Investment Objectives
Investment Objectives
A Word with Scott Rosenberg, Managing Director of RE/MAX Results Commercial | RCRE. Found online at www.rcre.co
By: Karen S. Kahen
I recently sat down with Scott Rosenberg to discuss the benefits of “investment objectives.”
1. What are some investment objectives?
Investors buy for a multitude of reasons. Some of these include protecting their equity, growing that equity, creating a yield and cash flow, sheltering income and creating tax breaks. Real estate is unique from most stocks, as it allows the potential to create wealth, yield equity and shelter revenue.
2. What is equity growth?
Equity growth is the increase in the principle (or cash) that you have invested.
3. How does an investor know how much money he/she can earn from an investment property?
One can never know 100% what he/she will earn over a period of time. From a projection standpoint, one needs to know what his/her cash flow will be, and what the projected growth in rent will be over years. With this information, you can project equity based on increase of rents over time.
4. How do investors acquire costly properties, spend significant amounts of money on upgrades while still making a profit at the end of the day?
Value investors add worth to properties that we would consider to be under managed. They make money in this by purchasing property in need of some repair, which has rents below market value. They then invest capital into improving the property, thereby yielding greater rents. How they end up making more money is through the increased cash flow. Thus, not only has the desirability of the property gone up, but the overall quality and rents that can be charged have increased, too. All of this can be applied in determining the value of the property, which increases the owners’ total equity. After the investors have added that value and are reaping the better cash flow, they have three options: Firstly, they can sell it for a 1031 exchange and try to repeat process again in growing equity and increasing value of property. Secondly, they can hold the property and collect the better rents. Thirdly, given a little bit of time, they can refinance the property, and pull out some of the cash they invested towards improving the property. Because of the better rents, they are able to take out a larger loan. They can take the equity in the form of cash out from their refinance, and then reapply dollars to another investment and repeat the process again.
5. What is some advice you have for future investors?
Start! First, select a location that you are interested in and have accessibility to. The most successful investors that I have worked with have made the greatest profits in their backyards. They have not sought out geographic locations too far from where they live. Secondly, get acquainted with that market and learn the basics of what investing into a property is, as well as get to know some of the brokers that are in that area. The third step is to start. Almost all of my investors’ investments’ have worked out very well for them, and most of them did the exact same thing. Very few of them did anything terribly unique or different. The important thing was that they got involved and they started.
Scott Rosenberg is the Managing Director of RE/MAX Results Commercial | RCRE, a commercial brokerage on the Westside which focuses on multi-family investment properties. For additional information please email to admin@rcre.co.
