By investor on September 4, 2009
The Risks of Buying Foreclosed Properties
With real estate prices at an all time high, foreclosed properties aren’t the hot commodity they were once considered. While you can occasionally find a great deal in a foreclosure you aren’t looking at significant savings over the appraised value anymore, for the most part. You are also looking at homes that are generally in some state of disrepair (it’s fairly safe to assume this since the owner most likely didn’t have the funds to make the house not much less maintain the home) and will require a different kind of investment after the sale.
However, if you’ve found a home that you absolutely love for whatever reason (the house itself, the school district, or the community) that is a foreclosure it is still possible to get a little more house for your buying dollar. Just don’t have expectations of paying pennies on the dollar as that rarely happens no matter what you read.
If you chose to buy a foreclosed HUD home, be aware that they are priced within the fair market value for the area minus the cost of repairs that may be needed. You most likely will not be getting a serious bargain on these unless you are in a position to do the repairs for yourself or know someone who is willing to do them for you cheaply (you will save more money in labor than you will save on the home). Keep in mind that HUD homes are sold by a bidding process and if you want to have an inspection you should do that before you bid on a HUD home.
There are several books available on buying foreclosed housing, each one offers a different method for doing so and no one method seems to stand out as any more valid than any other method. In all honesty though, the current demand for housing isn’t conducive to a buyers market. If you don’t want the home for the asking price, chances are (as I just discovered the hard way) there is probably someone else who does. And banks have no remorse over selling your dream home right out from under you, particularly if they are unimpressed by your offerings. At the same time, submitting a low offer for a foreclosed home that has been on the market for a little while may be the way to go. A bank makes no money if the house is sitting empty and it is in their best interest to sell and to sell quickly. If no one is biting at their price, they may have to lower their asking price or risk another month where the property is generating no income.
Keep in mind that foreclosed properties are generally sold ‘as is’ which means that the selling institution makes no guarantees and offers no repairs. Buying a foreclosed home is a risky procedure and should not be done lightly. You should expect a serious investment of time and energy into bringing a foreclosed home back to its former glory. Many of these in addition to facing neglect before foreclosure have been sitting empty for quite some time while waiting for actual ownership to divert to the bank and for the house to become saleable.
I guess it sounds as though I’m trying to talk you out of buying a foreclosed home and that isn’t the case at all. I do however, urge extreme caution in the buying process, particularly if you’ve never done this before. It can be a rewarding experience where you get a lot more house than you could afford otherwise (particularly if you can do the work that is needed for yourself) and it can also be an extremely rewarding process. Just remember to exercise great caution in the buying and bidding process so that you aren’t the one left hanging when all is said and done.
Posted in Foreclosures | Tagged buying foreclosed housing, buying foreclosed properties, Foreclosures, hud, make money foreclosure
By investor on September 4, 2009
Commercial Real Estate is the Real Golden Egg
Commercial real estate agents are quite often the highest paid agents in the industry. It just makes sense that this would be so. Commercial real estate carries much higher price tags than residential real estate, not to mention, that there are options available other than the actual sale of a property to procure income in the field of commercial realty. One such field would be lease procurement. A long-term lease can pay off for the realtor at a much higher rate than a one-time commission on a large sell.
A residential real estate agent would have to work three times as hard, if not significantly more, in order to bring home the same pay as a residential agent. Commercial real estate agents also rarely have to put in the long night and weekend hours that most residential real estate agents have to put in almost weekly.
Commercial agents get to work more typical 9-5 hours and still make the bigger bucks, yet there are far more residential agents than commercial agents in the market place. One reason for this is because commercial real estate agencies tend to want to hire only experienced commercial real estate agents rather than going to the trouble to train new and/or a crossover agent from residential real estate.
Commercial real estate is probably the most lucrative of real estate fields but getting started can be quite difficult. It’s hard to convince someone that you are the best person to sell his or her property, especially when it’s a high dollar deal, when you have no experience to back up your claim. The truth is that commercial real estate is much easier than residential to sell because you aren’t dealing with the emotional attachments and expectations that you have to deal with in residential real estate. Commercial real estate offerings and needs are usually very cut and dried. Location may be an issue, but the color of paint or landscaping is not usually going to be deal breakers in commercial real estate. It meets the dimensions and specified requirements; it will usually result in a sale.
