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Investor Seminar for Realtor Partners and Investors

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Information about Investor Seminar for Realtor Partners and Investors
Real Estate

Published on March 11, 2014

Author: RobertRatimorszky

Source: slideshare.net

Description

Presentation on to help Real Estate Agents increase their business. To make it easy for individual investors to understand there mortgage, how it can effect their over all financial plan. Why investing in Real Estate is a safe bet.
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1 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 “Real Estate Millionaire Club” Convention -- January, 2017

2 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Mortgage & Real Estate Investment Strategies to Build Wealth Presents:

3 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Robert Ratimorszky – Starpointe Mortgage My Experience: 5 years as a Practicing Mortgage Planner Illinois Licensed Mortgage Loan Originator 50 Millions Dollars in loans under management Real Estate Investor

4 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 – Starpointe Mortgage Why I am here tonight: Partner with 250 clients (like you) and, over the next 10 years, help them create $1,000,000 or more in equity that produces a monthly passive income of $15,000.

5 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Tonight’s Objectives • Challenge/Enlighten • Review the 7 main reasons to invest in Real Estate • Learn the 7 keys to successful Real Estate investing • Learn the basics of an Investment Real Estate Business Plan • Start to build Wealth Through Real Estate

6 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 What we won’t do tonight! Try to sell you any books, tapes, or seminars! Blow smoke at you about “investing in real estate with no money down”! Promise or promote any idea we have not used ourselves!

7 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Your Home and It’s Equity No Mortgage is good, right? I “should” always pay extra on my mortgage, right? I “should” get a 15 year, fixed rate mortgage, right?

8 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Wrong!

9 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 The “Meaning” of Debt Free Pay off Mortgage Become Debt Free Achieve Financial Freedom Make your life dreams come true Make a difference in the lives of your loved ones Care for elderly parents Provide education & opportunities for children

10 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 The Meaning of Debt Free Having no mortgage (traditional thinking) Having, but not needing to have a mortgage (new paradigm thinking)

11 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 The Impact of Leverage on Your Home No Mortgage With Mortgage Home Value $500,000 $500,000 Mortgage Balance - $350,000 Home Appreciation 3% 3% Invested Equity $500,000 $150,000 Home Value – 5 Years $580,000 $580,000 Rate of Return on Equity 3% 10.7%

12 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 The Impact of Leverage on Your Home No Mortgage With Mortgage Investment Assets - $350,000 Interest @ 6% - $21,000 Tax Ded. @ 31% - $6,510 After-tax Interest - $14,490 7% Invest. Yield - $24,500 Invest. - 5 Yrs - $490,893 Home Value - 5 Yrs $580,000 $580,000 Mortgage - 5 Yrs - $350,000 Net Worth - 5 Yrs $580,000 $720,893 Extra Wealth - $140,893

13 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Recommended Reading: “Missed Fortune 101” by Doug Andrew

14 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Why Invest in Real Estate? 1. Positive Cash Flow

15 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 The Option ARM Option ARM 2.90 Index + 3.10 Margin = 6.00% Interest Rate Option ARM 3.10 Index + 3.60 Margin = 6.70% Interest Rate Primary Residence – 80% Financing: Investment Property–90% Financing (No PMI):

16 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 The Option ARM Deferred Interest Interest Only Fully Amortizing Option #1 Option #2 Option #3 1.375% 6.00% 6.00% $1187 $1750 $2098

17 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 The Power of Deferred Interest! Since 1970, homes in our market have achieved average appreciation of 5% per year. In the preceding example, you could potentially defer $563 per month ($1750 interest only payment minus $1187 minimum payment) to your mortgage balance, which would equal $6756 in a 12 month period. During that same 12 months, if your $500,000 home appreciated 5%, you would gain $25,000 in new equity. Subtracting the deferred interest, you have still realized a net gain of $18244, plus you have leveraged the $6756 into another higher and better use!

18 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Interest Rate History

19 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 How This Strategy Can Work For You • Investment Real Estate • Primary Residence

20 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Why Invest in Real Estate? 1. Positive Cash Flow 2. Tax Advantages

21 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Tax Advantage #1 Depreciation Depreciation allows you to deduct a certain portion of the purchase price of an investment. This effectively offsets some of the income that you receive from the investment and allows you to achieve a greater after-tax yield. Only the value of the improvements, not the value of the land can be depreciated. With residential properties (both single and multi-family), you can depreciate the value of the improvements over 27.5 years.

