Some people who invest in investment real estate do so as a full-time endeavor.  This is because being a real estate investor can take a great deal of time and work.  First, one must find a reasonably-priced investment property that can be improved upon for sale.  Then, one must purchase the property, while taking into account any bureaucratic, financial, or legal entanglements attached to the property.  Afterwards, the person must plan and carry out repairs, all while trying not to go over-budget.  Finally, one must market the property for buyers.

However, there are people with other professional jobs who enter the business as a side project or one-time deal.  If you are in the latter group, you may be in a situation in which your own time is a luxury you simply cannot afford to spend on renovating and advertising a property.  Perhaps you already have a demanding full-time job, as well as family or community concerns that eat up the rest of your day.

If you are in this position, carrying out all the complex processes yourself is doubly daunting.   Therefore, you may want to make your investment in a turnkey property.  This is a piece of real estate that is completely ready for sale, or even for moving in—some turnkey properties can come with furnishings for the user.  Of course, such a property is likely to be much more expensive than one that still needs a lot of work done.  However, if you have a demanding, high-paying primary job, a ready-made  piece of real estate might be your best bet.  To borrow a term from the economists, you should also consider the opportunity costs.  You may save money by taking more time on a cheap property, but you will lose the opportunity to generate more profits from your regular job and side projects.

When investing in a turnkey property, do make sure to look over the house or apartment carefully.  There is a possibility that it is not as sale-ready as the agent or seller has told you.  You may also want to get a lawyer, para-legal, or alternative realtor to look over any agreements you have to sign, to make sure you are not being stuck with the previous owner’s legal problems.

In this day and age, time is money.  To save one, you may have to spend more of the other, but to the investor who is also a busy professional, such an exchange could be well worthwhile.

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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.

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Over the course of the past few years, one of the benefits of our otherwise-ravaged economy has been new initiatives from the federal government to provide incentives for consumers of various types. It’s like a psychological stimulus plan. The government is doing everything it can to hold consumers by the hand and say, “It’s OK, everything’s going to be fine and back to normal in no time. Here’s some money to spend, and we’ll go ahead and get rid of these taxes. Just go out and spend some cash!”. Obviously, it’s not been quite that simple, but some of the government’s new initiatives do in fact seem to be overt attempts to stimulate consumption.

Many investors (both seasoned and amateur) as well as start-up homeowners seek to make the most of their money by purchasing property under the market value. Unless you strike gold and happen to find the one seller on earth who doesn’t care about money, getting a home for less-than-market-value is most likely going to require making sacrifices in terms of quality, and this inevitably means sinking additional funds into repairs, replacements, and improvements. Due to this additional, post-contractual expense associated with rehab properties, many buyers fail to properly plan for this process, and end up with a defaulted mortgage and a failed investment attempt. For that reason, it is essential to research thoroughly what will be required to bring a property to market value, and factor that into both your profit margin and your mortgage considerations.

The federal government’s new way to keep us pumping what little money we have into the economy (especially banks and other lenders) is called the 203k Rehab Loan. This is a loan program through which home buyers can apply for funding from the federal government to purchase and repair the property. The catch? The property must be your primary residence. It’s not all bad though, you merely have to reside there for any 2 years (not necessarily consecutive) during a period of 5 years. This means you can’t simply use the government’s money to buy up and repair investment properties and become the next American billionaire. However, there is room to navigate within the rules, and many investors use the 203k Rehab Loan as a means of doing just that—meeting minimum residence requirements in order to maximize profit opportunities.

The 203k is largely ignorant of credit history. It is designed to give low-income families opportunities during difficult economic times to raise a family in a home and neighborhood whose quality exceeds that which they could have otherwise afforded. It is a reliable and safe source of funding, and with the number of available rehab properties below market value reaching record levels, there has never been a better time to take advantage of federal incentive programs to buy a rehab home! Who knows, in ten years, it could make you $1 million!

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The value of marketing in real estate success cannot be overstated. It is your only way of reaching customers and establishing the image and character of you and your business (as interpreted by the public). It can be very expensive, and extremely time consuming, but consistent and varied marketing is at the root of every real estate success story. If no one knows you, no one can do business. The sooner an investor or entrepreneur realizes this—that his primary job is marketing—the faster he will open up his business to an influx of leads and begin generating the kind of income we all dream about when we get into this business.

There are two basic philosophies with which to approach your marketing campaign, whether you spend $5 on it or $500,000. The first is called indirect response marketing. You are not talking to anyone in particular, just reaching out to the community, attempting to make them aware that you are here and ready for all their real estate needs. You cast as wide a net as you can, and hope that it catches a few solid leads for you.

