5 Tips To Making a Fortune Flipping Houses

November 17th, 2009 by loumil No comments »

If you’ve flipped through the television, you may have run across a few cable shows promoting the business of flipping houses in real estate. These shows state a person can easily make high profits by doing this type of business. In one instance, this statement is true; you can make a lot of money flipping houses when done correctly. However, you can easily lose that money when the house flip has gone very wrong. If you’re looking to make your fortune doing real estate investments, you need to be aware of the basics behind house flips.   

Above anything else, you need to realize that your final goal is to make a lot of money or as much as you possibly can. You also want to do this in as short a time frame as possible. You can do this by doing several smart things. 

Get An Inspection 

Have a thorough inspection completed before you make an offer on the home. The inspection will give you an idea of what is wrong with the home such as structural problems, plumbing problems and anything like that. From that, you can make the determination on whether or not you really want to make a commitment to the house. 

It’s important that you have this inspection done because it can affect what you offer on the home and how much of your money you’ll need to invest to make the home worthwhile to flip. If you determine that the house won’t give you much of a profit even after the repairs then you can walk away, if you so choose. 

Consider What Needs To Be Done 

After you’ve gotten the information you need from the inspection, consider everything you need to get done to improve the home that would make it appealing to a potential buyer. You need to remember the permits and get additional inspections done plus you will need to hire licensed contractors to fix the problems so that the home will meet local codes. All of these things will need a great deal investment to get accomplished and be reflected in the price you choose to offer the sell for the property. 

Look At The Overall Picture 

Many real estate house flippers fail to understand the big picture when they make their plans. For that reason, they fail to reach those big profits that can be achieved when they successfully flip houses. The idea is to buy a house for as low as possible, which needs very little work done to it so that the investor gets a high return. When you make the plans, make sure the changes are cost-effective. 

Make Non-Major Modifications 

If you can help it, don’t make a large quantity of structural alterations unless you’ve hired a licensed contractor to sign off on the safety of those modifications. These alterations can be quite pricey and dangerous (since the property’s stability comes into question). Keep in mind that you don’t want to make a lot of changes inside the home. It’s inevitable that you’ll need to replace the floor or repair/repaint the walls. However, you don’t absolutely need new kitchen and/or bathroom cabinets and fixtures. You can change these if you want to update the look of the home without cutting into your profits. 

Make An Impact 

You always want to make visual changes for the lowest amount of money possible. You certainly don’t want to buy a home that needs new air conditioning or heating units because these can be costly and aren’t seen. Locate a house you can flip that needs very little work done to it and allows you to use your imagination so you can profit big from it. After all, this is what investing is about.

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Five Reasons to Get Involved With Investing in Rental Properties

November 8th, 2009 by loumil No comments »

If you desire to get into the real estate investment business, you know that you can make a living at it. However, some of the investments carry higher risks than others. Those risks that are higher tend to have the greatest potential for high profits but remember the story with the rabbit and the tortoise… slow and steady will win the race. Many people have made a good living flipping houses but there have been some folks who have lost money trying to do this kind of real estate investment business. Which one do you think you hear more about?

Rental properties aren’t near as glamorous as many people are led to believe. You don’t get the instant profits that are seen with flipping houses but it’s a great way and a valid method to earn a steady amount of income. There’s just one small hitch: you need to plan correctly and follow it. With the economy forcing previous homeowners and families out, more and more people are looking for rental units to get into. For the time being, it’s great to be a landlord with a few rental properties especially when you own several family homes.

People tend to rent places to live for a variety of reasons and for rental property owners, there are risks involved. However, the risks are far less than those seen in flipping real estate investments. Before you purchase your property for the sole reason of renting it out, there are some things you need to ponder on.

Reason 1 – Find Investment People Want To Live In

When you’re out searching for a rental property, you must find a home that is located in an area people will want to move to. Yes, you can buy several cheap homes in section of the town that is rundown. However, it’s highly doubtful that you’ll make any real money from them. It’s always good to pay more for location to find your renters. Properties in these areas tend to stay occupied for long periods of time; ultimately making you the money you are looking for.

Reason 2 – Pay Close Mind To Who Lives In The Area

Make sure that you do some research on the area and who lives in the neighborhood. You can purchase a large home and turn it into small apartment units for college students but this will be a bad investment if the area is geared toward families or older adults. Make sure your rental properties match the demographics.

Reason 3 – Don’t Be Greedy

Your goal is to make money from your rental properties; however, if you place the rental price up too high, you’ll find it sitting empty for some time. Remember each month it sits empty, you don’t make money and are possibly losing money.

Reason 4 – Study The Market

It’s best to research the market in terms of buying and renting property. This can help you determine if a particular home would make a worthwhile property to rent. It can also tell you how much rent you can afford to charge without overcharging every month.

