OPENING REMARKS
It is good that we remember what happened this past year; what we accomplished, what is still left to do. We are closing it out and a new year is upon us. Our hope is that this new year will be a time of renewal, a time for new growth, a time that will be remembered as one of the great years of your life. As in most years, people are making new year’s resolutions. Hopefully, instead of making new year’s resolutions, you are making new year’s goals. Goals are different than resolutions. More than anything, new year’s resolutions tend to be wish lists. Goals attached to a plan will change your life. So go ahead. Set the goal. Make it big. Don’t be shy.
For example, let’s say your is to buy a 20 unit apartment. Write that down. Also write down subgoals that will help you get to the big goal. In this case, a subgoal may be getting educated on how commercial property works. Another subgoal may be to learn how to find investors to help you buy the property. Another subgoal may be to learn the laws that govern syndication. Syndication is the legal process of getting people to invest in your project so you can build wealth for them and yourself. Another goal maybe to learn everything you can about the market in which you will buy the property.
For the big goal, and for each subgoal use the SMART-A method for reaching each goal. SMART-A stand for:
Specific – Make sure the goal is specific; not some cloudy wish. In the case of a subgoal, you may say, I am going to take a course in buying apartment properties from Ken McElroy.
Measurable – Can you measure the subgoal. In this case, you can. You either took the course or you did not.
Achievable – Make sure you have the time and the money needed to take the class. If you do not, you may have to make adjustments to the goal.
Relevant – Make sure the step you are taking is relevant to the goal. If the course you plan to take does not move you toward your big goal, then reconsider what you are going to do.
Time-Bound – Give it a start and end date. For example, I will start the class on January 10 and complete it by March 5.
Accountable – Get someone you trust but who you know will keep you accountable to meet your goal. It can be a friend, a real estate coach, or a family member who has a vested interest in ensuring you meet your goal.
If you use this method, don’t forget to include the Accountability person, you will meet your goals for this new year.
In this newsletter, Sam and I outline our goals in real estate for 2022. Not only do we want you all to keep us accountable, we hope that by joining us in meeting our real estate goals, we can help you meet your real estate goals for this year.
Have a Happy New Year
THIS WEEK IN REAL ESTATE
Will the rise in real estate values continue to increase. There are a lot of reasons to believe that values will continue to rise for sometime. I am one of those who believe that prices will continue to go up for some time. However, there are those who recall how housing values crashed in 2008. Here is an article by Robert Kiyosaki who warns people to be cautious. Please read it, do your research, and be guided by what you believe is best for you and your family when making decisions to invest in real estate.
Do you remember the global financial crisis of 2007-08? Of course.
It was a monumental disaster triggered by the subprime mortgage crisis and collapse of the U.S. housing bubble. It was the worst housing crash in the country’s history and nearly caused a second Great Depression.
What caused the bubble?
#1: Price Surge
After the mid-1990s, housing prices went on a sustained surge through 2005 before peaking in July 2006. Residential real estate was not only a great investment, but also seemed to be a very safe one.
In some markets, such as Las Vegas and Phoenix, the housing market climbed almost 40% in a single year.
#2: Low Interest Rates
Following the burst of the tech bubble in the early 2000s and the September 11 terrorist attacks, the Federal Reserve drastically reduced interest rates and then maintained them for a lengthy period of time.
Because it was so easy to borrow money, everyone did.
People bought pricier houses than they could afford because they could get the loans. Eventually, subprime borrowers were plagued with too much debt and couldn’t pay their mortgages.
If you’ve ever chewed gum, you know that bubbles can only get so big — then they pop.
And that’s precisely what happened.
When home prices finally reached unsustainable levels, the bubble burst. A lot of homeowners and investors were caught off guard and U.S. foreclosure filings spiked by more than 81% in 2008.
Many people were left speculating about the failure of economists and financial analysts to predict the housing bubble and forewarn of its collapse. Everyone is wiser now and on the lookout for signs of another burst bubble.
So, will it happen again soon?
There are several criteria we can look at to determine how the housing market is doing in 2021.
Let’s examine the numbers:
#1: Higher Housing Prices
In June 2021, home prices across the U.S. surged 24.8% year-over-year, according to Redfin.
The median sale price was $386,888. And 56% of homes sold above their list price, which is a record high. Finally, these prices didn’t deter buyers, as the typical home sold in just 14 days.
That means homes sold for their highest prices and more quickly than ever.
#2: Higher Interest Rates
Interest rates are on the rise slightly, which means demand for housing could fall.
The higher the interest rate, the less house people can buy — existing homeowners won’t want to buy a new home and leave their lower locked-in interest rates if it means they have to pay more to borrow the same money.
