WHY INVEST IN REAL ESTATE

Instructor: Billy Epperhart

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REAL ESTATE MASTERY

EXAMPLES OF SECOND “X” INCOME (LEVEL 2)

RENT FROM REAL ESTATEPROFITS FROM A BUSINESSDIVIDENDS FROM STOCKINTEREST FROM BONDS, CD’S, ETC.ROYALTIES FROM SONGS, BOOKS, ETC.

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REAL ESTATE MASTERY

Possible Examples■ COMMISSIONS FROM INSURANCE

■ EARNINGS FROM INTERNET

■ INCOME FROM MLM

DEMAND • Everybody needs a place to live!

• You don’t have to “sell” to get

customers.

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LEVERAGE

STOCK MARKET$10,000

↓$10,000 Assets

↓$10% Return

↓$1000

Tax Rate Plays A Major Factor on

Return

“Capital Gains” Rate 15%

“Earned Income” Rate 35%

REAL ESTATE$10,000↓

Buys $100,000 Assets↓

10%

Return $10,000

Stock Market

RealEstate

$10,000 $10,000 $1,000

$10,000 $100,000 $10,000

Investment Asset Return @ 10%

CASH FLOW, INCOME

• Tenant pays for your asset

• What if I could show you how to

make $100,000 a year tax-free for the

rest of your life?

REAL ESTATE CALCULATOR

BILLYEPPERHART.COM

Instructor: Billy Epperhart

APPRECIATIONYear Property

ValueAppreciation Equity Buy

DownTotal Equity

1 $100,000 $5,000 $800 $5,8003 $300,000 $31,100 $5,200 $36,0005 $500,000 $80,300 $13,900 $94,2007 $700,000 $155,000 $27,600 $182,60010 $1,000,000 $320,800 $59,400 $379,400

APPRECIATIONYear Property

ValueAppreciation Equity Buy

DownTotal Equity

1 $300,000 $15,000 $2,400 $17,4003 $600,000 $93,300 $15.600 $108,9005 $1,500,000 $240,900 $41,700 $282,6007 $2,100,000 $465,000 $82,800 $547,80010 $3,000,000 $960,000 $178,200 $1,138,200

TAX BENEFITS

$100,000 PER YEAR TAX FREE■ ACQUIRE 30 SINGLE-FAMILY HOMES

■ TOTAL INVESTMENT $100,000 PER HOUSE

■ $300 PER HOUSE AFTER PITIM

■ DEPRECIATION COVERS THE POSITIVE CASH FLOW, MAKING

IT TAX-FREE

■ 30 TIMES $300 IS $9000 PER MONTH, OR $108,000 ANNUALLY

TAX BENEFITS• Depreciation (Phantom Loss)

• Interest and Other Costs

• No Capital Gains (1031 Exchange)

• Cash-Out Refi – No Taxes

1031 EXCHANGE RULES• LIKE KIND EXCHANGE- “all property types held for productive use

in a trade or business or for investment”• 45 DAY RULE- You must identify next property within 45 days of the

closing of previous property.• 180 DAY CLOSING- Time in which you must close on your

acquisition property from the closing of your disposition property• ESRCOW RESTRICTIONS- Escrow agent must be independent,

and no proceeds “boot” should come to you.• TRADING UP- You must trade for a property of equal or greater

value.

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CHARITABLE REMAINDER TRUSTA charitable remainder trust is a trust that provides for a specified distribution, at least

annually, to at least one non-charitable income recipient for a period specified in the trust

instrument, with the remaining interest paid to at least one charitable beneficiary.

Assume an individual, Mr. Smith, has $1 million of publicly traded stock and would like to

establish a CRUT. Assume the CRUT is set up to pay the annuity to Mr. Smith over his lifetime.

Mr. Smith selects a 10% CRUT. The CRUT will pay Mr. Smith 10% of its assets (initially

$100,000) per year until Mr. Smith dies. At that time, any balance remaining in the CRUT will

be distributed to charity. The term "unitrust" means the annuity percentage is fixed; the CRUT

will distribute 10% of the value of the CRUT's assets each year, and the CRUT's value may

increase or decrease over time. WIKIPEDIA 18

PRIMARY RESIDENCE RULES1. $500,000 Capital Gains Exemption

2. You must live in the home 2 of the last 5 years.

3. You can purchase a “second home” (Vacation

Home) during the same 5 years.

