Show Investors a Property Investment Opportunity

In order to raise private equity for any developer,the first step is to compile a detailed information package. This typically including comprehensive pro forma spreadsheets, investment vehicle structure, site details, and other such information.

However, the packages often neglect to include a snapshot of the deal from the investor point of view.  At a high level - how much investment is required, for how long, at what rate of return and how will that investment and return be repaid.

Investors first want to know the basics and establish if a deal matches their investment criteria and how it rates against other deals currently on offer.

If a deal is presented in a beautiful, large package that has to be read from cover to cover to determine its essence it can be a major turnoff to the busy investment professional and casual investor alike.

The more detailed information is really only necessary when an investor has established its suitability on a general level. What is suggested is first producing a more simple deal overview for the potential investor to review.

Begin with the name of the project and a very brief description of the deal.

The next piece of information to be included is the cost of the deal and so the equity needed. This part of the document will resemble a traditional debt term-sheet. It shows the investor how much the sponsor is committing to the deal themselves and how much is being sought externally. A typical equity split involves investors providing 90% of the required equity with the sponsor adding the remaining 10% .

Moving on to one of the more important sections, for obvious reasons. One needs to display exactly what the investor will receive in return for their equity contribution  - "Expected Returns to Investor".  You state what you are going to pay (typically per year) followed by an IRR calculation. The IRR tells the investor what their annual return would be if they invested in your project for x number of years.

The most common time frame for real estate investment opportunities is probably between 3 to 4 years. But, investors can also be sweet to deals that have a high long term return if the figures stack up. When the equity requirement and the associated returns over the timeframe have been established, the next step is proving the model. This requires presenting a breakdown of the various cash flows to the investor and sponsor, along with the refinance assumptions that feed the model.

On the supporting worksheets it is best practice to build the model in such a way that when an investor sees a number in the summary sheet that isn't clear, they can follow the links and understand its origins.

Constructing an investment summary can be relatively easy, especially if you have the proforma model outlining all the costs and revenues - it is really just highlighting the right information and presenting it in a clear and concise manner.

Without it however, your deal can die before it is even reviewed by the investor.

 

Technorati Label: real estate,property investment,investment

Sell Your Investment Property in Bad Economy,10 Simple Strategies

Real estate investors have made a big discovery. America is on sale. It is the perfect time to purchase good investment properties at bargain prices. Many new investors are considering this the perfect time to enter into the investment arena by purchasing properties hoping they can sell quickly and make a profit.

For investors purchasing with the intent to remodel there is an abundance of available homes in need of various stages of TLC can be purchased for deep discounts as REO properties and motivated sellers continue to increase everyday.

Selling real estate in a slow market is challenging. Everyone from President Obama to the person standing in line beside you at the local Wal-Mart is talking about the decline of real estate values and the difficulty people are experiencing selling their homes. Even with Michael Jackson dominating the news the conversations usually turn back to the housing market, job loss, and the economy, all which have a direct impact on the ability to sell real estate.

If we look at an overview of the real estate market across the United States, we find that many areas have experienced massive property devaluation, high foreclosure rates and poor home sales. Other areas have only seen a modest decline in values and sluggish home sales.

Recent housing reports hint at a glimmer of hope for a slight increase in home sales in some areas. The reality is that the sale of new and existing homes may show slightly improved sales in areas with more stable markets while others are continue to experience stagnated home sales.

Investors purchasing existing homes and remodeling to sell face challenges as they add their properties to a market overflowing with MLS listings and FSBOs.

The big question is this. If we locate a good investment property, purchase it at a deep discount and invest money to remodel it, can we sell it in todays market?

The answer is "yes."  You can stimulate your real estate investment property sales even in a slow economy if you educate yourself on the local real estate market before you buy, target desirable areas with increasing populations and stable or increasing home sales and invest in properties that have features appealing to a buyer. This process starts from the first moment you look at the property.

Follow these 10 simple strategies for selling your investment properties and you will increase your odds for success even in a slow real estate market.

