Measuring Your Investment
In Warren Buffett’s recent letter to shareholders, he predicts an eventual, and possibly dramatic, upturn in the real estate market; stating that it’s the GREATEST investment you can make today. In fact, he says the only safe investments are stocks, farmland, and real estate.
There are several methods of considering profits and gain in relation to capital invested. It could be non-monetary, such as a vacation home or a possible future residence, it could be a monthly income-producing asset (you’re return will be greater than it ever would be sitting in a bank), and it is an appreciating asset, so you can expect future equity, and often times immediate equity.
The Capitalization Rate
Cap Rate (%) = Annual Net Operating Income ($) / Initial Capital Invested (purchase price + closing costs) ($) x 100%
Great for analyzing your expected annual return rate as a rental property, comparing your annual NET income versus the buy-in cost. The higher the percentage, the faster your annual income pays off your initial investment. When you invest with us, you will continually find properties with a Cap Rate between 8% to 12%. This is an amazing return with low risk.
Return on Investment (ROI)
Return on investment (%) = Net profit ($) / All Capital Invested ($) * 100%
The ROI is similar to the Capitalization Rate, for a specific given time period, such as a 10 year return analysis.
Cap Rate and ROI Example
This is an example of a common investment purchase today: Eric purchases an investment rental property today, and he’d like to estimate his 10 Year Return on Investment, from the day of purchase to they day of resale 10 years from the day of purchase. He purchased the property at $100k including closing costs; after receiving the monthly rents and incurring maintenance expenses, HOA fees, taxes, and other, his first annual net is projected at $10,000; with a 5% annual increase, Eric is projected to profit an estimated $125,700. He assumes his property will appreciate at 7.5% / year (resulting in an estimated $206,000 sales price in 10 years).
Annual Cap Rate = 10% = $10,000 / $100,000 x 100%
10 Year ROI = 322% = ($125,700 + $206,000 – $9,000 (est. closing costs)) / $100,000
And, if you are eligible for financing with 20% down, your 10 Year ROI looks more like this:
10 Year ROI w/20% down = 1213% = ($125,700 + $206,000 – 80,000 – $9,000 (est. closing costs)) / $20,000
Cash + Financing
Cash is King, and Financing is Queen, and Proof of Funds is required prior to submitting any offer. Over 95% of purchases under $90k are cash purchases; with this said, Financing is possible if you qualify, and definitely increases your purchase power. Though the price range might be higher for financing, in reality you are putting less capital up-front, and at today’s low interest rates you could almost consider it “free” money. The lower priced range of properties tend to sell within days, so it’s important to act quick.
Improve your purchasing power, and get pre-approved today. If you plan to finance, you need to obtain a strong pre-qualification letter.
Note: Any condos that have HOA rental restrictions may likely accept financing, but they will have exactly that… rental restrictions. Any condos that do not have HOA rental restrictions will be cash purchases only, as lenders will not finance properties in a community with a rental ratio over 25% non-owner occupancy. On rare occasion, some single family homes and townhomes will have rental restrictions, be aware of this if you are purchasing a rental property, and this is something our team will verify during due diligence.
The Buyer Brokerage Agreement
As a home buyer, you understand the importance of having a dedicated professional represent you; a licensed Realtor who is here to help and represent you from your property search, to making and negotiating an offer, to inspecting the home and closing escrow. This point of contact learns your preferences, goals, and is your key resource for information and communications.
As much as it is important to you, to have a Realtor dedicated to you, Sellstate Deluxe provides you with a team of Deluxe Realtors dedicated to you. In return, as we dedicate ourselves to you, we ask for your dedication to us, up-front. Setting an up-front agreement is not only required by GLVAR, but it’s also good practice for both parties to have a clear up-front agreement on our professional relationship.
We’re here to help; contact us directly with any questions. Click here, to request your Buyer’s Opening Package Now!
Property Search + Analysis
Feel free to start your search now; our Deluxe Property Search pulls live data from the MLS, so it is always accurate and up-to-date, and more-so than Trulia or Zillow and most other sites.
After you have chosen to work with Sellstate Deluxe Realty, and you have completed a Buyer Broker Agreement, we will initial your thorough search, which will be monitored daily by a dedicated Deluxe Realtor. Depending on your preferences and goals, we will present these properties to you. We can schedule specific times to physically see the property, complete a live virtual tour, and / or send detailed photos with a professional camera (in addition to the current listing photos) so you get a great feel for the home, even if you are not in town.
