Real Estate Market

Successful real estate Investors know they can create long term wealth through buying and holding real estate as rentals. Everyone wants to be successful, but everyone isn’t. Why? It may be because they don’t have a plan. There is an old saying, “people don’t plan to fail, they fail to plan”.

The first element of that plan has to be putting together a team of people to help you accomplish your goals. You have to remember that being a successful real estate Investor requires that you have a TEAM in place. Investing is not a solo sport.

Let’s take a look at who we will need on our TEAM. All of these people are extremely important and need to be in place before you buy your first property.

Coach/Mentor – Every successful entrepreneur needs a good coach or mentor. By training under the watchful eye of someone who is successful, you will gain valuable knowledge and reduce the risk of failure.

Realtor/Wholesaler – This is the person who will find the property for you. Some people chose to work with a Realtor and some a Wholesaler, but basically they do the same thing, they find great deals!!! If you are working with a Realtor, they should be experienced in dealing with foreclosures. Banks want to unload these properties, but you need a Realtor that has had experience in negotiating deals with the banks. If you are working with a Wholesaler, they either already own the property or at least control it. Both of these people can determine the value of the property after it has been repaired. Both can advise you on improvements that should be made to get the house rent ready as soon as possible.

Lenders – Before you even think about buying a piece of investment property, you need to know ahead of time what lender you are going to use. Being able to get refinanced is crucial to the process. You do not want to buy a piece of property and then find out you can not get it refinanced. This is one of the biggest mistakes Investors make. They buy a property with their own money or use a line of credit, and then they can’t refinance and get their money back. Basically, you want to buy the property with hard money, rehab it, and then refinance to your permanent loan. Financing for investment property is very challenging, which is why it is even more important than ever to have a lender on your TEAM. This person may change, but you will always need to have a relationship with someone that you know will refinance your deals, whether it is house number one or number fifty.

Closing Attorney – A good closing attorney is invaluable. Call around and see what they charge to close a deal for you. By using hard money to buy the property, rehabbing it, and then refinancing it, you will have two closings. The first when you initially buy the property and the second when you refinance. That being said, you want to develop a relationship with a closing attorney that understands real estate investing, provides their services at a reasonable rate, and can close quickly.

Insurance Agent – You will need to shop around for a good insurance agent. It may be the person that handles your existing insurance, but a lot of companies don’t cover rentals or have limited coverage if they do. When looking for an agent, ask if their company covers vacancies. You will have vacancies!!! Don’t buy a policy that doesn’t allow for that. You may want to get a minimum of $300,000 liability. Also, look for a policy that has loss of rent. What if there is storm damage and your tenant has to move out for 3 months for the damage to be repaired, you don’t want to lose that rent money. Make sure the agent understands that you want to insure rental property, not that you are renting. One is a renter’s policy and the other is called a fire/hazard policy. Once you have accumulated several properties, you might want to consider an umbrella policy that would cover all of your properties for say $1,000,000. This policy pays in addition to the insurance on the individual property and is very cheap. It’s kind of a safety net for that “what if” scenario.

Contractor – When shopping for a contractor, be sure you find someone that is licensed and insured. If you are working with a Realtor that specializes in foreclosures they will be able to recommend several. The same goes for a wholesaler. Interview them and find out how they get paid. Most reputable contractors have lines of credit, so they don’t require as much money upfront to get the job started. Ask to look at a job they are currently working on or have just completed. This will give you an idea of the quality of work they do. Have several contractors submit bids on the job before you make an offer on the property. You have to know how much the rehab is going to be before you can make a sound offer. Go through the property and make a detailed list of what needs to be done. Remember, you are not moving into this house, this is going to be a rental. Once the property is yours, go back and get a firm bid on completing the repairs including the time frame to get the job done. Time is of the essence. A vacant house produces no cash flow!!! If one contractor gives you a better price, but can’t start for several weeks, it may be better to pay a little more to get the job done quickly. You should have in writing exactly what will be done and the total price. Of course, there is always the unexpected, but if the rehab goes according to plan, there is no reason for there to be a change in price. You may want to negotiate to pay them one-third upfront, one-third when the job is 75% complete and the last third when the job is complete and has been inspected. This way if there are any problems or things weren’t done that were on the list, the contractor has to take care of it before receiving final payment.

