Flipping properties, or turning them over quickly with or without renovations, appeals to investors who want to realize their profits without delay.  The concept of flipping is simple to understand at first glance:  get a property under contract or buy a property cheaper than you sell it, including the cost of renovations. It may sound easy and straightforward, but each of these steps can be complicated and there are key things you should know before you use this real estate technique.

If the property you are interested in is an REO (real estate owned), or in other words owned by a bank, then there are certain rules that may apply.  If the property is owned by Fannie Mae, Freddie Mac or HUD, there will most likely be deed restrictions, forbidding the property to be sold for greater than 10% of it’s purchased value within 90 days of it’s purchase date or a restriction of the deed being transferred within 90 days of purchase. Some of these rules may be changing, but as of this writing, that is how it stands.   Although there are still techniques to get around these restrictions, they are way beyond the scope of this post and not for beginning investors.  For the beginner, properties like these, although sometimes quite undervalued in a market, are not ideal for wholesaling.  In wholesaling, the objective is to pass the property off of your hands as quickly as possible before there are any ongoing costs to owning or controlling the property (like the mortgage).  With the 90-day restriction, the profits you can make from wholesaling REOs are very limited without using advanced techniques.

However, REO properties do make great candidates for rehabs.  Renovations generally take anywhere from four to eight  weeks, so by the time renovations are completed, the deed restrictions are very close to the end of their limitations. The only limit to the sale price then is what the buyer will pay.  In addition, you have demonstrated increased value by the renovations completed forcing the value of the property upward. When dealing with REO’s, make sure to get a reputable home inspector to inspect the home, chances are the former owners did not maintain the upkeep of the property.  Furthermore, if the house has been vacant for some time, many items may have fallen into disrepair.

Another key consideration when dealing with quick turnover is that your profits are VERY dependent on the initial price you pay for the house.  Before negotiating with a bank or other seller, work the numbers to determine the absolute amount you would spend to purchase.  During the negotiations, do not let the seller pressure you into spending more than that number.  It will eat into your profits and may make the ordeal not worth your time.  If you cannot get the house at a price that makes sense to you, walk away.  If you’ve accurately run your numbers, then the unfortunate investor to buy that house will not get an adequate profit out of it either. Keep those things in mind and flipping an REO will be a smoother and more pleasant process.

Tell us what you think by leaving a comment.  If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.superiorprivatemoneyreturns.com

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

Related Blogs

Closing, which is the actual transfer of the deed from the buyer to the seller, can be a stressful time in your real estate deal if you haven’t taken the necessary steps to prepare yourself.   There are horror stories of buyers purchasing a new home only to find out a few months later the seller wrongfully obtained it, causing pain and anguish for both parties.  How can you avoid scenarios like this?  The most important step to ensure a fluid closing process is to hire a reputable title company.

A good title company will research the deed, looking for proof of ownership each time the title was bought and sold, thereby ensuring that the house is the seller’s rightful property. Unfortunate examples of what can happen with mistakes in deed transfers have been in the news recently, involving cases of wrongful foreclosure procedures initiated by Fannie Mae and Freddie Mac due to a variety of reasons involving negligence and irresponsible business operations.  The problem now is that the former owners rightfully still own these foreclosed homes that were bought by innocent buyers.  This puts the buyers in an unfair situation, and can force them to return the houses back to the previous owners.  Hiring a reputable title company can help you to avoid being caught in a situation like this.  It is worth spending money on a good title company that does thorough research to feel secure that your house is legally yours after closing.

In buying a REO, the bank may dictate which title company is to be used.  You should try to negotiate this issue if you have a different title company you feel more comfortable working with. Talk to your title company and explain the situation, and they may give you a discount for taking business away from a competitor title company.  If you include using your title company as part of your offer, the bank may be agreeable to switching companies.  Just because the bank states who they want to have the closing with doesn’t mean it is locked in stone.  They still want to move the property.  You may have to pay the difference between what their title company fees are compared to what your title company charges. But if you have more confidence and peace of mind with your company, it is worth spending a little extra money to have that peace of mind.

