Profitable Real Estate Investment Property
Over the past 20 or 30 years, the number of homes bought and sold as investment property has continued to rise. In a recent year, one home of every four was sold as an investment property rather than only as a family home. The main reason for the interest in real estate as an investment – increase in prices have made investment a profitable business.
In this same period of two or three decades, the number of real estate investment programs and systems has made buying property possible for anyone willing to spend a little time studying the steps. One of the most popular methods used continues to be “flipping.” When most people think of flipping as an action, they think of it being quick. That is at the heart of the method.
Those who focus on flipping homes or other property buy the property and sell it as soon as they can, for a profit. Some have found this to be an excellent way to generate cash flow, and eventually they use the capital for larger investments that may take a bit more time to resell. One of the keys to successful flipping, of course, is the ability to buy a property with a buyer in mind. This can be risky for a couple of reasons. If the investor does not have sufficient capital and the property doesn’t sell right away, further investment can be difficult or impossible. Even with strong working capital, an investor can be caught holding a property if the prospective buyer or buyers change their minds. Read more
Getting In On The Pre-Construction Boom
For many years investors have been seeing excellent returns on their real estate ventures. The question that many people have at this time is whether or not the investing world has been largely affected by the current state of affairs in the real estate market? It would be impossible to think that it has had no effect and indeed it has.
Investors are quickly having to learn to diversify their real estate portfolios and get smart about the purchase and sale of properties. Unfortunately, dealing in real estate is no longer as “cut and dried” as it once was. It used to be quite simple, the market was incredibly strong, you bought low and sold high. No problem. But then, the market changed and lost some of the momentum that it once had, there was no longer competition for every available home! So what was the answer? Go after the homes that aren’t built yet!
Pre-construction has developed into one of the best place to put your real estate dollars. With the amazing number of buildings going up in just about any city, developers are anxious to get their developments sold before the construction phase is complete. To facilitate this need, they are typically offering great incentive packages to entice buyers to pre-buy units. This kind of sale usually applies to high-rise condo complexes as with many units to sell, buyers can cover their costs quickly and buyers get a great deal on a new home or rental property. But aside from the incentives, what are the good reasons to invest in something that is not yet completed? Appreciation. Read more
Overseas ‘Buy-To-Let’ Acquisitions On The Rise
The recent slow-down of the residential property market means that there is less opportunity for ‘buy-to-let’ investors to make significant short term gains in the UK, prompting a whole slew of investors to look abroad for their property investments. Add that to the fact that more people are quite prepared to arrange their own holiday by compiling all the elements on the internet, such as flights, car hire and hotel or property rentals and a potentially huge market for those seeking to let out their properties emerges.
Part of the reason for the shift away from package holidays towards independent travelling is down to the ease of booking on the internet. But another important reason is that the standard of finishing and decor at holiday homes tends to be far superior to those in hotels in the same price range, meaning that families get more from their money by arranging their own holidays.
This shift towards independent travelling has not gone unnoticed by those wishing to invest in property overseas. In the past many purchasers quoted capital growth as the main reason for buying a holiday home. However, more people are taking notice of the fact that there is a real business opportunity in owning property abroad from rental income too. Overseas estate agents Savills questioned 12,000 owners of property abroad and found that capital growth was the primary reason for purchasing their holiday home. However, many were aware of the business potential of offering holiday lets at their properties but for whatever reason had not turned that awareness into reality. Read more
Investing In Real Estate – Good Business Idea?
The lessons learned while investing in real estate can, unfortunately, be no more than an expensive education. Avoiding this negative path and profiting from real estate investment is possible, even probable, if the investor has the proper planning and financing in place.
One of the keys to successful property investment is gathering information before committing money to any potential “deal.” Of course, the home or building should be carefully inspected for physical problems beforehand. Tip: Don’t rely on memory when inspecting property. Hand-written notes on a small notepad is much better than making no notes at all. The more detail included in your survey notes the better.
If there are problems with plumbing that you see as a non-professional, make sure to write this down and consult with a plumber or contractor. If the roof looks well worn and you suspect leaks may be present, make note of this and have the roof inspected thoroughly. In fact, after a good walk through with family members, hiring a professional home inspector might be wise. This person can use experienced eyes to locate potential problems before bringing in a plumber, electrician or other construction pro. Part of the inspection service could be an estimate of how much work needs to be completed and how much it might cost. But remember this is just an estimate. The plumber or other service person may have a different cost figure!
Location is a primary factor in the success of any real estate investment program. In general, investors should purchase in the best location affordable, with an eye toward highway access, schools, stores and other amenities. It may even be a good idea to talk with someone at the community police department, to get an idea about crime and other problems.
