This page is where you can learn more about Entrust and our approach to real estate investing. It includes our criteria for a good deal, the assumptions we use to calculate return on investment, and is the home of our future blog.
BUYING A HOUSE IS EASY
Buying an investment property can seem intimidating but it doesn't have to be. Our clients range in ages from 19 to 80; many of them bought one or more investment properties before purchasing their own home. In fact, Emily and I owned three rentals before we bought our own residence (which was a triplex and gave us two more rentals). The point is this: regardless of your situation you can buy a good investment property. It helps to have money for a down payment (15-25%) and good credit, but even that is not a hard and fast rule in the investment world.
Click below to see the criteria and assumptions we use on our investment properties.
When determining if a deal fits our investment criteria, we use the following assumptions:
20-25% Down Payment
20 Year amortization (fixed for 5 years)
Interest rate of 5.25% (as of May 2020)
10% Property Management
Monthly property insurance of $70, unless specified differently
Annual maintenance of $600, although each home should specify more details. Most are renovated.
Something we consider, but which does not directly affect any of the calculations, is the potential appreciation of the local market.
We believe good investments must meet all the following metrics in the first year (at a minimum):
9%+ Cash on cash ROI
8% CAP rate
20% Cash on cash ROI plus principle pay down (only if utilizing debt)
1.2 Debt coverage ratio
If a deal does not meet all of the above criteria, we don’t believe the property is a good candidate for long-term rental investment. There are exceptions to that, but only in extenuating circumstances.
We chose these four criteria because they provide a balanced approach that cannot be easily manipulated by debt. For example, a higher loan to value would likely increase the cash on cash return, but simultaneously decreases debt coverage ratio. And since the CAP rate does not consider leverage, it is a good measure of the overall pricing. Of course, all purchases must also be at or below fair market value as well.
Cash on cash (CoC) ROI is the return of the net profit after all expenses on your initial cash investment
=net profit/cash outlay
The CAP rate is calculated as net operating income/cost of investment. Net operating income is the gross revenue minus operating expenses, but it does not consider debt service.
Principle Pay Down (PPD) is the amount the loan principle is reduced as a result of consistent payments.
Debt coverage ratio (DCR) is calculated as net operating income/principle & interest pmt.
It shows how well an investment’s revenue covers its debt obligations.
WHAT OUR CLIENTS THINK
My husband and I were both interested in entering the real estate market as investors or landlords after purchasing our first home in 2016. We both were working full time jobs in other industries and didn't know where or really how to start. We know Ben and Emily through mutual friends and knew they both had a lot of expertise in the housing industry and thought they would be able to give us a starting point. Ben was gracious enough to spend a lot of time answering my questions (some of them not even related to Ben's company) and after speaking to Ben, we realized that Entrust Investments might be the best way to "dip our toes" into the real estate market. About 6 months later I reached out to Ben again and told him we had been saving money and had a certain amount set aside to invest. About 4 months after that conversation, Ben reached out and said he found a property that would be a good fit for us. We spoke on the phone with him and he sent us a spreadsheet with three scenarios: Worst Case, Most Likely and Best Case. Each scenario laid out the purchase price, the estimated costs to update and repair and re-sale value. After thinking about the different possibilities, we decided to go for it! Ben and Emily were helpful throughout the whole process and managed the logistics for us. We ended up purchasing the property in early March and selling it in mid-June with the selling price landing in the "Best Case Scenario". Our experience with Entrust Investments was great and we are excited to work with them again in the future.
- Samantha Colyn, Denver
Ben sold me my very first investment property in Clarksville in 2016 when I was 26, and I still own it. Since then I’ve worked with him on seven real estate deals with varying investment strategies, and he has educated me along the way. I now own four rentals, that generate passive income. Whether someone is a seasoned investor looking for ripe opportunity or a first-timer like I was, and looking for the best way to enter into the world of real estate, I cannot endorse Ben and Emily enough.
- Carter Nelms, Nashville
In real estate everyone has heard it is all about “Location, Location, Location.” Well in working with another real estate professional I believe it is all about “Trust, Trust, Trust”. This what Ben, Kasey, and their team bring to the transaction. I have had the privilege of working with them on a deal that included purchasing two duplexes simultaneously. Through every phase of the deal and even post deal they exemplified trust. How, by being totally transparent, consistent clear communications, and being 100% reliable in everything said. They are also surrounded by a team of proficient real estate professionals. We have been in contact since the deal to discuss the properties, something I never experienced previously. I am looking forward to doing another deal with this team.
- Gary Slyman, Maryland