The last thing to remember with title companies is to make sure you provide adequate time for them to complete their work. You don’t want to rush everything at the last minute, because that is when mistakes happen.  If you find yourself in a rushed situation, you may have to reschedule the closing. Although that will irritate some people, it is better than overlooking important information.  Research good title companies and give them enough time to do their job, and you should be safe and secure in closing.

Tell us what you think by leaving a comment.  If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.superiorprivatemoneyreturns.com

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

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

Related Blogs

A tax lien is imposed by the government to secure the value of unpaid or delinquent taxes by acquiring the rights to personal property or real estate. Unlike most debts, tax liens are transferable from owner to owner, or generation to generation. This is called running with the land, and it means that a lien on a house does not simply vanish when a home is sold; rather, it becomes the responsibility of the new owner to pay the government. It is relatively simple to research whether or not a title has a lien imposed on it, and so payment of the delinquent tax is usually finalized in the terms of the purchase, and using the profits from the sale. For this reason, tax liens can be very crippling for a real estate owner, who no longer stands to profit even from selling the property.

Although it is the responsibility of the real estate owner to pay the debt incurred by taxes, it is not always—and in fact rarely is—the owner who pays the government directly. Most often it is the bank that holds a mortgage for the property. It might seem strange that such a creditor would be willing to offer more money to pay the delinquent debts of someone who has clearly demonstrated an inability to uphold the terms of such a transaction. However, if the debt associated with the tax lien is not paid, then eventually the property will be foreclosed by the government, and the value of the property (and therefore that of its mortgage) will plummet. For this reason, banks are often willing to pay to remove tax liens and the risk of foreclosure, but they then must turn around and demand payment from the owner. This is why banks run credit checks before handing out loans.

The mortgage holder pays the government using an escrow account, and although it seems like something done to help the home-owner, it is in fact an act of self-defense on the part of the bank, who is acting to prevent its mortgage investment from losing value. Understanding this, the government sends notices to both the home owner and the mortgage owner in the event of the imposition of a tax lien, and often the bank will set up an escrow account and simply pay the government with no involvement of the homeowner whatsoever.

Tell us what you think by leaving a comment. If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

Related Blogs

Investing in real estate is a good financial plan. Even with the market downturns, real estate is one of the safest places for your money. The market always recovers and over the long term, at a minimum, your investment increases. But, what if you want to make a profit on your investment faster? There are several ways to do so and one is in purchasing a home in foreclosure.

The positive to purchasing a foreclosure home is the below market price an investor can pay. Many times, the purchase price can be substantially lower than the market value of the home. The buyer can make a profit immediately on his/her investment property. When you purchase a new car, it looses value as soon as it is driven off the lot. Investing in a foreclosure home has the opposite return on your money.

With little or no work, the property can be flipped at market price thereby giving the investor an immediate profit. If the investor wishes to hold on to the home as an investment property for rent, the gap between the purchase price paid for the house and the home’s actual market value will increase even more over time. Either way, you have made a smart choice.

The investor should be aware of the downsides to foreclosure homes so he/she can avoid those types of situations. The most important is to ensure there are no other mortgages or liens on the property. Often, if a borrower can not afford to pay his/her mortgage, they may have other unfulfilled contracts as well. If they took out a second mortgage, that company will have to release the property before it can be purchased by another party. Similarly, if a contractor performed work on the house and wasn’t paid in full, they can place a lien on the property which can prohibit the new buyer from possessing the property’s title. A title search should be done so the new investor has the knowledge he/she needs to determine whether this particular foreclosure home is the best choice.

Understanding the local market is key in purchasing any home but also in forecasting your potential profit after the investment in a foreclosure. If the original borrower had little equity in a property and the property’s value was originally inflated, the bank is probably owed more than the actual value of the home. In this case, the bank may try to get more for the property than they would otherwise. As an investor you are looking for a good deal in a foreclosure. Not to pay a bank that made a poor lending choice.

