Mike Wong Realtor, GRI

I often check out several other non MLS websites for real estate properties, digging for investments for my clients. I have yet to find one I don't already know about. I often see the same ones over and over again, and that is what caught my eye.

Recently I found an associate's listing being marketed on craigslist by a different broker. Searching around some more revealed this broker was advertising and marketing many listings from other brokers that he did not have permission from.

A quick call to TREC (Texas Real Estate Commission) verified a broker cannot advertise the listings of another broker without an agreement, without permission, or without consent. Only the broker who obtained the Exclusive Right to Sell or Lease Agreement can market the property unless the owner gives another broker permission as well.

Yes I do want maximum exposure for my listings, and for another agent to bring me an ideal offer. However I did the listing presentation and earned the trust to market this listing. That means I am spending my time, energy, and money advertising for my client I earned the right to represent. And here comes along an unethical agent or broker who downloads the agent's information and photos off the MLS and markets the property as thier own listing.

Some people don't see this as a big deal. My clients may love the extra exposure. To a professional and ethical Realtor this is unacceptable to me or my company. We all follow a standard code of ethics when we recieve our license. I hold myself to a higher level of ethics, professionalism, and integrity that my clients respect and appreciate when they select me as thier representative.

So let me ask you a question: Would you prefer to be represented by someone with no ethics, no integrity, and no respect for industry professionalism on one of the largest financial investments you may make in your lifetime? Would you trust what they wrote on your contract if they violate licensing laws and steal listings from other agents?

In a tough market, some desperate agents will try anything to make a quick buck at the expense of others. Do you trust them to represent your best interests?

Do the right thing, work with the right agent. It's time to trust a professional who is accountable to a higher standard. Call Mike Wong for all your real estate needs in today's market.

Here we go again! I'll get straight to the deal instead of my philosophy because I know my investors are excited to read about this one.

We found a single family property priced at $64,000. Tax value is $109,000. So there is about $45,000 instant equity. The home needs a roof $5,000 and some sheetrock repair and paint $2,000. Property was negotiated down to $55,000. With repairs that puts the total investment to $62,000.

I cant believe this thing was sitting on the market for over 90 days! I kept second guessing this investment deal because of how long it sat on the market, but the numbers kept telling me it was a great deal.

The home is well maintained and upgraded. It's about 1700sf, and the previous owner installed gorgeous laminate wood floors, upgraded tiles, designer paint colors, and took great care of the interior of the home. We put a tenant in place immediately for $1150 per month.

Breaking down the deal:

$55,000 Cost of Property
$ 7,000 Cost of Repairs
----------
$62,000 Total Investment

$109,000 CAD Appraisal Value - $62,000 Investment = $47,000 Instant Equity

$47,000 Instant Equity = 75% Instant Gain. Wait, wait, wait. Say we can't immediately flip this property in today's current housing market because of the difficulty in lending. Since this price point is attactive to first time buyers lending could be a bigger issue.

So we are of course going to just rent it for 3 years until the housing market recovers to normal.
(3 Years = 36 Months)
36 Months x $1150 = $41,400 total gross rent collected

Simply put we spent $62,000 to make $41,400 in 3 years = 67% Return On Investment (ROI) on just the rent collected.

So looking forward 3 years to 2012 we predict the local housing market will be fully recovered and this home should sell for current tax value $109,000. However being the conservative I am, lets say it can only sell for $95,000 without factoring in any annual compounding appreciation to keep this simple and makes a measley $33,000.

$33,000 Sold Equity
$41,400 Gross Rent Collected
----------
$74,400 Gross Profit

Ladies and Gentlemen. We spent $62,000 and expect to made $74,400 in 3 years!
Check my math, that is 120% Return on Investment in 3 Years!

Here is my challenge. Im pegging this deal on my board in my office and charting it. In 3 years I will follow up with an updated article with the actual returns. Here is the beauty, this is just one investment.

I can't count how many stock tips and next big hit picks Im told about everyday. Just pick a handful of 5 of those stocks and track them for 3 years. Even more challenging pick only 1, track it for 3 years and hope for a 120% return. I picked only this 1 property. I'll report early if I can get 120% in just 2 years, but Im confident I can make more than that goal in 3 years.

How many investments have you made 3 years ago that are now double their value?

In my last entry to this series I explained instant equity capture and appreciation based on an actual property available in Sugar Land. In this section I will discuss cash flow and demonstrate the complete profit potential on this property.

REVIEW

I hope you are taking notes and applying this information. "Guru's" and "experts" charge hundreds or thousands of dollars to tell you this information. Here it is for free. Real local properties, real local specialist, real local results.

In the last entry we calculated a $45,000 profit in 3 years on the property from appreciation alone. Let me show you the additional cash flow and true expected profits of the property.

WHAT IS CASH FLOW?

CASH FLOW is the net income generated from the rent collected after expenses. Expenses include the loan Principle, Interest, Taxes, and Insurance. To be profitable cash flow must exceed your expenses.

Back to our case study property. Calculating in rent, taxes, expenses, and a vacancy factor should net about $8,200 annually x 3 years = $24,600 in net rent collected. This is CASH FLOW which is Key #3.

