It would be so nice to think that we lived in a world where everyone could always be genuine with one another; where to shamelessly reveal your true emotions was not just commendable, but standard.  Unfortunately, we live in a deceitful, dishonest world, where the successful investor is the cynical one.  Emotions in business are rarely genuine; they are not the indicators of true feeling, but rather tools in the arsenal of negotiating tricks that real estate professionals rely on to get the best deals.  While it can be difficult to willingly submit to this style of business, such a resignation may be required for success—or at least to stave off failure.

It is important to be passionate about your work—no sane observer would argue otherwise.  But it is perhaps more important to know when to reveal that passion, and when to leave it safely, quietly at home.  Negotiating, in general, is about estimating demand; and in order to do that, an effective negotiator must be able to read his opponent.  Logic (and basic economics) dictates that the more enthusiastic someone is about a deal, the greater the demand is for that deal; it follows, then that an opponent of the enthusiastic negotiator gains additional leverage from this perceived demand.  If you show up to purchase a property, and your opponent thinks you’d do anything to get that property, he will hold it against you financially—guaranteed.  If you appear thoughtful, prepared, and logical at a negotiation (as opposed to impulsive, unprepared, and emotional), then your opponent will be less inclined to inflate prices in negotiations.  Negotiating is estimating demand, and effective negotiating means underselling that demand for your opponent’s misguided estimation.  Some may call this dishonest or insincere, but in fact it is simply good business in the form of suppressed emotions.

On the other side of the coin, look for opportunities to expose your opponent’s emotions during negotiations.  This does not have to be in the form of targeted, aggressive interrogation, but can simply be a function of careful observation.  Look for facial reactions and body language that might reveal even the most stoic of negotiator’s true emotions.  With some, it’s like a game of poker; but as with all things, negotiators exist along a bell-curve distribution: the terrible few will make your job easy, the vast majority will be average, and a select few will prove a difficult negotiating match.  At every opportunity, take note not only of the language of your opponent, but also their emotional overtones.  Most emotional attachment to a deal can be turned into negotiating leverage and a distinct advantage for you, the opponent.

It is important to reiterate that this is not a call for dispassionate work from real estate investors.  It is crucial to have an industry field populated with committed, engaged, and passionate professionals.  Rather, it is a reminder that the very passion that may make you great at what you do, may also be costing you money at the negotiating table.  Learn to keep your emotions at bay, and you will find even more to be emotional about.  But only after the deal is done!

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Based out of Indiana, Jay Redding is a real estate entrepreneur, consultant and educator with experience in residential and commercial investing.

A lease-to-own option or a lease purchase is a great way for a real estate investor to make money from rent and later, the purchase price of the house.  There are different ways to set up the agreement because the terms vary between each landlord.  Some strategies will tend to lead towards repeated lease purchases due to the tenant bailing out, unable to purchase the property at the end of the term.  Other strategies will promote successful home ownership, resulting in home ownership for the tenant and the seller.

Not only is it unethical for a seller to try to set up the situation so the tenant will not buy the property, but it is in the seller’s best interest to sell the property.  While an investor may make $15,000 for the year for rent plus the 5% option fee of $11,250 on a $225,000 home if the property is not sold, a successful transaction will result in the $15,000 for the year plus the $225,000.  Clearly, when an income of $26,250 is contrasted with $240,000, it is more advantageous to negotiate the terms of a lease purchase to push towards selling.

The first step towards structuring a lease option to likely result in a sale is to carefully select the tenants.  You should develop a relationship with candidates so that you are able to judge their work ethic, determination, career options and financial situation.  Have a mortgage broker review their financial situation and provide guidance as to what needs to happen for the candidates to be approved for a loan. The candidates don’t have to be financially perfect now, but you want to be seeing a trend that shows they are moving forward in a positive direction that will yield results in one to three years.

The second step is to offer help and support as part of the lease purchase contract.  If tenants are required to take classes about budgeting, credit, loans and fiscal responsibility, and meet with a financial planner, they are much more likely to build credit.  Something happened to them that got them in a bind, and it is in your best interest to ensure that does not happen again.  Some landlords use part of the option money to cover the expenses of financial services.  A $500 investment may be the difference between a successful or unsuccessful sale.

The third step is to set a reasonable rent and option price that won’t strap the tenants and prevent them from spending the money for the upkeep of the home.  Since the tenants are responsible for the maintenance, and psychologically, if they spend money on the house they are more likely to want to buy it, it is your job to make it possible.  This goes back to careful tenant selection as well: they will need some surplus to fix a leaky roof or install a new mailbox.  The better the house is maintained, the better for you as a landlord.  Even if the tenants don’t buy the home, your property has been cared after.  The worst situation is if the tenants don’t buy the home and they haven’t been maintaining the property either.   Then the money you made from the rent and option fees would have to be reinvested in the property, cutting into your profits.