Investing in a foreclosure home is a strategic move. Your profit margin can be substantially larger than a typical home purchase. As long as the investor is aware of the home’s circumstances and the local market, a foreclosure home can add significant value to your investment portfolio.

Tell us what you think by leaving a comment. If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

Based out of Indiana, Jay Redding is a real estate entrepreneur, consultant and educator with experience in residential and commercial investing.ize-full wp-image-380″ src=”http://investmentpropertymadeeasy.com/wp-content/uploads/2010/05/Jay-Redding-003-150×150.jpg” alt=”" width=”150″ height=”150″ /> 

Investing in real estate is a good financial plan. Even with the market downturns, real estate is one of the safest places for your money. The market always recovers and over the long term, at a minimum, your investment increases. But, what if you want to make a profit on your investment faster? There are several ways to do so and one is in purchasing a home in foreclosure.

The positive to purchasing a foreclosure home is the below market price an investor can pay. Many times, the purchase price can be substantially lower than the market value of the home. The buyer can make a profit immediately on his/her investment property. When you purchase a new car, it looses value as soon as it is driven off the lot. Investing in a foreclosure home has the opposite return on your money.

With little or no work, the property can be flipped at market price thereby giving the investor an immediate profit. If the investor wishes to hold on to the home as an investment property for rent, the gap between the purchase price paid for the house and the home’s actual market value will increase even more over time. Either way, you have made a smart choice.

The investor should be aware of the downsides to foreclosure homes so he/she can avoid those types of situations. The most important is to ensure there are no other mortgages or liens on the property. Often, if a borrower can not afford to pay his/her mortgage, they may have other unfulfilled contracts as well. If they took out a second mortgage, that company will have to release the property before it can be purchased by another party. Similarly, if a contractor performed work on the house and wasn’t paid in full, they can place a lien on the property which can prohibit the new buyer from possessing the property’s title. A title search should be done so the new investor has the knowledge he/she needs to determine whether this particular foreclosure home is the best choice.

Understanding the local market is key in purchasing any home but also in forecasting your potential profit after the investment in a foreclosure. If the original borrower had little equity in a property and the property’s value was originally inflated, the bank is probably owed more than the actual value of the home. In this case, the bank may try to get more for the property than they would otherwise. As an investor you are looking for a good deal in a foreclosure. Not to pay a bank that made a poor lending choice.

Investing in a foreclosure home is a strategic move. Your profit margin can be substantially larger than a typical home purchase. As long as the investor is aware of the home’s circumstances and the local market, a foreclosure home can add significant value to your investment portfolio.

Tell us what you think by leaving a comment. If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

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

Related Blogs

A lease-option is essentially a two part contract: a traditional lease or rental agreement for a real estate property, with an option for the renter to purchase that property within a certain time period. As with most property contracts, there is no standard structure with lease-options; rather, it is up to the buyer and seller to reach agreeable terms. Most lease-options have a few characteristics in common, however—a fixed price for the future purchase of the property, and an increase in price to cover the “option” (this can either be an upfront payment, or an increased monthly rental rate). The lease-option framework holds a few real advantages for a buyer, but it comes with inherent risks as well.

It should be noted for prospective buyers that the majority of lease-option contracts do not result in a sale. This is because buyers who enter into this structure of contract (as opposed to those who simply make a purchase outright) tend to be unable to purchase the real estate at the time the contract is signed, whether the reason is a denied home loan, poor credit, lack of income or savings, or anything else. Generally the attitude of the buyer is that their circumstances will improve and they will be able to purchase in the near future—this is often not the case.