22 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Depreciation at Work Depreciation on a Residential Property Purchase Price/Initial Investment: $250,000 Value of Improvements (75%): $187,500 Annual Depreciation (27.5 years): $6,818 Net Income (10% cap rate): $25,000 Taxable Income: $18,182 Income Taxes @ 35%: $6,364 After-tax Income: $18,636 After-tax Return on Investment: 7.45% w/depreciation vs. 6.5% without depreciation

23 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Depreciation at Work Additionally, you may be able to “bifurcate” the property, dividing the purchase price into land value, improvements value, land improvements value, and personal property value. The advantage in doing this is that land improvements and personal property are depreciated at a faster rate.

24 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Tax Advantage #2 1031 Exchanges Section 1031 of the Internal Revenue Code allows you to avoid paying capital gains tax on the sale of your investment if you “exchange” the investment for another of “like- kind”. In other words, if you use the sales proceeds of a real estate investment property to purchase another real estate investment property of equal or greater value, you will not be obligated to pay capital gains tax on the proceeds of the sale.

25 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Tax Advantage #2 1031 Exchanges 1. Roll Over Investments Indefinitely 2. Step-up in Basis Upon Inheritance 3. Time Limitations to Identify Property and Consummate the Transaction - see a CPA for details

26 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 1031 Exchanges at Work 1031 Exchange of a Real Estate Investment Property Purchase Price/Initial Investment: $250,000 Sales Price/Net Proceeds: $300,000 Profit: $50,000 Re-invested Funds: $300,000 Capital Gains Tax @ 15%: $0 Sale of Investment Without 1031 Exchange Capabilities Purchase Price/Initial Investment: $250,000 Sales Price/Net Proceeds: $300,000 Profit: $50,000 Capital Gains Tax @ 15%: $12,500

27 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Why Invest in Real Estate? 1. Positive Cash Flow 2. Tax Advantages 3. Property Appreciation

28 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Why Invest in Real Estate? 1. Positive Cash Flow 2. Tax Advantages 3. Property Appreciation 4. Hedge Against Inflation

29 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Why Invest in Real Estate? 1. Positive Cash Flow 2. Tax Advantages 3. Property Appreciation 4. Hedge Against Inflation 5. Investment Diversification

30 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Why Invest in Real Estate? 1. Positive Cash Flow 2. Tax Advantages 3. Property Appreciation 4. Hedge Against Inflation 5. Investment Diversification 6. Psychological Asset

31 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 6. Psychological Asset Which has more appeal to you? This? Or This?

32 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Why Invest in Real Estate? 1. Positive Cash Flow 2. Tax Advantages 3. Property Appreciation 4. Hedge Against Inflation 5. Investment Diversification 6. Psychological Asset 7. Positive Leverage

33 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 7 Keys to Successful Real Estate Investing Determine Acceptable Level of Liquidity

34 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 7 Keys to Successful Real Estate Investing Determine Acceptable Level of Liquidity Determine Marketability

35 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Determine Marketability (continued) You Need A Plan! • Beginning to buy real estate without a written plan is akin to deciding to be jet pilot without getting your pilot’s license! • You must assemble your “dream team” – mortgage planner, attorney, CPA, and insurance provider • Starting small and leveraging the future appreciation is where most clients start

36 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 7 Keys to Successful Real Estate Investing Determine Acceptable Level of Liquidity Determine Marketability Determine the Impact of Leverage

37 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 The Impact of Leverage No Mortgage With Mortgage Home Value $200,000 $200,000 Mortgage Balance $0 $160,000 Home Appreciation 3% 3% Invested Equity $200,000 $40,000 Home Value – 5 Years $232,000 $232,000 Rate of Return on Equity 3.2% 16%

38 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 The Impact of Leverage (continued) No Mortgage With Mortgage Rent $1,600 $1,600 Mortgage Expense $0 $733 Other Expenses $400 $400 Month Cash Flow $1,200 $467 Annual Cash Flow $14,400 $5,604 Sale Proceeds $32,000 $72000 Initial Investment $200,000 $40,000 Internal Rate of Return 9.8% 24.0%

39 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 7 Keys to Successful Real Estate Investing Determine Acceptable Level of Liquidity Determine Marketability Determine the Impact of Leverage Evaluate Management Issues

