Real estate investors are losing money because they are afraid to invest in an unstable real estate market.  Although fiscal conservatives will maintain that in order to reliably attain wealth, one must manage and minimize the risks involved in investment, there is also something to be said for taking advantage of a great opportunity.  The financial crisis in this country has caused rental, leasing, and purchasing prices on properties to be driven through the ground floor and into the basement, widely increasing the margin for potential profit on a given investment; yet investors fail to act.

There have never been as many foreclosures and short sales as there are right now, and although the economy is showing signs of steady improvement, the forecasted numbers of foreclosures in 2010 and 2011 are supposed to set records (measured in millions, not thousands).  Even for the unlucky investors who took enormous hits to their portfolio and equity during the course of the last five years, there is no shortage of opportunities for creative financing terms.  One of the benefits of a slow economy is that is generates desperate sellers; and since we’d rather not perceive ourselves as taking advantage of the unfortunate, we remind ourselves that buying short sales and foreclosed properties helps quite a few people out of a very sticky and unsettling financial scenario.

The most costly mistake that investors will make this year is not losing money, but failing to capitalize on opportunities that could generate substantial income.  It is common knowledge even in high school to buy low and sell high, so why do investors think it wise to wait until the economy stabilizes to invest?  By then, so many real estate investors will have garnered enough capital to jump on the short sales and great deals that the demand will once again be on the rise, and we’ll be back on our way to the seller’s portion of the real estate cycle.  Take advantage now, before the recovery bubble takes shape, and you will reap the benefits as the economy is revitalized, breathing new air into that real estate bubble.  After all, it’s called a buyer’s market for a reason.  Buy, buy, buy, and take advantage of the opportunity to be creative with the financing—you just may make a fortune without using any of your own money!

Tell us what you think. J

SuperiorPrivateMoneyReturns.com

When the time comes to list and sell your investment property, the most important step is going to be marketing.  This is true in practically every business: the more effectively you can inform people of your product, the more likely you are to sell that product at a higher price.  To get your money’s worth out of a property, you’ll need to attract enough potential buyers to generate a sort of micro-market for your house.  Here are a few very basic, cost-effective ways to market your home for sale.

First and most important: signs.  Historical trends reveal that realtors attract about 10% of their total business from the signs they post.  These don’t have to be expensive or extravagant, but they need to be big enough to clearly read from a car, and they must at least appear professional.  No handwritten signs.  “Lead-In” signs are extremely useful tools for sellers; these are signs which advertise the home for sale, and display an arrow pointing in the direction of the house.  These should start on a busy street, and should lead the driver around each corner and intersection until they arrive at the house.  If you decide to be too frugal by skipping intersections, you will break the lead-in chain, and the whole effort will be in vain.  Be sure to be thorough.  All signs should include a name and phone number where you can be reached.

The next step is brochures.  These can easily be made using templates on any computer built after about 1998—which is to say, any computer.  Present photos and specifications of your home for sale, in a neat magazine-style layout.  Include your contact information to set up appointments to tour the interior.  Get a brochure holder (2.00 piece of plastic), and keep it stocked with brochures in a well-trafficked area (preferably where people walk on foot near the property).  If you are doing an internet listing (described in the next step), consider saving time and energy by simply printing your listing as your brochure.

The broadest category is internet listings.  These can be extremely fruitful or a huge waste of time, depending largely on pot luck, and only a little bit on the savvy of the marketer.  Craigslist advertising has proven to be a surprisingly effective marketing tool, even for transactions as major as a home for sale (eBay less so).  There are countless MLS sites online, including those specific to the type of sale you are trying to make (for example, you could try www.fsboamerica.org, which only advertises homes for sale by owner.  In today’s world, you have to assume the majority of people are searching for homes on the internet, rather than driving around town endlessly looking for signs.  Take advantage of this medium.

You can’t do too much marketing.  Anything you think of that’s not too expensive, try it out.  It may just generate the lead that ends up being your top buyer.  Try taking out ads in the newspaper, or even a lower-budget, topic-specific newsletter.  Community bulletin boards, flyers, these are all approaches which cost little or no money, but which will help to spread awareness about your home for sale.

Let us know what you think. J

SuperiorPrivateMoneyReturns.com

Probate real estate is one of those facets of the real estate market that is remarkably consistent, potentially very fruitful, and shockingly underutilized.  Probate refers to the process which occurs when property is left as part of the estate of a deceased person, and those to whom the property was bequeathed cannot or will not continue to make mortgage or tax payments.  This occurs with incredible frequency (nearly one fourth of all cases seen in court in the United States deal with matters of probate), and is extremely reliable—no matter what the market does, people will always die.  The government is more concerned with cutting losses than with making huge profits, which means when property is seized by probate, it is sold on the cheap!