Property Management Company – I wouldn’t even consider owning rental property without a property management company. Do you want the headache of dealing with tenants? I don’t!!! It is well worth the money to let someone else handle everything that goes into having tenants. Most property management companies charge 10-12% per month to manage the property for you. They collect the rent from the tenant, handle any maintenance issues, deduct their fee, and send you a check.. You don’t have to do anything, but go to the mailbox and cash the check!!!

Eviction Attorney – I know, no one wants to think about this, but if you have rental properties, sooner or later you probably will have to evict someone. It would be better to already have an attorney on your TEAM that does this than to have to start looking for someone after your tenant is behind on their rent. Also, you need for them to look over your lease to make sure it complies with state laws governing landlords and tenants. You want your lease to be landlord friendly, not tenant friendly. You need to know the time frame for an eviction as this varies widely by state.

Appraiser – You need to know before you buy a property what it is going to appraise for when the rehab is completed. The Realtor/Wholesaler will have a good idea, but you need to be as accurate as possible. Remember, the goal is to not be out of pocket any money. If when you go to refinance and you thought the property was worth $100,000, but the appraisal comes in at $90,000, you probably will have to go to closing with money. It’s a good idea, to get a verbal appraisal before you buy. Also, since you already have a lender on your TEAM, find out which appraiser they use. You can then contact them and ask if they will do a verbal appraisal on a property you are considering. If you tell them that you will ask the lender to use them for the appraisal, they usually will do a verbal for free. Even if you have to pay them something, it’s better to know the value on the front end, not after you have bought it. I do want to mention that even if you get a verbal appraisal, if it takes you 3 months or longer to get your property rehabbed and refinanced, then the appraisal may be off. Appraisers are limited as to the age of the comparables they use. So if it takes a long time to get the rehab completed and then you have to start shopping for a lender, instead of already working with someone, then the comps the appraiser used in the verbal appraisal may no longer be any good.

Accountant – Preferably, your accountant will be a CPA who has experience with real estate investments. Not only will they benefit you at tax time when it comes to write-offs, but also throughout the year in setting up your business correctly and reducing your capital gains tax if you sell a property.

These are your core TEAM members. Remember, to become a successful Real Estate Investor, you have to build a TEAM!!!

Buying your home is the probably the first property investment you make. You will see it increase in value over years and periodically it will decrease in value. However, it will never loose its total value like other investment vehicles such as stocks and shares and is therefore a sound investment. The principal reasons why property is such a sound investment are as follows:

Property Provides Safety and Security

Despite any economic downturn, property never looses its entire value. In the longer term, it will always see a return to former values before increasing again. Successful investment in property is the safest way to gradually build a substantial nest egg for your future.

A successful investment has the ability to generate income and equity growth over years. The downturns we see during a recession are merely temporary and have little bearing on the long term security and returns you will enjoy. This is why property is the cornerstone of so many portfolios; it creates wealth.

Property Returns Income and Equity

Renting out property gives you income. While your property increases in value over years you can be paying for it on a “buy to let” basis for example and later enjoy the benefits of the income generated.

Having a property portfolio built up over years allows you to live comfortably from not only the income but from the knowledge that your investment is gaining in value year on year. Your equity and capital growth is your wealth.

Property Allows You to Control Your Assets

Where you buy property and what you do with it will determine the rental income and to a large extent the capital growth. “Location, location, location” has long been the property investors mantra. Buying in an up and coming area whether it be in your city or in another country, always consider location in every way.

Quality will always attract quality which in turn provides better income and equity. By providing quality furnishings and decorations inside your property, for example, you will undoubtedly see a better return on your investment. You are in control so you can use that to your advantage.

Property Investment Gives You Leverage

Why property is such a good investment proposal for you is the leverage you can use. It is not necessary to have vast sums tied up in your new property nor do you need a fortune to become a private investor.

For investment purposes, you can borrow the larger part of the property value and generate a high return on the capital invested. With a carefully selected quality property it is easy to use this leverage or gearing mechanism and requires only a minimum amount of your personal money as investment.