That being said, if it is impossible to make an outright purchase, a lease-option can secure a buyer the rights to a piece of real estate while they try to accumulate the funds necessary to make the purchase, at a price they know well in advance. This assurance comes with a few drawbacks, but most can be overcome with good planning. In the contract, the option must always be paid for—sometimes there is an upfront payment to secure the renter’s right to eventually make a purchase, but more often the monthly rent is increased to pay for the option over a period of time. In many cases, it can be worked out so that the upfront payment can be used as a down payment on the eventual purchase, and the same can be done with the marginal increase in rent. Therefore, if the buyer makes use of the option, the rent is no more expensive than if it had been a simple lease, and the renter’s guarantee to be able to purchase is free. A lease-option only tends to be more expensive when the renter does not actually exercise the option, and therefore loses the upfront payment or any additional rent paid toward the purchase of the real estate.

As far as the fixed price for purchase goes, whether or not the buyer stands to profit depends entirely upon the real estate market. Generally sellers revert to lease-options when the housing market is poor, because they can list the sale price of the house at a higher rate than could be earned in the market. On the other hand, if the buyer enters into such an agreement, and while they are renting the real estate market turns and strengthens, then they have a guaranteed purchase price which may very well be surpassed by the market value. Both the buyer and seller in a lease-option stand to either gain or lose profits based on the conditions of the market, and thorough research should be done accordingly.

Tell us what you think by leaving a comment. If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.comnvestmentpropertymadeeasy.com/wp-content/uploads/2011/10/social-media-pic-10-17-1121-e1319063159658.jpg”>

A lease-option is essentially a two part contract: a traditional lease or rental agreement for a real estate property, with an option for the renter to purchase that property within a certain time period. As with most property contracts, there is no standard structure with lease-options; rather, it is up to the buyer and seller to reach agreeable terms. Most lease-options have a few characteristics in common, however—a fixed price for the future purchase of the property, and an increase in price to cover the “option” (this can either be an upfront payment, or an increased monthly rental rate). The lease-option framework holds a few real advantages for a buyer, but it comes with inherent risks as well.

It should be noted for prospective buyers that the majority of lease-option contracts do not result in a sale. This is because buyers who enter into this structure of contract (as opposed to those who simply make a purchase outright) tend to be unable to purchase the real estate at the time the contract is signed, whether the reason is a denied home loan, poor credit, lack of income or savings, or anything else. Generally the attitude of the buyer is that their circumstances will improve and they will be able to purchase in the near future—this is often not the case.

That being said, if it is impossible to make an outright purchase, a lease-option can secure a buyer the rights to a piece of real estate while they try to accumulate the funds necessary to make the purchase, at a price they know well in advance. This assurance comes with a few drawbacks, but most can be overcome with good planning. In the contract, the option must always be paid for—sometimes there is an upfront payment to secure the renter’s right to eventually make a purchase, but more often the monthly rent is increased to pay for the option over a period of time. In many cases, it can be worked out so that the upfront payment can be used as a down payment on the eventual purchase, and the same can be done with the marginal increase in rent. Therefore, if the buyer makes use of the option, the rent is no more expensive than if it had been a simple lease, and the renter’s guarantee to be able to purchase is free. A lease-option only tends to be more expensive when the renter does not actually exercise the option, and therefore loses the upfront payment or any additional rent paid toward the purchase of the real estate.

As far as the fixed price for purchase goes, whether or not the buyer stands to profit depends entirely upon the real estate market. Generally sellers revert to lease-options when the housing market is poor, because they can list the sale price of the house at a higher rate than could be earned in the market. On the other hand, if the buyer enters into such an agreement, and while they are renting the real estate market turns and strengthens, then they have a guaranteed purchase price which may very well be surpassed by the market value. Both the buyer and seller in a lease-option stand to either gain or lose profits based on the conditions of the market, and thorough research should be done accordingly.

