Cash after debt service

In the previous post, I said that you would never spend your line of credit on anything, but income producing assets.

So what do you live on?

John Dessauer calls it his favorite Candy and that is CADS. This stands for cash after debt service.

This is the money left over after all your expenses are paid. Cash flow is the life blood of any good investment idea.

John creates wealth by either cutting expenses or raising income. He then uses this new raised value to buy more income producing assets. He uses his cads as spendable income. This allows him time to write and travel, and spend time with his family.

Thanks Burke Bennett
http://www.seidahohomes.com
208 589 5599
burkebennett@hotmail.com

Getting a line of credit of your new value created

One of the things John Dessauer teaches is that once you raise the value of a commercial property have it reappraised and get a line of credit on the new value.

This is where you need to be careful. You just bought the property because you knew that all the numbers said it was a good deal.

Now some people would take this extra money and run out and buy liabilities such as cars, boats etc.

John says to use this line of credit to only buy income producing assets. That way your ratios will never be out of whack.

If you had a line of credit of $100,000 on a property. You could take this $100,000 and put 20% down on a $500,000 multi family property.

John Dessauer basically used 3 deals just like this one to create $1,000,000 in equity not to mention cash flow, and you and I can do it to.

Thanks Burke Bennett
http://www.seidahohomes.com
208 589 5599
burkebennett@hotmail.com

Raising rents over time

Raising rents over time happens especially when people quit buying homes. People have got to live some where. If the real estate market is down, another area has got to be hot.

Because the single family home market is slower more people are renting than buying. Because there are only so many rentals available the rents are going up because the demand is higher.

When I first bought by trailer park the rents were $150 per unit. I knew before I bought the park that the rents were $20 per space to low. 2 years later I raised the rents another $10 per space times 18 spaces.

What effect did this have on the park? Assuming costs stayed the same, raising the rents by $30 per space times 18 comes to $540 more per month or $6480 per year.

A trailer park cap is usually around 10% and so I just raised the value of the park by $64,800.

The velocity of money in the multi family unit market is so much faster.

Thanks Burke Bennett
http://www.seidahohomes.com
208 589 5599
burkebennett@hotmail.com

Forced appreciation

What is forced appreciation? Every one has heard of appreciation in real estate. That is where things just go up in value over time, but can this be foreced?

The answer is yes and this is how you do it. Say you buy a $1,000,000 income producing property with a cap rate of 8%. Cap rate in this example simply means if you paid $1,000,000 cash your property nets $80,000 per year.

You go into this million dollar investment and you cut your garbabe bill from $800 per month to $200 per month. The savings is $7200 per year. Because you own a property of 5 units or more the appraiser has to use the income appraisal approach. This simply means they use income to determine the value of the investment.

So you take $7200 and divide it by the cap rate of 8%. You just raised the value of the property by $90,000.

John Dessauer, the guy who teaches this class, asks why would you invest in the single family market where the velocity of money is so slow. Velocity of money simply means how fast your money works for you.

Thanks Burke Bennett
http://www.seidahohomes.com
208 589 5599
burkebennett@hotmail.com

My favorite real estate strategy

I have spent hundreds of hours studying various real estate strategies taught my millionaires who have become rich using the various strategies they teach.

The strategy that I like the best out of all that are out there are investing in multi family units.

I have invested in single family homes, I have done lease options, I have helped hundreds of people buy homes, but the reason I like the multi family strategy is how fast you can make money with minimal amounts of work and head ache.

Having 6 single family homes and baby sitting them is like baby sitting 6 extra kids.

When you buy a multi family unit, you buy 12 at a time. People always need a place to live, so investing in a good building is something that I am going to do more of in the future.

Also, you can hire a property manager to simplify your life and run this for you. You only have to get one loan to buy 12 units. Also, to raise the value of these units is pretty easy. Raising the rents even $10 per month times 12 units can raise the value of you property. $18,000.

The velocity of money is much faster than buying single family homes and flipping them.

So if you can get the net operating income on a unit you might want to invest in. Let me crunch the numbers to see if it is a good deal or not.

I look forward to working with you.

Thanks Burke Bennett

http://www.seidahohomes.com/

208 589 5599

burkebennett@hotmail.com