Property Has Other Benefits Too

Taxation concerning rental income and capital gains is a worry for many new investors. However, in many places worldwide there are incentives that vastly reduce this problem and in certain instances the problem does not exist at all. This is particularly true when you invest in overseas property.

St Lucia is one of the most dramatically beautiful of all the Caribbean islands, but its beauty is not the best known. Known for its steep hills and breathtaking valleys, both covered in lush green vegetation, St Lucia is somewhat undiscovered in comparison to the likes of Barbados. None the less, it offers some of the finest white sandy beaches, and most secluded coastal alcoves that you’ll find anywhere in the world.

Its near-virgin nature means that property on the island is not as expensive as some of the Caribbean’s better known hot-spots. In fact there are currently properties for sale throughout the region from as little as £125,000.

2008 was the year when the undiscovered became the desirable in terms of overseas property and holiday destinations. As a result the popularity of the property on the island, and the island’s tourism sector both grew rapidly during 2008.

The growth was so phenomenal that even the international downturn couldn’t put the genie back in the bottle, let alone put the lid on the growth potential of tourism to or property in St Lucia.

The fact that tourism is still very much a growth sector was made evident earlier this year, when several airlines announced the addition of new routes to the island, all of which will now be in operation.

At a time when the reports of an international tourism industry in contraction — when more flights were being removed than added — any announcement of new international flights came as a massive testament to an area’s growth. In September the report said:

British Airways are increasing their direct flights from Gatwick to St Lucia from three to five times per week from October 2009. There is also a new weekly service from Frankfurt, operated by Condor starting from 1st November 2009 and in the US Jet Blue has announced a new service from New York with three flights per week from October 26th 2009. Virgin already flies three times per week from Gatwick.

The other good thing buying St Lucia property now — at this early stage in its development cycle — is that the recent downturn has shown the damage overdevelopment can do, with Spain the shining example. So governments around the world are determined to avoid their property market’s facing a similar plight.

Of course the final benefit of buying property in St Lucia is the friendly tax regime, which offers VAT free property transactions, as well as no capital gains or inheritance tax.

Tax Lien Investing, in our new year of 2010, has never been, a better time for ordinary folk, like you and I, to buy homes for 1% to 5% of their market values.

Our economic “downturn” has sadly, made many consumers unable to pay their property taxes, and has SO heavily overburdened banks with foreclosure inventory at its highest peaks that we haven’t seen in years.

This is where you the investor, comes in and purchases a tax lien certificate, you basically pay anywhere from a few hundred to just a few thousand dollars, which allows you to become the note holder of the property, if the property is habituated (meaning occupied) then they will have a chance within a certain period of time to make good on the taxes PLUS interest legally obligated to you, which can be anywhere from, as low as 12% up to 30%+ depending which county and state you have the tax lien certificate within.

As you can see a good way of profiting from your investment, as if they DO NOT repay you, most of the time, you will become the property owner free and clear!

WOW! Not bad for a few hundred or thousand of dollars invested!

Back tracking to a few years ago, within a good economy, the norm used to be 90% Redemption from the home owner, which meant 9 out 10 home owners made good on their tax situation by making a payment, before you the tax lien holder gained ownership of the house. In which case, you gained back your investment plus interest, as was the worst case scenario! Not bad right?

Now sadly, but fortunately fast forward to the present in 2010, and those figures have changed from the 90% as was the case, to a WHOPPING 50% redemption rate, in certain markets, the housing crunch being the culprit.

Now what this interprets too, as the investor, is; you stand a good chance of taking possession and ownership of at least half of the houses that you have tax liens on!

TRULY AMAZING!