1. Buyers today are searching for homes offering extra features, high value, reasonable price, and available first time home buyer financing or other financing programs. Ask your Realtor to provide current information on what type properties are creating the highest number of sales in the area. What is the sale price? Purchase properties that you can market in these price ranges or a small percentage below. Target homes in areas where USDA, FHA and first time homebuyer financing is available to attract first time home buyers. First time home buyers tax credit and other programs will offer you a pool of available buyers.

2. When you are considering an investment property, identify the qualities the home has that will appeal to a wide range of buyers. Choose homes that offer additional square footage, garages, large lots, fenced yards, maintenance free exteriors and other features. Determine the age range of your potential buyer and identify what features they will look for in a home. Enhance or create these features during your remodel and use them as a marketing tool when you list the property for sale. Tour new home open houses to get the latest ideas on what builders are offering then apply these ideas to your home.

3 Women usually make the final decision about purchasing a home, but don't discount the things that appeal to men. While women may fall in love with the spacious kitchen, stainless steel appliances or the master bath, men are looking for other things. Create a workshop area and a space for the John Deere Mower and yard equipment. A nice patio perfect for a family cookout will make the man of the house feel right at home.

4. Choose interior and exterior paint colors that create warmth in the home but at the same time are appealing to buyers in general. Avoid using multiple colors on the interior of the house since it will make the home look smaller. Have a professional to advise you on colors that are neutral but still add soft color to enhance the appearance of the home. Sherwin Williams, Home Depot or Lowe's offers professional information on choosing and coordinating colors.

5. Offer the little extras like book nooks, all season rooms, extra storage, special kid friendly spaces and family areas. The addition of motion sensor lights will offer the buyer a sense of security. Consider installing a home security system and paying the fees for the first year is a big bonus to a buyer.

6. Create a series of "wow's" from the time the buyer pulls into the driveway. A fantastic first impression can be made even if you are on a tight budget. Landscaping, a neatly manicured yard, fresh paint and sparkling clean windows make the home inviting. Coordinate your colors and style inside so that everything from the light fixtures to the floor coverings complement each other to create a total put together look. Pay specific attention to the details when remodeling older homes so everything blends in with the architectural style of the home. With older homes the key is to make everything look like it has always been there.

7. Think green. Install Energy Star appliances and other energy saving features. Even a few energy saving changes in an older home can be appealing to an energy conscious buyer. Your local power company, Home Depot or Lowe's will have information on how to make your remodel more Energy efficient and still stay on budget.

8. Choose properties with family friendly neighborhoods where buyers feel safe. Consult with the local police department for crime rates in the area. Neighborhoods where the majority of the homes are single family and owner occupied are the most desirable. Ask if there is a neighborhood park, pool or other amenities. Some areas have an active neighborhood association which plan family events and have active websites promoting their neighborhood. These neighborhood perks are excellent marketing tools to attract buyers.

9. Consider the surrounding area and the convenience it offers the buyer. Is it convenient to shopping, schools, parks, etc? Is the property on a quiet street or one with high traffic? What does the community have to offer the buyer?

10. Always strive to create a quality product. Nothing will sell your house faster than a home that has been remodeled correctly. Investors who are remodeling homes to sell are competing against large numbers of MLS listings and FSBO's in the same neighborhoods. Many of these will be newer homes. Your attention to quality and detail will set your home apart from other homes on the market. Adding some simple interior and exterior staging will enhance the appearance of the home, highlight desirable features and will offer visual suggestions for use of the space for the buyer.

Investors who take the time to properly evaluate properties, research the market for current home values and sales, consider the availability of financing programs for first time home buyers and who are selecting good properties in desirable areas can be successful even in a sluggish market, creating a good return on their investments.

New investors should contact their area Real Estate Investor's Association and find a qualified mentor who can advise and guide them through their first purchase and rehab. You can visit the website for the National Real Estate Investor's Association to locate groups in your area. Taking the time to learn will avoid mistakes and bad investment decisions that will be very costly.

Delivering more than your buyer expects and offering the home at a price just a little under value will give the buyer a reason to choose your homes over a competitor.

Summary

As real estate investors we are aware that America is on sale. It is the perfect time to purchase good investment properties at bargain prices. Many new investors are considering purchasing properties that they can remodel and sell quickly. For rehabbers there is an abundance of available homes in need of various stages of TLC can be purchased for deep discounts as REO properties and motivated sellers continue to increase everyday. But the question is this...Can we sell in a slow real estate market?

