.

How to Calculate Net Rental Yield for the Real Estate Investor - W/Spreadsheets

By James Kimmons, About.com Guide
The beginning of a successful rental property investment strategy is an accurate estimate of rental yield for the prospective property. Here we see how to calculate Net Rental Yield, which takes the property expenses into account, though not the mortgage payments. Then we look at the same property with the mortgage included, and using the actual cash invested. This gives us a cash-on-cash rental yield.
At the end of this example is a link to two spreadsheets, one a sample and the other a blank one ready to calculate the net rental yield and cash-on-cash rental yield from your inputs.
Net Rental Yield:
Monthly Rental Amount $2,400.00
Percent of Year UnOccupied 5%
Take out for Vacancy for Annual Cash In of $27,360.00
Annual Insurance Cost $1,200.00
Annual Taxes $1,400.00
Annual Repairs Budget $600.00
Percent of Rent Mgmt Fee of 6%
These expenses total to Annual Cash Out of $4842
Income of $27,360 minus cost of $4842 = $22,518 rental income after expenses
Property Acquisition Cost $300,000.00
$22,518 divided by property value of $300,000 = Rental Yield of 7.5%
Cash-on-cash Rental Yield:
Monthly Rental Amount $2,400.00
Percent of Year Un-Occupied 5%
Take out for Vacancy for Annual Cash In of $27,360.00
Property Acquisition Cost $300,000.00
Less Down Payment - Cash In $60,000.00
Amount of the loan $240,000.00
Payment Monthly Pricipal/Interest $1,556.64
Annual Insurance Cost $1,200.00
Annual Taxes $1,400.00
Annual Repairs Budget $600.00
Percent of Rent Mgmt Fee of 6%
These expenses total to Annual Cash Out of $23,521.28
Income of $27,360 minus cost of $23,521 = $3839 cash return over cash out
$3839 divided by cash investment of $60,000 = Cash-on-cash Rental Yield of 6.4%
Mayrak Financial Solution Inc’s partner Maya Garg (Real Estate Broker with Royal Lepage Kingsbury, Mississauga, Ontario) manages Real Estate Investors property for them.