Real estate investment is a field where everyone with a day’s experience is eager to throw in their 2 cents’ worth of advice.  The result is an ocean of advice that is all pretty much the same information repeated over and over—buy low, sell high; multi-unit housing; foreclosures and flipping; etc.  What most relatively inexperienced investors fail to realize, however, is that that ocean of advice is leading to a flood of competition in the classic real estate markets.  Although the economy is still recovering, and it is more of a buyer’s market than ever, it is still worth your while to consider some of the investment strategies that have worked in the past, but are not necessarily highly glamorous or publicized.

One great example of such a property type is the mobile home park.  When most people think about mobile home parks, the image that is conjured up is one of poverty and dead-end investment opportunities.  After all, how can an investor expect to profit from a population of people who are generally regarded to be poor?  But the simple truth is that affordable land and housing is more in-demand now than ever before, and living in a vehicle is simply a cheap and popular way to do it.  As long as there are roads, there will be people living in mobile homes.

But why choose to invest in a mobile home park as opposed to, for example, a multi-unit rental property?  What follows are just a few of the reasons why considering an unconventional approach to investment (such as the mobile home park) can provide added benefits to the investor: the operating costs of the mobile home park are generally much lower than in rental units (35-40% of the gross income of the park, versus 50-60% of the gross income of an apartment building); due to the expensive and labor-intensive process of moving a mobile home from one park to the next, the turnover rate once a lot is rented is extremely low compared to apartments, where an individual or family can literally pick up and leave at any minute of any day (generally, once a mobile home enters a lot, it stays there for decades); various tax benefits to the investor exist, including the fact that the depreciable assets of the mobile home park are basically roads, curbs, waterways, etc., all of which are city projects that depreciate over a period of 15 years (whereas in apartments, the primary depreciable asset is the building, which depreciates over a period of nearly 30 years); when it is time for a family or individual inhabiting a mobile home to pick up and leave, more often than not (due to the cost and difficulty of moving the home) they will simply sell the mobile home, on the lot, to a buyer who will move in there—from the investor’s perspective, nothing has changed but the homeowner, and there is no need to go out and find replacement tenants.

Mobile home parks are one very specific way of making an unconventional living as a real estate investor, but there are countless others.  The purpose of this article is not to get readers to go out and invest in such parks, but rather to encourage them to consider that there are more investment opportunities available to them than the collective pool of advice would have them believe. Nearly everything in our society requires space to function, and where there’s space, there’s a real estate investment opportunity.  Open your mind and consider options other than the classic single-family home, duplex, etc.  Wherever there’s money being spent, there’s money being made—you just have to find the spenders!

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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.

Investing in tax liens and tax deeds is one of the most secure ways to earn a return and potentially buy a property for only cents on the dollar.  However, each county runs the procedures differently and each state has its own set of rules, so the process can be complicated and confusing for somebody new to the arena.  Some states run tax lien certificate auctions, while others bid on the tax deeds.  The differences are small, but crucial to understand.

In tax liens auctions, the lien is up for sale.  The opening bid of the lien usually includes all the expenses the homeowner owes the county, such as property taxes, legal fees, interest, and administrative fees.  Through a competitive bidding process, the lien buyer can own the certificate and thus assumes the tax lien debt of the property owner.  The homeowner can redeem the property during the redemption period and pay the penalty, all of which goes to the lien holder, or the lien holder can sue for the rights to the property if the property is not redeemed.  The vast majority of the time, property will be redeemed since mortgage companies also are able to participate in redeeming the property.  It is in the mortgage companies’ best interest to redeem the property since the tax lien takes precedent over the mortgage lien, and if the property is not redeemed then the outstanding mortgage will not be paid.

