Merry Christmas! I love this time of year, and all the joy and wonder it brings with it. I'm so excited to be able to give more this season and am so thankful for all the relationships I have created with you all. As you all know I've been sending out this newsletter for a couple of months now, and I'm really trying to increase my reach of people whether local or out-of-state, so I thought I'd introduce a little friendly competition. The person who can refer the most subscribers/investors to this newsletter by the end of 2019, will win $100! All you have to do is get your fellow acquaintance to shoot an email to firstname.lastname@example.org stating their name, phone number, email, what type of investing they do or would consider doing (preferably real estate related), and who referred them. Whoever gets the most referrals by December 31st, 2019 is the winner! I'll announce the winner January 1st, 2020. Alright, so I've gotten some feedback on some topics that you guys are wanting to hear about, and I will be tackling the one most of you have asked me to cover, House Hacking! By now, I'm sure most of you have heard of the term "House Hacking", which Brandon Turner of Biggerpockets has famously coined the term for meaning, purchasing a home, living in part of it, and renting the rest out. There are four main benefits to house hacking that will absolutely change your life. 1. It either dramatically reduces or eliminates all together one of your largest expenses—your living expense. 2. You build equity for free as your tenants pay down your mortgage while the property (in many cases) appreciates. 3. You save in taxes, as you are able to deduct a portion of your house expenses as well as account for depreciation. 4. You can get into a house hack for very little down if you’re a first-time home buyer. With such little money down, it will be tough to find cash-on-cash returns higher on any other type of investment. Without a doubt, this is the best way for anyone to become financially free. You will not only no longer have a mortgage, but if you have a job, all the money that was otherwise going to be put towards the mortgage can now be put to better use! I personally love this method of beginning to enter into real estate investing. Matter of fact, I love it so much that I entered into it myself! I'll talk more about my house hack when I get into that topic, but for now I just want you all to know that I believe so heavily in this method, and that each and everyone of you can do this, that I put my money where my mouth is. There are many different ways that you can hack your living expense, but for today we'll cover six of them. 1. Traditional House Hack This type of house hack is the one that my wife and I chose to tackle. In a traditional house hack, you typically buy a 2-4 unit property, live in one unit and rent the rest of them out. We did that with a fourplex. You can even do this with an extremely low down-payment. The FHA loan is very popular for this type of house hack as it only costs 3.5% down to get into one. When we tackled this project we also went with an FHA 203K loan which incorporates your renovation loan into the home loan, and you then pay 3.5% down of the total. After everything was said and done we spent about $300,000 for the purchase and renovation of the fourplex, and came out with an ARV (After Repair Value) of about $350,000. So after only paying $18,000 to get into the deal, we now have $50,000 of equity, no living expenses, and we cashflow around $500/month! That's a cash-on-cash return of 95% in the second year, now that renovations are complete and we are at 100% occupancy. I'm telling you guys, house hacking is LIFE CHANGING! 2. Living in the Living Room and renting out the bedrooms. This is for those people who aren't afraid to sacrifice their lifestyle for creating massive cashflow. This is typically done with a single-family home. You can either create some type of wall, door, or curtain to create the living room as more of a bedroom and if you had two bedrooms in the house, you could rent both of those out and probably live for free. Some investors have told me that this way was a little cheaper then the traditional multi-family route, so that could be very enticing to some people, AND you could even AirBnB out your bedrooms if you already had them furnished and make 2-3x more than market rents! Since AirBnB is a nightly fee, you typically see a lot more profit, and you get to meet all kinds of new people, but there are some downsides as well. Constant cleaning in-between turnover of tenants and having that large capital expenditure on the front end if your bedrooms aren't fully furnished. Plus having more taxable income since your profits well exceed your expenses. 3. Renting by the Room This is similar to the other method of house hacking except you actually live in one of your bedrooms. It makes for a more comfortable use of your property, and still takes money off of your monthly mortgage and sometimes even eliminates it all together. This is also done with a single-family home, but could be done with a multi-family property and thereby really maximizes cashflow! If done with a multi-family property you would typically want this property close to say a university and create some type of row/student housing. The upsides are phenomenal like 2-3x income potential, and guaranteed tenant base within your local area. Downsides are high-turnover, you're typically renting to teenagers so, we all know what that entails, as well as higher taxable income. 4. Living in an RV/Trailer while renting out your home In this method you could have any type of property, purchase a trailer or RV and place it somewhere on your property while either renting out the home or AirBnB the house! This creates so much room for financial growth it's incredible. 