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FIRST BANK MORTGAGE ERIC LAWRENCE FRAZIER MBA Vice President and Mortgage Advisor NMLS 461807 Meeting location: Northern California 1700 North Broadway, Walnut Creek, CA 94596 13830-A San Pablo, San Pablo, CA 94806 Office: 800-261-1634 ext. 703 Cell: 510 – 871-0055 Meeting Location: Southern California 104 E. Ontario Ave Corona, CA 92879 1110 Limonite Ave. Jurupa Valley, CA 91752 7710 Limonite Ave. Riverside, CA 92506 800-261-1634 ext. 703 Cell: 714-475-8629
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FIRST BANK MORTGAGE Full-Service Bank and Mortgage Company Company NMLS # 551928 3
ER I C L AWR EN CE F R A Z I ER , M BA PR ES I DENT | C EO M E D IA CO M PA NY ESTA B L IS H ED AU GU ST 2 0 0 9 R A D I O | TV | M AGA Z I NES | E V E NTS | A DVO CACY THE POW E R IS N OW IN C. 3 7 3 9 6 TH STR E E T R I V E RS IDE, C A 9 2 4 50 1 8 0 0 - 401- 8994 E X T. 7 0 3 E R I C .F RA ZI ER@THEPOWER IS NOW.COM
Apply To Buy Now! FIRST BANK MORTGAGE Direct line: 714-475-8629 Start the Process Now www.neverrentagain.com www.applytobuynow.com
FIRST TIME HOMEBUYER SEMINAR AGENDA Part I The Power Is Now to Buy!
Part II How to Buy a 4-unit Property
•Overview & Introduction
•10 Reasons to buy a 4-unit Building •10 Strategies you should know when buying a 4-unit building •4 Unit Properties for sale How to Qualify the property • How to Qualify for the loan
•About the Power Is Now Inc. •Homebuyers Club – The Power Is Now
•The Power Is Now Wealth Initiative
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INTRODUCTION • Married 37 years 4 Daughters, 3 Grand Children • Born in Memphis Tenn. Live in Riverside • University of Redland Graduate • Degrees: BSBAM, & MBA in Finance • 37 years as Lender/Mortgage Banker • 27 years as Real Estate Agent |17 Years Broker • Co-Founder of Frazier Group Realty (Family-owned) 7
YOUR RESOURCE FOR HOMEOWNERSHIP WE ARE PROUD SPONSORS OF THE OC REALTIST CHAPTER OF NAREB
THE POWER LUNCH
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MISSION The mission of the Power of Now Inc., is to inspire, educate, and empower real estate professionals, and consumers to build wealth through real estate with information, services and support that will give them the power to act now for their future. 14
VISION The vision of the Power is Now is to be a Household brand and resource for consumers and real estate professionals, to buy and/or sell real estate to achieve their personal, family and business goals to build wealth and leave an inheritance and legacy for their family. 15
OUR COMPANY MANTRA We are at our best and we maximize our success when we act now. Our Power Is Now!