If you structure your lease-to-own contract towards a purchase friendly path, you will make more profit, help the tenants, and earn yourself a great reputation.

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It is a bizarre time in the world of real estate.  Over the past decade, money has changed hands quite a bit, and the same old principles of real estate investment success don’t necessarily hold true.  Of course, certain tenants never die—buy low, sell high, and so forth.  But following the collapse of markets once considered to be indestructible, many investors are beginning to realize that new strategies might be required for investment success.  Admittedly, this is no new economic revelation—it is old wisdom to diversify any investment portfolio to help absorb the ups and downs of any typically fluctuating market.  In real estate, however, branching out is not always as simple as choosing to add a different type of stock to your portfolio.

Or is it?  Real estate investment is notorious in the investment world as a profession which requires an enormous amount of investor involvement.  While most investors do their work from a cushy office, many real estate investors can commonly be seen scoping properties, acquiring customers, sifting through leads, negotiating deals, prepping homes, repairing homes, remodeling homes, presenting homes—the list could go on a mile.  But for the career investor looking to diversify without completely changing his career path, there are options.

Placing your money wisely in the right community can be just as effective as slaving day and night over a property in the wrong community.  Conventional wisdom dictates that real estate investment should be done close to home, where the investor can remain involved.  But not all markets are sound for investment in these troubled economic times, and so for those investors living in such markets, there must be more profitable markets to look at (even if it means hiring someone to do the hands-on work for you).  Indiana is just such a community, with very low property prices (21% below national average) and relatively high rental rates (12% below national average), plus an ever-growing middle-class population.  2011 marks a unique combination of variables in Indiana, where prices still favor investors (both in terms of low purchase prices and rental rates high enough to cash flow), and the growing community is poised for a sweeping economic recovery.  As the community is revitalized, prices will soar, and those investors that jumped in now will be rewarded with enormous profits.

All great, if you live in Indiana and can monitor your investments there.  But for those of you investors who find yourselves elsewhere in struggling markets, consider taking advantage of the conditions in Indiana by funding the right project, and simply waiting for the returns.  So much for the list of investor responsibilities started above; a turn-key approach to real estate investment allows an investor, regardless of location, to be as engaged in the process as he sees fit; otherwise, the work can be turned over to a trusted team of local professionals specializing in Indiana real estate.  Research, contracts, legal obligations, negotiating, prepping, repairing, etc.—all falls under the responsibility of a local supervisor.  The trick is to select a team with your business interests in mind, and with extensive knowledge of the local Indiana market and community at large.  JMJ Services is such a team, specializing in turn-key investments in Indiana.  This service provides investors an opportunity to put their money somewhere smart, without having to divert all their time and energy (and career) to that new investment.  The time is now, and the place is Indiana.

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Based out of Indiana, Jay Redding is a real estate entrepreneur, consultant and educator with experience in residential and commercial investing.

In an economy where many people have little or poor credit and loans are hard to secure, lease-to-own options (or lease purchases) are a strategic way to attract future buyers.  The target audience for this strategy are people who have had a spill in the past, be it a lost job, high medical expenses, a divorce, or some other acute financial loss.   They are unable to secure loans in this economy because of tighter lending policies by the banks.  However, with a little guidance and due diligence, many of these people may be in a position to secure a bank loan in 1-3 years. Because of the recent economic turmoil, this target audience has grown tremendously in the last couple years and you as a seller, should take advantage of this market.

Sellers would want to offer lease-to-own options if they have properties which have been on the market for a while and are difficult to sell or rental properties that they would like to sell.  The property owner gets the benefit of both rent and the purchase price at a later date.  If you have a property that does not fit into either of those categories, you may still want to consider a lease purchase option.  In order to figure out if it is more profitable for you to offer a lease-to-own or just sell the property, you would have to take into consideration the time-value of money.

You are delaying the date of purchase by one to three years, depending on the terms of the lease purchase, but you also keep the rent and the option fee, which is priced anywhere from 1% to 5% of the purchase price.  Also keep in mind the tenants may not build up enough credit and you may have to repeat the process.  Also dependent on the terms of the lease purchase is the cost of maintenance.  Some landlords put the financial responsibility of maintenance on the tenants after they purchase an option, and the landlords periodically check in to make sure the property is up to their standards.  Other landlords keep the responsibility for maintenance and charge a higher rent. A cash flow analysis with different scenarios based on the tenant’s performance will let you know which option is the more profitable one to you.

A lease-to-own has the potential of being a win-win for both sides. With a little guidance and support from the landlord and a willingness to learn and exercise some discipline by the tenant, a successful completion can be achieved for both involved.  Home ownership for the tenant and a profitable sale by the investor.