For whatever reason, you will not find a great deal of competition in the probate real estate market (as opposed to foreclosure auctions for example, which these days are beginning to bustle with the frenzied activity of investors trying to capitalize from the slow economy).  Perhaps it is the nature of dealing with legal and financial matters with a mourning family—no one wants to approach a grieving widow who can’t make the payments on her dead husband’s home, and start a conversation with, “Hey, I’ll give you 70% of market value for your house…”.  It’s a very sensitive scenario, and many investors seem to simply shy away from this great financial opportunity.

As with all of these short sales and huge discounts, selling the property is what’s best for everyone involved.  If you perceive yourself as ripping off a mourning family, and it is rubbing you the wrong way, then remind yourself that by buying the home, you are relieving a struggling family from an enormous financial burden, and you are assisting the bank or government to regain a substantial portion of the money they lost on a bad investment.  If no one bought the home (even at such a big discount), the bequeathed would be financially crippled, and the financial institution would be stuck absorbing a huge loss.  The buyer is the savior in these situations.

Once you’ve convinced yourself that this is a noble gesture, you will have to approach whomever the property was left to when the probate opens in court.  The best approach in this situation tends to be making a low cash offer, which will often work since the seller will probably want to avoid the highly expensive cost of owning and maintaining a property that is in all likelihood not even their home.  Most of the time, they will be much happier to just walk away with a stack of cash.  As you can imagine, there is not usually a great deal of negotiating or competing with other buyers (which for you is a golden ticket and gives you all the leverage).  Think low, and remind yourself that you are doing a service to all parties involved.

What do you think?  J

SuperiorPrivateMoneyReturns.com

Every investor gets into real estate for his own unique, rather idiosyncratic set of reasons, but the common denominator among us all is to improve our quality of life.  Many (especially young) investors make the mistake of thinking that the best way to improve their quality of life is to knock out as many deals as they possibly can, generating as much income as they can scrape from the community, and establishing a name for themselves as the most dominant force in local real estate.  Well, all of those things are great for a career, but not necessarily for a human being.  Rather than jumping to throw your money at every little deal you come across, devote your energy and attention to finding the real superb deals (not just by the numbers, but also considering what it is you are looking to get from your investment).  The best deals are the ones which not only generate good income, but also allow the investor to pursue the facets of real estate and life which he sees as fit.

One of the most beautiful benefits of a career in real estate investing is the freedom which it allows.  If you play your cards right, you can generate the same income working 10 hours per week as you can working 50 hours, and you can do it anytime from anywhere in the world.  Too many investors lose sight of this, and are limited by the constant nagging nature of their quest for deals and more deals.  They end up rooted to their hometown, working furiously day-in and day-out… almost like a regular 9-5 office job—heaven forbid!!

Cater your deals to your needs and goals, and you will be in a much better place.  If you need to generate money immediately, don’t waste your time on even the best deals for rental properties.  Stick to your plan, even if the other offers are enticing.  If you follow every lead and snatch every deal, you will end up being pulled in myriad directions which, if not managed carefully, are bound to steer your career in a different direction.  Similarly, if you got into investing so you don’t have to work all the time, then you need to divert your efforts to finding a good enough deal that will allow you to generate substantial income, but which is not as hands-on as, say, a rehab or a property management investment.  Remember your goals when looking for deals, stick to them, and you will find yourself achieving them much faster (and probably with less work).

Tells us what you think. J

SuperiorPrivateMoneyReturns.com

In an historically bad economy like this one, there is no shortage of motivated sellers, which means there is no shortage of opportunities for buyers to get creative with their financing terms.  In many cases, investors with little or no credit can arrange to purchase a home, with little or no money down, and with no new loans.  The nature of the slow market (the buyer’s market) is that it allows buyers to take advantage of opportunities while working to improve their credit and acquire funding for a down payment.  Here are a few ways to go about this.

The first option is the lease-to-own route.  This is when a property owner rents the property to a tenant who intends to buy, but can’t afford to make the down payment or take out a new loan.  Every month, a portion of the rent is put towards a down payment on the home.  No loan, no detrimental credit impact, a place to live, and time to secure funding.  Generally, the contract will extend between 2 and 5 years, will require a small down payment on the home (3-7%), and will put anywhere from 10-50% of the rental payment towards the purchase of the home.  At the end of the contract, a mortgage loan (substantially reduced from the initial purchase price) can be obtained to cover the balance.  It’s pretty simple, but lease-to-own’s provide some incredible ownership opportunities to those who, in better economic times, could not hope to put together a competitive offer on the property.