4. Receive a Capital Gain Exemption on the

“second home”

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“REAL ESTATE PROFESSIONAL” DESIGNATIONReal Estate Professional Qualification

• Material participation in each specific rental

• Material participation in separate Real Property Trade or business

• 50% rule

• 750 hours rule

• 5% ownership rule

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.

.. .... .......... ...

$10,000

0K

2K

4K

6K

8K

........

TYPES OF INCOME

.... ....Capital Gains Income/ 15% Taxes

Quit Job

1 yr 2 yr 3 yr 4 yr

.

.............

............ .... ............ .......Earned Income/

50% Taxes

.

.

......

............

5 yr

.........Tax Deferred

Income/0%

EQUITY BUILD UP

• Like A Forced Savings Account

APPRECIATIONYear Property

ValueEquity Buy Down

Equity with Down Payment of$10,000

1 $100,000 $800 $10,8003 $300,000 $5,200 $15,2005 $500,000 $13,900 $23,9007 $700,000 $27,600 $37,60010 $1,000,000 $59,400 $59,400

CONTROL• Purchase below market value for instant equity

• You can create value through rehab (Vimy 58/135)

▪ You can rent it.

▪ You can sell it.

▪ You can refi and pull cash out.

INSURANCE

• Real Estate can be insured.

OPM• Banks Can Loan You 100%

• Partners Can Put 100%

VALUE• You can buy real estate for less than it is worth!

FOCUS ON RESIDENTIAL MULTIFAMILY

UNITSInstructor: Billy Epperhart

(BONUS)

ADVANTAGES OF 2-4 UNITS1. EASY FINANCE- CAN GET A MORTGAGE LOAN2. MAXIMUM LEVERAGE- LOWER DOWN3. BETTER PRICE VALUE- ABOUT THE SAME AS A SIMILAR

SINGLE FAMILY4. RARELY 100% VACANT5. MUCH HIGHER CASH FLOW PER SQUARE FOOT6. YOU CAN RENOVATE ONE UNIT AT A TIME7. LOWER MANAGEMENT COSTS AND TIME8. FREE MONEY AT CLOSING

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TYPES OF INCOME• EARNED INCOME• PASSIVE INCOME• DEFERRED INCOME

JOB INCOMEINCOME TAXSOCIAL SECURITY TAXFEW WRITE OFFS50% IS LOST TO TAXES

EARNED INCOME(WHITE LINE)

PASSIVE INCOME(GREEN LINE)CAPITAL GAINS INCOMECAPITAL DISTRUBITION INCOME ROYALTIES INCOME(NO SOCIAL SECURITY TAXES)15%-20%

DEFERRED INCOME(GREEN OR GOLD LINE)PRIMARILY REAL ESTATEDEPRECIATION1031 EXCHANGECHARITABLE REMAINDER TRUST0% TAXES

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REAL ESTATE ROLES/JOBSREAL ESTATE AGENTCONTRACTORMORTGAGE BROKERCONSULTINGPROPERTY MANAGERMAINTENANCE AND REPAIRTITLE AND ESCROWAPPRAISERINSPECTORINSURANCEINVESTOR 35

TYPES OF BARGAIN PROPERTIES“SITUATION OF SELLER”FORECLOSURESHORT SALEDIVORCEESTATE SALEBEHIND ON PAYMENTSWANTS OUT

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REAL ESTATE STRATEGIES

BUYING AND HOLDINGBUYING AND FLIPPINGWHOLESALING

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TYPES OF REAL ESTATE-RESIDENTIAL

SINGLE FAMILY1-4 UNITSCONDOSVACATIONAPARTMENTSMOBILE HOMESLOTS

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TYPES OF REAL ESTATE- COMMERCIALSHOPPING CENTERSFARMSSTORGAGE UNITSINDUSTRIAL/WAREHOUSECONSTRUCTING NEW HOMESRAW LAND