Most experienced real estate investors will urge those new to the business to avoid making decisions with their heart. Being sentimental about a property is not a good reason to make a purchase. This is far from true investment. Investment decisions are made based on numbers, costs, location and so on. Study the market to get an idea what houses and buildings cost in particular locations. In addition, this research will give you some basis for establishing a price when it comes time to sell. Read more
Things You Should Know That Can Make A Property Not Worth Investing In
When buying a property to repair and sell there are some things you should know. Some of these things can make a property not worth investing in. One thing you should know that can make a property not worth investing in is if the property is in an area that has a lot of natural disasters. To avoid buying a property in an area that has a lot of natural disasters you should do some research about the area before you invest. You can research online to see what natural disasters happened in an area before investing.
Another thing you should know that can make a property not worth investing in is if the property is infested with termites. If a termite infestation is bad enough it can take a lot of money to repair the property. Sometimes it can be more than the property is worth. It is recommended that you get a professional exterminator to look at the property before investing in it. The exterminator will let you know if there is a termite infestation and how bad the infestation is.
One last thing you should know that can make a property not worth investing in is the state of the foundation. If the foundation of the property is cracked or sinking this can mean a big problem. When a property foundation is cracked or sinking it could mean that this property is unstable and over time if left uncheck the property can collapse. It is also recommended that you get a professional to inspect the foundation of the property. Investing in real estate to repair and sell can be profitable if done right and you know what things to avoid. Read more
Buying Homes Pre-Construction
Many people hear about buying homes in the pre-construction phase of development and having the home value skyrocket in the first few years. The stories usually involve someone “getting in” during the early phases of development when the builders offer good incentives and competitive pricing. These homes can be great investments, but deals like these are harder to find now than they were even five years ago. So, talk to your real estate agent about pre-construction homes (and investing in the Charleston area in general) if this is something you are interested in.
A lot of our clients have opted to buy homes pre-construction because they need time to sell their current home. Building a new home in Charleston usually takes anywhere from four to nine months. We have found that new construction is the best way for people to go ahead and buy a home (reserving a price in the market) but also postpone their closing date (giving them time to sell their house). Along the same lines, most builders only require you to put down a small amount (anywhere from $1,000-15,000 depending on price of house) upfront. After you make this payment, you don’t usually pay any more until the house is built and you close on it. So, if you are still making mortgage payments on your current home, you don’t have to worry about making double mortgage payments until the time that your house sells. Also, if you are an investor, it would be beneficial for you to try to not close for a while so that you can capture the appreciation of the home.
Another benefit of buying homes pre-construction is that you know your home will be low maintenance. Builders are required by law to give specific minimum warranties to ensure that you don’t face any major problems during the first few years of living in your new home. One of the warranties is a minimum of 1-year “bumper to bumper” warranty which ensures that everything in the home is covered by the builder. There is also a 2-year warranty that covers all systems (electrical, plumbing, heating and air conditioning, etc.) in the home. Another warranty is the 10-year structural warranty which covers foundation and other structural problems. Read more
Types of Investment Property
Since real estate investing encompasses so many types of investment properties, its essential to classify them and pick the one which they are most passionate about. This would greatly enhance the probability of being successful in real estate investing.
The following are the main types of real estate investment properties that are suitable for beginner investors:
- Preconstruction Investment Property: These types of investment properties are acquired directly from a developer before the construction or renovation is completed. In return for commitment to buy even before the construction is completed the developer will give you a price discount and/or other financial incentives.
- Fixer Upper Investment Property: These types of investment properties are the ones which are in ugly condition and need renovation. These properties are acquired by real estate investors to flip them after fixing-up. In majority of the cases these properties are in foreclosure, or are bank owned properties (called REO which stands for Real Estate Owned). Some beginner investors also wholesale distressed properties to other investors without fixing them up. Real Estate Investors who wholesale make a smaller profit but are able to exit the deal fast and with low risk.
- Foreclosure Investment Property: These types of investment properties are the ones which you buy from sellers who are behind in their payments and may lose their property to the bank via foreclosure.
- Income or Cashflow Investment Property: These types of investment properties are the ones which generate rental income for the real estate investor. These are mainly apartments buildings and rental houses. This type of investment property is sometimes also called Income property, Rental Investment property or Cash Flow Property.
- Investment Property with Flexible Terms: These types of investment properties are the ones which can be bought with no money down or with very little money down. Seller of such properties are very flexible with their contract terms and are willing to make the sale easy for the buyer. Land Contract (also called Contract for Deed), Owner Financing, Lease Option (also called Rent to Own, Lease Purchase, Lease to Own, Lease to Buy etc) and other similar strategies fall under this category.