Another option which balances motivated sellers and small loans is what’s called a seller carry back mortgage.  This is basically when a seller agrees to act as the lender for a mortgage loan, allowing the buyer to complete the purchase and then repay the seller over the course of a few years.  It is very rare for a seller to agree to finance the entire purchase, but surprisingly common to find terms of partial seller carry back mortgages.  In these cases, the buyer takes a primary mortgage loan from the bank (one which is much smaller and easier to acquire than the loan for the entire purchase price), and a second mortgage directly from the seller.  This requires cultivating a pretty solid relationship with the seller, so bring your “A-game” when you follow leads—especially if you’re short on credit or cash.

There are many opportunities to simply find good deals—houses listed and sold below market value.  Be it through foreclosure auctions, probate sales, short sales, or creative financing terms, anyone can buy right now.  After all, it’s called a buyer’s market for a reason.  Use your head, not your money, and you can find a path to home ownership that won’t leave you destitute and with crippled credit.

Let us know what you think. J

SuperiorPrivateMoneyReturns.com

Once you’ve followed your leads and found that one great deal you’ve been searching for, you’ll need to make sure that the property you’re buying is what you think it is, and not just what it is presented to be.  In other words, you’ll need to have a thorough home inspection done by a professional.  If done right, this one pre-purchase home inspection will tell you everything you need to know about the home, what works and what needs to be repaired, and any other baggage that might eventually manifest once you own the place.  Here’s how to ensure you are approaching this process from the right angle, so that you don’t end up owning a hassle and a money sink.

The first step is choosing the right home inspector.  Years ago, there was just “a guy” to call when you needed an inspection.  Now there are over 30,000 licensed inspectors in the country, and you’ll need to know how to find one that’s qualified—not just certified (it takes little more than a payment to acquire the piece of paper, but experience and reputable work to be considered an expert).  Start with the inspectors that are officially associated with the major national organizations, such as the National Institute of Building Inspectors (NIBI) and the American Society of Home Inspectors (ASHI).  Next, be sure to do a thorough background check, in which you follow up with any references and reports you can find related to the inspector.  If you find a good one, they will do the work for you; if you get stuck with a bad one, you will end up paying for an additional burden.

You’ll find more than one candidate that looks good on paper, so after you call the licensing board to ensure that he is active and with no outstanding complaints, schedule a face-to-face interview.  See for yourself whether or not the inspector’s demeanor jives with his resume, and make sure he can answer all of your questions with an appropriate balance of knowledge, confidence, and experience.  At the interview, it might also be wise to request a sample of an inspection report.  When reading it, make sure that it includes all of the areas you expect from your own inspection, and that it is clear and professional.

Finally, be present at the inspection.  Having the boss around always ensures hard work from employees, and inspection is no different.  There is cause for concern if your inspector does not want you to participate.  Make sure the inspector does a thorough examination, not just a one-hour blow-through of the house.  Expect this process to take half of a work day (four or five hours for an average-sized home), and don’t settle for anything less meticulous.

If you approach your home inspection prudently, and you are careful to select the right inspector, then home inspection can be a breeze that could end up saving you from making a huge mistake, or it could be the final straw that allows you to close the best deal of your life.  On the other hand, the wrong inspector can lead you into financial devastation and a truckload of extra work and financial stress.  Do your homework and select the right inspector; and you’ll be on your way to profits.

Tells us what you think. J

SuperiorPrivateMoneyReturns.com

Fix and Flip: This is the most common strategy employed, and generally what comes to mind when people think about flipping a property.  You buy a property that needs repair, you take care of all the repairs, and you sell it as retail for a profit.  It is a reliable method that can generate thousands of dollars on a single deal.  Flippers run into trouble when they pay too much for the property or underestimate the cost of repairs.  Be sure to account for all of these factors before making a deal, and be smart (conservative) during repairs, or you will spend all of your profit.

Refinance and Lease-Option: This one starts out the same as the first strategy, except instead of reselling the property for cash, consider reappraising the home at its new value, and restructuring the financing associated with it.  That way, you can sell the home with a lease-option, whereby the tenant’s rent will cover your mortgage (or should, at least), and if the tenant decides to buy, then you won’t have to hire a realtor or go through the process of marketing and selling the home again.

Wholesale: Rather than selling the home as retail, consider passing it along to another flipper trying to employ the first strategy (fix and flip).  That is, wait to buy until you’ve found a good enough deal in a good enough market, where you can turn around and flip the property to another investor without actually making any of the repairs.  You will sell the home “as is”, below market value (just what the other flipper is looking for).  You may only make a small profit as compared to the rehabber, but you won’t do any work and could walk away with a few thousand dollars.