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ALTERNATIVES

TAX LIENSJUDGEMENTS AND LIENSBUYING AND SELLING NOTESLOT RESERVATIONSCONDO RESERVATIONS

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HOW TO IDENTIFY THE BEST

MARKETS TO BUY

Instructor: Billy Epperhart

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REAL ESTATE MASTERY

Real Estate After The Bubble

WHAT CAUSED THE BUBBLE1. PERFECT STORM

TOO MUCH MONEY-ASIAN CRISISDOT COM BUBBLE

1. WALL STREET ACCOMODATED-MBS, CDO’S2. MORTGAGE LENDING NEEDED TO DEPLOY THE MONEY3. HOUSING PEAKED IN PRICE JULY 2006

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OVERVIEW OF REAL ESTATE

INVESTMENTSMODULE 1.1

REAL ESTATE PRODUCES MORE MILLLIONAIRES

“The IRS has reported that 71% of all

Americans declaring 1 million or more on

their tax returns during the past 50 years

were in real estate or related activities.”

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AMERICAS FIRST MILLIONAIRE

JOHN JACOB ASTOR

BUSINESS MAN WHO TRADED IN FURS, SILK, TEA,

AND FINE CHINA.

HE TOOK HIS PROFITS AND INVESTED IN NEW YORK

REAL ESTATE-MANHATTAN.

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Bonus

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Bonus

REAL ESTATE PRODUCES MORE MILLIONAIRES

40 MILLION- Number of investors in the stock market

1 MILLION- Number of investors in Real Estate

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Bonus

STOCK MARKET- 11 TRILLION VALUATION

RESIDENTIAL REAL ESTATE- 23 TRILLION

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Bonus

HISTORY OF HOME OWNERSHIP

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Bonus

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Bonus

HISTORY OF HOUSING PRICES

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Bonus

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VALUE IS DIFFERENT FROM PRICE

Bonus

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Charis Bible College 57

Bonus

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THEN AND NOWStonemason in Jesus’ Time:

Paid in silver – equivalent of 1 oz. of Gold per week

Stonemason in 1776:$20 per week (1 oz. of Gold)

Skilled Stonemason Today:$1,200 per week (1 oz. of Gold)

Bonus

GOLD MINERS VS HABERDASHERS“With an ounce of Gold, a man could buy a suit of clothes in the time

of Shakespeare, in Beethoven and Jefferson, in the Depression of the 1930’s,” according to an article in the May 4, 1998 issue of Forbes. “Which is particularly interesting, because the real gold price has been astoundingly stable since Shakespeare (born 1564). “

Bonus

GOLD’S PRICE CHANGESNew 1910 3 BR, 2 BA $5,000 - 200 oz. Gold

New 2010 3 BR, 2 BA $200,000 - 200 oz. Gold

Gold’s Value Does Not

Bonus

GOLD’S PRICE CHANGES

Medium Price of House in America 2017 –$254,900

$257,200 - 200 oz. Gold

Gold’s Value Does Not

Bonus

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UNDERSTANDING REAL ESTATE MARKETS • INTEREST RATES• INFLATION• FLOW OF FUNDS• CONDITION OF ECONOMY• NATIONAL DISASTER

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Charis Bible College 67

INFLATION FROM 1920Bonus

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REAL ESTATE CYCLE

DEMAND EXCEEDS SUPPLY

DEMAND EQUALS SUPPLY

DEMAND IS LESS THAN

SUPPLY

DEMAND BEGINS

TO ABSORB SUPPLY

Bonus

UNDERSTANDING REAL ESTATE MARKETS • RENTS % OF PRICE• MEDIAN PRICE VS MEDIAN INCOME• HOUSING SUPPLY • JOB GROWTH• PRICES STABLE OR SLIGHTLY INCREASING• PROPERTY TAXES OR LOW TO MEDIUM