Reason 5 – Focus On Long-Term Goals

When you’re renting properties, it’s better to stay focused on the long-term aspects rather than the short-term ones. Think of the rental unit as a marathon with the best profits coming in at the end. You don’t want to pay a lot of interest on your property and you want to have it paid off as fast as possible so you can do two things:

- First, have extra income money to save in case of emergencies. – Second, you can purchase more properties to further supplement your income.

While renting one or two properties will give you some money, the real money comes from having 20 or 30 properties. The more rental real estate you own, the better chance of making money.

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Four Reasons Rental Investors Should Use a Property Management Service

November 1st, 2009 by loumil No comments »

When you invest in real estate, you’re going to be making tons of decisions. One such decision is hiring a property manager to oversee your rental properties. A property manager can do a variety of tasks and are great for people who have just way too many properties to deal with. Property managers will deal with the every day tasks so that you can have a life away from the real estate business. These people are a go-between the tenants and you.

Here are the Four Reasons Rental Property Owners Use A Property Management Service:

Reason 1 – No Emergency In The Middle Of The Night Phone Calls

There are numerous reasons to use a good property management services. For starters, they all but abolish the need for your tenants to have your home, cell or work numbers. If you’ve ever gone without a property management, you know that your tenants can call you anytime of the day or night when things are going wrong. However, your property manager will take care of these types of calls, which allows you to sleep all night. This is quite helpful when you have more than two or three units. After several late night emergency calls, you’d be pulling out your hair and getting out of the rental property business.

Reason 2 – Maintenance Staff

Many good property management services will have a maintenance staff that can deal with the issues that arise in rental properties. Their fees are, almost always, attached to the fees you pay for using the service in the first place. However, some services require additional fees. Read the fine print to ensure what you’re paying for. No matter what you pay, your property management service can always locate contractors who can deal with the repairs if it cannot be handled in service. This is definitely a treat for you. Why? You don’t have to get up in the middle of the night to find a plumber during those cold months. It’s also good that someone else will be dealing with the negative aspects of your rental properties.

Reason 3 – Legal Issues

Property management services can handle the legal aspects dealing with your tenants. For instance, your tenant is failing to make the monthly rent. They can handle the eviction process and eventually get a judgment against them for the back rent not paid. This unpleasant task is better left to someone else if you have too soft of a heart. Remember, your rental properties are your business and you need the money, even if you can understand their plight.

Reason 4 – Advertisements, Cleanups and Touchups

Your property management service can do all the advertising, cleanups and touching up that is necessary after a tenant moves out and before a new tenant moves in. This task allows you to have vacations whenever you want and lets you feel secure knowing that everything back home is being looked after. Everybody needs a break from time to time so having a property manager looking after things is a very good idea.

If you plan to invest in rental properties, using a property management service is the best worry-free way you can deal with them. If you’ve got lots of properties, going this route just makes sense.

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Make Your House Flips More Valuable by Focusing on the Bathroom

October 12th, 2009 by loumil No comments »

Many investors search for ways to add value to their house flips. One of the best ways is to attack the bathrooms.

Homes with good kitchens and bathrooms are in demand right now. However, always keep mind not to make it so grand that it’s above your neighborhood’s standards. It’s hard to get your money out when yours is the most expensive house in the neighborhood.

The scope and style of your bath update needs to fit the style and price range of other houses in your neighborhood. One way to approach the project is to canvass various places that sell bathroom fixtures, see what you like, comparison shop, and then see if there’s an outlet for your price range with a good design staff to help you on a “freebie” basis if you buy from them.

Lowe’s and Home Depot are useful if you are very price conscious. They carry brands we’re all familiar with. It can be fun to explore some of the avant-garde fixtures in some of the high end outlets, and then see if something similar can be achieved for less. And if the budget (and the neighborhood) can take it, go for a truly luxurious spa of a bath.

Simplicity is prized today. I think it may be because life tends to be so rushed and complicated. Simplicity does not mean boring. Far from it. The simple can pamper and provide great visual appeal.

Put together a plan within your budget and you are on your way. Improved bathrooms can actually add tens of thousands of dollars in equity to your home.

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Get Started Buying Foreclosures

October 9th, 2009 by loumil No comments »

Have you thought about investing in pre foreclosures? Pre foreclosures properties are houses that are in the final stage, before the bank takes the property back. So in effect, this means that the owner is still in charge of the property, but if they do not do anything to rectify their situation the bank is going to repossess the home.

There are a lot of advantages that go along with buying pre foreclosures. The reason that most people miss out on these homes, is because they have no clue what they are, or how to go about finding them.