Tell us what you think by leaving a comment. If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.comnvestmentpropertymadeeasy.com/wp-content/uploads/2011/10/social-media-pic-10-17-1121-e1319063159658.jpg”>

A lease-option is essentially a two part contract: a traditional lease or rental agreement for a real estate property, with an option for the renter to purchase that property within a certain time period. As with most property contracts, there is no standard structure with lease-options; rather, it is up to the buyer and seller to reach agreeable terms. Most lease-options have a few characteristics in common, however—a fixed price for the future purchase of the property, and an increase in price to cover the “option” (this can either be an upfront payment, or an increased monthly rental rate). The lease-option framework holds a few real advantages for a buyer, but it comes with inherent risks as well.

It should be noted for prospective buyers that the majority of lease-option contracts do not result in a sale. This is because buyers who enter into this structure of contract (as opposed to those who simply make a purchase outright) tend to be unable to purchase the real estate at the time the contract is signed, whether the reason is a denied home loan, poor credit, lack of income or savings, or anything else. Generally the attitude of the buyer is that their circumstances will improve and they will be able to purchase in the near future—this is often not the case.

That being said, if it is impossible to make an outright purchase, a lease-option can secure a buyer the rights to a piece of real estate while they try to accumulate the funds necessary to make the purchase, at a price they know well in advance. This assurance comes with a few drawbacks, but most can be overcome with good planning. In the contract, the option must always be paid for—sometimes there is an upfront payment to secure the renter’s right to eventually make a purchase, but more often the monthly rent is increased to pay for the option over a period of time. In many cases, it can be worked out so that the upfront payment can be used as a down payment on the eventual purchase, and the same can be done with the marginal increase in rent. Therefore, if the buyer makes use of the option, the rent is no more expensive than if it had been a simple lease, and the renter’s guarantee to be able to purchase is free. A lease-option only tends to be more expensive when the renter does not actually exercise the option, and therefore loses the upfront payment or any additional rent paid toward the purchase of the real estate.

As far as the fixed price for purchase goes, whether or not the buyer stands to profit depends entirely upon the real estate market. Generally sellers revert to lease-options when the housing market is poor, because they can list the sale price of the house at a higher rate than could be earned in the market. On the other hand, if the buyer enters into such an agreement, and while they are renting the real estate market turns and strengthens, then they have a guaranteed purchase price which may very well be surpassed by the market value. Both the buyer and seller in a lease-option stand to either gain or lose profits based on the conditions of the market, and thorough research should be done accordingly.

Tell us what you think by leaving a comment. If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.comnvestmentpropertymadeeasy.com/wp-content/uploads/2011/10/social-media-pic-10-17-1121-e1319063159658.jpg”>

A lease-option is essentially a two part contract: a traditional lease or rental agreement for a real estate property, with an option for the renter to purchase that property within a certain time period. As with most property contracts, there is no standard structure with lease-options; rather, it is up to the buyer and seller to reach agreeable terms. Most lease-options have a few characteristics in common, however—a fixed price for the future purchase of the property, and an increase in price to cover the “option” (this can either be an upfront payment, or an increased monthly rental rate). The lease-option framework holds a few real advantages for a buyer, but it comes with inherent risks as well.

It should be noted for prospective buyers that the majority of lease-option contracts do not result in a sale. This is because buyers who enter into this structure of contract (as opposed to those who simply make a purchase outright) tend to be unable to purchase the real estate at the time the contract is signed, whether the reason is a denied home loan, poor credit, lack of income or savings, or anything else. Generally the attitude of the buyer is that their circumstances will improve and they will be able to purchase in the near future—this is often not the case.

That being said, if it is impossible to make an outright purchase, a lease-option can secure a buyer the rights to a piece of real estate while they try to accumulate the funds necessary to make the purchase, at a price they know well in advance. This assurance comes with a few drawbacks, but most can be overcome with good planning. In the contract, the option must always be paid for—sometimes there is an upfront payment to secure the renter’s right to eventually make a purchase, but more often the monthly rent is increased to pay for the option over a period of time. In many cases, it can be worked out so that the upfront payment can be used as a down payment on the eventual purchase, and the same can be done with the marginal increase in rent. Therefore, if the buyer makes use of the option, the rent is no more expensive than if it had been a simple lease, and the renter’s guarantee to be able to purchase is free. A lease-option only tends to be more expensive when the renter does not actually exercise the option, and therefore loses the upfront payment or any additional rent paid toward the purchase of the real estate.