Technorati Label: investment property,real estate,strategies,investment,property investment

Property Investment Tips , 2009

Contrary to the constant barrage of fear mongering by the media, most people are still in work and many still have a decent amount of money to invest. Most will also be aware that now is the best time to buy just about everything, judging by the deals that are out there. Property therefore is no different.

Decide what you want - it is important you get your strategy right from the start. Do you want income or capital growth for example? Do you want short-term or long-term? Once you know what you want, it is easier to decide which type of deals to enquire about. If you're unsure ask yourself if you want to have cash now, or cash later? In a down market, many investors wish to generate income now rather than speculate on getting it in 2 year's time, mainly because they need it now. In an upmarket, many tend to do the opposite and speculate as immediate income is less important.

Be prepared for ups and downs. As good as an investment may sound when you are looking at it, do understand that, barring extremely secure guarantees, it may not work out. Is this an amount of money you are prepared to lose? If not, you may wish to go for something more secure like bonds, or lower the amount you wish to put into a property deal.

Do your own research - this is critical, not just for your peace of mind, but so you become better at investing. Don't just take your broker's word for it, check the deal out. Are the rental comparables offered correct for the area? Is there plenty of independent evidence to support the perceived investment case? What other developments has the supplier built before and were they delivered as promised?

Ask for evidence to back everything up that is said - following on from conducting your own research, make sure any claim made is backed with evidence. Ask for title and building permits if it is an off-plan deal and get them checked out. If the product involves insurance, ask for a copy of the policy and check for loopholes. If you are buying off-plan, make sure you have copies of all contracts you will be signing so you don't have any nasty surprises further down the line. It takes some extra time and effort it is worth it in the long run.

View the property if possible - many, many investors have bought property over the phone, which may or may not be a good thing to do. If the deal is off-plan there is nothing to see but land, but going reassures you that the location is a good one. If the property is already built, go and view it if you can. Check out the condition and satisfy yourself.

Big is not always good - when using service partners such as rental management companies, lawyers, accountants, etc. using the most well known brand might not be the best move. Quite often the bigger companies have less time for you or are less willing to bend their rules. Local family run companies can quite often offer the decent, thorough and personal service you will be looking for. Again it is important to spend time checking these companies out.

Consider different styles of property deals - there are a number of different types of deals on the table today, such as off-plan, below market value (BMV) deals, Developer Joint Venture schemes, or in different sectors such as student lets, short business lets and nursing homes. Have a good hunt around to find the type of deal that suits or diversify your risk by investing in a variety.

Value a good broker - as much as many critise the role of the middleman, he or she quite often is the one putting the deal together, not the developer or supplier. As a broker myself I may be biased, but a lot of work goes into structuring the deals and bringing them to market, as well as assessing which companies to work with. Quite often the broker has a better overall knowledge of the market place than the supplier does so use and value their service.

 

Technorati Label: property investment,tips,real estate

Investment Property Loans

 

You may find that applying for a mortgage is harder than it was first time around when you decide to purchase an investment property. However, there are a number of mortgage providers that will offer loans for investment property, so long as you bear a few important factors in mind.

When it comes to the down payment you should be prepared for the fact that many lenders will not give 100 percent loans, unless you are providing security for the loan. They could require a large down payment of around 30 percent of the total price of the investment property. However, if you do your research ahead of time, you should be able to find a lender that is a little more lenient and may offer 20 percent or less. You may even find some that offer 100 percent financing, although this can be a lot harder to be approved for.

The best option is to seek out a mortgage lender that specialize in loaning to finance investment property. These will have special plans available to you as they deal with people that want to invest in property all the time. They usually have special plans and features attached to their loans that are designed especially for property investors.

The features of loans for investment property are a little different to traditional mortgages. This can be a little daunting to new investors, but there are many options available to you as long as you are prepared to spend some time to research to find the best deals available to you.