Now as is evident, not only are we profiting from other tax liens, where you will recoup your investment and the interest owed, but it also broadens other horizons, of you having a diversified way of owning 50% of those homes, where you can;

1. Sell to either other new buyers of a home.

2. Sell to a Bank, Lending Companies, Investors

3, Rent to Own

Lets talk about Rent To Own:

The “magical way” due to the “down turn” of the economy, where you can immediately regain the down payment you put down on the house, and also offer a service to other home buyers, where they can actually avoid having to go through a Bank, as you being the note holder, is not only powerful but in demand! And remember creative financing in private circles has never been more in demand, due to the Banks not lending money as they used to. Now worst case scenario is, the “Tenant” that has rented the property does not make good on paying of the note you hold, you end up evicting them, as most of the time is the case, the down payment you received has most likely covered the investment you have made in order to being the note holder, so the situation in this event still remains profitable to you, and naturally many are waiting to step in and take over the role of becoming a new Tenant!

Hence a truly creative way of profiting from having a few Rent to Own homes in your possession. And due to our economic times, where financing has become so strict, you being a smart investor aid them in their troubles and also provide a moral benefit

So the world of starting a home based business, where all you need in today’s technology is a PC or Laptop (And yes Mac lovers too) and of course a trusty mouse is within your reach, and here’s the real bonus of this. You don’t have to physically travel to other states or the vast 3000+ counties across the United States to purchase these tax lien investments! As once more it can be done from home, and Internet access only!

By: Reeder Hardy

If you’ve considered entering the market of house flipping, then you will need to know what type of house in which to invest. It is important that you understand the difference between an ugly house that can turn into a beautiful piece of property, and a plain bad investment. Below you will find three tips to help you purchase the right investment.

1. Get to Know Your Market- It is important to monitor the real estate market in your area. Learn how long sellers have had homes on the market so you know how long it takes to turn a property. Also understand what the sellers offered to the buyers as far as paying closing cost. Pay close attention to the homes that sell quickly and examine what the homes offer that people wanted.

Tour model homes in your area and get to know what buyers are looking for as far as upgrades. Take notes on wall color, cabinetry, appliances as well as landscape. The more modernized you make your house flip, the more likely it is to sell quickly.

2. Know How Ugly You Want to Get- Try to imagine the finished home when you enter into a “fixer”. If a home has stained carpet, a bad odor, cracked paint, or over-grown yard, visualize it as a gold mine. Though most buyers would turn and run the other way, this is the perfect product for you to purchase. You will get a great price, and with a little elbow grease, turn it into a picturesque new home.

Always understand your physical and financial limitation when getting into the market of flipping homes. Certain issues like plumbing repair or hanging new sheet rock may require you to hire an outside source. If the home has serious structural problems, get an estimate from a licensed contractor before making the purchase.

3. The Profitability Factor- You may think that all your hard work may not pay off. However, a good house flip can earn you anywhere from $10,000-$100,00 per home. Not only are you taking a run-down home and turning it into somewhere livable for a family, you are also improving the value of the neighborhood.

It is a good idea when you first start flipping house to look for homes with small cosmetic problems. They are easier to fix up and cost you less in the long run. The more profit you begin to make, the more you will have to invest in larger projects. You never want to get in over your head right away. Start small and work your way up.

By understand your market and knowing what is worth investing in, you can easily flip a house for a pretty profit. The more investment homes you flip, the better you get to know the market as well as the craft. Eventually you can stop hiring outside contractors and do the work yourself. And always remember to always see the gem in the rough when working with “fixers”.

So you’re wondering how buying a tax lien works. You probably are hoping to find a safe way to make a really great interest rate on your money, without actually buying a property. Buying tax liens can be a great investment, as long as you’re privy to the pitfalls and risks that come along with the investment. If what you really want is real estate size paychecks without owning property, then good news: you don’t have to start buying tax liens to make money without property.

First, how buying a tax lien works. Depending on where you are, tax liens will be sold on a first-come, first-served basis; by round robin; or, in many places, to the highest bidder at auction. Once you’ve bought the tax lien, you will then wait out the redemption period, hoping the delinquent owner will pay you off, and then you’ll make your interest. If they don’t, you will then have to go through a legal process to become the deed owner. This part differs state-by-state, and can be pretty complicated.

Since you don’t want to take that last risk, the best bet is to bid on very nice properties, whose owners will likely bail out of the tax problem. Unfortunately, everyone else wants those too. You may have to bid a lot of money to get that tax lien, and if the owner doesn’t end up paying off, you just bought yourself an expensive property for retail price.