Other states only offer tax deeds.  Tax deeds are different because it is not the lien certificate that is up for auction, but the property itself.   The highest bidder for the deed owns the rights to the property.  Some states may offer a redemption period, and if the former homeowner redeems the property, then the rights of the property transfer back to the homeowner.  With tax deeds, it is more important to research the properties thoroughly so that you don’t end up with a vacant lot or a worthless property that will be difficult to sell.  Also, some states do not absolve the liens on the property and the tax deed owner will be responsible for paying off any liens.  A title search at the county’s treasurers’ office will reveal if there are any outstanding liens.  Additionally, tax deeds are usually cash-only sales and the deed owner has 24 hours from the time of auction to give the money.  Tax liens may offer a longer window to produce the funds, but again, the rules vary from state to state.

Some states are better than others to invest in: those that offer tax lien certificates can give you a great return, the vast majority of the time, and perhaps a property 5% of the time.  States that offer tax deeds without a redemption period, like Massachusetts, can give you a property that was bought very cheaply, but will never offer a return.  First, select your state and county and then research the intricacies of the process before you decide to invest in tax liens. For more information about investing in Indiana tax liens, visit www.practicallyfreehouses.com, RF Tax Lien Investment’s website, a company that specializes in tax liens and can help you on your endeavors.

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To many people, buying tax liens seem like a great way to make a profit with very low risk.  The main risk of tax liens is that you will end up with a worthless lien and won’t recover your money, but there are other inconveniences of tax liens that can be easily overlooked.  These inconveniences are not risks, per say, but they are disadvantages that should be known before deciding to start the process of buying tax liens.

The exact timeline varies with each county, but generally there is a two month period from the time the list of properties with tax liens is published until the tax lien auction.  This means that within that period, homeowners can pay off the lien before it ever gets to auction.  This makes it very difficult to do the necessary due diligence to ensure that you won’t get stuck with a worthless lean.  For example, this past year (2010) in Marion County, Indiana, there were 7,000 properties with tax liens.  By the time of the auction two months later, around 4,000 went to sale.  This means that 3,000 of these properties were redeemed, and if some investors had picked one of these 3,000 properties to research, then their resources were wasted.  They could have spent considerable time and money hiring inspectors, figuring out the market value and doing market research only to find that the properties they had chosen had been redeemed.  The best way to mitigate this downside while still doing your due diligence is to do a ‘short-handed’ version of due diligence.  Inspections are a good idea, but don’t spend as much money doing research as you would on, say, a retail flip.  You want to make sure the property is worth more than the lien, but you don’t need to know exactly how much.

This brings me to the other downside of tax liens, inspections.  In Indiana, there are laws forbidding the lien buyer to enter the property.  This makes it difficult to complete your due diligence!  Only exterior inspections are allowed, which cover the foundation, siding, roofing, windows and brickwork.  However, you’re not allowed to see what the inside of the property actually looks like unless there are pre-existing photos.  This poses some risk, because if the homeowner defaulted on taxes, chances are that they haven’t had enough money to keep up the property and it may not look so pretty on the inside.  A way to solve this dilemma is to have a monetary reserve for renovations, if necessary, and to focus on properties that can sell for a high price, protecting your profit margin if renovations are necessary.

The last downside of tax liens is one inherent in the tax lien process, and that is you don’t know if you are going to get a return or a property when you buy a lien.  Many times the lien will be paid off, leaving you with some profit, but sometimes you will have the opportunity to sue for quiet title.  If you want to invest in tax liens, you have to be flexible with either outcome.  Also, don’t forget the one-year redemption period before you actually can own the property.  Patience and flexibility are key with tax liens, because you don’t really know what you’re getting until a year later.  If these downsides don’t deter you from the potential for a 10% to 15% return or owning a property for a fraction of the value, then tax liens may be a good investment for you.  For more information, visit www.practicallyfreehouses.com, RF Tax Lien Investment’s website, a company that specializes in tax liens and can help you on your endeavors.

