W I L L A M E T T E VA L L E Y
C O N N E C T I N G .
E L E VAT I N G .
I N S P I R I N G .
REALTORS®
PREFERRED BUSINESS SPOTLIGHT
CAR ISSUE
Cathie Velasco, Oregon Rental Property Management All Photos by: Pamela Hagedoorn, SilverDream Photography
FEBRUARY 2020
Your clients matter here
We offer customized solutions for your buyer or seller. We educate your customer through the entire process. We provide the most cost-effective solution. We offer free estimates. We offer financing (can be paid out of escrow).
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We offer a transferrable warranty. We provide a dedicated customer service advocate
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503.928.8631 O.
their project.
503.931.2185 M.
We are a trusted, locally owned and operated company
280 Liberty St SE, Suite #100 | Salem, OR 97301
serving Portland and the Willamette Valley.
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FOUNDATIONS Cracked walls, gaps in your floor, and stuck windows or doors are all signs of a dangerous foundation.
Cherry Creek Mortgage Co., Inc. NMLS #3001. All rights reserved. Oregon License Number ML-4807.
(503) 581-6052
Mendell@c-rem.com | 1365 Commercial St SE Salem, OR 97302 2 • February 2020
BASEMENTS Basement leaks don’t simply vanish, and they only get worse over time. CRAWL SPACES Mold, humidity and allergens are all signs of a harmful crawl space. Improve the air quality by cleaning out and sealing up the crawl space.
“Real Producers want Real Results for their clients. TerraFirma Redefines our industry with only the best engineered solutions and only what your client needs. You provide the highest quality service for your clients and when you entrust them to us we do the very same. We will make sure your client has all the information they need and the solutions that work for them to give them the peace of mind that the home they are selling or buying is safe and protected with a transferable warranty. Your client will never forget that you cared about them enough to recommend only the very best to serve them.�
DIRECTOR OF BUSINESS DEVELOPMENT Mendell Gosnell, CPMÂŽ
Oregon Licensed Principal Broker
jbailey@terrafirmafs.com 503-828-3340 Exclusive REALTORÂŽ Concierge Services
goterrafirma.com www.realproducersmag.com • 3
TAB LE OF
MEET THE
CONTENTS
WILLAMETTE VA L L E Y
06
09
Preferred Partners
10
Publisher’s Note
REALTOR® Cars
REAL PRODUCERS TEAM
22
18
Industry Expert
Sponsor Spotlight Cathie Velasco
Sabrina Dikeman
Allison Blakely
Publisher
Client Relations
Pamela Hagedoorn SilverDream Photography Publisher’s Assistant/ Photographer
If you are interested in contributing or nomination REALTORS® for certain stories, please email us at sabrina.dikeman@realproducersmag.com. DISCLAIMER: Any articles included in this publication and/or opinions expressed therein do not necessarily reflect the views of N2 Publishing but remain solely those of the author(s). The paid advertisements contained within the Real Producers magazine are not endorsed or recommended by N2 Publishing or the publisher. Therefore, neither N2 Publishing nor the publisher may be held liable or responsible for business practices of these companies. NOTE: When community events take place, photographers may be present to take photos for that event and they may be used in this publication.