The best advice I can give anyone considering a field in commercial real estate is to go for it. You may have to earn your stripes by taking an unattractive ‘apprenticeship’ where you help close the deal for someone else and get a pittance for your efforts for a couple of years, but once you’ve closed a few deals and learned the ropes, the sky is literally the limit with commercial real estate. You are looking at massive growth and income potential that would be difficult at best, but quite nearly impossible to achieve in residential real estate.
Posted in Commercial | Tagged commercial property, commercial real estate, commercial real estate agent, commercial real estate investing, high dollar real estate deals, real estate
By investor on September 4, 2009
Finding Investors for your Real Estate Venture
Many Americans dream of investing in real estate, the sad fact is that most of those of us who dream about it, do not have an exciting amount of disposable income in which to make these deals that will net the high profits and most consider either a mortgage (which will entail interest payments over a period of time and require that we are able to get the necessary financing—not everyone is) or finding an investor who is willing to front the money, but doesn’t want the sweat equity and leg work that may be what your strength is. Of course, you are probably sitting there thinking, yeah like they grow on trees.
The thing is you would probably be surprised at some of the unlikely places you can find someone who is willing to invest their money in a real estate deal but do not want to invest their labor or do not have a lot of time to invest. Busy professionals may want to make the investment to supplement their retirement plans or simply to diversify from the stock market, it seems that real estate has become a much more stable place to invest these days.
Have brochures, flyers, and business cards printed. Post them wherever you are allowed and hand business cards to everyone. Seriously. Offer a modest finder’s fee to those who provide solid leads. Check your paper for investors who are looking for someone like you. Chances are, if you have the need for an investor, there is an investor out there who has a need for someone like you. Try placing your own ad. In fact, branch out for placing and sorting through ads, your local market may not be as ideal as one that is half an hour away.
Remember those business cards, hand them out to every parent you run across at the PTA meetings, soccer practice, choir rehearsals, you name it. Even put your kids to work for you. Chances are that your card will eventually find its way into the right hand and perhaps a beautiful partnership is formed. Also keep in mind that if you work it wisely you may only have need of an investor on the first few deals, after that you can do your own investing.
Also check into any local organizations for investors. Not all investors are involved in real estate transactions currently and not all want to be limited to one partnership, the more money on the table the greater potential return. Also important to remember is the old saying about a bird in the hand. Never, ever, alienate investors.
You may have need of them again someday or they may have need of someone like yourself. You want to maintain a good relationship for as long as possible. It is also wise to remember this because this world does happen to be a small one. Even in the area of real estate investment, word gets around quickly. This is a business and you must treat it as such if you ever hope to make it lucrative.
It is also wise to remember that no business is worth sucking the life out of you. If you find this is not your thing, move on. One deal doesn’t marry you to the business nor does it make you a guru. Investing in real estate or partnering with other investors can be an extremely delicate negotiation process, not everyone is cut out for it. I do wish you the best of luck in your endeavor and hope that you have gleaned some useful knowledge by reading this.
Posted in Investment Property | Tagged borrow money for real estate deal, getting financing for investment property, investors, real estate, real estate investor
By investor on September 4, 2009
The Fatal Flaw in Flipping Houses
The idea of flipping houses has become a phenomenon in this country. It’s quite astonishing how many would be handymen and women have secret dreams of getting their hands dirty playing with power tools and turning the most rundown house in any given neighborhood and turning it into the diamond they feel it could be. Unfortunately many of these would be ‘flippers’ have no real clue of the task they are considering.
First of all, it is quite possible to make a very good amount of money by rehabbing properties with the intention of selling quickly. The problem with this is that most people who attempt this make one of two fatal mistakes (fatal for the maximum profit potential that they are tossing out the window).
The first fatal mistake they make is that they become emotionally invested in the home they are rehabbing and rather than doing a few simple cosmetic changes and turning the property quickly, the end up doing major renovations, investing a lot of time and money (when flipping properties, time is money, the longer you are working on the home, the more mortgage payments you have to make, the less money you walk away from the close with).
You have to remember that the property you are flipping is an investment and you want to get in, do the work, and sell the house. You don’t have to turn it into a luxury home or even a home that you would want to live in. In fact, you wouldn’t want to do that in certain neighborhoods because you would never recover your investment.