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Deals are often made and broken, fortunes earned and lost, while sitting at the negotiating table over a real estate investment deal.  Mastering this facet of your investment career is one of the single most important skills you can acquire to be successful, and there is no shortage of idiosyncratic tips and strategies to help you become a more effective negotiator.  One of those, which was once the classic negotiating trick but has somehow lost its fervor in recent years, is to establish a system of rewards—I scratch your back, you scratch mine, everybody goes home happy.

The trouble with offering rewards or perks to your negotiating opponent, is that you are negotiating in an effort to make as much money as possible, and sacrificing tangible benefits to your opponent just doesn’t quite feel right in the realm of negotiating.  So the trick is to find the balance between what you’re willing to give up, and what your opponent might need to sweeten the deal a bit.  In order to do this, the effective negotiator (who, of course, has spent countless hours learning every aspect of the deal and preparing his approach to the letter and cent) must learn to place himself in the shoes of his opponent, and look at the deal from the alternate perspective.  Then simply ask yourself, “What would I need to want to go through with this deal?”

Classic examples of negotiating rewards—and you see them everywhere you go—include: providing discounts for buying larger quantities or bulk purchases, offering recommended business or letters of referral in return for better prices, agreeing to pay more in return for expedited service, etc.  Rewards are really just another flavor of compromise: both sides end up doing something they weren’t originally inclined to do (buy more, pay more, receive less, additional workload), but they make those small sacrifices with an eye on the bigger picture of getting a good deal done.  Anyone who has sat at the negotiating table of a great deal and watched it fall through, knows the frustration that leads to a willingness to compromise, sacrifice, and offer rewards in an effort to move forward with the transaction.

There is some tact involved here.  It can be off-putting, even insulting to tactlessly introduce a reward for business.  Of course, if you can get a deal done without laying anything down on the table, then it would be a mistake to sacrifice more than you have to.  Therefore, it is important to advance as far into negotiations as your comfort will allow, without providing any perks.  Offer it up too early, and you may lose out on a better deal for yourself.  But be careful; offer it up too late in the discussion, and you may have already lost the deal altogether.  This is an idiosyncratic skill—it will take a few tries for you to develop your own way of tactfully presenting your discount, offer, or reward in a way that is enticing but not disconcerting, at the right moment to get the deal done with the best results.  It’s a tricky balance, but remember that is starts with you placing yourself in the position of your opponent, thinking about what you would need in order for the terms of the deal to make it an acceptable one.

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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.

If you’ve browsed the channels on television in the early morning hours, you may have noticed real estate infomercials promising wealth without any risk if only you would buy this book or that program about tax liens.  The enthusiastic host, friendly and trustworthy, promises you profits without any risk.  At this point you should shut off the TV because of course, there is no investment that guarantees profits without risk, but is the infomercial completely full of it?  Truthfully, buying tax liens can be a great way to invest in real estate and it is possible to profit with low, but not zero, risk.

The laws governing tax liens vary among states and the procedures are different between counties, but generally tax liens offer a potential profit at minimal risk.  You, as the investor, are the tax lien buyer.  Your money goes to the municipality so they can use the funds for public works, and the homeowner is now indebted to you instead of the state. Once you purchase a tax lien, there is a redemption period in which the homeowner or mortgage company can pay you the amount owed and recover the property.  In Indiana, the redemption period is one year, and if the tax lien is paid off between 0 to 6 months, the buyer of the tax lien receives 10% interest.  If the lien is paid off in months 7 through 12, then there is a 15% return.  The specifics vary across states, but generally there is some return for the tax lien buyer. For the buyer, this means that if the tax lien is repaid, there is a guaranteed 10% to 15% return on your investment, in Indiana.  What a great deal!

If the tax lien is not repaid, then the buyer has the option to sue to clear liens off the title.  This is also where the risk comes in.  Some tax liens are so high that they are more expensive than the value of the property.  It is possible to have bought a $10,000 tax lien only to find out that the property is a vacant lot that you can’t do anything with.   However, you can offset this risk by doing your due diligence on the property before you purchase the tax lien.  Indiana counties publish a list of properties that have tax liens held against them either once or twice a year, and the auction for those tax liens take place around two months after the list is published.  This means you have two months to research the property before you bid for the tax lien, which greatly helps to mitigate the risk that you will purchase a worthless lien.

