Income Investing 101Income Investing 101

Why Are We Here?Why Are We Here?

Value investing is at its core the marriage of a contrarian streak and a calculator."

- Seth Klarman

Value InvestingValue Investing

EXPERIENCED Invested in over $15 million of Northern New Jersey since 2008 Buy & Hold Investment in Section 8 and Student Housing

EDUCATIONMBA- Finance Real Estate Instructor License Masters in Real Estate Finance (NYU)

My ReasonsMy Reasons

1) Personal Investment Plan

2) Find Your Deal

4) Analyze the Deal

5) Checklist for Site Visits

6) Presenting an offer

7) Due Diligence Stuff

8) Asset investment plan

9) Sources of Capital

10) Closing Table- Now What

11) Getting Money Out!

Income Investing?Investing into instruments that provide repeat cash flow with diminishing effort

Investing Instruments

Multifamily

Student Housing

Tax Liens

Discounted Notes

Commercial Assets

I. Investor Type

II. Investment Strategy

III. Capital Availability

IV. Return on Equity Requirement

V. Risk Tolerance

VI. Target Hold Period

Investor Type Investor Type

Return on Equity:

Return you want to make

on your invested cash!

Beat My Return on Equity?

High Risk

Medium Risk

Low Risk

"We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely."

- Warren Buffett

Online

Realtor.com

Loopnet.com / Showcase.com (Commercial Asset Specific)

Auction.com

MLS Public Sites

Offline

Signs/Marketing

Bankruptcy Attorney

Real Estate Brokers/Agents

Cash Flow? NOI? CAP Rate?....Ahhhh

Gross Income

-Vacancy

-Rent Loss

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Adjusted Gross Income

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Fixed Expenses: -Property Taxes

-Property Insurance -Fees and Permits

Variable Expenses: -Utilities

-Maintenance -Professional Fees

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Net Operating Income (NOI)

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Key RatiosKey Ratios

TYPE OF RATIO FORMULA IDEAL RATIO RANGE

CAP Rate (ROA) NOI/Purchase Price 6-11%

Return on Equity (ROE) Net Cash Flow/Equity 10-20%

Break Even Ratio Debts + Expenses/GPI 60%<

Loan to Value Debt/Asset Value 80%<

DSC Debt Payment/NOI >1.25

Back of Envelope AnalysisBack of Envelope AnalysisAssumptions

ROA 10% (Cap Rate)Vacancy Rate 10%Management Fee 5%

Asset Case Facts:Total Units: 4Purchase Price: $200,000Gross Income: $40,000Operating Expenses: $20,000 NOI: $Market Rent/Unit: $1,500

Analysis & Legal ToolsAnalysis & Legal Tools

Prospect DealProspect Deal

Checklist Items

Location

Asset

Tenant

Littleton Investment- FactsLittleton Investment- Facts

Asset Facts

Asset Type: 3 Family Asset

In-place Rents: $ (What is the number?)

Expenses: $12,000 (As provided by Seller)

Sale type: Short Sale

Deal Source: GSMLS

Debt Sources -Mortgage

-Preferred Equity -Bridge Financing -Mezzanine Capital

Equity Sources -Self Directed IRA

-Syndicate Capital -Operator Equity/Cash

EQUITY + DEBT = CAPITAL STACK

Littleton Investment- CAPITAL TABLELittleton Investment- CAPITAL TABLE

Investor Facts

Re: 10%+

Risk: Moderate to High

Capital Source: Equity & Debt Combination

Legal agreements to learn:-Letter of Intent-Purchase & Sale Contract-Option Contract

Home Inspection

Environmental Inspection

Municipal Inspection

Financial Analysis

Market Analysis

Asset PlanAsset Plan

Investment Target Strategy Asset Current Financials Value Add Opportunities Stabilized Financials Exit Plan

HUD Statement

Mortgage Document

Note Document

Title Report

Insurance

Get Your Cash Out:

Open Market Sale

Auction Sale

Rollup Sale

TIC Sale

Seller Financed Sale

@Ankit_RER

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