+ $120,000 investment purchase price
- $ 5,000 repairs and improvement
+ $ 25,000 instant equity capture
+ $ 23,000 appreciation over 3 years at 5% annually
+ $ 24,600 net rent collected over 3 years after expenses

$125,000 investment = $187,600 value in 3 years. Potential profit = $62,200
Profit of $62,200 on $125,000 in 3 years is a 50% return on the initial investment.

THE RESULT = 50% RETURN ON INITIAL INVESTMENT

What other investment in today's market will give you a 50% return on your initial investment in 3 years?

Ladies and gentleman, I learned how to invest in the stock market in 8th grade. I got started with actual saved money in high school. I've seen REITS (Real Estate Investment Trusts) create phenomenal returns and then collapse. I've seen the international markets and funds such as India and China return as much as 300%, then collapse with the world wide recession. I lost when the tech bubble busted, and I lost in our current recession just like everyone else including Donald Trump, Bill Gates, and Warren Buffet.

I get emails and stock tips everyday. Since I'm not running the stock company I can't analyze the deal and thier numbers and products from within. Do you trust anyone who claims they can predict when the economy will actually recover?

I am however running a real estate business with access to 100s of millions of dollars of properties to analyze. I'm an investor with a track record and have the tools to make money in this market when every other investment available out there right now is losing. Im quietly investing myself into real estate, and creating future millionaires. I've negotiated deals that created millionaires, and I plan to do more of those this year.

So ladies and gentlemen, if I check back with you in 3 years on May 17, 2012 will you have 50% more on your current investments?

Give me a call, it's time for a new strategy.

Here it is! We finally closed a deal that has been in the works over the past couple of months on a spectacular property in the master planned community of Greatwood in Sugar Land, Texas. I'm so excited that I finally get to reveal what has been in the works now that its completed. I feel like Ive been keeping this huge secret until it was a done deal!

Residents have known this building as the Greatwood Sales Center. Agents have known this building for being for sale on the market for way too long. I knew this was the perfect building for my client, and I could negotiate a great deal on it. In today's market, selling requires an innovative strategy.

Coordinating and managing this complex commercial deal in today's financial environment was definitely a challenge. Completing a complex commercial deal in 60 days was very satisfying to say the least. I cant describe how rewarding it is to have coordinated this WIN - WIN transaction.

The WIN-WIN Transaction:

1) My client the buyer got the perfect building at a great price to fit his future needs.
2) The seller finally sold a property that has been on the market for years.
3) The seller's agent looks good for selling the property and bringing his client to the closing table.
4) As the buyer's agent, I got to demonstrate my complete skills and services to complete the transaction.
5) We sold a landmark property in one of the largest master planned communities in Sugar Land.

This is the second entry of a series of articles I will be contributing to my blog to help educate the consumers and clients who contact me for my services. I will cover the basic steps to get started and help new investors with basic concepts on thier first deals to be successful.

In the first article I covered selecting a qualified Realtor and team to get started, and looking for instant equity in properties that are priced below market value.

KEY #2: APPRECIATION

One of the most basic and most attractive reasons to invest in real estate is the fact that it appreciates over time. Each market has a different rate of appreciation, and there are a variety of factors that will influence the rate of appreciation. There is a general consensus that real estate values double about every 20 years.

We can actually chart appreciation rates in neighborhoods and cities. In my market area I like to calculate the appreciation rate at a very conservative 4% per year. Actually most residential properties I analyze average about a 5% to 6% appreciation rate annually.

Unlike the stock market, we can predict the annual appreciation of a real estate investment. The stock market prediction is based on speculation and company results. Real estate is also some speculation, but in our market there is very little risk.

EQUITY CAPTURE + APPRECIATION =

Equity Capture + Appreciation = Just the Beginning! Combine both of these key qualifications we identify in investment properties and you have the formula for creating personal wealth and a sound investment. Do not consider properties that do not meet both of these criteria.

CASE STUDY SAMPLE IN SUGAR LAND

For example today I ran a search on the MLS for homes in my market area. I came across a property that is selling for $25,000 below market value. According to tax records and neighborhood trends I will calcuate in the average 5% appreciation rate in this neighborhood.

CALCULATING APPRECIATION

This home is listed for around $120,000, current market value is about $145,000 if it is in good condition. Looks like it needs new carpet, paint, and countertops to be in great condition. With the 5% appreciation rate with current market value calculates out to be $7,250 the first year of ownership resulting in an estimated market value of $152,250 after year 1.

If my investor leases the property for at least 3 years before selling it and allowing the market to recover, we can predict the 5% appreciation value the property at $167,855. So my investor sells for $165,000 after 3 years of ownership for an estimated profit of $45,000 from just the appreciation alone without factoring in the rent collected or improvements.

A $45,000 profit isn't bad, BUT I'M NOT FINISHED MAKING MONEY FROM THIS INVESTMENT YET!

In my next entry I will detail the numbers and analysis and show you the real profit potential of this investment with the #3 key. For now I need to get some rest, so I can be up bright and early to check out this case study property in the morning.