The second thing you must remember when flipping properties is don’t get greedy. Just because you think you could make more money if you added the granite countertops doesn’t mean you can. I’m not suggesting you take shortcuts or do anything that is structurally unsound, but I think you will be amazed at how much less it would cost to resurface an existing bathtub than to replace it.
Want to change the look of a room dramatically without investing a great deal of money? Grab a paintbrush. Changing the color of a room can have a dramatic effect on the overall look of a room. Rather than buying new cabinets for the kitchen and bath, try cleaning the original cabinets and adding new cabinet facings–these are little things that can make a profound difference in the market price of a house. For curb appeal hang ferns on the front porch (if it has one or invest in a little landscaping—just don’t go overboard). Don’t decide that you need 30,000 for a month’s work rather than the 12,000 you were originally hoping for and spend 25,000 to make the 30,000. It becomes a catch 22 when greed kicks in. So don’t get greedy.
Flipping houses is by far one of the quickest ways to amass a serious profit in real estate investing, especially if you can do the work yourself. Just remember to set a budget from the beginning and stick to it. Make a list and don’t deviate for cosmetic reasons (serious problems do occasionally occur and they must be dealt with safely). Don’t get greedy and have fun with it. It’s a learning process and the first experience can be frightening and exhilarating at the same time.
Posted in Featured, House Flipping | Tagged fast cash real estate, fixer upper, flipping houses, House Flipping, make money fast real estate, Rehabbing
By investor on September 4, 2009
Investment Property
We have all seen the countless late night infomercials about how people have become overnight millionaires by investing in property. We’ve seen the success stories and heard the wonderful tales of real estate success born out of desperation. We have also viewed them all with some degree of skepticism. The truth is that there is money to be made in real estate. The truth is also that there are not that many true real estate tycoons. Most of the so-called tycoons have made much more money selling their books than they ever actually made in real estate.
Investing in real estate is like any other venture you enter into it. It takes blood, sweat, and tears to make it work for you. While it takes a lot of work, it can be a very successful venture. There are many options for investment properties. Whether you are considering property rentals or buying property and fixing it up for resale there is a significant investment not only of money but time as well. No investment venture is going to be successful unless there is a great amount of love and labor involved.
Here are a few tips for investing in rental properties:
1) Make sure that the area you are buying your rental property in has a very high demand for the type of property you are offering. You don’t want to invest in a family home as a rental property if your market is mostly college students. You could consider subdividing a larger home for this type of market and having two or three smaller rentals rather than one larger rental.
2) Check the property value in the area you are investing in. You don’t want to choose an area that is in decline for rental properties if you can avoid it. The declining state of the neighborhood will minimize your potential profits.
3) Be absolutely sure that the income generated by the unit will cover not only the mortgage you are taking on but also the empty times, repair, and upkeep. If you’re investing in a property you want to make sure that you are actually making money.
If you aren’t considering turning your investment into rental properties but are more interested in fixing it up and selling it at a higher rate there are some guidelines you should follow as well.
1) You must make your best effort to be accurate in your estimate of the work that needs to be done so that you can recoup your expenses and earn a little profit when you turn the house.
2) You need to educate yourself about the area the home is in. Learn the value of similar houses, or houses in a good state of repair in the neighborhood to see how much your potential profit may be. Remember that it isn’t necessarily a good thing to have the best house in the neighborhood. Potential buyers will assume that the value can’t go up much from that point.
3) Make sure you have a detailed inspection and are aware of every potential repair that needs to be made, which ones are immediate needs, which ones are cosmetic needs, and which ones can wait. Don’t waste money on the ones that can wait unless they will significantly improve the value of the home. Kitchens and bathrooms are the only ones I would consider for cosmetic needs and structural needs must be addressed before cosmetic needs. Trust me, it isn’t fun hanging drywall twice because the first job was ruined by the new leak in the roof.
Overall, keep in mind that this is about making the most money possible for your investment. Keep the improvements as simple and cost effective as possible and you should be able to enjoy a nice profit. Also keep in mind that it takes money to advertise your home regardless of if it is a rental or you are trying to sell so keep a budget set aside for that. Remember that you will still have to make the mortgage payment even if it sits empty for a while so set your prices competitively for the area. Good luck with your investment and try to have some fun with it.
