Maximize Real Estate Rate of Return

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Maximize Real Estate Rate of Return

Two Stream Strategy

        I received a telephone call yesterday from a potential borrower,who had a unique way of maximizing his rate of return on real estate.  His strategy involved rental income as well as debt income from his real estate portfolio.  He has managed overtime, to develop a portfolio of rental properties as well as lines of credit on said rental.  His philosophy boiled down to maximizing his rate of return on each and every rental property. 

        Over time, he was able to develop two income streams per rental by extending money from his lines of credit to flippers(people buying investment properties and rehabbing to flip) at a rate of return of 18%.  The cost of his lines of credit was roughly 8%, whereby leaving him a net rate of return of 10%. The average on his rental properties was roughly $1750 per month, and his average line of credit per property was roughly $100,000. This allowed him to rent the line of credit for approximately $10,000 per year resulting in an additional income stream per property of roughly $833 per month.  Now instead of making $1750,he is making $2583 per month on the exact same property.  

        I’ve always been fascinated in the different ways people approach the development of income streams, and this is a classic example.  This guy not only used the rental income of his real estate, but he also used his equity position gained from the development of his real estate and managed to put that to work. I guess it holds true, the reason some people make money with real estate, while others see it as an albatross is predicated in their ability to see how income streams can develop. 

        To be a good asset manager, you must realize the potential of the asset as well as how to move forward in order to maximize your real estate returns safely.  The good news, if you’re successful, your real estate will always be in the same place and willing to produce without any additional expectations.  Making fora great relationship in perpetuity.

– Nathaniel Fulford V

A House of Cards Falling Blog

Building a House of Cards

Pitfalls of Borrowed Money

      The topic I’d like to discuss today is the pitfalls of using borrowed money to replace your income in lieu of developing your real estate.  I made a special trip yesterday hoping to find out why one of my borrowers had stop making their monthly interest payment.  I was unable via telephone calls, emails, letters and text messages to get a response, henceforth a 1.5-hour trip.  Upon arriving shortly thereafter, I was able to touch base with my borrower.  The discussion inevitably led to the question of how come you stopped making your monthly payments?

       The answer was she had decided it was no longer in her interest to keep pouring money into the project, given that her partner was moving forward to litigate the value of his equity and collection thereof.  So here we sit, they have a project that in my opinion needs roughly fifty thousand to complete, and now the cost of their borrowed money has been adjusted to the default rate of interest for failure to meet their monthly interest payment. And now, the borrower claiming the other partner mismanaged part of the borrowed money.  At this point I’m only privy to one side of the story. 

     The sad truth is both parties are looking to profit from this incomplete real estate venture, instead of realizing the importance of putting aside their differences and moving forward to complete said venture. Now the money goes to pay lawyers. The incomplete real estate venture is on the market at a sales price of a completed project, and both parties waiting for a favorable outcome in opposition to their counterparts. Between both parties, they have managed to build the perfect house of cards, and unfortunately in the end, neither party will in my opinion benefit. 

Moving Forward is a Choice

     If they could only set aside their differences long enough to complete the project, I’m sure they would both walkaway with a healthy return on their investment, rather than who is to blame for this failure. Moving forward in life is your choice, so I suggest learning to compromise.  Otherwise, the end result is your own house of cards.

-Nathaniel Fulford V

Are You High Income or are You Wealthy?

Category : Blogs

One You Work for, The Other Works For You

        Wealth is nothing more than the accumulation of assets that work for you.  High income to a large extent, leads to the acquisition of assets that you work to keep.  In other words, you work for the bricks and mortar of your nice home. 

        Acquiring assets that work for you overtime gives you a sense of security within yourself.  Knowing that your assets wake up each morning; ready to go to work, with the only expectation of making your life more plentiful is a great feeling. So how do we acquire the assets that work for us? 

        Acquire assets that generate more than their cost.  Real estate if purchased and developed properly will not only pay for itself, but it will pay for you as well.  Properly leveraging this asset can not only create immediate income, but it can provide future income as well.  And the good news is that it will always be in the same location, ready to go to work.

In a Nutshell

The success of an economy built on real estate, over time will take on an existence by itself.  It will grow in perpetuity, and not only give you a great future, but also provide a future for generations to come.

My feelings on the subject,

Nathaniel S. Fulford V

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