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A common fear among real estate investors is that housing prices are going to fall further and investors won’t be able to sell their properties.  This fear is very legitimate and reasonable: after all, holding onto a property costs money since the investor is responsible for upkeep and the mortgage, and even getting rid of the property can be expensive because of closing costs.  Investors don’t want to get stuck in a position where they can’t move properties, especially if they’ve renovated them.  This is a real risk in real estate, and in order to avoid this as much as possible, you should do market research.  Before you invest, you want to be as confident as possible that you will be able to sell your property.

First, pick out a local market that you would be interested in investing.  Generally, it is easiest to pick the same town that you live in or a town close-by, but it doesn’t necessarily have to be close in proximity.  If you have family or associates in other towns or cities, they can also be good connections to the real estate market.   If you live in rural Indiana, you wouldn’t want to invest in a property in, say, Cincinnati unless you have set up a power team in Cincinnati to be you eyes and ears on the ground.

Once you pick out your market that you think you would like to invest in, research it.  Generally, data for at least 250,000 people is statistically reliable.  If you have a good relationship with a realtor in your targeted area, they should be able to help you obtain good information from the local board of realtors.  If you are not that lucky, you may need to pay a realtor to get the information you are looking for.  Remember, each submarket can be very different. Important information to know would be average selling price, average days on market, concessions sellers are making to buyers and the percentage the actual selling price is of the asking price. This will help give you a feel for what is happening in the market. You realtor can also provide their perspective of the market you are targeting.

Once you compile the information and analyze it, then make the decision to invest.  If you are uncertain about your analysis, you can always ask other investors what they think.  Of course, that requires sharing information with them, but if they are people you trust, maybe you can do a joint venture if you both think it is a good market.  Thorough preparation will allow you to prosper in the long-term in real estate.

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http://www.superiorprivatemoneyreturns.com

Based out of Indiana, Jay Redding is a real estate entrepreneur, consultant and educator with experience in residential and commercial investing.

How many real estate investors got into the business primarily to make money?  There’s no shame in it; the vast majority of investors don’t find any particular joy in searching for properties, sifting through leads, fine-tuning contracts, navigating legal and financial issues, prepping properties, etc.  There may be a great deal of satisfaction and gratification in closing a deal or a job well done; but for most, the bottom line is the money.  It’s rather surprising, then, that so many real estate investors continue to be so hands-on and engaged with their investments.  While this type of commitment to the work is certainly commendable, it’s not for everyone.  For those investors looking to place their money wisely into an undervalued property in a growing community, and then simply sit back and watch their money grow, there are other options.

As in any other field, turn-key investments in real estate allow an investor to select a project and purchase a property, and then turn the project over to others (a group of real estate professionals specializing in this type of investment, like JMJ Services in Indiana) to develop and execute all the particulars.  Essentially, an investor from anywhere in the world can recognize a market with potential for profit, provide some funding, and move on to something else while their money grows.  There is no need to devote hours in the day, there is no need for hands-on labor, and there is certainly no need to make this investment the center of your world (as so many local investors are forced to do).  Professionals will negotiate a deal, purchase the property, execute the investment plan (rental, retail flip, lease option, etc.), and update you on the status of your money as often and in-depth as you choose.

The preceding paragraph provides an argument for turn-key real estate investments in general; but perhaps the most important aspect of generating profit from this kind of long-distance investment is properly selecting a particular market and group of professionals that have the recipe for success—and that’s easier said than done.  Although many people hear “real estate” and instantly think Malibu, Manhattan, and all those other high-end markets, the truth is that there is just as much money to be made in places like the Midwest—and Indiana in particular—where the effects of the recent recession have combined with a generally low cost of living to provide excellent conditions for investment success and property value growth.  Although asking and sale prices for properties are well below the national average, rental rates remain high enough for properties to cash flow.  More importantly, as the economy continues to improve, Indiana’s rapidly-growing community will provide an enormous foundation of demand for property purchase, driving up the value of your investment.

The beauty of investing in a market like Indiana is the flexibility.  Properties here provide investors with many viable options.  Recent foreclosures and general economic stress means great opportunities for retail flipping; and a strengthening, recovering community means the potential for lease options and other, more creative approaches.  As an investor, it is vital to have a portfolio balanced with various types of investments to help taper and filter the effects of unpredictable economic turns.  Sinking all of your money in one market bears the potential for disaster, as does putting it all into one type of investment.  Consider operating from a distance in a new market like Indiana, an option which allows investors to expand their interests and generate income.

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Too many investors believe that the Midwest—and Indiana in particular—is a stagnant money sink for real estate investment.  There is a general misconception that there is no money going around in Indiana; however, various statistical parameters reveal numerous trends indicating a great potential for investors to profit in Indiana.  Among the most significant of these trends are that rental prices, although lower than the national average, remain high enough to cash flow; cost of living is well below average (providing for many of the other benefits of investing in Indiana); and standard property price points are much lower than in most other parts of the country.  Furthermore, Indiana is a growing community (at one point a few years ago, Fishers, IN was the fastest-growing community in the country!), which means an increase in the demand for properties that fast-acting investors can get their hands on early enough.