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OUR COMPANY SLOGAN
We Make Homeownership Dreams A REALITY
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INTRODUCTION As a Media Company The Power Is Now Inc., endorses First
Bank to provide lending programs for first time homebuyers, move up buyers, investors, churches, nonprofits and foreign nationals. First Bank is a family owned full-service Consumer and Business bank since 1910. Go to www.firstbanks.com and learn about the 4th generation Family that is leading the bank. 18
THE FOUNDATION TO BUILDING WEALTH IS TO BUY REAL ESTATE NOW GET PREAPPROVED TODAY www.applytobuynow.com
YOUR POWER IS NOW TO BUY - NOT TOMORROW •Start taking action instead of procrastinating •Start believing that homeownership is achievable •Start living within your means & not for others •Start saving money for emergencies •Start living on a budget and create a plan •Start paying off your credit card debt •Start working on restoring & maintain your credit score •Start reading and studying about money & wealth
•Stop spending money indiscriminately •Stop going out to eat every day for lunch •Stop financing clothes and shoes pay cash •Stop financing cars and vacations pay cash •Stop making excuses for where you are •Stop all auto pays from your checking account •Stop paying cable & monthly Memberships •Stop complaining and get help •Stop hoping for solutions because hope is not a strategy 20
Thepowerisnow.com/homebuyersclub START BUILDING WEALTH BY OWNING REAL ESTATE
THE HOMEBUYERS CLUB FREE MEMBERSHIP
What you get as a Club member: •
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Participate when we are live on Facebook, Zoom, and BlogTalkRadio Monthly on Tuesday at 7PM Call me 7 days a week to ask your questions about homeownership and get one on one consultation. Learn about loan programs, down payment assistance, and realistic advice for real estate transactions through special seminars. Received notifications to listen to current weekly online radio shows on The Power Is Now Radio and BlogTalk Radio and Facebook. 22
THE HOMEBUYER’S CLUB FREE MEMBERSHIP Con’t. • • • • •
Receive by email a free monthly issues of The Power Is Now Magazine and Radio Magazine Watch and learn about the real estate industry on The Power Is Now TV Read our blogs about the Real Estate Industry Receive a free one-time counseling meeting for a budget and savings plan Receive a free one-time counseling meeting for debt elimination and credit restoration plan. 23
THE HOMEBUYER’S CLUB PAID MEMBERSHIP What you get as a Club member: In addition to all Free Membership benefits, for a onetime setup fee of $297 and $97 per month you will receive: • •
Set up fee is reduced to $97 for Seminar attendees. Monthly 45-minute accountability meeting to review the results of your budgeting, financial goals for the month and to set new goals for the following month 24
THE HOMEBUYER’S CLUB • Monthly reviews and analysis of your budget and other expenses, including taxes, insurance, and emergency fund • Monthly reviews and assistance to improve your credit score and help manage your credit related spending and financial plans • Monthly review of your debt elimination and savings plan for homeownership and build your emergency fund. • You can cancel anytime. No contract. No obligation.
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CHANGING YOUR MINDSET TOWARD FINANCIAL LITERACY AND WEALTH BUILDING.
The Power Is Now Wealth Initative
THE POWER IS NOW WEALTH INITIATIVE Five Key Objectives: 1.
Knowledge - Knowledge is the Power you need to build wealth.
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Commitment to Financial Independence – We must take Individual responsibility for our lives.
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Knowledge always comes before money or the money will soon be gone.
Commitment requires disclipine and discipline requires a budget and accountability
Investment in real estate - We must prioritize ownership in real property as opposed to personal property.
Real Property appreciates. Personal property depreciates.
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THE POWER IS NOW WEALTH INITIATIVE 4.
Financial and Credit Management - We must live within our means and not abuse credit.
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Credit is not income - It is a convenience for cash. Good credit is the beginning of building wealth. Good credit is a Fico Score of 720 to 799 higher. Great credit is 800 to 850.
Creating Wealth - We must understand that wealth is a mindset that become an asset and legacy overtime.
