Financial Floating Manager

Posts Tagged ‘Estate’

The following collection of real estate investing tips will probably have a few things that you already know. That’s okay. There will be a few you haven’t heard before as well, and in any case, we sometimes need to be reminded of what we know.

1. Find an agent with the right experience. When selling real estate, drive around and see what else is for sale in the same area. Look particularly at the name of the agents on the signs. The agent whose name shows up the most in your neighborhood will likely know best how to price and market your property. You can also do this by looking through real estate guides to find those agents who are either active in your area, or with your type of property.

2. Make low offers correctly. When making a low offer that may offend a seller, let him know that it isn’t personal, that this is just what you need to make daily deal work for you. You can include a list of concerns or of things that you will have to repair, to justify the lower price. If you have a choice in a situation like this, it may be better to let the agent present the offer without you. It can be tough for a seller to hear you say anything bad about his property in person. A list of concerns is less personal, and less likely to offend him – which makes it more likely that he’ll seriously consider your offer.

3. Look for “extra” opportunities. When flipping a house, you might normally look for fixer uppers that can simply be “put into good shape” and sold for a decent profit. But if there are “extra” opportunities that other investors aren’t seeing, you can make even more. These are things like a full basement that can be converted into living space, or attic space that can be made into a bedroom or office, or an extra lot that can be split off and sold without reducing the value of the home much.

4. What to do when rentals won’t produce cash flow. People often buy rental houses, duplexes, and even four-plexes for homes, thinking they are “investing” as well. They pay according to personal values, so these properties can be priced well beyond where they would produce cash flow. Apartment buildings, on the other hand, are priced according to one thing more than anything else: net income. The lesson? When you can’t make cash flow with small rental properties, think bigger.

5. How to find motivated sellers. Real estate investors will often talk about the importance of “motivated sellers,” but how do you find them? When searching newspaper classified advertising, pay attention to the wording. “Need to sell,” “Must sell,” and “Will look at all offers,” are the usual indicators, but you can look at the rental ads too. “Must have a good job,” may indicate a landlord who is tired of tenants and ready to sell. Searching county records for out-of-state owners is another way.

6. Don’t rely on appreciation. If you are planning on rising real estate values as your primary way to profit, you’re speculating, not investing. Recent drops in values in many areas show the flaw in this strategy, but also keep in mind that transaction costs can be up to 10% of the sales price, so you have to have a big increase in value just to break even. Enjoy any appreciation as a bonus, but buy based on the cash flow, a plan to increase the value (fix and flip), or some other well-thought-out plan for profit. This may be the most important of these real estate investing tips.

Real Estate Investing is simple, but not necessarily easy!
You see, people can complicate anything! It’s like telling someone how to drive a car. It’s not complicated at all. Just open the door. Sit down. Turn the car on and put it into drive. But, people always make things harder than they need to be… They start asking thinks like “which door should I open… the left or the right?” or “Do I unlock it with a key or click the button” and on and on we go. Twenty minutes later, we’ve still not even been able to get into the car.
I liked that analogy because it applies to real estate. There are really 5 things you need to know – or steps – when it comes to real estate.
Here are your Top 5 Real Estate Investing Tips!
Tip #1: Find a Motivated Seller

Stop wasting your time trying to make deals out of deals that aren’t there. Sellers are motivated to sell a piece of real estate by only 3 things:

Change in personal situation. Sellers become very motivated to sell their properties when things in their personal lives change and they can no longer afford the home or there is an emotional reason for selling. Personal reasons for selling a home are: job loss, divorce, relocation, illness, etc.
Tip #2: Evaluate the Deal

Once you’ve found a motivated seller, it’s time to decide if the deal is going to work. Real estate investing comes down to the numbers. There are 5 factors to consider in order to decide whether or not to invest in a property.
Location. If real estate is located in an area that is full of abandoned properties and rundown houses, the score will be lower than if the house was located in a prime location, close to all of the area amenities.
Condition. The better the condition of the property, the higher the score will be. For instance, a brand new home is going to have a substantially higher score than a property that’s rundown and needs major repairs.
Price. The lower the price, the better! The goal is to purchase real estate for as little as possible. 30% or more below market value will score much higher than when the seller is asking for market value or better.
Financing. Real estate comes down to the numbers. If the seller is willing to give you financing with flexible terms and low interest rates and you don’t have to come out with any of your own money, it’s better than when the seller needs all cash up front.
Seller’s Motivation. On a scale of 1 to 10, how motivated is the seller to sell his/her property? The more urgent their situation is, the higher the motivation score.
Tip #3: Write an Offer