Posted in Investment Property | Tagged basics of real estate investing, investment property basics, make money with real estate, passive income, rentlal property
By investor on September 4, 2009
Financing Options for Your Investment Property
Any time a decision is made to purchase property, whether this property is investment property or for your personal residence, the question of how you are going to pay for it is bound to arise, as it should. Property is probably the single largest investment that most people will make within their lifetime. Despite what the late night infomercial gurus claim there really is no one size fits all solution for financing.
Homes that are for sale for no money down are few and far between and most courthouses have been combed fruitlessly in search of those four hundred dollar (back tax) properties. So, unless you have happened upon the pot of gold at the end of the rainbow, you are going to need some sort of financing for your property.
If you are planning for this property to be an investment property, you have some unique financing options, or at the very least you are more likely to be able to enjoy some of the more creative alternatives to typical financing. Here are some of the options that would be available to you and why they may be a good idea for investment properties when they wouldn’t necessarily be wise choices for your residential property.
1) Adjustable rate mortgages. This type of financing allows you to make lower monthly notes for a specified period of time. Generally one to two points below the average interest rate at the time the loan is taken out. The problem with these for a residential loan (more specifically long term loans) is that the interest rate rises at the end of the specified period. One would hope, for an investment property that it would have been sold for a profit by the time the higher interest rates kick in. These loans typically provide three to five years for the lower interest rate before rising, this gives you plenty of time to make repairs and improvements to the home before putting it on the market again. Hopefully you will have done your homework and chosen an area that has a fairly healthy real estate market so you don’t have to worry about the home being on the market for a long time. Remember, an empty house is not netting you any profit.
2) Balloon notes. This type of financing is something I would normally encourage anyone to think twice about. This allows you to live in the home (or work on the home) for a certain period of time, usually at or around market value for the home, but at the end of the period there is a huge balloon payment. The bad news is that most people couldn’t possibly afford to make the final payment and as a result lose the home they have been working so hard for over the last five years. If you are absolutely certain that you can sell, flip, rehab and sell for a profit, or whatever you are planning to do with this home then I would recommend considering this (and this is the only occasion I would even entertain the idea of a balloon note) but it is an option, ugly as it may be.
3) Another thing you may consider if you are going to live in your investment property at all is buying a fixer upper and trying to get an FHA 203 (k) loan. This loan allows you to add the cost of repairs onto the amount you are borrowing. It even escrows the funds to go to the contractors upon completion of the work, just to keep some folks honest. It’s a good option if you have the credit worthiness and plan on living in the home you are investing in (even if only for a little while).
Hopefully, I have shed some light on the murky waters of investment property financing. It can be a rough river to navigate at times, but in the end, I feel it’s a worthy venture.
Posted in Investment Property | Tagged getting a loan for investment property, investment property financing, investment property mortgage, no money down, real estate financing, rental property financing
By investor on September 4, 2009
Managing Tenants is not for the Faint Hearted
Anyone who has gone to the trouble and expense of investing in rental property is seeking the most return on his or her investment possible. The best advice I can give you though is to invest the extra monthly expenses you would need to go to in order to hire a property manager. First of all, it is money well spent. Not only is someone else sweating the details of whether or not the rent checks are collects, bounced, repairs need to be made, and those infamous late night phone calls, but you are purchasing your personal peace of mind from these details while still enjoying the steady income that comes from having a property rented out.
I think we will all agree that the tenant is the most important part of the equation in a situation where rental property income is relied upon. With no tenant, there is no income. But when you own a property and have a sizeable investment made in that property it is difficult to be objective when dealing with the people who will be living in what you perceive as your home. It is much better to have a casual and more importantly objective observer make the decisions about who becomes your tenant.
If you chose to manage your own property there are some things you want to consider.
1) Become familiar with the laws in your state about the rights of both tenants and landlords. This is vitally important for you. You must make sure that you are aware of any potential problems before they arise and your rights and responsibilities as a landlord.