Buy and Hold, or Buy, Sell to Buy again and hold - building not spending – creating a legacy of wealth and not leaving a legacy of poverty. We must be intentional about leaving a legacy of wealth and an inheritance for our family. It will not happen by accident but by planning, investing and learning over time. 28
10–Point Wealth Building Pledge WWW.THEPOWERISNOW.COM 29
10 POINT WEALTH BUILDING PLEDGE I, (state your name), from this day forward, declare before my God, my family and my community a renewed commitment to build wealth and to leave a legacy and an inheritance for my family and my community. I pledge the following: 1. To save and invest 10 to 20 percent of my after-tax income 2. To be a proactive and informed investor in real estate 3. To be disciplined and knowledgeable consumer in my spending 4. To measure my personal wealth by net worth and not my income 5. To engage in sound budgeting, credit and tax management practices 30
10 POINT WEALTH BUILDING PLEDGE 6. To teach business & financial principles to my children & demonstrate them in my actions 7. To use a portion of my wealth to strengthen my community and my church 8. To be humble and not live extravagantly saving instead of consuming 9. To ensure my wealth is passed onto my family, and my community 10. To maximize my earning power through a commitment to financial literacy and professional development 31
How to Buy A 4 Unit Apartment Building AS A FIRST TIME HOMEBUYER 32
10 REASONS TO BUY A 4 UNIT APPARTMENT BUILDING AS A FIRST TIME HOMEBUYER 33
10 Reasons to buy a 4-unit Building 1. It is easier to qualify for a 4,3,2 unit property than it is for a single family home. If you can buy a 4 Unit property and live in one unit the income from the other three units can be added to your income to qualify. 2. As a First Time Homebuyer you can buy a 4 Unit home with only 3% down on a conventional loan and 3.5% down on an FHA loan and Zero Down with a VA loan for veterans. Normally the down payment required to buy a 4-unit property is 25%. 3. You are building for present and the future. Having a home you can call your own addresses the present and provides you stability. But, a 4-unit property also sets you up for the future with retirement income. 34
10 Reasons to buy a 4-unit Building 4. Income property appreciates faster than residential single-family homes in most areas. Income property rate of appreciation can range from 5% to 7% or higher and are driven by the income on the property, while residential property appreciation can range from 2 to 5% or higher and are only worth same as other similar properties in the neighborhood. 5. Your rental income on the other three units will increase every year. It is the next best thing to getting a raise every year at work.
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10 Reasons to buy a 4-unit Building 6. Because you have three units providing income to pay the mortgage you have eliminated your most significant housing expense and can save more money. Imagine being able to save the money you are paying in rent now. 7. The unit you occupy will one day provide rental income to pay the mortgage on your next purchase. Whether it is a single-family home or another 4 unit home. The unit you occupy represents a future windfall of income when you move.
8. You will be able to leave an inheritance for your children that could pay dividends for generations in income and appreciation as an asset. 36
10 Reasons to buy a 4-unit Building 9. The tax write off of owning a 4-unit property are significantly more than a single-family home. You can benefit at a much higher level. Not only can you write off mortgage interest, property taxes, but you can depreciate the portion of the building you are renting and write off maintenance, insurance, property management, repairs and etc..
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10 Reasons to buy a 4-unit Building 10. You can create a business. In reality you are in business whether you want to be or not. So form a business of any type: LLC, Corp. or Sole Proprietorship. –
Do not transfer title of the property to a legal entity. You will alienate the title and the loan will be due and payable. Consult an attorney or how to hold title.
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Obtain an umbrella policy and form a sole proprietorship. It will save you time and money and begin writing off your travel on business or vacation to look at other properties to buy, attend educational seminars, obtain a real estate license, website, computers to run your real estate business. You have a business. 38
10 REASONS TO BUY A 4 UNIT APPARTMENT BUILDING AS A FIRST TIME HOMEBUYER 39
10 STRATEGIES YOU SHOULD KNOW WHEN BUYING A 4 UNIT BUILDING 40
10 Strategies to know when buying a 4-unit Building 1. Buy 4 units in the neighborhood you know. If you cannot afford to buy there try to stay within an hour from your home or work. If you are occupying the property location really matters if you have children.
2. Buy near schools/shopping centers/downtown and you will always have people willing to rent. 3. Avoid rent control areas if possible. All cities in California will eventually have rent control. 41
10 Strategies to know when buying a 4-unit Building 4. Buy units with a minimum of 2 bedrooms and 1 bath. Never buy units with 1 bedroom and 1 baths or lofts. The property must be exclusive and in a very expensive area to justify so few beds and baths. Try to buy units with 3 bedrooms and 2 baths or more.
5. Buy units that have separate meters for water and electricity. If the units do not have separate meters add the cost to the purchase price to determine if you should buy it.