Short Sales, REO’s, + Equity Sales
The type of sale can affect the length of the purchase process, ease of sale, price, and condition.
Equity or Traditional Sales
An Equity Sale is when a Seller of Real Estate who has equity in their home; expect faster response times, Seller’s Real Property Disclosure, homes with owner pride, and a variety of conditions from New, Recently Renovated, to Needing Renovations. Equity is a positive difference between the current fair market value and any outstanding Mortgage Loans, Lines of Credit, or other Liens associated with the property. Equity = Assets – Debts
This term changed from just being a Real Estate Sale because of…
Short Sales are wild transactions, though they are becoming tame and understood. Expect a delay of a bank response of up to 6 months (or less or more). Make sure to have your agent pre-screen the listing agent and current owner, and keep a weekly tab on updates. You can find great deals, but you need to maintain patience. This type of purchase sometimes brings up frustration within buyers as a result of the slow-to-respond negotiators, keeping parties involved in state of the unknown.
You can find quality homes at a fair or better than fair price.
Real Estate Owned (REO) Sales
Real Estate Owned homes make up less than 1/3 of the current supply of Las Vegas homes for sale. Sometimes they can be as smooth as a traditional sale, but they are distressed properties, and sometimes they may randomly take just as long as a short sale, especially when liens exist. Also, expect to make offers within 24-48 hours, and expect a delay response, up to several weeks.
Some key differences: banks will almost always have addendums that rewrite the contract and clarify that you are buying the property As-Is. Also, it’s not just a single individual; when you make an offer, the seller’s agent passes your offer to a bank representative, usually a local attorney, who will respond to your offer when they feel like it; they must analyze it, look at it, let it sit on their desk and give time to other buyers to look, provide you with a multiple offer notice, and then they will respond only to the highest and best offer, one at a time, until they ratify a contract. Otherwise, these transactions are common and easy to work with.
The Buying Process
Are you ready to start your investment purchase today? Click here, to request your Buyer’s Opening Package Now!
To learn more about the general buying process click here to check out or Buying Real Estate 101 page.
Single Family Vs. High Rise Vs. +
All properties come in a variety of Ages (year built), Styles, Sizes, Communities, Schools, and Local Amenities. We do provide you with a variety of resources at the top of the page, such as a Property Search, Maps and Tools (e.g., area/zip maps, occupancy map, crime map, +), school reviews, and more.
Single Family Residences (SFR)
With SFR’s you have title to the land (lot), structure, rights to air space, and often a common interest community. Lot Sizes will vary depending on the price ranges, areas, and communities. The Price per Square Foot will increase in certain areas based on what fair market prices buyers are paying.
Many properties in Las Vegas have Common Interest Communities with a Homeowner’s Association, which maintains the common areas, and implement common rules and regulations, and helps keep communities en-sync.
Condos and High Rise Condos
With a Condo you are responsible for everything within your walls, and you are responsible for paying into your common interest community, which maintains the building(s) common areas, exterior, and landscaping. You own air-space, but you do not own any land.
From experience and statistics, SFR’s will have fewer days on the market (and they are easier to rent).
Town Homes are similar to condos, but you own the airspace above and below you, so you would never have someone living above or below you.
The Leasing Process
When Leasing your home with us, expect Deluxe Service. We are a licensed Property Management Company, with 7+ years of experience, currently managed properties are 300+ strong and growing, with an occupancy ratio over 98% at any given time.
Click here to see a sample Property Management Agreement
In calibration with our online presence, your property will be exposed through a variety of venues: the local MLS, Craigslist, Facebook, Trulia, Zillow, and other websites, plus we will advertise directly to tenants who contact us daily seeking rental properties. Average days to rent are between 0 – 60, and our basic monthly fee is 8% of the monthly rent, minimum $100 ($50 for condos).
The Lease Agreement will be between the tenant and the managing company. We advertise the property, pre-screen potential tenants, create legally binding lease agreements, collect and process rents, provide 24 / 7 Emergency Services, conduct eviction processing when necessary (normally this take no more than 5-10 days), we renew lease agreements, and overall we make it so easy for you that you can kick-back, relax, and receive a rental income without any hassle.
We’re here to help you with your purchases, management, leases, resale, and more; Contact Us Today.
The Re-Selling Process
When you are ready to resell your Real Estate, we are here to help and represent your property, with a Deluxe Guarantee.