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PREFERRED PARTNERS
This section has been created to give you easier access when searching for a trusted affiliate sponsor to use. Take a minute to familiarize yourself with the businesses sponsoring Willamette Valley Real Producers. These local businesses are proud to partner with you and make this magazine possible. Please support these businesses and thank them for supporting Willamette Valley Real Producers! 1031 EXCHANGE Beutler Exchange Group, LLC (503) 748-1031 www.beutlerexchage group.com
HOME INSPECTION 360 Professional Home Inspection (503) 509-8691 www.360proinspection.com
BASEMENT WATERPROOFING John’s Waterproofing Company (503) 419-0404 https://www. johnswaterproofing.com
Inspections Unlimited – Brandon Biehn (503) 931-6401 www.inspections unlimited.com
CLOSING GIFTS / CLIENT APPRECIATION / PRIVATE PARTIES Paint and Pinot Parties & Events (503) 586-3738 www.paintandpinot.net
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CONTRACTOR Goff Construction (503) 559-8670 www.billgoffconstruction.com FIREPLACE INSERTS, STOVES Home Fire Stove 1695 Market St. NE, Salem, OR 97301 (503) 364-6339 www.homefirestove.com FOUNDATION REPAIR / WATERPROOFING TerraFirma Foundation Systems 13110 SW Wall St Portland, OR 97223 (844) 371-8816 www.goterrafirma.com GARAGE DOORS & REPAIRS Dave’s Garage Doors (503) 641-8987 www.davesgarage doors.com
6 • February 2020
Pillar to Post Home Inspection – Derek Renz
HOME STAGING Creative Concepts (503) 881-0886 www.stagingoregon.com HOME WARRANTY Kimberly Peterson First American Home Warranty 541-521-3302 www.homewarranty. firstam.com HOUSE CLEANING SERVICES Azucena’s Cleaning (503) 779-5906 www.azucenacleaning.com SOCIAL MEDIA GURU, VI Rafael Designs – Eddie Peterson (503) 551-8071 www.epeterson9981. wixsite.com/rafaeldesigns
MORTGAGE/HOME LOAN AND REFINANCE Academy Mortgage Ben Nelson (503) 910-9872 https://academymortgage. com/lo/bennelson Cherry Creek Mortgage Lisa McCormick (503) 502-0336 www.cherrycreekmortgage. com/profile/lisa-mccormick LandMark Professionals Katy Canales (503) 581-8100 www.bestloanprogram.com Mortgage First Corporation (503) 588-3511 www.mortgagefirstcorp.com US Bank Home Mortgage Angie Stanley Team (503) 316-3700 https://mortgage.usbank. com/or/salem PHOTOGRAPHY/ MULTIMEDIA SilverDream Photography (503) 507-5783 www.silverdream photography.com Brian Stone Real Estate Photography bstonephotography @yahoo.com (503) 930-7265 PROPERTY MANAGEMENT Centurion Real Estate Management, LLC 1365 Commercial St. SE, Salem, OR 97302 (503) 588-0940 www.c-rem.com
Big banks pick their own products and rates. We act as your client's personal shopper.
Oregon Rental Property Management 280 Liberty St SE, Salem, OR 97302 (503) 567-0816 www.orpmllc.com
REAL ESTATE SCHOOL A1 Superior Schools (503) 551-4467 www.a1schools.co ROOFING AND ROOF REPAIR Anytime Roofing (503) 446-0918 www.anytimeroofingllc.com
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Jamie@mortgagefirstcorp.com
Brokers are better.
