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Return on Investment – ROI

Return on investment

In this article, we’ll review Return on Investment (ROI) and how financial returns are analyzed when investing in real estate.

ROI can be a confusing term for many real estate investors and those interested in investing in income producing property, otherwise commonly referred to as commercial real estate investment. What is a commercial real estate investment? It’s financial investment in those properties generally providing monthly income from ownership in multi-residential apartments, office buildings, industrial use, property, warehouse, strip retail centers or free standing retail. These properties generate monthly income that is used by the owner to pay down debt (mortgages) and all other monthly expenses such as property taxes and insurance and when done right, cash flow. The investment provides cash flow, principal pay down, and tax benefits for the investor.

The ROI is generally viewed as the annual or longer period financial benefit “return” provided from the investment in relation to the down payment and other costs needed to purchase the property. One should also consider the time involved to manage the asset. To determine ROI for any real estate investment, some facts and assumptions or “weighted” concerns, are made by the investor. For instance: what is a competitive (reasonably expected) gross annual income from the property, how much vacancy will the property experience annually, what will it cost to own the property, how will tax laws effect my investment and what type of appreciation may I expect given the timing and location of the investment?

To drill down further, it’s important to note the weighted concerns change based on timing, location and type of investment to name a few. For example: depending on the location and type of investment, a differing emphasis will be applied to the ROI formula appreciation expectations. For example, in an area like San Jose, CA an investor will heavily weight the ROI expectation with investment appreciation, but in rural America, annual cash flow from the investment will be more heavily weighted to determine ROI. The reason for this difference is simple, In San Jose, not many buildings (no land for new construction) can be added to the region…this forces those requiring a commercial facility to pay more to the existing property investor/landlord, driving property value higher. In Rural America, annual cash flow is more important because once property demand outstrips supply, generally, commercial property can be added to the region since land is available for new construction. However, new construction is not warranted until rents and ROI’s exceed costs associated with new construction. Cash flow is more important since new construction is available as an option going forward.

Return on investment


WRITER:Uncle Real Estate is a real estate broker in California. He is a real estate investor in California since 1989.

The #1 way to succeed in real estate sales

This # 1 goal must be achieved to succeed in real estate sales.

What is your guess?

When a client calls you or you call a client, what is your #1 goal with that call? The answer may seem obvious to many and others probably have so many ideas in their head for what # 1 could be.

The #1 way to succeed in real estate sales

It’s a very simple answer. The #1 goal of the real estate agent must be to understand what your client wants. To succeed in real estate agency an agent must understand what their client wants. If you don’t take the time to understand what your client wants, you have mostly luck on your side (good and bad). If you don’t want to leave things to chance, you must ask a lot of questions first and foremost. One way to understand what your client wants is to ask the simple question; “Mr and Mrs Client, what would you like to change in your life as it pertains to (whatever your service or product is here?)” If you are a real estate professional, asking the client gentle, caring questions about what is their real estate goals and dreams. When reflecting on the answers, you want to ensure the client is considering the good and the bad of the opportunity for which they are inquiring or you are introducing. Ask follow up questions to build trust; “Why would this home be a good fit for your family”? What resolve will occur in your life by owing this home vs the living situation you’re currently in? Break the answers down. Is the client response quantifiable? Is it an emotional solution they’re seeking? Is this home the home that will facilitate what the client wants? If the answer is no, probably not, or the client is unsure about their decision, more time needs to spent on the investigation of the clients wants.

I often try to talk a client out of a purchase (play devils advocate) simply to confirm they strongly believe this home/property is the answer for them.

The #1 way to succeed in real estate sales is determining what your client wants.

Uncle Real Estate

If you take the time to determine what your client wants, and why they want it, you will be successful in your sales career.

WRITER:Uncle Real Estate is a real estate broker in California. He has been a real estate investor in California since 1992.

Get to know your real estate clients

Do you ever wonder what your real estate clients want you to do as their Agent?

Studies have shown, real estate clients want you to KNOW and UNDERSTAND them.