40 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 7 Keys to Successful Real Estate Investing Determine Acceptable Level of Liquidity Determine Marketability Determine the Impact of Leverage Evaluate Management Issues Calculate the Rate of Return

41 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Calculate Rate of Return (cont.) Return on Investment w/appreciation: (this is the calculation used while owning the property) The Math: Cash flow before tax+principal reduction+Tax Savings+Appreciation Cash Invested (Current equity position) Example: (see worksheet)

42 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Calculate Rate of Return (cont.) Internal Rate of Return = The total actual rate of return of an investment when you take into consideration the initial investment, periodic cash flows and net sales proceeds. This is a time value of money calculation. (This is the calculation used when the property is sold) Example: Initial Investment: $50,000 Annual Cash Flow: $5,000 Sales Proceeds: $65,000 IRR: 14.49%

43 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Calculate Rate of Return (cont.) Internal Rate of Return Calculations (financial calculator): N = Term (number of years that you hold the investment) I% Year = Annual Interest Rate PV = Present Value (initial investment = negative number) PMT = Annual Cash Flow (negative or positive number) FV = Future Value (sales proceeds)

44 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Calculate Rate of Return (cont.) Internal Rate of Return Calculations: N = 5 I% Year = UNKNOWN PV = (-$50,000) PMT = $5,000 FV = $65,000 Internal Rate of Return (IRR): 14.49%

45 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 7 Keys to Successful Real Estate Investing Determine Acceptable Level of Liquidity Determine Marketability Determine the Impact of Leverage Evaluate Management Issues Calculate Rate of Return Consider the Tax Impact

46 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 7 Keys to Successful Real Estate Investing Determine Acceptable Level of Liquidity Determine Marketability Determine the Impact of Leverage Evaluate Management Issues Calculate Rate of Return Consider the Tax Impact Understand, Calculate and Manage Risk

47 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Understand, Calculate and Manage Risk (cont.) Understand the Indexes 1. LIBOR - 1 month LIBOR (follows Fed Funds Rate) - 6 month LIBOR (predictor 6 months from now) - 1 year LIBOR (predictor 12 months from now) 2. MTA - 12 month moving average of the monthly 1 year Treasury Index MTA is more stable and slow moving than LIBOR related indexes

48 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Understand, Calculate and Manage Risk (cont.) 0 1 2 3 4 5 6 7D ec,03 M ar,04June,04 Sep,04 D ec,04 M ar,05 Jun,05 MTA 1 Mo LIBOR Prime Rate

49 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 7 Keys to Successful Real Estate Investing Determine Acceptable Level of Liquidity Determine Marketability Determine the Impact of Leverage Evaluate Management Issues Calculate Rate of Return Consider the Tax Impact Understand, Calculate and Manage Risk

50 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Example Property Acquisition Plan (see Handout) Background: Client owns two current rental properties currently and has a primary residence with a $150,000 15 yr fixed rate mortgage. This home is valued at $250,000. This client’s plan called for leveraging the most property for the least down payment. His goal is to amass $1,000,000 in equity in the next 10 years, creating enough passive income to pursue investment real estate full time. Under this plan, the borrower can leverage $525,000 in rental real estate for $50,000. In addition, the client has created $553 per month in passive income, while decreasing their overall monthly mortgage expense.

51 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Our Goal Revisited: Amass $1,000,000 in equity $15,000 monthly income Create that 2nd or 3rd income that every family needs to achieve their financial goals!

52 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 What’s Next? 1. Decide if Investment Real Estate is right for you. 2. Pull credit report and improve scores (1 in 3 are incorrect) 3. Enroll in our Rate Watch Mortgage Management Program 4. Build your “Dream Team” (give me names!!!) 5. Write Your Plan 6. Start building wealth through Investment Real Estate!

53 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 “Real Estate Millionaire Club” Convention -- January, 2017 I hope to see you in Hawaii!

54 Robert Ratimorszky-Starpointe Mortgage robertr@starpointechicago.com 847-774-9657 Thank You! Thank you for attending my seminar. Honest, thoughtful feedback is the only way I can improve what I do. Please take five minutes to complete the survey enclosed in your package. All surveys turned in this evening will be entered into a drawing for a complimentary Missed Fortune 101 book and a Texas Instruments Business Calculator.

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