After you’ve done your homework and looked at the numbers, it’s time to put the pen to the paper. But before you write your offer, make sure you have 2 exit strategies in place. This way, you’re not stuck holding onto a piece of real estate that you can’t rent or sell. Many people are losing their shirts in real estate because they jumped in on pre-construction and hoped to “get rich quick”. Consider submitting 3 contracts on the same property with different prices and terms and let the seller decide what works best for his/her situation. For instance, you may have a wholesale offer at 50% of market value, a seller financed alternative that you might use for a rental, and a lease option which you might do a sandwich lease-option.
Tip #4: Line Up Your Financing

Once the seller has agreed to one of your offers, it’s time to get the deal closed. If you’re wholesaling the property, find your investor-buyer. If you’re going to close on it yourself, line up the financing via a conventional lender, hard money lender or line of credit. Also start looking for a tenant or tenant-buyer if you’re goal is to build a long term real estate portfolio. The key is to get your financing lined up in accordance to your exit strategy and begin moving immediately.
Tip #5: Follow Through with Your Plan

Many real estate investors purchase a piece of property with one plan, buy-fix-sell. They write the offer based on a certain sale price and with a specific plan to renovate. Then, once they close on the home, they over-improve and try to sell it for more than it’s worth or use a hard money lender and then decide they want to rent it.
If you follow these steps and remember the tips, then you will make money in real estate. If you deviate from the plan, then your chances of running into problems increase. You wind up with the wrong type of financing, you can’t find tenants, the holding costs eat the profits, etc.
Remember, real estate investing is like driving a car. It’s simple. Get in, turn the key, put it in drive, and go!

Have you tried your luck at foreign exchange, bonds and stocks, but to no avail? Are you perplexed as to what to put your money on? Consider real estate investment, as several people have turned into millionaires through shrewd investments in real estate. By means of this article, we will elaborate four common real estate investing tips, which would help you realize significant profits via property investment. Be it a newbie or a seasoned investor, these tips are sure to be of help to one and all alike.

Real estate investing tip #1 – Perhaps the most lucrative investment technique is to buy a run down property, fix it up, and then sell at a significant profit. Since the property is shabby, you might be able to acquire it for a low price. However, you must ensure that the cost incurred in the repair is restricted to a minimum so as to guarantee a profit. You can do this by making sure that the basic amenities are in place, without going overboard with the renovation. Such a buy-fix-sell scenario demands excellent property valuation skills and a rather frugal attitude while renovating.

Real estate investing tip #2 – Purchase properties that are about to face a foreclosure. A property typically faces foreclosure when the homeowner is financially distressed and is unable to repay the loan. Another common reason for foreclosures is dissolution of marriage with the abandonment of the house by either of the couple. Such a distressed property can be bagged for a low price by an articulate investor, who can convince the homeowner to sell the property prior to the foreclosure sale. Then the investor may sell the newly bought property at a significant gain.

Real estate investing tip #3 – Locality is a paramount aspect in real estate investment. Two similarly built houses may have varying valuations if they are situated in different locations. So, you must be abreast of the hot locations in your concerned region. If you are just about to start you real estate venture, I suggest you look for places that offer high rentals. Purchasing a property in such a region would result in a healthy monthly source of income.

Real estate investing tip #4 – Ever heard of Warren Buffett? The acclaimed stock investor made billions through a contrarian’s approach to stock investment. You may take a contrarian’s view to real estate investment as well. For instance, you may buy a property when it is out of favor with the majority of investors. That is, acting in opposition to the majority opinion. A contrarian’s approach is not a sure shot path to real estate success. Moreover, it’s complicated and therefore beginners are advised against it.

All in all, there are several avenues that you could realize profit in real estate. However, it is imperative that you be prepared to put in extra work hours, especially at the beginning of your real estate career. Putting your shoulder to the wheel is what’s required to make substantial profits in real estate.

Copyright © 2006 Joel Teo. All rights reserved.