If what you really want is to make some big money from real estate without owning property, consider investigating the overages created from these same tax sales. When more is bid for a property than is owed in back taxes, the overage is usually held for the former owner to collect. But the owners are usually gone by the point that they are notified of the funds – so they never collect them.

These are huge amounts – $10,000, $20,000, even $50,000. Because they aren’t subject to state money finder laws, you can legally collect 30-50% as a finder’s fee for these funds, and owners are happy to pay. If no one connects them with their funds, they are usually lost permanently to the government shortly after they become available to collect.

This means, without owning property, you can build a five-figure per month business, helping owners reconnect with their lost money. The current economy assures you’ll have no shortage of foreclosures to work for quire some time.

We break our active buyers list into two major groups: retail or rent to own buyers and investor wholesale buyers.

In our Active Buyers Checklist we deal with them in very similar ways. We contact them each time we have a new property that would be appropriate to send them.

For our retail buyers and rent to own buyers we would do a blast out to them with each new property that we have to retail or offer on a rent to own. We do our blast usually via, but occasionally also use voice broadcast. On rare occasions where we happen to know a particularly well qualified buyer and a property that would be a good fit, we will get on the phone and make a personalized call to them.

For our real estate investor wholesale buyers we use a similar strategy of blasting out the info on the property to them. Like the retail buyers list we also use email and voice broadcast, but since we often have fax numbers for our wholesale buyers as well, we have also done fax blasts successfully on occasion.

There tend to be certain investors that have proven-through doing several transactions with us-more serious buyers that others and we do, from time to time, make a call to them before blasting it out to the list.

Having a big, healthy buyers list is one of the keys to running a successful investing business and especially true of running a successful wholesaling business. It is well worth your time to focus on growing your list of both retail buyers and investor wholesale buyers.

As in any business, the success of any real estate investing business is locating deals that can make you a profit. These deals mainly come from motivated sellers, or home owners who really need to sell.

Such motivated sellers are driven by circumstances beyond their control, and sometime they can lose the house if they do not sell. Such circumstances include

• Foreclosure
• Bankruptcy
• Divorce
• People with lien
• Burned landlords with defaulting tenant
• Job transfer – hence they own more than one home
• Expired listings – homes that just don’t sell
• Inherited property (and sometimes debt)
• Property that needs repair, so is not marketable
• And so on

The key to locating motivated sellers is locating people in trouble who own real estate. Identifying sources of these leads will give you an almost unlimited number of leads that could become profitable deals.

There are several sources of such leads that exist in most places:

1) Subscription newsletters

In my surrounding counties there are subscription newsletters that list every record in the local county court system. Even though these may not exist in your local market, they are valuable sources of good leads.

I check people in bankruptcy, divorce, liens, probates, etc, then check if they own real estate. If they do, they get into my mailing list

2) County records

From most counties, you can get information such as filed notice of default, foreclosure notices, probate notices, etc. These are valuable sources of leads for your real estate investing business

3) MLS listings

People trying to sell their houses for a long time unsuccessfully quickly become motivated sellers. These expired listings can be valuable source of leads for your real estate investing business

4) Burned landlords

Landlords filing for eviction in the local courthouses are fed up with their tenants and properties, and may be looking to sell as motivated sellers

5) Compiled leads

Even though these might be over-shopped, you may find people that compile lists such a foreclosures, bankruptcies, etc for sale. Sometimes these can yield good leads for your real estate investing business

6) Absent home owners

People that own property, but their mailing address is different from the property address means they have more than one home. It’s likely these can be motivated sellers for your real estate investing business

Once you have identified the best leads for your real estate investing business, the next step is to send them marketing mail pieces whether post cards of letters.

Preferably, send them more than one mail piece spaced maybe 30 days apart. This will drastically increase response rate.

Always make sure that you provide a web address for your real estate investing website as well as a phone number. Your website should take the role of convincing them that you are the best buyer for their property and pre-screen and pre-negotiate the deal for you.

If they call instead, make sure you have a scripted series of pre-screening questions that will tell you if it is a deal or not quickly without wasting time.