The contrasting approach is called direct response marketing, and it is done by selecting a specific portion of the community, and targeting them as directly as possible. Rather than casting a net to catch your fish, here you are using a line and bait, looking for just one fish. The bait you attach to your marketing is a specific service you offer (“We Buy Homes As Is”, for example), and it should be any service needed by your target market. This should be less expensive that indirect response, simply because it occurs at a smaller scale, but it probably won’t produce as many raw leads (although it will produce only those leads relevant to your business’ interests).

Neither of these approaches is right or wrong, and in fact they are most effective when used together. If your business has the cash reserves to do it, there should be a massive indirect response campaign, supplemented by several, highly-specific direct response marketing campaigns to various target communities. The choice (or balance) between the two will be entirely up to you or your business, and it will depend on which direction you want to go.

The next major decision will be the type of medium you employ. Simply put, be as varied as possible. Try to get your name everywhere—flyers, business cards, signs, billboards, TV, radio, internet; whatever you can reasonably afford. The more opportunities potential customers have to become familiar with your name, the more quickly they will turn to you when it comes time to buy or sell property. Just like the old adage, “all publicity is good publicity”, there is no such thing as too much marketing.

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http://www.indianainvestmentpropertygroup.com
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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.

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Rental properties are a great way to earn extra income each month and have a minimal role. Some people consider this ‘true investing,’ since the properties are held for the long term and do not require active, day to day labor. Other tactics, like wholesaling or flipping properties, can still generate income, but they are more labor-intensive. Holding rental properties fits many people’s lifestyles, but not all rental properties are equal, so it is important to evaluate them before you sign the deal.

The bottom line when it comes to rental properties is the Net Operating Income. The NOI is the total amount you will make each month as a landlord minus the expenses and excluding your debt service. It can be determined by adding up all the rents, but the important factor is to accurately assess your occupancy rate and the percentage of tenants that will pay that rent on time. If the NOI covers all expenses plus the ability to pay your debt service, then the property is profitable.

Another common number when evaluating rental properties is the Gross Scheduled Income, or GSI. This number is calculated by multiplying the total monthly rents by the number of units by twelve months (total rent x # of units x 12 months). It tells you the scheduled yearly income, with the operation term being scheduled. Don’t confuse this for reality! It is only the income that is planned. It does not take into account occupancy rates or quality of tenants into consideration, so do not confuse this number with the NOI. Additionally, the assumption is that for calculating the total rents, you have data on the average rents in the area so that the number is based in reality. GSI is useful as a guideline, and can tell you the maximum rent, but don’t solely base the decision off this number alone.

The number which is critically important is the economic income or economic occupancy. This is the realistic prediction for your total rent. It takes into consideration the occupancy rate and the percentage of tenants paying on time. For example, if you have a 90% occupancy rate and assume that 90% of those tenants pay on time, the economic income is going to be 80% of your GSI. You can find out these numbers by asking for the last two years of financial data on the particular property you are evaluating. If it is a new property, then you need to make sure your market research is robust: know the average vacancy rate and average rents, and make assumptions about the tenants off your other properties (if you have any). If this is your first property, then make sure to include plenty of room in your calculations, like over-estimating that 20% of the tenants will pay late instead of 10%.

Eventually, you will start to get a feel for the numbers in a certain market as you look at more data and do more deals. A mentor can give you guidance through the financials, but make sure you’re basing your purchase on math and not on gut feelings.

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Equity is the difference between the value of a property and the balance of the mortgage left to pay. As the value of your home increases, due to appreciation or improvements you’ve made (also known as forced appreciation,) and as you pay off your mortgage, the equity increases. Building equity is essentially building wealth. When investing in real estate, one of the goals is to increase equity in all the properties you own.

A simple yet effective way to increase equity is to improve the value of the property, which can be done through repairs. Cosmetic repairs, like a new coat of paint or new floors, are not too costly and can add to the aesthetic appeal of the property. Intensive repairs, like wiring or plumbing, may be necessary if there are problems with the property, but are also costly. You need to select which repairs provide the greatest returns. Traditionally this has been remodeling kitchens and bathrooms. Putting in granite countertops, a stainless steel sink, tiling for the floors, modern lighting and large mirrors are all ways to increase appeal without an unseemly cost. Think of it from the buyer’s view: when he/she enters the home, he/she will be impressed by the appearance. Modern bathrooms and kitchens give the impression that the entire house is modern and up to-date, even if it was built in the 1900s. A more modern and appealing house usually translates into a higher sale price.