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10 Strategies to know when buying a 4-unit Building 6. Make sure the roof is 20 years or younger. If there is an old roof add the cost to replace or repair to the price. Old roofs mean big problem. 7. Make sure all units must have covered parking and storage for the tenants. 8. Obtain tax returns on the seller and/or rent rolls to determine the real vacancy factor. Is the landlord collecting rent and is it consistent.
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10 Strategies to know when buying a 4-unit Building 9. Obtain a crime report – look for drug arrests, gang violence, sex offenders, etc. These are real problems that you may not be prepared deal with especially if you are living in the property. 10. Look for month to month leases. Long term leases are a problem. You need to be able to raise the rent. Also, make sure you have property management. Do not manage the property yourself.
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10 STRATEGIES YOU SHOULD KNOW WHEN BUYING A 4 UNIT BUILDING 45
HOW TO BUY 4 UNITS AS A FIRST TIME HOME BUYER 46
FIRST: HOW TO QUALIFY THE 4 UNIT PROPERTY THE PROPERTY MUST MEET THE SUFFICIENCY COVERAGE RATIO 47
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11346 Magnolia Ave. Riverside, CA • Sufficiency Coverage Ratio AKA Debt Coverage Ratio is 1 to 1 or 1:1. After allowing for the Vacancy Factor. For Example: • Rents are: $5,600 Actual • Vacancy Factor is (25% of the rent) • Qualified Rent = $5600x75% = $4200 • DSCR/SCR = Rent/PITIMI = 1:1 or higher 1.25:1 • $4200/$6471 = .649 DSCR or SCR. • The property does not qualify using projected rents 52
FIRST THE UNITS MUST QUALIFY • Sufficiency Coverage Ratio AKA Debt Coverage Ratio is 1 to 1 or 1:1. After allowing for the Vacancy Factor. For Example: • Rents are: $6,200 Projected Rents • Vacancy Factor is (25% of the rent) • Qualified Rent = $6200x75% = $4650 • DSCR/SCR = Rent/PITIMI = 1:1 or higher 1.25:1 • $4650/$6471 = .72 DSCR or SCR. • Using Projected Rents the property does not Qualify 53
CAP RATE VS. SALE PRICE 11364 MAGNOLIA AVE. RIVERSIDE, CA Sales Price: $979,900
Target Cap Rate 7%
NOI = $41,200.00
NOI = $41,200.00 divided by
Sale Price: $979,000
Cap Rate 7% or .07 =
Cap Rate: 4.18%
Value: $ 588,571
41,200/979,00 = 4.18%
Current Price: $979,900 Loss in Equity: $391,329
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281 NORTH VALLEY VIEW HEMET, CA • Sufficiency Coverage Ratio AKA Debt Coverage Ratio is 1 to 1 or 1:1. After allowing for the Vacancy Factor. For Example: • Rents are: $4,015 Actual • Vacancy Factor is (25% of the rent) • Qualified Rent = $4,015 x75% = $3,011 • DSCR/SCR = Rent/PITIMI = 1:1 or higher • $3011/$3385 = .889 DSCR or SCR. • The property does not qualify using actual rents 59
281 NORTH VALLEY VIEW HEMET, CA • Sufficiency Coverage Ratio AKA Debt Coverage Ratio is 1 to 1 or 1:1. After allowing for the Vacancy Factor. For Example: • Rents are: $4800 Projected. • Vacancy Factor is (25% of the rent) • Qualified Rent = $4,800 x75% = $3,600.00 • DSCR/SCR = Rent/PITIMI = 1:1 or higher 1.25:1 • $3,600/$3384 = 1.06 DSCR or SCR • Using Projected Rents the property does qualify 60
CAP RATE VS. SALE PRICE 281 NORTH VALLEY VIEW HEMET, CA Sales Price: $502,900