An apartment complex or a single family home offers one primary source of income. However, for the smart investor, residential real estate can offer many more sources of income.

Some are obvious including:

• Corporate units,
• Washer dryer rentals,
• Pet Fees,
• Cleaning Fees,
• Application fees,
• Laundry Services,
• Storage,
• Etc.

Some are less obvious and can provide a much needed boost to marketing your residential rentals. A few of these could include:

• Furnishing features like flat screen televisions, lawn service, or maid service at a profit;
• Roommate lease plans; or
• Including cable and high speed Internet

These type packages are worth considerable attention today because with large percentages of prospective residents beginning their search for next rental home or apartment online seeking unusual search strings (the choice of terms a consumer puts in a search engine like Google) make the unusual services and amenities powerful differentiators. Thus, not only does potential revenue for the rental home rise, the potential market size is increased for the innovative owner or manager.

For owners with large numbers of units, other revenue streams become possible such as advertising to residents, subcontracted business services to residents and others.

When considering, alternative revenue the tax and asset value ramifications of each stream is important also.

For example, services like furnishings may offer depreciation. Or, products like storage may become rental income. In fact, in general including services as part of the rent is valuable for multifamily rental properties. A revenue stream that is rent based can increase asset value 10 to 15 times the impact to Net Operating Income depending on the market capitalization rates.

These ideas and concepts can be the basis for steady and significant increases in rental residential revenues, income, and cash flow for large and small owners alike. Investors can use this to improve and existing portfolio or as the basis to complete “value add” purchases successfully.

There are lots of things to consider when hunting for an investment property in Australia. To help guide you through the process, we have put together the following 6 questions to answer for any property you are considering buying. These questions are sure to get you thinking about some of the important factors in making a good real estate investment decision!

Question 1: How much rent could the property earn?

Try and establish how much the property could earn as a rental in today’s market. You could work this out by any number of ways, including asking local property managers for their opinions, checking out rental listings on the major real estate websites, or asking the vendor what the current tenants are paying if the property is already rented. Remember to be conservative in your estimate – the rental market changes frequently and it’s better to not overestimate the rent potential when working out whether this property is a good investment decision.

Question 2: Is the property rented now, and if so – for how much, and how long?

If the property is currently rented, ask the real estate agent exactly what the tenant is currently paying, and when this was last reviewed. It is common for landlords not to increase the tenant’s rents in line with the current market, so don’t be shocked if the tenant is paying an amount you consider cheap.

Question 3: What is the demand like for rental properties in the area?

Ideally, you will want your rental property to be earning income all the time, and not be vacant for long periods of time. You can assess the strength of the rental market in the area by doing things like seeing how many properties are listed as being for rent in the area on the major real estate websites, attending open houses for local rental properties and seeing how many people show up, and asking local agents how long properties on their books are vacant in the area.

Question 4: What will the gap be between your mortgage and other expenses and the rent you could receive?

Once you have estimated the rent, and the costs of the property, compare the two and see what the difference is. Depending on your tax strategy you may be looking to have a negatively geared property (eg where expenses are greater than income) – but be careful of the affect of this on your cash-flow each month. How are you going to fund the shortfall if there is one?

Question 5: What types of renters would pay that amount of rent, and what would they look for in a place?

If the property is an apartment located near a city center, your target market of renters may be young professionals. Perhaps it’s near a university, and so your target will be students, or it’s a large house in a suburban area where mainly families will be renting. In each case, ask yourself how much would these people pay to rent in the area, and what would they be looking for? Assess your proposed purchase by reference to what your target rental market in the area would be wanting in a rental.

Question 6: What ongoing fees will you have during the year on this property?

For properties in a strata, it is crucial for you to understand what the strata levies are currently set at. Buildings with pools, concierge services and lifts can force strata levies up towards $2000+ per quarter, whereas smaller blocks without these amenities can have strata fees of less than $500 per quarter. Again, consider your target rental market when assessing these levies. You might also want to consider your cashflow during the year – can you afford to make these large payments when they are due? Is the rent enough to cover these payments and the mortgage? Other fees to consider include the council rates, water and electricity (some of these costs you may pass onto your tenants).

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