As far as the fixed price for purchase goes, whether or not the buyer stands to profit depends entirely upon the real estate market. Generally sellers revert to lease-options when the housing market is poor, because they can list the sale price of the house at a higher rate than could be earned in the market. On the other hand, if the buyer enters into such an agreement, and while they are renting the real estate market turns and strengthens, then they have a guaranteed purchase price which may very well be surpassed by the market value. Both the buyer and seller in a lease-option stand to either gain or lose profits based on the conditions of the market, and thorough research should be done accordingly.

Tell us what you think by leaving a comment. If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

Related Blogs

Related Blogs

Related Blogs

We are living in unprecedented economic times right now in America.  As in all extreme conditions, some people are bound to suffer terribly, while others manage to navigate the hardships and perhaps emerge even better than when they started.  Our economy—ripe with poverty, unemployment, defaulted mortgages, and foreclosures—is under such conditions; many can do nothing but ride it out, and hope things improve before they are completely devastated.  Others, on the other hand, have realized that the down economy creates a buyer’s market—and what’s more, the record number of foreclosures provides incredible opportunities for investors of any level of experience to find great deals.

While there have always been “foreclosure cleanup businesses”—investment firms which deal only in purchasing, repairing, and reselling foreclosed and other distressed properties—the recent record number of foreclosures have caused a significant chunk of the investing population to follow this route toward success.  Like all major investments, however, foreclosures require substantial research before-hand, the ability and willingness to say “no” to a bad deal, guidance of an experienced professional, and commitment to see a major project through to completion.  It is no easy task, but the opportunities to profit are often unbelievable.

Once an investor decides to try his hand in foreclosure cleanup, the question becomes, “Where do I find these great deals, and how do I beat the hoards of other investors to the punch?”.  The short answer is that the deals are everywhere (advertised online, in newspapers, MLS, etc.).  But—as you may have already discovered—everyone has equal access to and awareness of these resources, so using them does not provide any real advantage over the field.

As an alternative to the conventional listing sources, consider using the Chamber of Commerce as a source of information and leads.  Chambers are generally local, but occur at every level of government and society—town, city, state, regional, national, international, etc.  In general, a chamber of commerce is a network of businesses meeting together to preserve and advance the interests of business (and therefore the condition of the market and economy).  Often called a board of trade, the chamber voluntarily assumes the responsibility of watching over the often-local economy like a sort of consortium of super heroes.

And, as it turns out, you’re invited!  Practically all Chambers—even the U.S. Chamber of Commerce—are membership organizations, which means that for a modest membership fee, any old real estate investor can attend and participate in these meetings, where first news of any market or community updates is broken and discussed.  If you want to succeed in a business with so much competition as foreclosure investments, then you need to be on the cutting edge.  When it comes to matters of the local economy (including foreclosed homes), the local Chamber of Commerce is the place to be.  Sitting as a fly on a wall in these meetings with a notepad or a smart phone could be your ticket to hearing about the best deals before they are publicly listed.  For those investors who take advantage, the head-start on these great foreclosure deals will be well worth the couple hundred dollars paid as annual dues for membership in the Chamber (these costs vary dramatically with the particular Chamber).  Information is almost never free; but when the information is good enough, you barely even notice the cost!

Tell us what you think by leaving a comment. If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

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

Related Blogs

There is no shortage of real estate in which to invest—it is simply a matter of finding the properties that are likely to be profitable.  Although much of this is based on the investor’s involvement in and knowledge of the local community in which he works (therefore providing for informational gaps that give some investors a competitive advantage over others), there are some reliable sources for finding investment properties which can be accessed by anyone.  This includes, but is not limited to: real estate agents, market listings, wholesalers, and public auctions.