Cap Rate 7%
NOI = $39,508
NOI = $39,508.00 divided by
Sale Price: $502,900
Cap Rate 7% or .07 =
Cap Rate: 7.86%
Value: $ 564,400
$39,508/$502,900 = 7.85%
Current Price: $502,900 $61,500 Gain in equity
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6828 SAN PEDRO STREET LA, CA • Sufficiency Coverage Ratio AKA Debt Coverage Ratio is 1 to 1 or 1:1. After allowing for the Vacancy Factor. For Example: • Rents are: $3,785.00 Actual • Vacancy Factor is (25% of the rent) • Qualified Rent = $3,785x75% = $2,838.75 • DSCR/SCR = Rent/PITIMI = 1:1 or higher • $2,839/$3797 = .75 DSCR or SCR. • The Property does not qualify at actual rents 66
6828 SAN PEDRO STREET LA, CA • Sufficiency Coverage Ratio AKA Debt Coverage Ratio is 1 to 1 or 1:1. After allowing for the Vacancy Factor. For Example: • Rents are: $5,600 Projected. • Vacancy Factor is (25% of the rent) • Qualified Rent = $5,600x75% = $4,200.00 • DSCR/SCR = Rent/PITIMI = 1:1 or higher 1.25:1 • $4200/$3797 = 1.10 DSCR or SCR • The property does qualify at projected rents 67
CAP RATE VS. SALE PRICE 6828 SAN PEDRO STREET LA, CA Sales Price: $585,000
Cap Rate 7%
NOI = $45,420
NOI = $67,200 Projected
Sale Price: $585,000
Cap Rate 8% or .08
Cap Rate: 7.76%
Value: $ 960,000
$45,420/$585,000 = 7.76%
Current Price: $585,000 $375,00 gain in equity
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SECOND: HOW TO QUALIFY FOR THE LOAN AS A FIRST TIME HOME BUYER 69
HOW TO QUALIFY FOR THE LOAN • There is No DPA for 2 to 4 units. You must have the money or get a gift from a relative. • You cannot use Projected rents to qualify the property. You can only use market rents when the property is vacant. • You must have 3 months of the PITIMI in reserves. It cannot be a gift. This is in addition to your down payment of 3.5%. • You must occupy one of the 4 units full time and live there a minimum of 1 year. • We will add the rent, from the three units that will remain rentals, to your income minus the vacancy factor to help you qualify. 70
HOW TO QUALIFY FOR THE LOAN • • • • • • •
For example: 4 units renting for: $1500 + 1400 + 1400 + 1700 = $6,000 You choose the $1700 unit because it is largest unit. (3 units) $4,300 x .75%= $3225 + your employment income. Employment $6000 + rental $3225 = $9,225.00 Total income. Qualifying Housing expense 42.% =$3,875. (PITIMI) Total Debt Ratio = 50% = $4612.5 (PITIMI + All Debt) 71
HOW TO BUY 4 UNITS AS A FIRST TIME HOME BUYER 72
Apply To Buy Now! FIRST BANK MORTGAGE Direct line: 714-475-8629 Start the Process Now www.neverrentagain.com www.applytobuynow.com
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FIRST BANK MORTGAGE Full-Service Bank and Mortgage Company Company NMLS # 551928 74
FIRST BANK MORTGAGE ERIC LAWRENCE FRAZIER MBA Vice President and Mortgage Advisor NMLS 461807 Meeting location: Northern California 1700 North Broadway, Walnut Creek, CA 94596 13830-A San Pablo, San Pablo, CA 94806 Office: 800-261-1634 ext. 703 Cell: 510 – 871-0055 Meeting Location: Southern California 104 E. Ontario Ave Corona, CA 92879 1110 Limonite Ave. Jurupa Valley, CA 91752 7710 Limonite Ave. Riverside, CA 92506 800-261-1634 ext. 703 Cell: 714-475-8629
YOUR RESOURCE FOR HOMEOWNERSHIP WE ARE PROUD SPONSORS OF THE OC REALTIST CHAPTER OF NAREB