It’s important for any agent to take a genuine interest in a client’s real estate goals and objectives. It’s equally important to understand the “style” of business that will work best for them, to help them with making tough decisions. As a top performing real estate agent you want to provide your client with the support and guidance they need. You must understand them as a real person. To understand any person, it helps to understand a bit of psychology and human behavior. During the hustle of a hot selling season, agents can forget, the real estate business is a “People Business” first. Real estate itself has little relevance if it’s not important to the client. The transaction documentation has little relevance if it does not suit the buyer or seller.

How do we begin a new relationship? We take the time to understand the people we want to know and support. We can’t be an effective agent if we don’t understand the different types of people we work with.

Let’s summarize the four Basic personality types we will be working with.

1. Ego Expressive

Wants to “look” good and reflects emotions openly.

2. Driving Domineering

Needs to be in control, be right, and accomplish things.

3. Complacent-Amiable

Feels the need to be comfortable and to get along easily.

4. Stable-Analytic

Doesn’t like change, slow to make decisions, respects laws and limitations, needs an abundance of information, data points and detail to make a decision.

Ego Expressive

If a client is Ego Expressive, you will generally want to be focused on real estate that is pride of ownership or potentially upgraded to pride of ownership… and in the best locations. This buyer is prideful and wants the real estate to be a prideful asset. Curb appeal is important. Once documentation begins, this client will want crystal clear contracts and any mistake such as a typos or incomplete documents will disappoint the client.

An agent’s promptness and outward appearance is important to an Ego Expressive. You can generally expect open communication with an Ego Expressive and a good team member throughout the transaction process.

Driving-Domineering

The Driving Domineering (DD) client will not focus as much on pride of ownership. Things will need to be done the way they want and it’s best for them to identify the more subtle characteristics of the real estate without the agent pointing out every detail.

Be ready for the toughest questions. Don’t expect empathy if things become challenging. A DD is used to finding the “good” in something without being guided too much. An agent is largely in a support role with this client. Take the time to protect this client from mistakes and making sure they are looking at the project from all angles.

In real estate, we use a term, “control” to discuss the level of influence an agent has with a client. When it comes to a DD client, an agent can expect to have little control. Sometimes this type of client will want to move too quickly since they want to get things done and accomplished. “Time is a wasting” is a motto you will hear from DD. However, it’s critical to be the professional. Control the pace of the transaction the best you can so that your client stays in the best position during the negotiation.

Complacent Amiable

“Wants to be comfortable and get along”. Complacent Amiable is genuinely concerned for the agent. This type of client will want to know your commission is enough for your effort. You can expect they will also be concerned about the other side of the transaction (seller or buyer). They will want to know the buyer or seller is getting a “fair” deal.

The more complacent amiable clients you have, generally the easier your real estate transactions will be.

Stable Analytic

The Stable Analytic wants facts, and data points to establish their position. You will do the most research for this type of client. They do not work from their gut. They will analyze each feature and do their best to connect features to value.
Wear your eye glasses more often with this client.

Every client is different. It’s important to take the time to understand what type of client you are working with and the best way to serve their needs. Always be concerned about the facts, and the accuracy of all information provided. As always, look out for the client’s needs. When asked to produce information, challenge yourself to compile the data and provide it legibly. You will earn the respect of all types of clients and keep them for life.

WRITER:Uncle Real Estate is a real estate broker in California. He has been a real estate investor in California since 1992.

Real Estate Agents wear many “hats”

So you want to be a real estate agent.

Have you ever wondered what it’s like to earn “commission only” in your job?  Do you desire to be in charge of your daily schedule and also how much income you earn?  The Real Estate profession might be just the right profession for you. To get started in real estate sales, and as part of a plan for success, you will want to understand what the role of the real estate agent is.  Let’s see if you’re surprised once we complete the review of the many hats a real estate agent wears.

