Property Sales 480.600.6001    Property Management 602.614.0993
Investors

Professional, Personalized Services You Can Trust...Valley of the Sun Real Estate™

Valley Of The Sun Real Estate & Property Management - Working with the Investor-Client

Working with the Investor Client is one of our specialties. Having spent a lifetime involved in Phoenix real estate development in one capacity or another, coupled with a post-graduate degree in Urban Planning and Public Administration have uniquely prepared our Broker, Jon Beydler, for working with the investor client either for “fix and flip” or “buy and hold” properties.

The Valley of the Sun Real Estate’s Property Manager, Cheryl Beydler, has several years of experience working with the Investor Client who has chosen to “buy and hold” their acquisitions. Together, the Beydler’s have created an Investor Business Model that has proven successful for numerous Investor Clients. Since 2003, Mr. Beydler has participated in over 100 “fix and flips” and Ms. Beydler has managed close to the same number of Investor “Buy and Holds”.

“FIX AND FLIPS”

Most of our “Fix and Flip” Investor Clients engage in this activity in order to generate cash flow, thus near-term wealth. The key to success in this type of investing is found in locating and acquiring the subject property—One makes their money on the “buy”.

In a stable market, look for either a property with a distressed owner or a property with significantly deferred maintenance. One needs to cover both the cost of the fix and the net profit in the purchase price. Typically, look for a 10% net pre-tax income. For example, the average resale price of a home in metropolitan Phoenix is $204,000. The “fix and flip” model would look something like the following:

Acquisition Cost $150,000
Fix Cost $20,000
Resale Price $204,000
Sales Costs (Escrow, Title, Realtor Commissions, etc.) $14,000
Pre-Tax Net Profit $20,000

Please note that residential real estate investors typically look to make as much in pre-tax net profit as they invest in the fix. Of course, the above example illustrates a perfect model. The key to this particular example actually taking place falls directly on the shoulders of the Selling Agent’s ability to find the right property, in the right location, and successfully negotiate the acquisition in the face of multiple investor competitors.

Make sure to add enough value to the fix in order to push the resale price up in order to make your target pre-tax profit. To facilitate this, it is vitally important that you drive and shop other active listings in the area; to determine how much ‘push’ the neighborhood can absorb prior to throwing in money and over pushing what the neighborhood will bear.

In other scenarios, an investor might be wise to scale down the fix in order to quickly flip the property for an acceptable net profit. Regardless of your ‘fix and flip’ approach, it is of utmost importance that you work with a seasoned Realtor who can quite literally walk into a prospective property and work out the financial model in his/her head within 10 minutes. Your agent usually will be within 98% accuracy every time.

If the Investor Client were to replicate a 10% pre-tax net profit every 90-day cycle, throughout the year, the actual annual rate of return on one’s money is much higher than 10%. The original $150,000 investment we illustrated before now has been turned at least four times in one year with a gross return of nearly $80,000, which translate into a 53.3% return on one’s initial investment.

“BUY AND HOLD”

Sometimes the wild ride of the fix and flip market may offer just a little bit more excitement than some Investor Clients want out of life. Many investors these days are looking for a more stable long-term investment strategy. The “Buy and Hold” approach has always been a popular alternative to the “Fix and Flip” rodeo. Investment properties offer some unique long-term strategies for the Investor Client:

·You’re the Boss. Once the Selling Agent has identified a suitable property where you can achieve both short-term positive cash flow as well as long-term equity growth, the Investor Client may close the escrow and sign a Property Management Agreement with our Property Manager, Cheryl. You’ll continue to have ongoing input and final say into a myriad of management details that, at least partly, will determine the long-term success of your investment.

·Lucrative Leveraging. Many times real estate investment properties are purchased with borrowed funds. If a property is purchased with considerably more debt than equity, it is considered to be a “highly leveraged” investment. Assuming that a property appreciates in value over a long-term period, you’ll be earning a return on the total “leveraged” investment, not just on your equity. Assume, for example, that you purchase a $100,000 property using $10,000 of your own money and $90,000 in borrowed funds. Given a 5% annual appreciation, in ten years your $10,000 investment will have earned a return of more than $60,000 in property value appreciation. That’s the power of leveraging. In the case of Valley of the Sun Real Estate, most of our clients own their investment properties outright, and have zero debt to service. We are not advocating leveraging debt to make money. It may be the only a viable option for investors who may not be in a position to pay for all their properties in cash. ·

·Rental Income Cash Flow.Typically, tenants of rental property pay rent on a monthly basis. That means that if you’ve purchased the right property in the right location, you’ll have some passive cash flow income flowing to you every month. You’ll likely be left with a relatively small chunk of the total rental cash flow, of course, after deducting expenses such as mortgage payments, property management fees, repairs and maintenance, etc. But having real, in-your-pocket cash return from your investment each and every month in addition to long-term equity growth is a major perk of owning an investment property. ·

·Who Pays Off That Mortgage?Not you. Though you’ll be getting the benefits of the mortgage used to purchase your rental property, your tenants will be amortizing the mortgage for you. The longer you own the property, the greater the amount of the mortgage your tenants will have paid down for you. Every year, your tenants will be building your wealth as they reduce the mortgaged principal and increase your equity value. ·

·Tax Bill Takedown.An enormous benefit of owning a rental property is the payoff you’ll receive in tax deductions. The amount of tax write-offs that you might gain depends upon your personal circumstances, but you can reasonably expect some very significant tax savings. Your mortgage interest can be written off, along with the costs of insurance, legal and professional services, maintenance, travel, and many other business-related expenses.

Sitemap:


Logo


Valley Of The Sun Real Estate
290 S. Alma School Rd. Suite 15 • Chandler, AZ 85224
Property Sales 480.600.6001 • Property Management 602.614.0993



Chandler  ScottsdalePhoenix


Copyright © 1997-2017 Superlative Inc. All Rights Reserved.