Private Funding

Made Easy

"You gain strength, courage, and confidence by every experience in which you really stop to look fear in the face... The danger lies in refusing to face the fear, in not daring to come to grips with it... You must make yourself succeed every time. You must do the thing you think you cannot do."

— Eleanor Roosevelt

George Lawler -

Phone: 410.832.2040Fax: 410.339-4053Email:glawler@wtplaw.

com

Representation of clients in hundreds of private offerings. Representation of public and private companies in merger and

acquisition transactions, including representation of outer-garment manufacturer in $300 million sale.

Representation of companies in venture capital transactions. Representing emerging growth companies for private

placements, venture capital financing and initial public offerings. Representation of emerging companies in establishment of

equity-based incentive programs, including options and restricted stock.

Representation of software and hardware companies, homeland security companies, manufacturers, real estate developers, homebuilders, retailers, financial services companies, biotechnology companies, food and beverage companies, venture capital investment vehicles and private investment companies/hedge funds, broker-dealers and investment advisers.

Accomplishments

Education AV Peer Review Rated: Martindale-Hubbell Co-Chair:  Corporate and Securities Section Member:  American Bar Association Member:  Maryland State Bar Association Listed in Best Lawyers in America, 2009-present Listed in Maryland Super Lawyers, 2008 - 2010 Lecturer:  University of Baltimore School of Law Lecturer:  The Maryland Institute for Continuing Professional

Education of Lawyers Writer on Securities-Related Topics Presentation of Seminars on Securities-Related  and

Corporate Topics

University of Maryland School of Law (J.D. 1978, with honors, Order of the Coif)Top 5%

Northwestern University (M.B.A. 1973)

University of Notre Dame (B.A. 1972)

Securities Presentation For Investors

One Sanford Avenue Baltimore, Maryland 21228

Office 443.463.5909 Fax 866.859.6019

jeff@viprealestatelaw.com 

Jeffrey P. Shiller, P.A

Contract Essentials For Real Estate Investors

Don’t Get Stung!  What Every Real Estate Investor

Absolutely, Positively, Must Know Before Signing a Contract To Buy Or Sell a

Property

Don't Miss Out On These Imperative Free Tools

Before Writing Your Next Real Estate Contract

Your Hard Money Bankers Team

"7 Steps To Guaranteed Hard Money Loan Approval." 

 At Hard Money Bankers, part of our mission is help you skyrocket your real estate investing career through timely education on hard money, as well as other relevant real estate topics.

 For that reason, we have put this Report together to teach you, among other things:

How To Write A Proper Loan Application For A Hard Money Lender;

What Hard Money Lenders Consider Good Deals and Bad Deals;

How To Get The Lender To Look At YOUR Deal First; How to Make The Lender "Drool" Over Your Deal; Insider Tips On What "No-No's" Will Get Your Deal

Killed

Your FREE Report

Your Homework Was To:Your Homework Was To: Contact Brokers

Request Property Packages

Analyze the Property Packages

Continue Networking to Identify Private Investors

Continue Mailing Seller Letters to Identified Markets

Analysis of a Multi-Unit Analysis of a Multi-Unit PropertyProperty

Gross Collected Rent- the income of a business from all

sources before deducting allowable expenses

Effective Income - Gross Income less vacancy and collection allowance, plus miscellaneous income

Net Operating Income - Income after deducting all operating expenses but before deducting income taxes and interest

Debt Service - the total of annual costs in principal, interest and charges related to the mortgage

Cash flow - A measure of a company’s financial health. Equals cash receipts minus cash payments over a given period of time; or equivalently, net profit minus amounts charged off for depreciation, depletion and amortization.

Capitalization Rate – Cap Rate

In commercial real estate, cap rate, or capitalization rate, is used to determine the values of income producing properties such as apartments of five units or more, office buildings, strip malls and other such properties. The cap rate can represent extremely different things to different people in respect to their interests in commercial real estate.

How it works…..

Cap Rate

Capitalization Rate (Cap Rate) =

Net Operating Income (NOI)

Value / Sales Price / Asking Price

Cap Rate has two main components which area: Net Operating Income (NOI) and Sales Price/Value of the property.

Divide NOI by the Sales Price/Value of a property; you receive the Cap Rate.

If you have 2 of the 3 components you can determine the variable in the equation. The different equations used to determine any of the three variables are below:

1. NOI / Value = Cap Rate

2. NOI / Cap Rate = Value

3. Value X Cap Rate = NOI

As you can see, depending on the information you have regarding the property, you can determine any of the three variables.

OK!!! So What? Why Do I Need to Know the Cap Rate?

"You must pay the price if you wish to secure the blessing. " — Andrew Jackson

Safe Investment: Cap Rate of 5%

Avg. Investment: Cap Rate of 10%

Risky Investment: Cap Rate of 20%

Debt Service Coverage Ratio - DSCR

It is a ratio used by bank loan officers in determining income property loans. This ratio should ideally be a minimum of 1.25, preferably 1.35+. That would mean the property is generating enough income to pay its debt obligations.

In general, it is calculated by:

A DSCR of less than 1 would mean a negative cash

flow. A DSCR of less than 1, say .95,  would mean that there is only enough net operating income to cover 95% of annual debt payments. For example, in the context of personal finance, this would mean that the borrower would have to delve into his or her personal funds every month to keep the project afloat. Generally, lenders frown on a negative cash flow, but some allow it if the borrower has strong outside income.