Most other types of real estate investment property deals are not suited for beginner investors. Read more
Leveraged Property Investments – Why Do Property Investors Use Leverage To Maximise Their Returns?
The following case study outlines the reasoning why it is financially beneficial to use the banks money to finance property investments rather than ones private reserves. Lets assume that we are purchasing a property for 100 000 and that property inflation averages 10 percent per year over a 5 year term. (I have specifically left out the currency as this example can be applied to any country.)
Your Capital Growth on the property would look as follows:
Year 1: 100 000 + 10 000 (10% growth) = 110 000
Year 2: 110 000 + 11 000 (10% growth) = 121 000
Year 3: 121 000 + 12 100 (10% growth) = 133 100
Year 4: 133 100 + 13 310 (10% growth) = 146 410
Year 5: 146 410 + 14 641 (10% growth) = 161 051
Case 01: You use your own personal savings to finance your acquisition
In this case you would have made no more than the average rate of property inflation. In other words, you would have made a return of 10% per year plus of course any rental income that you may have received less any property related expenses that you may have incurred.
Your initial investment of 100 000 would have yielded a return of 61 051. This is a rather poor return on investment of only 61% over the 5 year period.
Alternatively you look at the advantages of leverage or as it is also commonly referred to as gearing.
Case 02: You put down a 20% deposit and use the Read more
What Does It Take To Be A Professional Investor?
With current mortgage problems and the market on a constant roller coaster when is the right time to become a real estate investor? What is do successful investors know that the hobby investors fail to recognize? Who can we listen to get solid investing advice that will help me achieve my investing goals?
The first rule of thumb when it comes to becoming a professional real estate investor is buy low and sell high. Wow what a break through concept! Lets take a look at what the reality is. Right now as the real estate market is tanking, according to some people, the professional are starting to come in and buy everything up. What are the hobby investors doing? They are panicking and dumping their high priced investments that they bought right before the market tanked.
The professional investors are getting wholesale priced real estate at incredible terms. The hobby investors are giving away their properties at incredible terms, lease options, rent to own, no bank qualifying etc. This isn’t exclusive to real estate…the same thing happens with the stock market and the hobby investors always wonder why they are losing money. The hobby investor waits that the market is going up and looks like a safe risk before jumping in the game. The professional investor makes up the rules to the game and makes money on the follies of those that don’t understand what the rules are.
Buy low and sale high. Why is that concept so difficult to grasp? Read more
Lease Option To Purchase Contract Clauses That Work To Protect You
Lease Purchasing is one of the most profitable and practical ways to be in real estate. You don’t need a bank or an extensive line of credit to get started. There is an absence of Tenant & Toilet problems (if setup correctly)! It’s creative and even fun! Lease Purchasing can also be a nightmare if you do not have the foresight to have well designed, strategically written contracts.
Recently I was asked by a reader of my Lease Purchase Times © newsletter where he could find good generic Lease Purchase contracts.To me that is like asking a neurological surgeon if he can recommend a do it yourself brain surgery kit and combination salad maker!
I advised the reader that there are generic contracts from several sources. One such source is your local real estate agent or office. They have the multi-purpose fill in the many blank type forms. The question remains, however, are they any good or even WORTH THE PAPER THEY ARE WRITTEN ON ?
My handy Law Dictionary defines Generic as follows: Something not specific or not referring to a specific thing. Generic contracts are just that generic. They are designed with the one size fits all concept. In reality, they are not designed to protect you or your interest in the particular Lease Purchase transaction with which you are currently involved. I have collected many of these so called generic Lease Purchase contracts for years; Not only have I received contracts from Realtors and stationary stores; others came from the get rich quick, while staying in bed all day, books and seminars. They all have one thing in common. They are garbage ! They are poorly written and lack the necessary clarity and/or specific verbiage inorder for the contract to be enforceable. I have designed and utilize 8 specific contracts for my own Lease Purchase deals. Which one I use is determined by the hat I am currently wearing at the time. Am I the Landlord/Seller, the Tenant/Buyer or the Assignor/Assignee? Will I be Subletting, Assigning, Sandwiching, Pure Optioning or just quick flipping , bird dogging, networking or consulting ?
TIP: I always carry a couple copies of my Lease Purchase Contracts in my cars trunk right next to my earthquake/Wildfire emergency kit* compartment. An investor is always prepared especially if you live in Southern California!
Here are a few suggestions for items that should be contained in any Lease Purchase Agreement. Some of these may seem like obvious inclusions. Having been involved in Lease Purchasing for many years now, I can tell you that the obvious is not always so! Read more
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