#3: Lower Inventory
Inventory remains low, which has been a problem for years — but it was incredibly low this past spring.
According to Fortune, “the number of homes for sale in the country rose 10% — up 23% since bottoming out this spring.” Prospective homebuyers and investors are still experiencing the most competitive market we’ve seen in the last few years.
Now, I’m not saying we are truly in a bubble yet or that it’s about to burst.
Of course, hindsight is always 20/20 in these matters. But I am here to provide a warning that history does have a history of repeating itself, so doesn’t it make sense to be on guard?”
There’s no time like the present to start preparing for bad times, and having a solid financial education is your best offense.
Robert Kiyosaki
Editor, Rich Life Daily
REAL ESTATE TIPS
What is leverage?
Archimedes an ancient Greek mathematician, once said, “Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.”
In finance, leverage is the use of debt (borrowed capital) in order to undertake an investment or project.
How does leverage work in real estate?
In real estate leverage is used when you put down a certain amount of money and borrow the rest to secure a piece of property.
How does this work. For example, let’s say you want to buy a property that is valued at $500,000. You don’t have that much money so you go to a lender to see if they can help you buy the property. The lender tells you that if you put down 20 percent, they will lend you the other 80 percent. In this case with only 20 percent of the money needed, ($100,000) you can control a $500,000 piece of property. The lender puts up the other $400,000.
But leverage does more than allow you to control a property with a relatively small amount of money. It also gives you the opportunity to maximize your gains. As an example, in October of 2020, my wife and I purchased a property in Boise Idaho for $485,000. We put up $97,000 and the bank put up the difference. Since then, the property has increased in value to $636,600 an increase of $151,600 or a 31.25% increase. However, the value of our down payment grew by $151,600. That is a percentage increase of 156%. This is the value of using leverage to increase wealth.
This year, make it a point to identify a property in a growing area that will allow you to use leverage to grow your wealth.
OUR GOALS FOR 2022
This past week led to Christmas, a good time to take a moment and celebrate the season. We all need to take a moment and think about what the spirit of Christmas means. At the core of it all, I believe it is an opportunity to bring joy to others. It is always nice to reflect on what was accomplished thus far, but Christmas is the gift-giving time. The actual gift itself is not as important as the significance of the joy it brings.
So far, we have written about strategies related to REI and the current real estate economy. We give snapshots of our journey from week to week and highlight its lessons. Every year, around this time, I get a chance to see familiar old faces, share meals, and share laughs. The question always pops up, “What have you been up to?” or “Anything new in your life this year?” That is when we give each other a recap of our year-to-date memories and joke about how unpredictable, silly, and wonderful life can be. We often talk about our work or career changes. We talk about our trials and tribulations.
I wonder how many people start the conversation with, “Did you meet some of the goals you set for the year?” or “What goals do you want to achieve next year?” This is an REI newsletter and we often talk about mindset and goal setting. The two are interrelated. As you know, Sergio and I have collaborated in rental real estate to generate passive income. We have regular meetings and speak to others about our journey, as well as provide education on the path to take in REI for the most profitable passive income stream. We do this in person, through zoom meetings, and this newsletter.
Together, we agree that our 2021 REI journey was a success. Most goals were met, but 2022 will be here in no time at all. Our REI goals for 2022 are as follows:
1. Acquire 150 doors by December 31, 2022. This will mean achieving benchmarks throughout the year and adjusting our underwriting as the economy changes.
2. Have a list of 100 accredited investors – able to invest a minimum of $50k by December 31, 2022. Our list is growing and we want to make sure our investor pool is ready to commit when opportunity knocks.
3. Get the podcast launched by January 22, 2022. This will help our investors and followers understand our strategies for building generational wealth.
4. Increase the number of newsletter subscriptions to 1000 by December 31, 2022. The newsletter was launched this summer and has gained a lot of traction. We want to set this milestone as a minimum to build from there the following year.
5. Improve our accounting systems for investment properties by March 1, 2022. As portfolios grow and territories expand, we must adapt to the growth and expansion. Each asset is unique. Our team has to set best practices and standard operating procedures to ensure that investors are confident with our acquisitions and management.
Like any other holiday season, I find myself feeling too liberal with holiday sweets. As with anything we do, there is always room for improvement. I will make it a mission to trim off unwanted weight in 2022 by adding some variety to my activity. 2022 will include more leisure walks to burn calories and clear the mind.
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If you want additional information on what I am doing or would like to partner with Sam and me on a deal, email me at sergiosais14508@gmail.com.
Have a Happy New Year.