Because the cost of living is so relatively low in Indiana, prices are generally quite manageable from the buying perspective.  In fact, average price points in Indiana are markedly lower than the national average: the value of housing units in Indiana averaged at $94,300, compared to the national rate of $119,600 (a 21.1% difference); in terms of asking price, Indiana’s average for housing units is only $78,600, while the national average is $89,600 (a 12.3% difference).  Low prices mean solid investment opportunities, especially in a community like Indiana’s where the rental market is still thriving.  Because the demand for renting many property types is greater than that for owning them, rental rates remain significantly higher than might be predicted by the retail value of the property.  For those with the means of funding to do so, it’s an excellent chance to add a solid, sustainable source of income that will reliably cash flow.

Beyond the capacity of properties to generate cash flow from rentals, single-family homes in the Indiana market also provide investors with multiple strategy options that can all realistically produce 5-figure returns.  As with any type of investment, it is important to maintain a diverse and balanced portfolio of investments.  If conventional rental is not what your portfolio requires, then consider one of multiple other single-family markets which are currently active in Indiana communities, including (but not limited to) the retail flip and the lease option.  The lease option is a great transitional step between renting and flipping investments, because it affords the investor an opportunity to take their time to carefully and thoroughly put together the best deal to sell the property, while still generating a monthly income.  A more aggressive approach to diversification might be retail flipping, where an investor finds a deal well below market value and oversees the process of bringing the property up to its proper market value for sale.  With record foreclosures over the past few years, flipping is picking up tremendous momentum in Indiana, and it’s a great alternative option to rentals if needed.

Find the right niche in any community and any market, and a real estate investor can make a good living.  In 2011, Indiana, that niche is broad and growing.  Investors will find a veritable bevy of single-family homes on the market, with low prices and a low cost of living.  Once acquired, these properties open the door to a number of opportunities for profit in perpetually-growing Indiana communities, including conventional rental, retail flipping, and lease options.  It’s a great time and place to jump on low prices and growing value.  Don’t miss out.

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http://www.superiorprivatemoneyreturns.com

Based out of Indiana, Jay Redding is a real estate entrepreneur, consultant and educator with experience in residential and commercial investing.

The first tool that real estate investors must use to profit in the current economy is information.  Investors should have a good grasp of why and how the housing bubble burst in order to understand how to spot and avoid the next one.  There are many contributing factors to the crash of 2008, as the recently published 500-page report of the Financial Crisis Inquiry Commission set up by President Obama explains.  The most pertinent information to investors is the signs that they can look for that will influence their investing decisions.  This information can be simplified to a single phrase: when everybody is getting into real estate, it’s time to get out, and if nobody is investing in real estate, it’s time to get in.

Of course, this phrase is actually quite complicated to implement.  Knowing where to invest is key, and local markets vary widely in terms of the real estate activity.  However, understanding how housing economics work will make you a better investor.  In general, and I specifically mean “in general” property value will always go up since the population is growing and land is limited.  Property values in cities tend to increase faster than in other areas because the population is growing more quickly, leading to higher demand.  However, all this is general: there are fluctuations in the market that are very difficult to predict, and not all properties increase in value at the same rate.  This is why you must always invest with an eye towards the long-term in real estate.

Hindsight is 20/20, and from past experience we know that a sign that the housing bubble will burst is if the economy is overheating and experiencing tremendous growth.  Viewing this trend at a micro-level, we can see why.  High appreciation rates entice investors to buy houses, hold on to them for a period of days, weeks or months, and sell them without adding to the value of the house through renovations.  The seemingly ‘stable’ appreciation rates allow these flips to be done multiple times per property, artificially inflating the cost.  When this happens to most properties in the area, it seems as though the value of real estate is going up, when really the increase is due to speculation. The prices of the properties outpace the increases in incomes, as a result, many of these home owners (due to numerous reasons) end up defaulting on their loans, and the market bottoms out.  Obviously, this is a very simplistic analysis of what happened, but it gives you the general idea.

A way to protect yourself from this happening again is to own both rental properties and retail properties for sale.  If the economy slows, more people will want to rent, and if it picks up again, more people will want to buy properties.  If you own both, you’ve got yourself covered.    Another way to protect yourself is to assume the natural ebb and flow of housing prices when you invest: be flexible if the property you’ve just renovated isn’t selling. Make sure you have “Multiple” exit strategies that will work before you invest.   Maybe you can rent the property, sell the property on a lease option, or sell the property via a contract sale. Maybe you just have to lower the price and take a cut in your profits.   Understanding and analyzing the real estate market before you invest will make you a wiser, more strategic, and more profitable investor in the end.

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