5. Rent out an additional Dwelling Unit This is known as "Luxury House Hacking" which is great for already established families. You live in your home and typically buy or build another dwelling on your land. Like say a trailer, RV, In-Law suite, or what have you. Some people even build 2-4 unit detached dwellings on their property to really maximize cashflow. You just want to be sure that your property is zoned for such a thing before attempting to build on your land. 6. The Live-in Flip This is done with a single family home and doesn't generate cashflow for you like the first five do for you, but has massive upside and tax benefits if done properly. You typically buy a single family home that needs a little repair work done. While you live there you fix it up to top notch, and after the two-year timeline you sell it and pay no capital gains on the first $250K of Net proceeds or 500K if you're married! This one is a little more time consuming, but great if you want some scaleability since you'll have practically no taxes to pay, you can take all your proceeds and move them into a bigger and better property that will create even more room for appreciation or a different style of house hacking. All in all house hacking is an incredible way to create massive wealth by reducing or eliminating your living expenses. At time of writing you can pay as little as 1% down on certain loans. This REALLY maximizes cash-on-cash return and lets you get into the deal for practically nothing. The investors I talk to that have done this say cash-on-cash returns are typically 30-70% and that doesn't even include equity increase or tax savings! I highly recommend house hacking and would be more than glad to talk anybody through how any of these strategies can work for you. Investing Opportunities: This month we have come across two deals that are very enticing. We are looking at around 15-20% IRR (Internal Rate of Return) annually for our investors with a total ROI (Return on Investment) at around 130% over a 5 year period. So not necessarily a real long term play, but I do recommend that you stay liquid if you're thinking about partnering with us for these deals. I will be sending out a video at the beginning of 2020 giving more detail on how we structure our deals, what you have to do to be apart of them, what you can expect in returns, how the process works, and more. So keep your eyes peeled for that. Detailed Market Research: - A proposed change in the fee structure for customers of the Mobile Area Water and Sewer System (MAWSS) have been announced. The proposed rate hikes are expected as the system transitions from a declining block structure, where water gets less costly as the usage increases, to a more uniform structure. The changes, which will be brought to a vote of the system’s board of commissioners on Monday, Dec. 16, will result in a 3 percent increase in sewer rates in 2020, a 6.5 percent increase in 2021, a 4 percent increase in 2022 and a 4 percent increase in 2023. - A possible revival of the Mobile River Bridge project was discussed by business, political and civic leaders at a closed-door meeting last week. Discussions were very limited, but those in attendance agreed the bridge, in some capacity, was necessary for the future of the area and they wanted to see a less costly version of the project move forward, sources said. The biggest issue driving opposition to the project in the first place, was a proposed $6, one-way toll for use of the entire project, including the George Wallace Tunnel, which is decades old. The toll was designed to payback in spades a concessionaire through a 50-year contract. - Elected officials at every level celebrated early in the fourth quarter as the Trump administration — through the U.S. Trade Representative (USTR) — announced that airplane parts vital to Airbus in Mobile would be excluded from planned tariffs on $7.5 billion of products coming from the European Union. Earlier this year, the USTR had included some of those component pieces on a preliminary list of potential products that could be targeted for retaliatory tariffs against the EU as part of a 15-year dispute between Airbus and its primary competitor in the aerospace industry, Boeing. For years, Boeing has accused several European countries — namely Spain, Germany, France and the United Kingdom — of making loans and illegal subsidies to Airbus that skew international competition between the two companies and hurt the U.S. economically. Though the U.S. has been waging this trade battle on Boeing’s behalf, deep in Trump country, Airbus is responsible for more than 1,000 local jobs, and Mobile has continued to grow as a major player in the aerospace industry due in no small part to Airbus and the suppliers it has brought to the area. This is a massive win for the thousands of Alabama workers connected to Airbus Mobile. - Dr. J. Reid Cummings, director of the Center for Real Estate and Economic Development (CREED) at the University of South Alabama, recently released a report revealing how real estate across all sectors in Baldwin and Mobile counties has fared year-to-date when lined up with last year’s yardsticks. Baldwin County, Q1 to Q3, 2019 - Sales volume increased finishing 11.8 percent higher at $1.27 billion through September 2019. - Average sales value rose sharply, ending up 20.3 percent at $219,500. Median sales value (arguably the more significant metric) was also higher at $216,700. - The average sales value rose to $271,400 while the median sales value was down 3.1 percent to finish at $252,600. - Condominium unit sales were steady, registering only a slight decline to finish with 1,904 transactions. Sales volumes increased, however, rising to $687.2 million. Average and median sales values were both higher as well, ending the period at $358,200 and $287,500, respectively. - Commercial real estate activity showed its strongest gains to date, ending the period with 283 transactions on total sales volume of $232.4 million, a 17.7 percent increase. Average sales value rose slightly to close at $792,500, while the median sales value ended lower at $258,200. Mobile County, Q1 to Q3, 2019 - Average and median sales values were both higher, gaining 9.3 percent and 11.1 percent, respectively. - Total sales volume fell 9.6 percent to end at $666.2 million versus $737.1 million in the comparable 2018 timeframe. - New single-family home sales declined slightly, with 19 fewer new homes being sold in the first three quarters of the year versus the same period in 2018. - Total sales