Real estate agents tend to be a good source for finding property for those who are not intimately aware of the real estate available in the community.  One would not be hard-pressed to find an experienced real estate investor working through an agent, for those who are relatively new to the process, real estate agents can be an extremely advantageous source of information.  It is the job of an agent to be aware of the local property that is available for purchase, and they tend to use software which organizes those properties into a more effective form where the investor can narrow down the options based on price, location, or any of a multitude of other parameters.  Although agents can be very helpful, the drawback is that their income is derived from the investor’s pocket.

In order to cut out the middle man, one approach is to subscribe directly to market listings.  Although this, too, requires payment from the investor, the market listings do not earn a percentage of the price of purchase of the real estate; rather, there tends to be a relatively small monthly or yearly subscription fee to gain access to a list of available real estate.  Subscribing to market listing organizations requires a proactive investor who is familiar with the language and process of real estate investment, and who is himself willing to search for the right property (as opposed to delegating that responsibility to a real estate agent).

Wholesalers can be anyone or any organization which owns a great deal of real estate—enough that each property does not need to be sold at exorbitant prices in order for the organization to profit.  The most common type of wholesaler is a bank, which usually has a Real Estate Owned (REO) department to manage all properties owned as a result of foreclosure.  Accessing this source requires an even greater familiarity with the process of real estate investment, but the reward is property that tends to be sold well under the market value.  It is something akin to buying groceries from an enormous national supermarket, as opposed to the small mom-and-pop store at the end of the block.  Sometimes REO properties are auctioned off publicly.  This is a forum where anyone can purchase bank-or-wholesaler-owned properties cheaply, but—as all auctions do—it requires competing with whoever else happens to attend on that day, and it can therefore be unsuccessful.

Tell us what you think by leaving a comment. If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

Related Blogs

Understanding the difference between land and the actual house itself may seem obvious, but many people don’t realize that it should impact their investment strategy. Land is in demand, and as our population increases, the demand for land will increase, appreciating in value. (Side note: this is not true for all land. Some land can be undesirable because of its location, but often this is not the case).The house, on the other hand, is a physical structure which will need repairs and depreciates in value. When looking to invest for the long term, you should be thinking about the value of the land more than the value of the house. The opportunity for your maximum returns comes from the appreciation of the land.

If you are distinguishing between house and land correctly, you will come to the conclusion that the best investments may be in small, ugly, run-down homes if they are in a good location. You can buy those properties for cheap and either destroy the house and sell the lot (sometimes poor structures detract from the value of the land) or you may improve or rebuild the house. The house is always changeable, but the land is not.

A great way to get a feeling for the potential value for the land is by looking at government plans for the community. Growing communities are key places that will maximize your profit. Indicators for growing communities include plans for building shopping centers, expanding roads, new hospitals and increased public transportation. You can find out this information by contacting your economic development office or your town hall. Another area is by looking at the school system. Are the schools ranked near the top? Strong schools are an attractive aspect for parents. You may also want to look in areas on the fringe of big cities or commercial centers, because those prices will increase as the value of being close to the city increases. Spend most of your time researching the land, not the actual house, and you’ll make a better long term investment.

Tell us what you think by writing a comment. If you would like updates of when new posts are made to this site, make sure you subscribe to the RSS feed.

Tell us what you think by leaving a comment. If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

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

Related Blogs

There is never a shortage of investors, young or otherwise, that are looking to get their start in real estate.  There are plenty of success stories and the allure of working a job on your own time and terms, where there is no cap on your income potential, is very attractive.  But for every success story, there must be 1,000 failures—those who never made it past their first or second investment.  In most cases, early failures can be avoided by simply doing the proper research, and navigating away from some of the more common mistakes.