2) Happy tenants equal long-term tenants. If your tenants aren’t happy, chances are they won’t stay around very long. It is much better to have a property occupied than empty. Unless you are extremely fortunate and have a waiting list, it is likely that your property will be empty for at the very least one month, every time a tenant leaves. This gives you time to make necessary repairs, clean, and take care of other issues that are sometimes neglected while tenants are in place. Keep your tenants warm, dry, and most importantly treat them with respect if you want them to stay around for a while.
3) Perform a thorough background check on your tenants and listen to your gut. If the little voice inside your head is screaming that this isn’t a good idea then it probably isn’t.
4) Get everything in writing. Get a signed lease that details every conceivable possibility.
Again, I will stress that my personal recommendation is that you hire a property manager to deal with the tenants in order to save you the headaches later on. It’s a relatively small fee considering the hassles it prevents and the peace of mind it provides. If you chose not to, my hope is that the advice I’ve given you will provide some degree of assistance in the way you interact with your tenants.
Posted in Landlording, Property Management | Tagged Landlording, managing tenants, Property Management, property manager, real estate investing, rental agreement, rental property
By investor on September 4, 2009
The Truth about Real Estate Investment Seminars
If you have an even passing interest in real estate investing, perhaps you should consider first investing in a real estate investing seminar. These seminars are generally a few days long and offer a brief oversight into many different aspects of real estate investing. Not only do they show you the things you may have considered before, but also introduce you to new ideas for investing projects, prospects, and financing.
You can find ads for these weekend and daylong seminars at almost every turn on the web. Finding one in your area may be a little trickier. A word of caution though, not all real estate investing seminars are created equal. In fact I would talk to someone who has attended one of the specific seminars that you are interested in attending. Many feel that they have been ripped off by seminars that offer a great amount of hype and only ultimately become a session explaining what should be done but offering no advice whatsoever on how to do it. Many leave feeling very disappointed and as if they have been taken advantage of. These seminars offer big returns but no substance and exist solely for the purpose of making money off of the dreams of others.
Not all real estate investment seminars are put on by crooks, in fact many do offer information that is beneficial to all of those who attend. If you choose to attend a real estate investment seminar in your area, be sure to take copious notes. Check and see if bringing a tape recorder into the seminar so that you may record the session and listen to the information when your mind isn’t distracted by the presence of other people. Ask others what they thought of the information they discovered there and compare notes. Make contacts while attending. One of the most important things to bring away from a seminar is contacts.
The people you meet at the seminar are people who are also interested in some way, shape, form, or fashion in real estate investing. These people are people you should get to know. Some will have experience, some will be completely new, but all will have different understandings of investing and different contacts of their own. They may know a good contractor or other contacts. They also may be interested in investing rather than sweat equity, which you can provide, or the other way around. Seminars can be very much worth every penny for contacts alone.
No matter what your interest in real estate investing, it is most likely worth the cost of attending even if the information isn’t something that is completely new to you. Sometimes rehashing information that you’ve heard before, or seeing it presented in a different manner can make a light bulb go off in your mind. Also by brainstorming among others you can hear different perspectives of a common problem that you may not have considered previously.
But please do due diligence when seeking out the right seminar for you to attend. Find out everything you can about the specific information that will be presented. Call the organizers and ask specific questions and go with an open mind. Don’t attend however, if you truly can’t afford the cost of the seminar. More importantly treat this as a business rather than a hobby and pay close attention to the details rather than paying marginal attention and hoping to glean some tidbit of information.
Posted in Featured, Investment Property | Tagged Investment Property, real estate investing, real estate investing seminar, real estate investment seminars, real estate seminar
By investor on September 4, 2009
4 Essential Real Estate Investing Tips
Over the last several years, real estate investment has been the center of much interest. Infomercials abound about the money to be made by real estate investment, reality television shows concerning fixing houses and reselling them are in great abundance and a new American dream has been born. While real estate investing can be quite profitable it’s not as easy as they make it look on television. You must know your market area very well and while there is
There is always the possibility of failure and that must be an acceptable risk for you, if you wish to prosper through real estate investing.
Here are some tips to keep in mind when investing in real estate:
1) Specialize. Don’t bounce back and forth between different types of real estate investing (such as fixer uppers, rentals, lease options, low down payment homes, etc.) if you specialize in one and become an ‘expert’ in that particular type of investment you will only be making the costly mistakes that are made during the ‘learning curve’ for one type of investment property rather than for several. In addition to missing out on some of the costly errors, you are becoming more and more accomplished in your chosen area of expertise with each new transaction.