volume also declined, dropping from $55.4 million during the first three quarters of 2018 to $53.9 million in 2019. For the period, both average and median sales values were higher, up 5.6 percent and 9.7 percent, respectively. - Condominium unit sales rates dropped 19.9 percent over 2018. Sales volume for the 140 units changing hands totaled $21.3 million for the period. The average sales value finished ahead 2.5 percent at $151,200, while the median sales value fell sharply to $94,000. - Commercial real estate sales for the year have seen declines across the board. Sales volume was down 54.1 percent, finishing at $211 million for the period. Sales activity also declined, totaling 21.9 percent less than last year. - Average and median sales values were both lower, ending the period at $727,800 and $219,500, respectively. - At this point last year, following a quarter-point increase, there was the possibility of continued interest rate increases by the Federal Reserve. At that point, seven such increases had occurred in the previous three years and the Fed was expressing concern over the need to slow the economy down a bit. It acted on Dec. 19, 2018, by raising rates another quarter of a point, but at the same time, indicated rate increases were over for the foreseeable future. Alabama hits record highs in job growth, lows in unemployment! - The preliminary, seasonally adjusted unemployment rate was 2.8 percent in October, down from September’s rate of 3 percent, and well below October 2018’s rate of 3.8 percent. - More than 80,000 Alabamians are working today than last year, and 20,000 fewer people are counted as unemployed. Our economy is supporting over 2.1 million jobs, more than ever before. - Alabama has never experienced an unemployment rate in the 2 percent range. In October, manufacturing employment was at its highest level in more than a decade and record high employment was recorded in the professional and business services sector. - A new record low of 63,333 unemployed persons was counted, compared to 66,883 in September and 83,400 in October 2018, equating to an over-the-year decrease of 20,067. - Wage and salary employment increased in October by 7,900. Monthly gains were seen in the trade, transportation and utilities sector (+ 3,100), the professional and business services sector (+ 3,000) and the government sector (+ 2,600), among others. - Manufacturing employment measured 271,600, which is its highest level since November 2008, when it measured 273,600. Professional and business services employment measured 259,700, a record high. Prichard Starting in-house residential garbage pickup - Aided by a portion of a $4.1 million loan, the city of Prichard has purchased three new garbage trucks and 10,000 trash cans, as it moves to transition toward a city-run trash pickup service. - Mayor Jimmie Gardner announced on Monday, Dec. 9, that residents would begin to receive the new garbage cans soon, ahead of the new service would begin Feb. 3, 2020. The city is ending its $1.5 million contract for garbage service with Republic and moving it in house. The move will save the city $400,000 per year. The Wharf in Orange Beach is seeing accelerated expansion moving into the winter months - Sand and Kisses on the Gulf, a children’s clothing boutique, is leasing 1,470 square feet of retail space located on Wharf Parkway in Suite L103 and plans to open in early 2020. - Montgomery-based Civil Axe Throwing is leasing 3,215 square feet of indoor throwing and entertainment space on Wharf Parkway in Suite F224 and plans to open in early 2020. A groundbreaking ceremony was recently held that will bring USA Health Mobile Diagnostic Center back to the Midtown area. Per a news release, the new 10,000-square-foot, two-story building under development at 2505 Old Shell Road will bring the internal medicine providers back to the neighborhood where it began in 1982. The practice moved to West Mobile in 1987 and the new facility is anticipated to open in the summer of 2020. Entrepreneurial hub Innovation PortAL has been offering tours of its 30,000-square-foot property currently under heavy construction on 358 St. Louis St. in downtown Mobile. The mixed-use, two-story site will offer a blend of long-term business, training, co-working, incubator and retail spaces for wide and diverse array of tenants. Outdoor urban gardens, showers, white boards and lunch and lounge areas will also be woven within the architecture, which will eventually hold 200 occupants at full capacity. An opening date is slated for sometime in the spring of 2020. Locally owned coffee house Nova Espresso, located at 302 St. Anthony St. in downtown Mobile, diagonally across from the Innovation PortAL construction site, recently announced expansion plans after opening less than a year ago. Hot off the heels of the University of South Alabama’s Center for Real Estate and Economic Development (CREED) study, covering the first three quarters of 2019, the new November numbers released this week by the Baldwin County Association of Realtors (BCAR) Multiple Listing Service (MLS) show a probable fast and furious finish for the decade in residential demand. November 2019’s sales volume hit $188,559,114, an incredible increase of nearly 21 percent (20.5) when compared to 2018’s total of $156,378,311. The local market also saw a corresponding decrease in supply. Last month 534 homes were sold, while last year 592 moved, an evaporation of nearly 11 percent (10.8). Although the total number of properties sold in November dipped, homes are still on the market for fewer days — 76 for 2019 as compared to 90 in 2018. Total active residential inventory available last month was 2,964 properties. Closing: Thank you everyone for taking the time to read my newsletter during this busy holiday season. Don't forget to tell your fellow colleagues and investors pals about the newsletter so you can win that $100! I'm always looking to get some more feedback on what you guys are wanting to learn about so you can always email or call me and let me know. Merry Christmas and have an amazing New Year! We're all going to do great things in 2020!
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