The final strategy is a bit riskier, only because it involves predicting the local economy.  If you find a real hot, booming real estate market, and are able to get the timing just right, you can enter a contract for a house or condo that’s under construction (or better yet, under planning).  If the situation is right, you can wait until the development is complete, and then resell the home or condo at its retail market value for an enormous profit.  Be advised, if the local economy turns sour, you will be stuck owning pre-construction property that is sure to deflate in value.

Tell us what you think.

SuperiorPrivateMoneyReturns.com

When getting started in real estate investing, it is essential to approach with the right angle and attitude.  The days of walking onto the scene and making millions in your first year are long gone (if they ever existed at all), and these days it is all about baby steps.  There has not been a better time to be a start-up investor in decades, since interest rates and prices in general are so low right now.  The key to starting out with reliable success in real estate, at a time when the market is not blowing up, is to invest in income-generating properties.  They may not be glamorous, but small condos, duplexes, triplexes, and even four-unit buildings, will produce steady and reliable monthly cash flow.  Garnering and maintaining a few of these is a great way to start development of an ownership portfolio, and—more importantly—they should allow the start-up investor enough income to quit a day job and focus on making some real income moving forward.

Again, the key is to start out slow and steady.  Do not expect huge immediate returns.  Imagine your first investment is a duplex, for which you charge $800 rent for each side.  If the property only costs you $1,200/month to maintain, then you are earning an easy $400/month.  It doesn’t sound like much, but it is a great launching platform, and not a huge risk for a first-time investment.  If that works, you’ll buy more, and once you have five of these, you will be earning almost $25,000/year.  Once again, it’s not an overwhelming amount of money, but you could do much worse working much harder.

Once you’ve developed a bit of a portfolio, some capital, a whisper of a reputation, and—most valuable of all—the experience of owning and maintaining an investment property, you will be much better equipped to focus on bigger, and more fruitful investments.  Plus, in that first year or two of development, you may even collect enough funds to quit your day job, allowing you to focus your attention on your investment projects.

After a while, you will see that you are not paid in labor hours as an investor.  At first, acquiring properties, tenants, lawyers, etc., will be a lot of work, and you will feel underpaid.  But if you take it slow, adding one property at a time, you can learn all of these skills at a very manageable rate, until eventually the money is coming in with very little labor input on your part.  This is the beauty of investing: if you prepare correctly, and start from a good portfolio launching point, you can plant the seed of an investment, and then simply sit back and watch your money grow.

Tell us what you think. J

SuperiorPrivateMoneyReturns.com

When the time comes to list and sell your investment property, the most important step is going to be marketing.  This is true in practically every business: the more effectively you can inform people of your product, the more likely you are to sell that product at a higher price.  To get your money’s worth out of a property, you’ll need to attract enough potential buyers to generate a sort of micro-market for your house.  Here are a few very basic, cost-effective ways to market your home for sale.

First and most important: signs.  Historical trends reveal that realtors attract about 10% of their total business from the signs they post.  These don’t have to be expensive or extravagant, but they need to be big enough to clearly read from a car, and they must at least appear professional.  No handwritten signs.  “Lead-In” signs are extremely useful tools for sellers; these are signs which advertise the home for sale, and display an arrow pointing in the direction of the house.  These should start on a busy street, and should lead the driver around each corner and intersection until they arrive at the house.  If you decide to be too frugal by skipping intersections, you will break the lead-in chain, and the whole effort will be in vain.  Be sure to be thorough.  All signs should include a name and phone number where you can be reached.

The next step is brochures.  These can easily be made using templates on any computer built after about 1998—which is to say, any computer.  Present photos and specifications of your home for sale, in a neat magazine-style layout.  Include your contact information to set up appointments to tour the interior.  Get a brochure holder (2.00 piece of plastic), and keep it stocked with brochures in a well-trafficked area (preferably where people walk on foot near the property).  If you are doing an internet listing (described in the next step), consider saving time and energy by simply printing your listing as your brochure.

The broadest category is internet listings.  These can be extremely fruitful or a huge waste of time, depending largely on pot luck, and only a little bit on the savvy of the marketer.  Craigslist advertising has proven to be a surprisingly effective marketing tool, even for transactions as major as a home for sale (eBay less so).  There are countless MLS sites online, including those specific to the type of sale you are trying to make (for example, you could try www.fsboamerica.org, which only advertises homes for sale by owner.  In today’s world, you have to assume the majority of people are searching for homes on the internet, rather than driving around town endlessly looking for signs.  Take advantage of this medium.

You can’t do too much marketing.  Anything you think of that’s not too expensive, try it out.  It may just generate the lead that ends up being your top buyer.  Try taking out ads in the newspaper, or even a lower-budget, topic-specific newsletter.  Community bulletin boards, flyers, these are all approaches which cost little or no money, but which will help to spread awareness about your home for sale.

Let us know what you think. J

SuperiorPrivateMoneyReturns.com