The risk for tax liens is low compared with the potential profits, but there is a much higher risk if you go into the auction blindly.  Indiana tax liens are a wonderful investment because you either get a 10% to 15% return, or you get the property for a fraction of the value.  Tax liens are not the ‘miracle investments’ that infomercials would lead you to believe, but they definitely can be profitable and a means for purchasing properties very cheaply.

For more information, visit www.practicallyfreehouses.com, RF Tax Lien Investment’s website, a company that specializes in tax liens and can help you on your endeavors.

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Owning or managing property for rent is a relatively reliable and time-tested means of establishing lucrative cash flow.  However, no facet of real estate investment puts investors closer to the consumer than being a landlord—and that means taking risks.  Anywhere you go, there is no shortage of people looking to take advantage of those around them, and in property rentals that means tenants looking for a free ride.  The biggest headaches for the average landlord are brought on by dealing with these troublesome tenants, and that means confrontations, evictions, collections, even legal action.  This is not a reason to turn tail and run, however; prudent and thorough landlords have every opportunity and advantage to protect themselves—if they have the knowledge to do so.

It is important for landlords to hope for the best, but expect the worst.  That means going into every new tenant relationship with an open and optimistic mindset, but at the same time making preparations on the assumption that this is going to be the worst tenant you’ve ever dealt with.  It is practically a universal standard that new tenant applicants must provide a verified bank account at the time of application, but most tenants believe that is enough to protect themselves and collect their assets in the long-term.  One of the oldest tricks in the book, however, is tenants’ applying for and moving into an apartment, and then immediately switching bank accounts to avoid collections.  The best defense against this ploy is for the landlord or manager to check every collected rent check against the account listed on the application, and investigate any differences.  This will be invaluable in the event of any legal action down the road.

If things fall apart, and a landlord finds himself having to evict a bad tenant, the strongest and most effective legal recourse is a bank levy.  After a money judgment has been issued as a result of the eviction, a bank levy is the judicial process by which funds are seized from a bank account to satisfy that judgment.  First a writ of execution must be requested from the same court where the eviction was implemented.  That writ must be served personally by the sheriff or proper process server to the bank that maintains the account in question, and is most effective when brought directly to the same branch used by the evicted tenant.

The bank is required to honor the levy, but only if they can definitively identify the holder of the account.  Usually this is not a problem, but in some cases it is not enough to have the name of your tenant; the more information you can provide on your evicted tenant, the better the chances of his being correctly identified at the bank for a levy—which is why it is so essential to keep accurate account records for all tenants, even while their checks are clearing without incident.

Owning and renting property is still a great way to maintain a steady income, even in the face of deadbeat tenants looking to take advantage of your willingness to put yourself at risk.  To ensure that your experience as a landlord is a generally pleasant one, the best thing to do is carefully screen new tenants.  Of course, sometimes a bad apple will find its way into the bunch, and so it is of vital importance to conscientiously and thoroughly keep up-to-date records and notes on all tenants, in the event that your relationship with one becomes a legal one.

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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.

Tax liens can be confusing for new investors, since the investor is actually buying a lien, not a property.  The rules governing tax liens vary from state to state and the procedure is slightly different among counties, but the idea behind tax liens is universal.  Municipalities run off of property taxes, using the money to pay for schools, roads, or other public works.  It is imperative, therefore, that the counties collect this tax.  If homeowners default on their property tax, then the county places a lien against the property.  Liens are positions of priority, indicating the order of entities to be paid if the property is in default.  Typically, mortgages are in the first lien position, but tax liens imposed by the state take first priority, including over IRS income tax liens. The county can then auction off these liens, ranging from hundreds to hundreds of thousands of dollars, to lien buyers, who then hold the debt of the homeowner.  This allows the counties to collect their necessary revenue and provides a great opportunity for the investor.