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1761 Liberty St SE, Salem, OR 97302
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SIGNS AND GRAPHICS 1 Day Signs (503) 371-1329 1010 Commercial St. SE, Salem, OR 97302 www.1-daysigns.com
Company NMLS# 40558
TITLE AND ESCROW Fidelity National Title Company 500 Liberty St. SE, Suite 200 Salem, OR 97301-3496 (503) 585-7219 www.fidelitytitleoregon.com VIDEO PRODUCTIONS AND WEBSITE DESIGN Skyline Video Productions (503) 979-2141 www.skylinevp.com WINDOW COVERINGS Made in the Shade Andrea McCann 503-581-8257
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FOCUS ON OUR
PROMISED RESOLUTIONS publisher’s note Now that the new year is upon us, we can focus on our promised resolutions. Every year, we vow to make changes in order to better ourselves, our families and our lives. Regardless if it’s quitting bad habits, weight loss, making more time for the family or a hobby or even taking on larger goals at work, there are a slew of reasons why we come to the conclusion that we should implement these goals. Sometimes, though, our goals are too drastic or difficult or maybe life had other ideas for you to focus on and they end up falling through or fading out. The new year brings change, which isn’t always easy, and sometimes it can be hard to get motivated to embrace something new and different. Doing things “the way they’ve always been done” feels so much more simple and comfortable in many cases. Change
can be good for us though, and sometimes even necessary. The change concept can also be applied to your life in Real Estate. Maybe you have spent too much time operating in a certain direction or your business goals do not align with your personal goals. Change can be stressful and it has a rippling effect that touches everything that surrounds you. Sometimes change is unexpected and unwelcome, from rapidly evolving technology to new regulations and everything in between. So how do we address change? The only answer is change. Change keeps businesses competitive. Implement new technology to improve operations, make eco-friendly changes to save on costs, use software to better track customers, make these changes because, after the initial rough patch of transitioning from one method to another,
you will very likely see improvement. Of course, sometimes we have a choice in making the change, and other times changes are simply thrust upon us. In either case, it is important to focus on not just the desired goals of your operations, but the necessary changes, whether you choose them or they choose you — that you must make for overall productivity. Rather than shy away from change, I encourage you to embrace it. Why? Because that change can make you competitive. It can improve a previously lengthy or complicated process. In some cases, it can save you money and time by increasing efficiency. Other times, change is simply the only option to stay afloat during a challenge in the industry. Stepping out of your comfort zone can prove to be very rewarding. I wish all our Real Producers a very Happy New Year! Sabrina Dikeman Publisher, Real Producers 503-991-4341 sabrina.dikeman@realproducersmag.com
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Request an inspection today! Marie Baker & Derek Renz 503-856-8775
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www.realproducersmag.com • 9
®
Sarah Roelof Sarah had always wanted a 1969 El Camino, a car that both honors her birth year and satisfies her love for a car that “is both a car and a truck!” Her biological mom, Kathy, passed away two years ago. But before she died, one of her last requests was for Sarah’s uncles to hunt down
CARS
and find Sarah her El Camino. After about a year of searching, her uncles finally surprised her by presenting his Classic Red 1969 El Camino on her 50th birthday, surrounded by friends and family. It was a moment to honor and remember her mother, as well
as to celebrate the joy of a life lived to the fullest. A car can be so much more than just transportation. It can also symbolize the love between family members, and the memories of a life shared with each other.
Brian Joseph of Coldwell Banker Mountain West has had a 15 year project restoring his 1972 Datsun 510 Wagon that he has owned since 1999. Almost everything has been modified and he has done
10 • February 2020
most all the work himself. Engine: Nissan 3.3L Turbo V6 with electromotive engine controls Suspension: Custom tube frame back half with 4-link suspension
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Zach Fischer Zach Fischer drives a red 1952 MG-TD affectionately named “Lil Red.” The car has been in his family for years, and his senior pictures were actually taken in the front seat of this gorgeous classic. Today, he owns this family keepsake and participates in the local Willamette MG club. When asked his favorite thing about the car: “It’s just a fun car to drive in the summer and around town! I like that people smile and wave when they see it, it really makes my day.”
12 • February 2020
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"My car is and 2014 BMW I8. I am not much of a car person but knew I wanted something new and sporty. I called BJ Donofrio and asked if he had anything that I would like, and that was what he came up with. I liked this car because it was different than anything I had seen or that anyone else had. For me it’s the perfect Real Estate car". Tina
Bry Taylor-Campos of Windermere Salem and her race car driving husband own a 2017 GRT by Phillips. The class is an IMCA Modified raced on a dirt track all over the NW. This type of car is a tube chassis with an all aluminum body, powered by a Chevy 604 crate motor that is sealed, Very few things can be changed in it. John’s number is 36, in honor of his father who also ran the number 36 back when he raced on asphalt. The past 19 years have been great years for the J Lightnin’ race team. Lightnin’ wanted to make a difference and be more than just another Driver. The car has been dedicated to serving our community and raising awareness by displaying on the back deck of the race car, logos, for United Way and the other organizations they serve. In 2017 John joined the Break the Chain Racing Team and was instrumental in bringing awareness at dirt tracks in the NW to issues such as domestic violence and addiction. We are always looking for more marketing partners who would like to advertise on the car and help out with expenses throughout the year. In 2017 John drove to his first track Championship on this side of the mountain, at Willamette Speedway and also was the 2017 IMCA Modified Oregon State Champion. In 2018 John won the IMCA Wild West Modified Shootout.