  1. A licensed Fiduciary
  2. An Orchestrator
  3. A Motivator
  4. A Problem Solver
  5. A Detective
  6. A negotiator

A Licensed Fiduciary

  1. Protect the interests of the Buyer and the Seller
  2. Trustee of Funds
  3. Exercise due diligence
  4. Sales agent vs Brokers License

An Orchestrator

As an orchestrator,  a real estate agent is required to coordinate the efforts of all parties involved in a transaction to a successful close. You will orchestrate the following:

  1. Attorneys
  2. Accountants
  3. Lenders
  4. Escrow Officers
  5. Contractors
  6. Other Agents
  7. Buyer and Seller

A Motivator

  1. Embrace the tension and stress through your dissatisfaction with the present
  2. Use the property features to sell the benefits of ownership when they are consistent with the clients objectives
  3. Utilize the urgency of time
  4. Bring people to a point of decision

A Problem Solver

  1. Be able to identify and isolate any problems from symptoms
  2. Creatively identify all options  for solving a problem
  3. Support Parties to select the best option for them
  4. Confirm the solution or options selected
  5. Get the solution implemented into the contract

A Negotiator

  1. ISOLATE areas of agreement from areas of disagreement
  2. REDUCE are of disagreement to smallest common denominator
  3. Probe for areas of compromise among parties
  4. Overcome Objections through inquiry
  5. Guide Parties to Agreement

A Detective

  1. Understand the personalities
  2. Understand the motivations
  3. Understand all of the options
  4. Understand the Quality or lack of Quality
  5. Lead with Kindness

When you understand and embrace each of the roles described, you are well on your way to a six figure income in an age old profession.

WRITER: Uncle Real Estate is a real estate broker in California. He has been a real estate investor in California since 1992.

How to be positioned to buy your first income property

Uncle Real Estate is happy to help

Have you ever wondered how to obtain your first ever income property?

Would you like to review some first time income property buying strategies that work?

Hint: The actions required to buy your first income property are very similar to how you will purchase your second, third and fourth income property. So let’s focus our attention on the most important purchase ever…your first income property purchase. We will begin by deciding what type of property you want to buy. Your positioning will be adjusted based on the desired property type you are searching for. What type of property would you like to own? I’ve been fortunate to have purchased income property by both stumbling into position and by dogged determination. The odds of success increase substantially if you use the dogged determination strategy.

Common Types of Income Property

1. Rental Home

2. Apartment building 2-4 units

3. Apartment building more than 5 units

4. Heavy or Light Industrial use buildings/property

5. Retail strip centers, anchored shopping centers

6. Office buildings

7. Storage facilities

8. Single, unit, free standing commercial

As a first time income property buyer, you will need to be “in position” to succeed with your real estate investment purchase. Do you realize that means YOU must be looking for the property every day even hourly at times, and at the very moment you locate the right property, you must pounce before losing out to someone else. It’s critical for you know and understand value so that you can move quickly with confidence. Remember, it’s easy to be in position to buy something that is not a quality income property because no one else wants it. However, to be in position to purchase a well-priced, well-located, desirable income property is challenging because there is a lot of competition in the world for the same type of property. With Employee Pensions disappearing for workers and 401 K’s getting punished every so many years by Wall Street money types and various emotional economic forces, individuals are trying to build retirement through income property. The challenge to create a quality retirement has made the income property playing field very competitive.

What does being “in position” mean?

Being “in position” is different for everyone, but there are some similar characteristics and a way to optimize your position. That’s right, every first time buyer can maximize his or her own position for the ultimate opportunity to buy. You want to be as ready as possible to impress the seller with an offer in a timely manner. Each real estate investor is unique in their preparation to purchase a property. For one buyer, being in position to buy is having a lender pre-qualification letter in hand and a real estate agent looking for the property on their behalf, for another buyer, being in position is having all cash on hand and doing much of the ground work themselves.

What are the Characteristics of being in position to buy??

1. Identify the type of property you wish to own.

2. Limit your search area to three locations within one hour of you if possible. (the closer the better)

3. Have a relationship with a loan agent/lending institution where your loan application documents have been submitted for loan approval.

4. Create a relationship with a quality real estate agent in each location you are searching.

5. Be placed on a “search criteria” email list with each agent working for you.

6. Understand the numbers and locations you’ve identified better than the competition.

7. Be mentally prepared to say “yes” to writing an offer if the right property hits the market.

8. Be aware of professionals that will help you determine the condition of the improvements.

9. Understand what is required by local county, or cities to review existing property files on record.

10. Become familiar with city and county staff operating planning and building departments.

WRITER: Uncle Real Estate is a real estate broker in California. He has been a real estate investor in California since 1992.