Why savvy Bay Area real estate investors are moving their money out of the Bay Area to places like Austin, Boise, Kansas City, and Dallas

• Properties are dramatically cheaper
• Rent to purchase ratios are significantly better
• Demographic and economic trends point to steady, continued growth and excellent appreciation potential

Brought to you by:

Kevin Boer
3 Oceans Real Estate, Inc.

Christine Kani
Equitas Capital Group

Jeff Brown’s latest thinking on real estate investment
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Jeff’s seminar is titled, Move Your Money — Make More Money!

Read on to learn more…

What’s This About?

Do you own investment properties in the Bay Area? Do you find yourself wondering if there are places with better rental returns than the paltry 2% to 3% we deal with here? Are you sitting on a pile of equity? Have you been toying with the idea of selling your Bay Area investment property?

Think about this: You own an investment property in, say, Palo Alto. It’s currently worth about $1M and you’re probably getting about $25,000 per year in rent. So a $1M asset is bringing you in $25,000 per year — and that’s before expenses.

Now let’s take that $1M and see what it does for us in Austin, Texas. $1M in Austin will get you 4 — that’s right, FOUR — duplexes, with each side renting for about $1,000 to $1,200 per month. Let’s use the lower figure…that’s $2,000 per month per duplex, or about $8,000 per month for the whole set. That’s right — EIGHT THOUSAND DOLLARS — per month, or just under $100,000 per year.

That’s 4X the return your Palo Alto unit is getting you. Not badn

Generally speaking, given the choice between making $25,000 per year in rent vs. $100,000 per year with the same investment … most of us would take the latter.

Our speaker

We’re honored to have Jeff Brown of Brown and Brown Investments in San Diego join us for a seminar on investing. Jeff is a thirty-year real estate investment veteran who advises clients on creating wealth through “purposeful planning.” He’s been at this game since a guy named “Nixon” was in the White House.

Jeff keeps a close eye on the real estate investment market across the whole country and advises clients, depending on what life stage they’re in, where and how to invest. He always takes the long-term, complete picture point of view. When it’s the right time to make a move, he puts together the right team of specialists — brokers, 1031 exchange experts, top-notch mortgage folks, tax advisors — to execute the deal in as tax-effective a way as possible.

You can read more about Jeff and his investment philosophy at his web site and on his blog. Warning: Read through his content only if you’re interested in making a dramatic improvement in your real estate investing. If you’re content with where you are — say, 2.5% cash-on-cash returns in Palo Alto or Cupertino — then don’t waste your time. Jeff is all about helping people do much much better in real estate.

The numbers

You’re smart. You’re a skeptic. That’s good! You shouldn’t just believe anything put in front of you. Do those examples above look too good to be true? For Bay Area investors used to low rent-to-value ratios, it’s hard to believe there are places where $1M in real estate gives you $100K per year in rent.

That doesn’t make it false. It just makes it more appealing — once you believe the numbers.

Let’s kick the tires on those numbers a bit and see where they come from…you’ll be surprised to see that for many Bay Area investors, we’re actually significantly under-estimating how much better you could do.

The following examples are deliberately over-simplified to drive home our main point. For the moment, we’re ignoring some very important things like interest expense, property taxes, maintenance expenses, property management fees, depreciation, tax breaks, and so forth. After these simpler examples, we’ll look at some more complicated, real-world ones.

All right. Here’s a listing currently on the market in [DALLAS/AUSTIN/ETC.]. It’s a duplex…[DESCRIPTION] and it’s listed at [PRICE.] Experience says we could probably get it for [PRICE.]

Now, here’s a snapshot of a current similar rental… [DESCRIPTION]

Here’s how the numbers work…

But wait, there’s more!

Many Bay Area investors have a lot of equity trapped in their properties. Let’s say you bought a home in Palo Alto seven years ago for $500,000, put $100,000 down, and borrowed $400,000. That same home is now worth, say, $1,000,000. To make the numbers easier to crunch, let’s say you’ve only been paying off the interest on the loan, so you still owe $400,000.

That means you have $600,000 ($1M value less $400,000 loan) of equity trapped in your investment property. Watch the magic as we unleash that equity…

First scenario: Sell the property for $1M (and by the way, despite what the media says, $1M properties are still selling quickly — VERY QUICKLY — in Palo Alto. After paying Realtor and transaction fees, let’s say you’re left with $930,000. After you pay off your $400,000 loan, you’re left with $530,000.

Now let’s say you decide to sock away $130,000 and invest the remaining $400,000. Depending on your exact situation, Jeff would most likely recommend a diversification strategy in which you put your money into several types of properties in different geographies. Let’s simplify it and say you decide to put all of it into Austin duplexes.

Some folks are comfortable putting only 10% down; let’s assume you’re more conservative and want to put down 20%. That means you can buy duplexes worth $2M (20% of $2M = $400,000). At $250K each, that’s 8 – COUNT ‘EM! EIGHT! — duplexes.

Eight duplexes? Now that’s some tasty revenue! With each half-duplex conservatively renting for $1000, that gives us $16,000 in monthly revenue, which translates to … ARE YOU SITTING DOWN? — $192,000 per year in rental revenue.

Neat little trick, eh? We take a property that’s generating a measly $25,000 per year in rent, and we spin that equity into a cash cow of nearly $200K per year. That’s an eight-fold increase — a testament to both the ridiculous disparity between rental ratios in Palo Alto vs. Austin, as well as to the power of leverage.

And yes, you could get even more cash out of the property if you wanted. If you were comfortable putting down only 10%, you could get double the number of duplexes`and increase your gross rental income to nearly $400,000 per year — a sixteen-fold increase.

Second scenario: Now let’s say you own in Cupertino. Just as in the past example, the property’s worth $1M and generates about $25,000 per year in rent. Again, you still owe $400K. You feel like keeping the Cupertino property for now but decide to refinance to pull out some of that equity.

You pull out $200,000 in equity, leaving you with a still very-comfortable 40% equity position in your Cupertino property.

Now, what can we do with that $200,000? With a 20% down payment, you can buy $1M worth of duplexes, or 4 of them. At $1,000 per side per month, that gives us $8,000 per month, or just under $100,000 per year.

Add that to the $25,000 rent your Cupertino property is still generating and you have gross rental income of $125,000 — a five-fold increase of where you are currently.

More on the numbers…

Ok, you’re right that we’ve oversimplified the numbers. Let’s get down and dirty and detailed…

Your objections

The only objection we’re willing to let you get away with is the one that says, “I’m content with where I am in my investing.” We can’t argue with you on that, though we might be a bit skeptical. But if that’s the case, hey…best of luck!

Saturday, March 1st
10am to Noon
and
2pm to 4pmClockTower Conference Center
205 East Middlefield Road
Mountain View, CA 94043Registration

• Email seminar@
• Phone
• Online