14 • February 2020
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Stephanie Wells Agent Stephanie Wells has fond memories with this classic 1948 Ford F100, one of many cars that her father-in-law, Dan Wells, has restored. This is the same car Dan learned to drive in, and he kept it as a family memento through the years before beginning its restoration in the early 2000s. Finished in the same burnt orange and burgundy color scheme Stephanie planned to use for her wedding, the car was finished in the nick of time so that the family could take wedding pictures featuring the classic vehicle. Dan has since has been diagnosed with Parkinson’s and can no longer drive the car himself, but during the summer the family still periodically takes him out driving so that he can enjoy the car he put so much love into.
16 • February 2020
Sandie Gray with Keller Williams Capital City owns a grey 2015 Audi S3 named “Sally.” She states, “I love how it looks driving down the road. I love the fact I can pull up to the line in what looks to be a “mom” style car and run competitively with the Muscle cars. My husband and I have invested a lot of care and attention in this car.” Though primarily used for business purposes, Sandie and her husband have also made quite a few personalized modifications on the vehicle so that they can also occasionally take a trip to the Portland International Raceway or Woodburn Dragstrip. Some of these modifications include: APR intake, APR downpipe, Mabotech stage 3 big turbo M560is, Go fast bits DV+ diverter valve, Precision Raceworks stage 3 LPFP walbro 450 pump, Precision Raceworks port injection 1300cc, Torqbyte LPFP driver kit, Innovate Motorsport ethanol sensor kit and gauge, Eurodyne Maestro software tuned by Frank Mabo, Eurodyne Transmission tune, Michelin pilot super sport 4s tires, BBS forged wheels, H&R lowering springs, Wheel spacers, Brisk 12rs plugs.
www.realproducersmag.com • 17
Christy Temple, of the HomeSmart Realty Group, drives a Black Chrysler 200 Hardtop Convertible that she has jovially nicknamed “Lady Vader.” She says, “Being able to cruise in the Summer with the top down is my favorite thing about the car, but I also love that it is unique in the area and that you don’t see many hard top convertibles in Salem!” The perfect combination of a smooth ride and a gorgeous (but not too flashy) persona this is the perfect car for riding off into the sunset.
Colleen Benson of Keller Williams, says, “We call her the Elkie”! Yes, she and her husband Kerry have a 1966 Chevy El Camino cherry red, that she says, “Goes fast”! “Kerry and his dad take their hot rods to the Drags in Woodburn in the summer- his dad has always owned hot rods and Kerry grew up watching him at the drags on the weekends.
18 • February 2020
We also love to take it out for drives on weekends usually to brunch when we can. We get a lot of thumbs ups when we are out around town. I like to tie a scarf around my hair and put some bright red lipstick on to match the car- part of the fun! Besides, with no A/C we have to roll all the windows down. Kerry has completely rebuilt this car and has owned it for 20 years”.
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O re g o n Re n tal P ro p e r ty Ma nag e me n t sponsor spotlight Written By Jennifer White Photography by Pamela Hagedoorn, Silver Dream Photography
This month, we introduce you to the fabulous Cathie Velasco with Oregon Rental Property Management (ORPM). This wonderful lady knows everything when it comes to property management. It comes naturally and easy to her. She absolutely loves it, challenges and all! She is a single mother to two wonderful children. Shane, who is 21, and Seth, who is 17. She also has a boyfriend of two-and-a-half years, Robert Maple. As one of the four owners, and their principal broker, Cathie grew up in southern California in Huntington Beach. She got involved with the real estate and property management industries at an early age. Before moving to Oregon, she managed two apartment complexes and then got into residential property management. For a year-and-a-half, she was an assistant to a loan officer.
