Cash Flow, Leverage, Equity, Appreciation and Risk (CLEAR)

 

CASH FLOW: “The amount of net cash generated by an investment or a business during a specific period” When we purchase a property we ensure that it has positive cash flow. Positive cash flow is the amount of money that is left over AFTER all expenses, loan payments and taxes. We only buy properties that will cash flow at a minimum of 10% a year on real money invested. Using an example again, if we invested $10k, we would get a minimum of $83.00 per month in positive cash flow ($83 x 12 months=$1000 or 10% of $10k)

 

LEVERAGE: “The use of fixed costs in order to increase the rate of return from an investment.” This definition from Webster’s says it all. Leverage will increase your rate of return. To understand leverage it is best explained by an example. What if you went to the bank and said that you have $10k but you want to buy $100k in an index fund. And you want the index fund to act as the security for the loan. What would they say? They would say forget it. Yet when you buy a house you can put down $10k for a $100k house and have the actual house (similar to the index fund) act as your security.  But here is where the real leverage works. Homes appreciate. What is appreciating is the $100k and not just your $10k. If the home appreciates at 5% a year then on $100k that equals $5k per year, or 50% on your original $10k investment. That means your original $10k grew at 50%, AND the loan is secured by the actual property. Try buying $100k for any stock offering with only a $10k deposit and then make 50% return on it.

 

EQUITY: When we rent out our properties, our tenants pay our loan (mortgage payments). That means that at the end of the first year the original $100k mortgage loan is now worth only $98,222.00. That means you made $1778.00 or an increase in equity.

 

APPRECIATION: “an increase in price or value;” Simply put, real estate historically has gone up in value, i.e. it appreciates in value. As stated earlier if a $100k home appreciates at 5% a year that means in the first year it will be worth $105k.

Now lets put it all together by using our example of a 10k investment and see how much our total profit is.  First off we use the banks money to buy the $100k house (leverage). Secondly we then rent it out earning $83.00 per month in positive cash flow. Thirdly at the end of the year our bank loan of $100k is now worth $98,222.00, which means we made another $1778.00 and finally at the end of the first year our property appreciated by 5% or in our case $5000.00. Let’s add it all up. ($83 x 12) $1000 + $1778 + $5000= $7778.00. The bottom line is that your $10,000.00 investment has earned you a total of $7778.00 in one year! That equals a 77.78% return on your investment (ROI). If you were to put that $10,000.00 in a GIC paying 5%, you would have made only $500.00 in the first year. Has the “light” come on yet?

 

RISK: “to place something valued in a position where it could be lost”. We combine the above values along with our team of experts to reduce risk as much as possible. Although we cannot guarantee any investment, we only get paid once you do. Above all, we value our relationship with you as our most important as we would be disappointed to lose. 

  

How we make investing.... EASY

 

Many people think that there is not a lot of work that goes into investment real estate, that you have to be lucky, or that it's a timing thing. That's the same as watching professional hockey players shoot, pass and score and saying that it's easy....They make it LOOK easy, but in reality it is very difficult. The same can be said for investing in real estate, it may look easy, but its not.  To consistently find good property takes time, skill and knowledge.

We have our "system" for finding properties; formulas, spreadsheets, economic analysis, market fundamentals and conditions, micro and macro economics that all relate to finding the best investment.

  

OUR APPROACH:

To holding property is unique in that we are a business that deals with the average homeowner, the average renter, and the average investor. But our programs are anything but average. What makes us different is that all are equal in our eyes. All three, homeowner, tenant, and investor are treated as customers. All three have opportunities to achieve their financial goals in life through real estate ownership. And because we are a business, we always look at the bottom line. We demand a high return on our investments. This means that you can expect the same, high returns on your investments. Yes we buy homes for cash, yes we do rent homes and apartments, yes we do rent to own options, and yes if you invest with us, your investment will be secured by real property.

 

Our objective is as follows: To treat homeowners, tenants and investors as customers, not just numbers in a file, but as clients and ultimately, friends.

 

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