Another way to build equity is to increase the payments on your mortgage, thereby paying off the remaining balance more quickly. Some banks do not allow mortgage payments to exceed a certain amount, (why would they agree to less money?) so if you are frustrated with the rules, you may want to refinance. Refinancing may allow you to lower your interest rates or reduce the term of your mortgage, reducing the balance you owe for the mortgage and increasing your equity.

The equity that you have accumulated is realized once the property is sold. With the extra wealth you have accumulated, you may want to continue to invest in real estate. There are many venues of real estate investing, and building equity allows you to explore those options. With real estate, as with any investment, wealth accumulates more wealth. So build up that equity and keep investing!

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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.

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It is hard to make a strong argument against the value of the internet. To begin a list of the improvements it has offered in the arenas of commerce, government, communication, and personal life would simply be a waste of time, because that list is so comprehensive. However, the internet—like all good things—has some side-effects which may be great for some, but are a thorn in the side for the rest of us.

I know a physician who is an old-school surgeon, and have often heard him complain over the course of the last decade or so about the know-it-all patients who spend five minutes on Wikipedia and come to his office thinking they have all the answers. Healthcare is an extreme scenario, because no matter how much the patient may think they know, in the end they have to use the Doctor’s services to get whatever treatment or care they need.

Real estate, on the other hand, is not as sure a thing as medicine. In real estate, that same know-it-all customer might spend five minutes researching home sales or purchases, and conclude that they simply have the information they need to do it on their own. Twenty years ago, realtors and investors could operate their businesses however they wanted, and treat their customer with as much or little care and consideration as they saw fit—like in healthcare, the customers had no other options. But now, with listings and tutorials readily available to the average browser, real estate professionals must continuously demonstrate their value to customers in an ongoing effort to prevent being replaced by the internet.

In most cases, this can be achieved not by changing how hard you work or how you conduct your business and transactions, but rather by simply adjusting the manner in which you treat your customers. There is no rule of thumb guiding the proper treatment of customers—every customer’s unique psychology and temperament will determine what mannerisms appeal most to them. The key, in all cases, is to be attentive and considerate, and always polite. Whether your tone is serious, comedic, chipper, etc., will be a function of what you think will mesh best with each individual customer.

Real estate purchase and sales is a people-oriented industry. Real estate professionals, including investors, must be engaged and helpful at every step of the way, thinking less about the numbers and more about the needs of your customers and the long-term value of the services you can provide your customer whether that be a buyer, seller, renter or another investor.

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By far the best way to make money in a capitalist economy is to know something. The more you know, the more opportunities arise for you to translate that knowledge into tangible form—namely, money in your pocket. Dealing with taxes is no exception; actually there may be no better example of turning knowledge into money. If you put taxes into very simple terms, everyone pays some amount related to their value. If you normalized the amount that everyone pays in taxes to exclude consideration of the taxpayer’s value, you would see a fork in the road where you can pay the standard amount with no exclusions or deferrals, you can make a mistake and end up paying far too much, or you can use your knowledge to keep the money in your pocket where it belongs and out of the hands of the government.

In 1997, the laws governing tax exclusions for home sellers were made much looser. Before the change, someone selling a home would find it very difficult to meet all of the requirements to get a tax exclusion on gains up to $125,000. But now, it is relatively easy to qualify (especially if you are aware of the requirements and standards of eligibility going into the purchase of your home—and if you are a real estate investor, then hopefully you are aware of such matters). A single homeowner can altogether avoid capital gain taxes up to $250,000 on the sale of a home (a married couple can skirt up to $500,000), provided a few conditions are met.

First, the home being sold must be the sellers principle residence for at least two years out of the five year period leading up to the date of sale. The two year period does not have to be consecutive, and the requirements do not speak to what happens in the property during the time when the seller is not residing there primarily. Secondly, this is a tax exclusion which may only be utilized once in a two year period (with some exceptions). Thirdly—and this is really more of a help than a disqualifier—if it is a couple filing for tax exclusion, only one spouse has to meet the residency requirements cited above.

All said, the eligibility requisites are not too stringent, and it is important to take advantage of this opportunity to save an enormous amount of money upon sale of your home. Further, if you are a career investor, consider this opportunity when designing your investments and living considerations, because it may just be worth living in an investment home for two years to earn back the money that would otherwise have gone to the government when you resell !

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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.

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Most people assume that when someone fails as a real estate investor, it is because they couldn’t do enough deals to keep their business afloat.  Often, it is exactly the contrary.  Many amateur or unwise investors simply don’t know how to turn deals down.  They end up buying everything they can get their hands on, regardless of its merit as a profit-generating investment, and they wind up drowning in debt and unfulfilled responsibilities.  This, obviously, can be crippling, and is a primary force driving bad investors out of the business.