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Bonus

CHARACTERISTICS OF THE BEST INVESTMENT MARKETS

1. PROPERTY PRICES

▪ Prices are not more than 2 to 4 times median income

Page 27

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YEAR INCOME PRICE RATIO

1950 $3,319.00 $7,354.00 2.2

1960 $5,620.00 $11,900.00 2.1

1970 $9,876.00 $17,000.00 1.7

1980 $21,023.00 $47,200.00 2.25

1990 $35,353.00 $79,100.00 2.2

2000 $50,732.00 $119,600.00 2.4

2006 $46,326.00 $246,500.00 5.3

2010 $50,221.00 $170,500.00 3.4

2015 $57,129.00 $236,300.00 4.1

MEDIAN INCOME TO MEDIAN HOUSE PRICE

CHARACTERISTICS OF THE BEST INVESTMENT MARKETS

2. RENT

▪ Monthly rents return 1-1.5% of the purchase price

HISTORY OF RENTAL INCOME

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CHARACTERISTICS OF THE BEST INVESTMENT MARKETS

3. HOUSING SUPPLY

▪ Housing supply is diminishing (Ask Realtor for the number of listings on July 1st of the last five years

and the price per square foot.)

CHARACTERISTICS OF THE BEST INVESTMENT MARKETS

4. JOB GROWTH

▪ Job growth is taking place

▪ Property taxes are low

CHARACTERISTICS OF THE BEST INVESTMENT MARKETS

5. PROPERTY TAXES

▪ Prices are still flat or slightly

increasing

BONUS

CHARACTERISTICS OF THE BEST INVESTMENT MARKETS

6. PROPERTY PRICES TRENDING UP

WEBSITES THAT HELP YOU EVALUATE PERSPECTIVE AREAS

▪ RENTS: 2016 fair market rents

▪ APPRECIATION: office of housing enterprise and oversight

▪ VALUES: realtor.com; zillow.com

▪ PROPERTY TAXES: realtor.com

Bonus

IS IT OK TO BUY NOW?

RENTS (1.0%-1.5%)

MEDIAN INCOME (3X-4X)

6 MONTHS INVENTORY

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REAL ESTATE MASTERY

MINDSETS ESSENTIAL FOR

ACHIEVING SUCCESS

MANY PEOPLE HAVE THE WRONG BELIEFS ABOUT SUCCESS 1 Corinthians 9:25-2725 And everyone who competes for the prize is temperate in all things. Now they do it to obtain a perishable crown, but we for an imperishable crown. 26 Therefore I run thus: not with uncertainty. Thus I fight: not as one who beats the air. 27 But I discipline my body and bring it into subjection, lest, when I have preached to others, I myself should become disqualified.

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FAILURE IS ONLY AN EXPERIMENT HOW TO DEAL WITH FAILURE

Learn from it

Evaluate your thinking and behavior (cause and effect)

Use experimental perseverance (keep adjusting)

Believe you can succeed

Risk again!

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OTHER PEOPLE ARE IMPORTANT TO MY SUCCESS

Realize you need other people

No man is an island to himselfThere’s no limit to what you can accomplish if you help enough people get what they want

Be first to introduce yourself to others

Develop a pleasing personality

Don’t project blame

Understand differences in people(put yourself in their shoes – empathy)

Don’t be opinionated

Work at being a good listener

Be real and sincere

Be a giver

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PAY NOW OR PAY LATER(SELF-DISCIPLINE)

WHAT DO I HAVE TO BECOME TO FULFILL MY PURPOSE?WHAT DO I NEED TO GIVE UP TO GET ALL I WANT?(DELAYED GRATIFICATION)WHAT HABITS OR CHARACTERISTICS ARE KEEPING ME FROM GETTING ALL I WANT?

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WISDOM IS ESSENTIAL

• WISDOM IS THE ABILITY TO MAJOR IN

MAJORS, NOT IN MINORS.