The first great error made by new investors is one of mentality.  Real estate is no longer the kind of market and industry that allows you to throw some money in any random direction, shut your eyes, and wind up with a 1,000% profit.  For a long time, it was safe to assume that, considering the rapid growth in our nation’s cities and suburbs, any piece of property you purchased was sure to be more valuable 5, 10, and certainly 20 years down the road.  Now, in a struggling economy that sees financial institutions in the straits, and homeowners and renters strapped for cash, it is not such a sure bet.  Today’s real estate game is not about riding a wave of appreciation, but rather about finding good individual deals.  This can only be done with diligence—consistently generating and following up on leads, crunching numbers, and making good decisions.

Finding good deals—properties which you are absolutely certain can be purchased (and probably repaired) for at least 10% below the retail market value of that property—is a recession-proof investment strategy.  In tough times, like all other opportunities to profit, finding good deals becomes more competitive; more people looking for fewer deals.  But desperate sellers lead to creative financing opportunities, and never underestimate the power of less money now (versus more money later).  You can find or create deals in any economy.

It follows that the second major error to avoid is investing blindly in a property.  This means just reading the price tag and signing your name, without a thorough knowledge of the property’s problems and equity, where it will cost you money, and where it bears the potential to earn you income.  Do your research; hire a credible appraiser and contractor, and know what you’re buying.  Risk is inversely proportional to knowledge.

Foresight generally derives from knowledge and understanding.  Now, with a thorough understanding of what you are getting into with your investment, you should have a concept of cash flow.  Cash flow kills new investors, because when the chips are down, start-up investors with no cash reserves are forced into very sticky situations (reduced rates, improper maintenance and repair, etc.).  The key is to have some back-up cash prepared for the tough times, so when they hit you are prepared to maintain your investments and hold out for better times.  Sometimes it’s better to take bigger loans, even when you have your own cash, to finance investments, just so that you have a contingency plan in the bank.  It might hurt your wallet some (as the tough times always do), but it will save you from ruin.

Tell us what you think J

SuperiorPrivateMoneyReturns.com

Related Blogs

Not to be confused with, “Real Estate: A Recession-Proof Industry”.  Clearly, over the past ten years, the real estate market has been falling to a catastrophic point.  This title is not meant to suggest that real estate is not affected by the economy; rather, I mean to say that an informed investor can profit in any type of market or economy, simply by knowing what he’s getting into and modifying his strategies accordingly.

Sure, there are buyer’s markets and seller’s markets, but truth be told, there is no true good or bad time to make an investment.  You can make money any time by making intelligent, informed decisions; and you can lose money in any market by making hasty or ill-advised decisions.  If you are waiting for changes in the market to hatch your plan, maybe you should consider adjusting your plan and hatching it now.  Real estate, unlike stocks and bonds, is not something that fluctuates dramatically day-to-day; it follows long, drawn-out cycles and trends which must simply be endured during the course of any investment career.

The extremely oversimplified version is this: in a rising market, finding deals is very competitive and difficult, but they can be quickly resold for reliable profit; in a falling market, those same good deals become more abundant, but because you cannot expect to quickly resell the property for profit, your good deal must now be a great deal to compensate either for the cost of ownership or repair as you await an opportunity to sell or rent for profit.  Obviously, there are a million factors with which you could complicate that equation, but it illustrates the potential to make money even during hard times.

The best advice for making good decisions is—quite obviously—to be well-informed by doing thorough research.  Study market trends at every scale (from international all the way down to the specific target neighborhood).  Find local professionals who can help interpret highly localized trends, for example the amount of time a home spends on the market, asking vs. sale prices, etc., and how all of those figures compare to previous years.  Having a solid foundation of knowledge is the key to understanding a neighborhood, where it’s been, and where it’s heading.  This is the only way to effectively shape and mold your strategy to fit the circumstances.  You cannot simply always rely on flipping homes, or always rely on long-term ownership.  Depending on the market conditions, one or more of these approaches could be a dead end.

Let us know what you think. J

SuperiorPrivateMoneyReturns.com

Related Blogs