For those of us left behind—or at the very least those of us clinging for our lives to stay in the game—it is of critical importance that we learn how to pass on the offers that will ultimately hurt our businesses.  Here are some tips to keep in mind.

The first and most important thing to remember is to keep the bottom line in mind.  Although this sounds cold, calculating, and perhaps inhuman, it is the best way to earn a reliable income.  Keeping the bottom line in mind involves the coincidence of two behavioral tendencies: thorough research and emotional detachment.

Thorough research means knowing a property inside and out (quite literally) before buying it.  It means knowing exactly where the value is, exactly what is going to cost money down the line, any hidden expenses, taxes, maintenance, etc.  If it is your first time buying a home (or anything less than your tenth!) you will need the assistance of an expert in figuring out exactly what the property costs—beyond what’s written on the contract.  Once you do your research, you can draw up your own set of numbers which can serve as a tool of comparison during the negotiating process with the seller (it will also demonstrate that you know your stuff, and are not to be taken advantage of!).

Emotional detachment is often a function of experience in the field of real estate, but that doesn’t mean it’s not something you can be aware of and aspire towards in the early stages of your career as an investor.  This is the notion that you cannot simply go around buying all of the properties that you like (you might be amazed at how many investors do this—you probably wouldn’t be shocked to hear how few of them are successful though).  It is important to love what you do—that is the only way to be sure you will do a good job.  That being said, after a few forays into home-ownership, it becomes apparent that when you tour a home for sale, you are evaluating nothing more than the home’s location, structural integrity, and price.  That is to say, everything else (all of the cosmetics and amenities), can be applied in whatever manner the buyer sees fit.  In other words, make sure that if you fall in love with the home, you are not simply falling in love with what the previous owners have done to it (you can decorate any property any way you want).

Keep the bottom line in mind, don’t become overly attached to any properties you tour, and learn to say no by default.  Saying, “No” should become such a habit that when you find the right property to buy, you should have to literally convince and remind and drag yourself to finally say the word “Yes”.  This will prevent deal saturation and overextension of your resources.

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http://www.indianainvestmentpropertygroup.com

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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.

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Getting started in real estate investment can be very tricky, especially if you’re not one of the lucky few who start with an enormous amount of capital to invest.  But just because you don’t have a pile of cash and all the real estate connections yet, doesn’t mean you can’t break into the investment world by capitalizing on special and highly lucrative opportunities.  One such opportunity—which tends to present itself on a fairly regular basis—is investing in preforeclosure homes, or homes which are in the default stage of their foreclosure.  These are homes for which the bank has started the process of foreclosure by filing paperwork classifying the property as such; however, preforeclosures have not yet been subjected to the next step of the process—the trustee sale or sheriff sale—when the bank auctions off the house or repossesses it.  If an investor knows how to find preforeclosure homes, he can purchase them at a hugely discounted prices, quickly reselling them at the market price for a pretty profit.

This works for very little money for several reasons.  First, the investor incurs no holding costs, since the seller has already defaulted on his mortgage by the time negotiations begin.  This means that right up to the point that you purchase the home, no one is paying the bank (and the investor is not responsible for this).  Second, since preforeclosures are such a specifically-defined market, the investor does not have to waste time and money developing several different marketing strategies to find good leads of various types.  Having a focused marketing campaign allows the novice investor to develop experience, relationships, and funding without overexerting himself.

Perhaps the biggest advantage of investing in a preforeclosure is the motivation of the sellers.  These are people who are on the brink of losing their homes, are being persecuted by the bank, and are desperate to have a little breathing room.  For the investor, this means an opportunity to make a very low offer.  It is not uncommon for investors to produce equity spreads in excess of 30% when purchasing preforeclosures.  Further, since so many foreclosures have been caused by recent economic uncertainty, banks are under tremendous pressure to sell the homes rather than repossessing them (which would be an overexertion of bank and FDIC resources).  Therefore, with a little savvy, the investor can negotiate huge discounts that produce even higher equity spreads, all amounting to more money in the investor’s pocket.

Finally, since the preforeclosure purchase agreement allows the buyer to simply take over the existing financing structure of the previous owner, no credit qualification or approval is required to purchase the preforeclosure home.  This is good news for the thousands of people interested in breaking into the world of real estate investment, but who are disqualified because their line of credit is not good enough to purchase a property in the first place.

Overall, although you are not likely to find high-end properties, investing in preforeclosures is a relatively safe and reliable way to get involved in real estate investing, without spending too much money you don’t have.  It requires only paying attention to foreclosure listings, a bit of capital, timely and aggressive negotiation, and a bit of luck (like all investment) to be successful, but the rewards can be huge considering the low level of risk involved.

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http://www.indianainvestmentpropertygroup.com

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