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ADVERSITY SERVES ME AS OPPORTUNITY

HOW TO TURN ADVERSITY INTO OPPORTUNITYWork hard on seeing the possibilities

Get better – not bitter

Be receptive to new ideas and new approaches

Ask the successful questions

Stimulate your thinking with new people, places and ideas

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MY PERSONAL DEVELOPMENT DIRECTLY AFFECTS MY LEVEL OF SUCCESS

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KEYS TO FINDING BARGAIN

PROPERTIES

Instructor: Billy Epperhart

KEY 1: KNOW WHAT YOU WANT ESTABLISH CLEARLY WHAT YOU ARE DESIRING TO ACCOMPLISH

• Replace your current Income – An Income Stream

• Increase Your Income Longterm

• Cash to Pay debts

KEY 2: PLAY THE NUMBERS GAME MUST BE WILLING TO PLAY THE NUMBERS GAME

• Look at Many Properties

• Understand that there is a Time investment

• 100 properties (using my on the ground system) for 1

offer

KEY 3: FOCUS ON RESIDENTIAL PROPERTIES PRIMARILY SINGLE FAMILY

• Lower Costs to Enter - Less

money down; easier to purchase

$100,000 house than $500,000

apartment building.

• Easier to Find/Plentiful

• Much Easier to Finance

• Easier to sell

KEY 4: LOOK FOR DISTRESSED PROPERTIES

• “Distressed” means Condition of

Property (needs cosmetic improvement)

KEY 5: DETERMINING VALUE• Total investment no more than 80% of real value

• The tax assessment is generally a good purchase point.

• Sales comparisons to like properties

• Replacement Cost

• Income Approach

KEY 6: LOOK AT THE SELLER

You make money in real estate when you buy, not when you sell.

You’ll usually know if a property is distressed in the situation of a seller by the listing price of the property.

There is a higher degree of motivation to unload the property.

KEY 7: FORECLOSURES

• The particular loan payment wasn’t paid in a

timely manner.

• The best way to buy a foreclosure is when the

lender has taken the property back.

Rent:

• Gross monthly rental income returns 1.5% on the

total investment of the property

KEY 8: IDENTIFYING YOUR FORMULA

Rent:

• Property investment $50,000 rent should be $750

• Property investment $100,000 rent should be $1500

• The Positive Cash Flow goal should be $300, no less than $150

KEY 8: IDENTIFYING YOUR FORMULA

Neighborhood:

• Focus on the low to moderate income

neighborhoods

KEY 8: IDENTIFYING YOUR FORMULA

Value:

• Value should be 20-30% more than you

have invested

KEY 8: IDENTIFYING YOUR FORMULA

• Ask them if they own investment properties and for

how long

• Do they work with any rehab contractors - looking

for good prices

KEY 9: REAL ESTATE AGENTS

• Ask them if they or another agent that they know personally manages properties.

• Explain your formula, and ask them to bring you only properties that meet it. “You make money when you buy, not when you sell.”

KEY 9: REAL ESTATE AGENTS

• Avoid “retail agents”

• Spend more time looking for an “Investor agent”

than you do for properties.

KEY 9: REAL ESTATE AGENTS

WORK HARDER IN TOUGH MARKETS

• Real Estate Agency Websites - use google.com to find

• Seller Ads in Craigslist

• For sale By Owner signs

• HUD foreclosures- there is usually one agency handling these

FOCUS ON RESIDENTIAL MULTIFAMILY

UNITSInstructor: Billy Epperhart

BONUS

ADVANTAGES OF 2 - 4 UNITS1. EASY FINANCE- CAN GET A MORTGAGE LOAN

2. MAXIMUM LEVERAGE- LOWER DOWN

3. BETTER PRICE VALUE- ABOUT THE SAME AS A SIMILAR SINGLE FAMILY

4. RARELY 100% VACANT

5. MUCH HIGHER CASH FLOW PER SQUARE FOOT

6. YOU CAN RENOVATE ONE UNIT AT A TIME

7. LOWER MANAGEMENT COSTS AND TIME

8. FREE MONEY AT CLOSING

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BONUS

• Loopnet.com- great commercial site

• Has single family as well

• Banks- Ask for their REO department

• Business Cards/Flyers/Signs- “I buy real estate”

WORK HARDER IN TOUGH MARKETS

BONUS