Technorati Label: investment Property,loan

These Investment Property Financing Things You Should Know

 

A property fire sale as homes and buildings everywhere are being foreclosed caused by the current financial crisis makes it an excellent time to purchase properties as investments, the drying up of credit lines has made it a mite more difficult to secure loans from banks or credit unions that are in the best interests of the investor.

You should know that investment property financing is different from financing a residential property. For one thing, it usually requires a better credit history. For another, the down payments tend to be considerably larger. However, with a decent enough credit history, proper diligent research and enough knowledge of the current market it is possible to secure a fixed rate mortgage to cover the entire cost of the property for 15 or even 30 years. Should this prove impossible, however, there are still many other ways to obtain investment property financing. In cash strapped times like these, for example, it is not uncommon for seller financing to be a possibility. Seller financing is, in essence, establishing a separate mortgage with the seller. If the bank's mortgage only covered 50% of the cost and the seller is willing, he can carry the other 50% as a personal debt and be paid in installments to be contractually determined by himself and the investor. It is even possible, in buyer's markets such as this one, to get seller's financing for 100% of the cost if a bank is unwilling to offer a loan. Should seller financing prove inconvenient or impossible, other possibilities remain such as taking out a home equity loan or even receiving legal personal loans from third parties in order to cover the down payment.

The current buyer's market presents a unique and potent opportunity to buy investment property. The multitude of options available for investment property financing ensure that each investor can find a plan that is beneficial to him or her as long as he is diligent and disciplined enough to do the research.

Technorati Label: Investment Property,Financing

The Choices and Alternatives of Property Investment

Property investment has been popular for numerous reasons, amongst which the ability to leverage and borrow at low cost and for its perceived lower correlation with the state of the economy. Leverage, in particular, is highly attractive to investors. For a million-dollar investment property, one needs to put down a small downpayment of 10-20% of the cost of the property. Along with this, we also observe that the cost of borrowing funds for property is far lower than the prime rate charged by banks for other collateralized loans. Investors leverage up to purchase the property, rent out the property and use the rental to repay the loan instalments. If all goes well, they own the property after 10 years.

2005-2006 has seen a boom for high end property in Asia, reminiscent of the heydays of the late 1990s.

However, one of the downsides of property investment in this form is the illiquidity of one's asset. In simple terms, this means that the piece of land or apartment or bungalow is not easily convertible into cash. Selling off an investment property would take easily more than a few weeks and it could be another few months before the transaction is completed and money is received in the bank.

The other disadvantage of property investment is the indivisibility of the investment. One buys a condominium apartment; he or she cannot easily sell off 10% or 20% of the property to raise cash as there is no ready market for investments in this form.

In recent years, financial innovations have emerged in the investment space, providing investors exposure to property and overcoming the two disadvantages described above.

Real Estate Trusts - in some countries, this is called a Real Estate Investment Trust. In this structure, a company commonly purchases commercial buildings and takes over the management of rental and maintenance. The assets are then placed in a trust and units in the trust are sold to institutional and retail investors. The income received from the rental is then distributed to unitholders after deducting management fees and other relevant costs. Real estate trusts can also comprise residential buildings, but this is less common and higher risk as rental rates are more volatile.

The real estate trust enables investors to get in on property investment without having to come up with a large amount of money, as the units in the trust are usually bought and sold on a stock exchange. For as little as a thousand dollars, investors get to hold a share in a portfolio of property investments.

Trading on an exchange also enables units of the real estate trust to be easily exchangeable for cash, as these units trade frequently.

The other benefit of this structure is that yields are more easily projected due to the long term contractual nature of commercial leases. This is not necessarily true for residential property.

The one disadvantage of this, is that investors do not get the benefit of substantial leverage, nor do they enjoy the lower cost of borrowing that comes from buying a property. In addition, there is no physical asset being owned, as the investor owns a right to the distributions of the asset, the sentimental among us might want to touch and feel a live physical building.

Lately, we have seen unit trusts specializing in property investments. In most cases, the fund manager reviews the universe of investible property trusts and selects those that fit his criteria. A property trust might also comprise infrastructure trusts and shares in property development companies.

Such property trusts and property unit trusts have done well in the last year and are gaining rapid popularity. Time will tell if they continue to realize the early promise shown.