2) Inspect. Always, always, always have a thorough inspection of any property before you buy. This can be costly but it is much less expensive in the long run to know without a doubt what you are getting into before buying the property.
3) Compare. Compare the value of other properties in the area with the asking price of the property you are considering. You want to insure that you have an accurate understanding of the value of property in the area in which you are buying. If you are buying a fixer upper you wouldn’t want to pay a price equal or near the prices of houses of similar size and better condition in the area.
4) Education. Educate yourself on the local market. This should include information such as the number of bedrooms the average home buyer wants, the school districts that are in demand and those that aren’t, and the features that home owners pay the most attention to in homes (such as kitchens, bathrooms, fenced in yards). Find out what the housing trends in your area are and make it your mission to provide houses that fill those particular needs.
Following the tips above will not guarantee you success or prevent failure but they will get you started on the right foot in real estate investment. Keep in mind that there are other extenuating circumstances that must be considered when investing in real estate: among these are taxes, back taxes, the local economy, and actual demand for housing. If you have a firm understanding of the local real estate market perhaps you are ready to delve into the world of real estate investing.
Posted in Investment Property | Tagged Fixer Uppers, Investment Property, lease options, real estate investing, real estate investing tips, rentals
By investor on September 4, 2009
Investing in Rental Properties
If you’ve ever paid rent in your life, you’ve probably wondered what it would be like to be the landlord. I know if you’re anything like me, you probably swore to one day do just that, to become the one making money by placing roofs over the heads of the masses rather than the one spending money that would never present a return on the investment. As I’ve grown and ‘done my homework’, I’ve discovered the being a landlord isn’t quite the bed of roses I always thought it would be.
We all know that investing in real estate is a risky venture. There is the excellent potential for a good return on your investment but the risks are always lurking in the background and if you have educated yourself properly in the real estate industry you are well aware of the risks that abound. Among the many opportunities in real estate investment, rental property continues to be a product that is in steady demand by the population and more and more often in shorter supply. Therefore I would cautiously call this a rather safe investment. I say cautiously because ‘stuff’ happens and anything can go wrong and quite often will.
If you keep a few important tidbits of information in mind while scouting your potential rental investment property you will be reducing your risks ever so slightly.
1) Make sure you learn the laws regarding rental properties in your area. Each state has different laws about the rights and responsibilities of landlords and tenants. Make sure you are aware of the laws in your specific state.
2) Location, location, location. It’s not just a saying. It’s actually quite important when you’re considering whether or not to invest in a property for the sake of gaining rental income. College towns are a great place to invest in rental property. Especially if the college has inadequate housing. Also busy streets are better to help you keep your property filled. Drive bys often generate more rentals than newspaper advertisements. Put a for rent sign in the yard and wait for the calls to come in.
3) Choose low maintenance homes to rent. Vinyl siding is a good thing with rental houses, it requires no paint only an occasional pressure washing. You also don’t want to go top of the line with water heaters and appliances for a home that will see many many renters who care for less for the state of these things than you do. Keep that in mind when making not only your home purchase, but purchases for the home as well.
4) Make sure the house you are considering for a rental property complies with zoning laws and is up to date on all codes. Have it inspected before you buy and explain what your intention for the property is. It is a very costly venture to bring a house completely up to code, especially if you’re only making a little bit more than the cost of the mortgage payment each month.
5) Don’t buy a house for a rental if you are counting on raising the cost in order to recover your expense. First of all there is no guarantee that the current rental market will support an increase in rent (then you are making the note on an empty property) and secondly, things go wrong—roofs need replacing, flooring, paint, hot water heaters, and heating units. These repairs can be quite costly and if you’re not making enough each month to set aside a contingency fund for events such as this you may as well shoot yourself in the foot. It would be much less painful.
While there are no guarantees when investing in real estate whether for rental properties or anything else, following this advise will help reduce the risks you are taking. Good luck with your venture, my hope is that it will be a wildly successful one.
Posted in Investment Property, Landlording | Tagged being a landlord, investing in rental properties, rental property, tentants