Cash on Cash Return

Cash on Cash Return is probably the most important ratio you need to focus on when evaluating the performance of a property investment. Cash on Cash Return is the property's annual net cash flow divided by your net investment, expressed as a percentage.

EXAMPLE:If the net cash flow from a property is $10,000,

and the cash invested in the property is $100,000, then the Cash on Cash return is calculated to be 10% ($10,000/$100,000).  The net investment in property is the cost of the property less the amount you borrowed.

A way to view this ratio is to compare it to a return of a certificate of deposit.  You deposit money in the bank and the bank pays you an annual return, say 5%.  The 5% is the Cash on Cash ratio. 

"Do not wait; the time will never be ‘just right’ to invest in your future; financially, spiritually or physically. Start where you stand right now, today and work with every resource and tool you have been blessed with to have at your personal command. If you allow your resources to sit idle waitin’ for that perfect opportunity, it will not come and you will surely lose all the possible benefits. What you didn’t realize was the abundance of more resources and better tools that are and will be provided to you as you go along." — Napoleon Hill

Cash on Cash Return

Net Operating Income (NOI) – Debt Service (Cash Flow)

All Acquisition Costs (Including Down Payment)

I

R x V

Income (NOI)

Return on

Investment

Value (Sales

Price)

Calculating Monthly Payments

N I/Yr PV PMTNumber of Payments

Per YearInterest Per Year

Present Value / Sales Price

Payment Per Year

You Need 3 of the 4 Numbers Above

Calculating Your Payments

Calculate the number of payments per year by the number of years for the loan

Ex. 12 payments per year x 30 years = 320 Payments

Enter 320 and Press “N” on financial calculator

Enter Interest Rate and Press “I/Yr”Enter Purchase Price and Press “PV”Press “PMT”

"There are no secrets to success. It is the result of preparation, hard work, and learning from failure." — Colin Powell

Calculating Payments

1. Calculate Yearly Payment on a $850,000 Mortgage at 7% with a 20 Year Amortization?

2. Calculate the Interest Rate on Monthly Payment of $5,800 with a Value of $720,000 and a 25 Year Amortization?

3. Calculate the Sales Price of a 32 unit Apartment Building with a Monthly Payment of $8,425 at an Interest Rate of 8.5% Over a 20 Amortizati

Answers….

1.$6,590.00

2.9.9%

3.$970,819.80

Analyzing Rule of Thumb

Use Actual Figures and Expenses.. If not then the “rule of thumb” applies as an average of expenses

5-10% - Physical or Economic Vacancy

Apartments – 45-50%

Mobile Home Communities – 40-45%

Self Storage Facilities – 35-40%

Detailed Rule of Thumb

"Your chances of success in any undertaking can always be measured by your belief in yourself." — Robert Collier

Phases of AnalyzingPhase 1- “Sniff Test”If the property passes then contact

seller/broker for additional information on property.

Questions to ask, “I am interested in the property located at 123 Main Street. Is it still available? Would you please send me the property package and any info you have? “I have a Seller Questionnaire. May I send it to you?”

When you get information back then move to…

Income & Expense Statements Rent Roll Samples

Property Information Package From Seller

Income and Expense Statement

Rent Roll

Rent Roll II

Seller Questionnaire

Let’s Analyze

Your LOI has been accepted on a 92 unit property. The sales price is $2,000,000 with a 6.5% interest rate for 30 years. The seller will finance with a 20% down payment (DP). The NOI is verified with actual income and expenses of $224,000 over the past 12 months. The closing costs are $92,000. Average market value of the cost per unit is $55,000.

What is the cost per unit?

What is the cap rate?

What is the annual debt service ( mortgage payment)?

1. What is the monthly payment?2. What is the annual debt service?

What is the cost per unit? Purchase Price (PP) / Number of Units = $21,739

What is the Cap Rate? I = NOI $224,000 so R = .112 or 11.2%R x V $2,000,000

What is the Annual Debt Service (Mortgage Payment)?

Your DP is 20% so $400,000 Mortgage Amount (PV) is $1,600,000 Interest Rate is 6.5% Term is 30 years / 360 Payments

What is Monthly Payment? $10,113.10 What is Debt Service? $121,357.30

What is the Debt Service Coverage Ratio (DCSR)?

DCSR = NOI / Mortgage $224,000 = 1.8

DSCR $ 121,357.30

So far is this a property you would buy?

"Opportunity is missed by most people because it is dressed in overalls and looks like work." — Thomas A. Edison

"The men who try to do something and fail are infinitely better than those who try to do nothing and succeed." — Lloyd Jones

Phases of AnalyzingPhases of Analyzing

Phase 11- Analyze Manually “Long Hand”

Use the Rags to Riches Analyzer and Property Data

If Phase 11 Analyzing Provides Acceptable Figures to You Then It’s Time to Draft Your…

Letter of Intent ( LOI )

Letter of Intent (LOI)

Initial Site Visit Due Diligence

Checklist

Assignments for Assignments for Class 4Class 4

Contact Brokers

Request Property Packages

Analyze the Property Packages

Continue Networking to Identify Private Investors

Continue Mailing Seller Letters to Identified Markets

"Tomorrow you will be more DISAPPOINTED by the things you DIDN'T do then by the ONES you did today. So pull up your anchor, sail away from this safe HARBOR in which you sit, allow the WINDS to catch in your SAILS. TAKE ACTION. EXPLORE. DREAM. DISCOVER." — Tammy Phelps