I am excited to announce that Chase and I will be reviewing the full process on how to buy your first, or next, investment property!  This topic will be broken up into two parts to give a full, in-depth guidance on closing an investment property.  

Tonight we will cover Part 1: 

• Getting Started
• Sourcing Funds/Loan Pre-approval 
• Analyzing Deals
• Making Offers (to on & off-market sellers)  
  
  

Next month we will finish the process with Part 2:

• Contract Negotiation
• Due Diligence 
• Funding the Deal/Loan Process
• Closing

Whether you are a complete newbie or experienced investor, we are sure you will learn new tips and resources to help with your current investment process as we take a deep dive into investing in the local real estate markets! Join us live at 6:00 pm on the Harrisonburg REI website.
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​Can't make the meeting? We have recordings of all our previous meetings on the website as well. 

The Harrisonburg Real Estate Investors network is a group of experienced investors, agents, lenders, attorneys, insurance brokers, contractors, and real estate newbies looking to grow their business. They focus on real estate investing ranging from residential to multifamily investments and active to passive real estate investing. Their goal is to establish a community of real estate professionals, both amateur and experienced, that creates the network and environment to grow everyone’s business. Check out their Facebook page or join their Meetup group to get more information about upcoming meetings! 

I got my license in 2014 and since then I have had the honor of being named a Top Agent by Virginia Living Magazine, a Top Agent in America and in the top 5% of local agents in production and negotiation by HomeLight.  In addition to sales, I am passionate about micro loans and created a local KIVA team that provides loans to those who could not otherwise get financing. My passion for real estate investing eventually led me to start an investment club in 2017. I later joined forces with Chase Louderback to create the investors club we have today.

I have not only sold short term rentals to clients but also taken a deep dive into understanding how to create successful short term rental business locally. Tonight I will be discussing how I analyze a property to see if it makes sense as a short-term rental as I dissect a previously listed short term rental that was for sale. 

Join the meeting here.

The Harrisonburg Real Estate Investors network is a group of experienced investors, agents, lenders, attorneys, insurance brokers, contractors, and real estate newbies looking to grow their business. They focus on real estate investing ranging from residential to multifamily investments and active to passive real estate investing. Their goal is to establish a community of real estate professionals, both amateur and experienced, that creates the network and environment to grow everyone’s business. Check out their Facebook page or join their Meetup group to get more information about upcoming meetings!

Evan Mayo is a trial attorney and real estate investor located in Charlottesville, Virginia. He began investing in real estate in Charlottesville in 2017 and has a personal portfolio in Charlottesville, Virginia and Harrisonburg. He also works in a real estate partnership based in Chattanooga, Tennessee that raised over 1MM in private capital to purchase 30 units in the past eighteen months. Evan’s law practice focuses on personal injury, defamation, and construction litigation cases. He also advises on real estate tax matters including self-directed IRAs and 401ks. His primary real estate interests are creative financing and the use of equity and debt instruments to permit small and medium-scale real estate investors to continue growing beyond their personal means.

Join us for a conversation with Evan Mayo about techniques for fundraising and using partnership structures to accelerate real estate growth. Evan will share the different structures he has used in partnerships in Tennessee and Virginia to accumulate small multifamily properties over the past two years. He will include tax treatment of these different structures, creative methods to compensate wholesalers, contractors, and silent partners, including collateralization, shared appreciation notes, and an introduction to options as security concepts. There will be a Q&A period following the presentation.

The Harrisonburg Real Estate Investors network is a group of experienced investors, agents, lenders, attorneys, insurance brokers, contractors, and real estate newbies looking to grow their business. They focus on real estate investing ranging from residential to multifamily investments and active to passive real estate investing. Their goal is to establish a community of real estate professionals, both amateur and experienced, that creates the network and environment to grow everyone’s business. Check out their Facebook page or join their Meetup group to get more information about upcoming meetings! 

The 1031 tax exchange had earned it's name rather unimaginatively: it comes from tax code.  This section of tax code mostly revolves around investment real estate.  The government is providing this opportunity for investors as an incentive to keep investing in real estate. 

How does it work?