Once the investor has bought the lien, there is a redemption period of 1 year, in which the homeowner can pay back the investor and remove the lien from the property.  The exact figures vary among states, but the investor will get a return anywhere from 10% to 15%, in Indiana. Most of the time, the mortgage company will actually pay off the lien, since the outstanding mortgage would not be paid if the tax lien buyer sues for the property’s title.  However, in some cases nobody pays back the tax lien within the redemption period, and then the buyer will receive the tax deed.  After they have the deed, they may sue, to clear the title of all liens, known as suing for the quiet title.  The suit process is very simple: just hire a real estate attorney.

There is one important caveat to suing for quiet title.  Once a lien is sold at auction, the lien holder (meaning the homeowner) must be notified that it has been sold.  Some counties notify the lien holders and others require that the lien buyer (you) do that.  If this is not done properly, the lien holder can contest the sale when the buyer sues for quiet title.  If this occurs, then the buyer might not get the property, but they still maintain their lien position and will get a return when the tax lien is paid off.

If the suit is successful, then the property legally belongs to the lien buyer.  The best thing about obtaining a property this way is that it is not the buyer’s responsibility to pay the outstanding mortgage or any other liens on the property!  This process allows an investor to purchase a property for a very small fraction of what the property is actually worth.  There are however, risks to tax liens that should be researched before actually participating in a tax lien auction, but tax liens can be a great investment for any real estate investor.  For more information, visit www.practicallyfreehouses.com, RF Tax Lien Investment’s website, a company that specializes in tax liens and can help you on your endeavors.

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Through my experience in real estate investing, I’ve seen new real estate investors make the same mistakes over and over again.  I’ve listed the five most common mistakes I’ve seen in hopes that you, as a beginning real estate investor, will avoid them!

1.  Not taking action. So many people take the courses, attend the boot camps and return to their homes and do nothing!   They’re back in their same rut and they do nothing to change this.  When you get back from your learning session, take action!  The information is at its freshest immediately after you have taken the course.  To imprint your new information into your mind, you must take action so that your new skills and knowledge will stay with you. If you don’t, the chances of you ever actually taking any type of action on your new found knowledge becomes slim to none.  So take action now!

2.  Lack of Due Diligence.  Take time to do your research; don’t go out and buy a property because somebody says it’s a good deal!  Work the numbers.  You need to know the key facts and figures like the after repair value, taxes, insurance, and average rents to figure out your fixed costs and your income.  Then, know what the market is doing: is it growing, stable, or shrinking?  Research takes time, but it saves you from getting into messes.  The numbers don’t lie!

3.  Screen your tenants. If you are a buy and hold investor you will have to deal with tenants or hire a property management company to deal with tenants. People are generally good, but you don’t want to get stuck with bad tenants. Bad tenants can cost your thousands of dollars. Learn fair housing laws and proper screening techniques to weed out the bad apples.  If you do this correctly, 90% of the bad apples will self select themselves out leaving you the good tenants to choose from.

4.  Have exit clauses in your purchase contracts. Always have 1-2 exit clauses in your purchase contract to protect yourself and to provide an opportunity to back out of a deal if after further due diligence the deal does not look as good as it initially did.   Two very simple ones are, “this offer is subject to approval of my partner,” and “this offer is subject to satisfactory rehab estimates completed within 10 days of accepted offer.”  If you realize that the rehab costs will be too high and you have no room for profit, then you can walk away and save yourself from making a huge mistake!

5.  Not having a mentor.  90% of the problems that people run into can be avoided if they are just willing to find a mentor to help them out on their first few deals. Even if you have to give up some of your profit, working with a mentor is worth it.  You are gaining experience and they will protect you from doing something stupid.  After one or two deals with a mentor, you should have the self confidence and the knowledge to go on your own.

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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.