CAT H I E
VE L ASCO 20 • February 2020
In 1995, she moved here to Salem, Oregon, and in 2004 she got her real estate license. Cathie says, “There are a lot of agents that don’t specialize or get involved with property management.” She has managed a lot of single-family residential properties for investors and some kept asking her if she would be interested in starting her own business. On January 1, 2019, that dream became a reality. She loves getting to
build her own platform and creating something she has ownership in. They provide exceptional leasing and full-service property management solutions to both tenants and owners. ORPM currently manages a little over 100 properties, including single-family homes and multi-family homes which is fantastic for their first year in business! They want to continue to grow and help investors and REALTORS® in the rental industry. They would love to continue to expand in both single and multi-family properties.
There are two locations, with the main office in Salem Oregon, and the other in Beaverton (Portland area). One thing that makes ORPM different is its fee setup. They charge 9% of the monthly rent, and if they manage multiple properties for a client, that fee is reduced. They also don’t charge the extra fees other management companies do. For example:
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Existen and many more. She’s also on the board for Mid Valley Association of REALTORS® Community Fund and for the events committee as well. With her expertise, she advises REALTORS® and investors who are looking to start off in the rental industry to reach out to ORPM. There’s no charge for them to evaluate the property and offer their suggestions on what it could rent for. This also helps the REALTORS’® relationships with their clients. Lets everyone know they are all looking out for their best interest.
She wants investors and REALTORS® to know there have been a lot of changes with the laws in the Oregon area this year when it comes to property management. There are a lot that are not aware of these changes. One example would be that owners can’t just give a 30- or 60-day notice. There are new steps that have to be followed. She suggests to both agents and investors to reach out to them with any questions.
There’s no fee to deliver notices, lease renewals and or marketing the property, but they handle everything from top to bottom for you. Including collecting rent, screening, maintenance, handling legal needs should they arise, and so much more. They also have this awesome online set up that gives both the owner and tenants easy access to keep up to date. They can pay rent, view notes, see activity and more. This removes a lot of the stress of property management from the owner(s) and/or REALTOR®. Cathie adds, “I feel it’s very important to build great relationships with REAL-
22 • February 2020
TORS®.” There are several she refers out where she has built those relationships with. She trusts them. Another unique feature about ORPM is they offer a referral fee to REALTORS® who refer them, and they make sure that the client is always attached to that real estate agent, so the agent doesn’t have to worry about losing a client to them. She also feels it’s very important to be involved with the community. She does a lot of volunteering and donating for different non-profits like; Friends of Pimpollo, Habitat for Humanity, Salem Art Association, Family Building Blocks, No Solo
Through their extensive experience in real estate and asset management, they are able to deliver great quality service with the transparency and responsiveness clients deserve. Whether you’re a REALTOR® working with a client, an investor looking to buy a rental home, a tenant looking to rent, or need professional property management, they are there for you.
Cathie Velasco Oregon Rental Property Management (503) 567.0816 www.orpmllc.com
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Investing in
Real Estate. Why? How?
Written by: Mendell Gosnell, Centurion Real Estate Management, LLC
A farmer once told me that in order to be successful you need to earn money while you are sleeping. Investing in real estate is a great path to accomplish that. There is a myriad of options for investing in real estate, but for this article, we will be focusing on rental property. (Rental property could be anything from a rental house to a large multifamily complex or other commercial property). The bottom line: Real estate is one of the ways you can earn money while sleeping and the beauty is
24 • February 2020
For instance, if your primary motivation for investing is safety, you must manage accordingly.