To explain it simply, one could sell their investment property and not pay taxes on the sale by reinvesting the money back into another investment property.  This would allow an investor to increase their investments. 

Traditionally, these exchanges were allowed so that two owners could exchange their properties tax free.   However, the odds of someone finding a perfect trade are slim.  Therefore, most people execute a delayed exchange.  This means that a third party would hold onto the funds received from selling a property until another property is acquired.  

Important:

• The intermediary must receive the funds directly.  If the seller receives the funds, they will not be eligible for the 1031 exchange. 
  
• Within 45 days of the original sale, a property must be designated as a replacement.  This must be provided to the intermediary in writing. 
• The closing of the replacement property must occur within 180 days of the sale of the previous property. 
• Any cash leftover from this transaction is taxable.  

Please let me know if you have any questions by leaving a comment below.

Why do real estate investors leverage their investment properties?  The most obvious answer is that the more they leverage, the more properties they can purchase.  If purchased correctly, each property should generate positive cash flow.  Not only do the investors get more monthly cash flow with more properties, but they also have more renters paying down more mortgages creating more equity. 

Another reason investors leverage their money is because of the Return on Equity (ROE).  The ROE is calculated by dividing the total annual return by the equity. As you can see in the chart below, your ROE goes down as your equity goes up.  This is why some investors choose to pull their equity out of existing investments and use them to obtain new investments. 

One word of caution: the more you leverage, the more you risk.  Some investors choose to pay their mortgage off and simply receive returns on through cash flow.  

Cash-on-Cash Return is what you would use to compare your investment to other types of investments, like stocks.  To calculate Cash-on-Cash Return, take the Annual Cash flow and divide it by the Down Payment amount. 

                                                     Annual Cash Flow   
                                                       Down Payment

Lets see it with an example from Camden Towns.

                                                            Investment Anaylisis from HarrisonburgInvestmentProperties.com

This is a continuation of a serious entitled: The Top 10 Terms of Commercial/Investment Real Estate. 

Most buy and hold real estate investors agree that cash flow is the ultimate goal.  To calculate cash flow, you take the NOI and subtract it by the Debt Service.

NOI - Debt Service = Annual Cash Flow

See how the cash flow is calculated for Pheasant Run in Harrisonburg.  Click here for available properties. 

This is a continuation of a serious entitled: The Top 10 Terms of Commercial/Investment Real Estate. 


Cash Flow Calculations Source:
http://www.harrisonburginvestmentproperties.com/pheasant-run/

Debt service is simply the mortgage payment associated with a property.  This can be annualized by multiplying one payment by 12. 

If you are considering purchasing a property that has a NOI of $60,000.  To better understand what your cash flow will look at, you will want to subtract your debt service from the NOI. 


Example Property 1

                                             NOI:          $60,000

Monthly Mortgage Payment:           ($896
                                                                  x    12)
Debt Service                            -         $10,752              

Cash Flow                                           $49,248          


This is a continuation of a serious entitled: The Top 10 Terms of Commercial/Investment Real Estate. 

The net operating income is the income minus the expenses excluding the mortgage.  The NOI is used to help determine the profitability and value of a property.  So, the NOI is effectively what the property would be making a person who buys in cash. Here's an example.

                                               Annual Income: $100,000
-                     Annual Operating Expenses:    $45,000
__________________________________________________
                      Net Operating Income (NOI):    $55,000


The NOI is important if you are thinking about purchasing a property.  It will not only give you a sense of what you will be earning but it will also help the bank determine if you can afford the mortgage payments.  If you own the property, it's a helpful tool to help determine the value of your asset.  Furthermore, you can look to increase the value by increasing the NOI. 

This is a continuation of a serious entitled: The Top 10 Terms of Commercial/Investment Real Estate. 

Operating Expenses are what it costs to run a business.  Some examples of operating expenses include: taxes, insurance, utilities, management fees, landscaping, maintenance, repairs, and advertising. 

The following is what buying a Campus View Condo may look like.  The expense sheet is from HarrisonburgInvestments.com

This is a continuation of a serious entitled: The Top 10 Terms of Commercial/Investment Real Estate.