ACQUIRE CASHFLOW PROPERTIES WITH REDUCED EQUITY COMMITMENT

The Strategic Master Plan for Building a Cashflow-Generating Real Estate Portfolio with Efficient Capital Deployment

Paul Kappel

TABLE OF CONTENTS

PART I – THE PRINCIPLE OF CAPITAL-EFFICIENT REAL ESTATE ACQUISITION

Chapter 1 – Why the amount of equity does not determine wealth

1.1 Equity vs. Wealth Building
1.2 The Difference Between Capital Ownership and Capital Control
1.3 Why Real Estate Can Be Acquired with Debt Capital
1.4 The Leverage Effect
1.5 Cashflow Instead of Pure Appreciation
1.6 Return on Capital vs. Property Yield
1.7 The Strategic Use of Debt Capital

Chapter 2 – The Cashflow Real Estate Principle

2.1 Purchase Price
2.2 Equity
2.3 Debt Capital
2.4 Rental Income
2.5 Operating Costs
2.6 Financing Costs
2.7 Amortization
2.8 Cashflow
2.9 Return on Equity
2.10 Wealth Growth

Chapter 3 – The Capital Efficiency Framework

3.1 Equity Commitment
3.2 Capital Turnover
3.3 Cash-on-Cash Return
3.4 Return on Equity
3.5 Debt Service Coverage Ratio
3.6 Loan-to-Value
3.7 Safety Margin
3.8 Capital Productivity

PART II – FINDING THE RIGHT PROPERTY

Chapter 4 – What makes a true cashflow property

4.1 Gross Rental Yield
4.2 Net Rental Yield
4.3 Rent Multiplier
4.4 Cashflow Before Financing
4.5 Cashflow After Financing
4.6 Appreciation Potential
4.7 Maintenance
4.8 Vacancy Risk
4.9 Location Quality

Chapter 5 – The Perfect Property for a Reduced Equity Commitment

5.1 Small Apartments
5.2 Multi-family Homes
5.3 Mixed-use Buildings
5.4 Commercial Properties
5.5 Student Apartments
5.6 Micro-apartments
5.7 Holiday Properties
5.8 Serviced Apartments
5.9 Special Properties

Chapter 6 – Location Analysis

6.1 Population Development
6.2 Employment
6.3 Rent Development
6.4 Purchase Price Development
6.5 Rental Yield
6.6 Infrastructure
6.7 Universities
6.8 Employers
6.9 Transport Links
6.10 Future Prospects

PART III – ANALYZING REAL ESTATE DEALS

Chapter 7 – Comprehensive Real Estate Due Diligence

7.1 Purchase Price
7.2 Land
7.3 Building
7.4 Lease Agreements
7.5 Tenant List
7.6 Operating Costs
7.7 Maintenance
7.8 Renovation Needs
7.9 Energy
7.10 Legal Documents

Chapter 8 – Calculating the True Return

8.1 Gross Return
8.2 Net Return
8.3 Cashflow Return
8.4 Return on Equity
8.5 Return on Total Capital
8.6 Internal Rate of Return
8.7 Total Return
8.8 Sensitivity Analysis

Chapter 9 – The Deal Scoring System

9.1 Location
9.2 Purchase Price
9.3 Rental Yield
9.4 Financing
9.5 Cashflow
9.6 Appreciation
9.7 Risk
9.8 Liquidity
9.9 Exit Opportunities
9.10 Overall Score

PART IV – REDUCING EQUITY

Chapter 10 – The Various Sources of Equity

10.1 Personal Equity
10.2 Debt Capital
10.3 Shareholder Loans
10.4 Private Investors
10.5 Joint Ventures
10.6 Seller Financing
10.7 Mezzanine Capital
10.8 Subordinated Debt
10.9 Equity Capital

Chapter 11 – Understanding 100% and 110% Financing

11.1 What Does 100% Financing Mean?
11.2 What Does 110% Financing Mean?
11.3 Purchase Price Financing
11.4 Financing of Acquisition Costs
11.5 Bank Requirements
11.6 Creditworthiness
11.7 Loan-to-Value
11.8 Risk of Full Financing

Chapter 12 – Strategic Consideration of Acquisition Costs

12.1 Real Estate Transfer Tax
12.2 Notary Fees
12.3 Land Registry Fees
12.4 Broker Fees
12.5 Financing Ancillary Costs
12.6 Reserves
12.7 How Ancillary Costs Are Incorporated into Capital Planning

PART V – FINANCING STRATEGIES

Chapter 13 – Bank Financing

13.1 How Banks Evaluate Real Estate
13.2 Loan-to-Value
13.3 Loan-to-Value Limit
13.4 Debt Service Capacity
13.5 Household Calculation
13.6 Property Cashflow
13.7 Interest Rate Fixation
13.8 Amortization

Chapter 14 – The Optimal Financing Structure