Some other benefits of a real estate investment include, but are not limited to: Depreciation tax write-offs on property that provides the “Phantom cash flow.” Tenants pay your monthly mortgage which helps you reduce your principal debt, which in turn increases your overall equity in the property. Hedge against inflation. In as much as inflation silently erodes wealth, your investment in real estate still stands strong because rents generally go up over time.
How can you do this? You can do this by minimizing risks and increasing insurance coverage. Other risks might include the type of financing you secure on the investment.
There are some more important topics on how you can invest in real estate to delay tax upon selling by using a 1301 exchange (1301 exchange allows you to trade into a like-kind property which helps avoid tax indefinitely), but that is a topic for another day. Put simply, there are multiple benefits attached to real estate investments. That is why it is an advantageous investment strategy for anyone wanting to build wealth, especially “long-term” wealth.
industry expert Why should you invest? Why should you encourage your clients to invest? Real estate is one of the best means of creating passive income. This is because investing in real estate allows you to leverage your time and money. It allows you to see your money grow in a hands-off manner. This article will look at the basics of real estate investment, why you should consider real estate investing and how you can evaluate your real estate investment when you finally choose to invest.
you to purchase insurance, which will protect you against certain types of loss and damage.
that you are taxed less on passive income compared to what you get taxed from your earned income. Another great plus of real estate investment is the fact that it is tangible and controllable. Real estate investment gives you the power to monitor where your money is and how your money is growing as opposed to a stock investment in a publicly-traded company where you have little or no knowledge about how your investment is working. Real estate investment gives you a chance to: Improve your investment and choose what you would like to improve. Choose your tenants. (Note: You must follow Fair Housing Guidelines and you must not discriminate). Outsource the day-to-day caring and administration of the property to a Professional Property Manager while you still enjoy the benefits. Enjoy added benefits of using financial leverage
Having looked at the basics of real estate investment, let’s highlight why people invest in real estate. Although there are a vast number of reasons why people invest in real estate, let’s narrow the reasons down to the five core “financial” reasons: 1. S: Safety (Capital preservation) 2. P: Periodic return (Cash flow) 3. L: Leverage (Using borrowed funds) 4. A: Appreciation (Hedge against inflation) 5. T: Tax advantage (Income tax shelter) It is important to understand your primary reasons for choosing real estate investment.
On the other hand, if the primary reason why an investor is investing is because of periodic return or cash flow, then we channel the energy and investment funds towards deferring capital projects while trying to achieve market rents for the property and looking for ways to minimize current and future expenses. Aside from the five primary financial reasons for choosing a real estate investment, you can make money from real estate in four specific ways. You must be thinking that there are more than four ways of making money in real estate? Yes, that is correct – but the ways you can make money from real estate are from four basic types of investment returns or categories if you will. Cash flow Appreciation Loan Amortization Tax shelter After looking at the reasons for investing in real estate and the types of income that you can generate from real estate, the next question that needs an answer is how to know you have a good deal? How to know if you are getting good returns? There are different ways to determine this, and they include figuring out the Gross Rent Multiplier (GRM) or calculating the Cap rate. You can also know a good deal by looking at the firstyear return on your cash investment (Cash-on-
Additionally, aside from the great returns you can achieve, you can also take the tax write off against any expenses used for the property. Believe it or not, real estate investing, unlike other forms of investing out there, has some risk protection as well. For any real estate investment deal you want to finance your bank will require
www.realproducersmag.com • 25
cash). Metrics like Internal Rate of Return (IRR), Discounted Cash Flow (DCF), and Modified Internal Rate of Return are also instrumental. The metrics mentioned above are very good, and they will provide you with lots of information but the only way you can know if it is a good deal or not is when you compare it with other deals. We will further discuss the metrics later in this text. NOTE: The numbers are only part of the deal analysis, a good property report, and a critical look into the financial report is essential. You will also find a good checklist or property questionnaire useful as well as a great real estate agent and property manager.
Tax Shelter A tax shelter is a part most investors know about but they don’t have an in-depth understanding of what it means. Generally, you get taxed on all money received. If you get a paycheck, for instance, to get the net amount you deduct tax from the gross amount earned. Some investors think that they will get taxed from their cash flow which is not “technically” true. Another beauty of real estate is what some refer to as a tax shelter. A tax shelter is the second, and it is known as a depreciation deduction. In the tax code, the IRS calls it cost recovery.
Here are four ways your investment(s) works for you:
HOW?
Cash flow Cash flow is the money in and out. What you are looking for in real estate investment is positive cash flow. Positive cash flow is the amount of money you have after paying for all expenses.
I learned that real estate is a lot like a game called Monopoly. You get the land; you put up structures and trade with them. In the game of monopoly, we all know the property that is more desired than the others. The more you move around the board, the more the game gets better. The properties that stand out are the most desired and they deliver higher ROI over time. The game of monopoly helps in teaching real estate investment.
To be more specific, positive cash flow is your Gross Potential Rent minus any vacancy or rent loss plus any other income like laundry or parking income minus your monthly expenses, including your loan payment. Appreciation Appreciation is how much the value of the property increases over time. Appreciation is indirectly related to the overall market strength and directly related to the improvements made to the property that has helped increase the total overall performance like lower vacancy, reduced expenses, and higher rental rates. In real terms, appreciation sometimes is referred to as “Value enhancement” (future resale price minus the original price of purchase). Loan Amortization Loan Amortization is your monthly mortgage payment. If you don’t have an interest-only loan, your payments will be of two parts. The first part of the mortgage has a principal portion that is set aside to reduce your loan balance. The second part is the interest portion of the loan that is paid monthly and it is the expense you get to write off when it is taxtime. The principal amount paid is to kill off the loan. (The word Amortize comes from a Latin word which means “death”…essentially to finish or put to death the loan.)
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In real life, not every deal you land on should be purchased. You will find the art and science of the Investment Evaluation Approach come as a helpful tool in measuring the strength of a real estate deal. Several methods and approaches can be used (each approach has its own strengths and weaknesses). Having an understanding of the methods will help you get better real estate investment deals. Cash in return This approach helps you compare the cash at the beginning with the cash received at the end of the first year. It gives you a quick snapshot of your short term return on investment.
today will be worth more than a dollar in the distant future. If you understand the concept of compound interest as it relates to a checking account, TVM is just the reverse. TVM (can be thought of as the true market value), as it relates to real estate, asks the question “what the real estate investment is worth today compared to other potential opportunities available.” This opportunity cost is the discount rate. Running a discounted cash flow analysis on all future streams of positive cash flow (3-10 year time horizon) is used to determine the Present Value of Real Estate. Some assumptions are made, and one of the assumptions is the estimated sales price, say for instance, after five years. Each stream of cash flow (usually broken down yearly) will then be discounted back to the present with the final year combining cash flow and net sales proceeds. Computing this method of tracking is time-consuming and more technical. It is the preferred evaluation method for some investors. The numbers are just a part of the investment analysis. A thorough evaluation of the financial report of the property, demographics, leases, expense ratios, etc. will also be performed. If you want to be a happy real estate investor performing in-depth due diligence will keep you safe and help to ensure a profitable investment. In conclusion, when you understand the basics of real estate investment, why you should invest, and how to evaluate real estate investment you will not only invest in real estate because of the money, you will also be investing because you have an in-depth understanding of how it works. Good luck and happy investing.
CAP rate (Capitalization Rate) CAP measures the relationship between the value of the property and the net operating income (NOI). Once the NOI is known, the current market cap rate can be applied to determine the likely price of the property. For instance, if the NOI of a property per year is $45,000 by 7% CAP, then $45,000 can be divided by seven and the result, in this case, will give a value of about $642, 857. Present Value (PV) PV is the Time Value of Money (TVM). It is a concept that we all understand – that a dollar
www.realproducersmag.com • 27
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