The top advantage of pre foreclosures is the price that goes along with them. Being that the owner has to sell the house before the bank takes it, they will be more inclined to listen to any offers that they receive. This means that it is not out of the realm of possibility to find pre foreclosures that are up to 50% off of the market value.

In addition to the great price that you can get on pre foreclosures, you will also be able to deal directly with the owner. This is an advantage because the buyer is in the driver’s seat during a pre foreclosure deal. If the home owner turns down your offer and fails to sell the property, they will end up losing everything. But they know that if they sell the home they can at least end up making back a little bit of money.

Locating pre foreclosures can be done in the same way as locating homes that that bank already owns. You can find them in the newspaper, online, or by calling the lender directly on the phone. The decision is up to you, and you can base it on what seems to be most effective.

Generally speaking, when you are buying pre foreclosures you will not have as much competition as you would when searching out foreclosed properties. This is beneficial in getting a great price and ending up with the home that you want in the end.

Buying pre foreclosures can be very profitable. If you are looking for a new home, don’t forget to check out these properties.

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“No Money Down” Investing. Is It For Real?

October 8th, 2009 by loumil No comments »

So you’re thinking about investing in real estate? But you’re afraid that you do not have enough cash. Here’s something you try use as long as the property seller is motivated enough to negotiate with you. Let’s be honest, not every seller will be interested (or even understand) the concept I’m about to talk about. Your best bet is to find a property that the owner is very motivated to sell, whether the reason is because he/she is moving, involved in a divorce or frustrated with tenants.

The easiest way is to take over their mortgage payments – this is called ‘assuming’ the mortgage. Of course, you will need to be approved by the original lender to assume the mortgage. However, if you cannot get approved for an assumable mortgage,  you can also try a ’subject to’ assumption.   This where you merely make payments while the property remains in the seller’s name.

You’ll take over the original mortgage.  Then, create a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short period of time – 2 or 3 years. The seller will be interested because instead of having the money sit in a bank doing nothing, they can be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the term.

When the term ends you should be able to refinance the cost, or you can sell the property assuming the property value went up.  Be careful in this market, as the value of the property may not have risen during that time.  But some markets around the country are already starting to rebound.  So, this a perfect strategy for one that is bottoming out.

Now of course there is more this strategy than this short post. But this strategy is worth looking into if you’re looking to start investing with very little money.

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Real Estate Can Help You Reach Financial Independence

October 6th, 2009 by loumil No comments »

Even with the economy as bad as it is, 63 percent of Americans are somewhat or very unhappy with their current jobs, according to Paige Wagner, operations manager for the American Real Estate Investor’s Association. “Most people simply end up in a career without really thinking about it,” Wagner says. “Once someone settles into a job, they usually stay in the same industry even when changing jobs.”

To further back that up, Wagner reports that only two-tenths of 1 percent of the population are willing to change careers midstream to become real estate investors. “Most people aren’t willing to put in the effort to learn a new career, even when they can make up to six figures,” she says. “It seems that for most people, just the idea of tackling something new like investing causes them to bring up all kinds of reasons why they shouldn’t get started.” Wagner says people mention the following reasons for not starting to invest in real estate: It’s the wrong time to get into the real estate market, they don’t have enough money to invest, or they’ve heard too many nightmare stories about being a landlord.

Here’s the interesting thing, at the same time that some people are coming up with all these reasons to avoid real estate investing, the other brave few learn to overcome the obstacles they face. “With members in all 50 states, we’re able to see investors making money in both ‘up’ markets and ‘down’ markets,” Wagner says. “Some investors even use creative methods of buying to avoid having to come up with down payments. The investors that hate being landlords usually sell on a rent-to-own basis so that their tenant buyer will agree to take care of all the day-to-day maintenance for them.”

Bill Bronchick, president of the Colorado Association of Real Estate Investors, mentions that real estate investing strategies have changed from years past. “It’s a whole new ball game today compared with the way my mom used to invest,” Bronchick says. “Investors these days can get started without cash or credit if they are willing to take the time to get educated.”

Many cities have at least one real estate investor group. “The monthly meetings and trainings are a good place to meet others who are already investing or interested in doing so,” Bronchick says. “You can also get a feel for whether you are in a hot or a cold market by talking with other investors.”

So if you’re thinking about getting in the game, there’s no better time to start than the present.  There are so many opportunities to make money in real estate really quickly.  Even if you want to keep your current job, there’s no reason you can’t do this part time and have some additional income coming in.  So get out there and make some deals.

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Finding the Real Estate Supply Market

October 6th, 2009 by loumil No comments »

During the last post, we discussed how to determine the real estate demand for your market.  Now lets discuss the supply side.  Knowing the housing supply is also critical to your success with your real estate investing business.  Here are some questions to ask in order to determine the supply:

  1. Are there any new contruction in your market? ? Again, the census figures can tell you what’s happened over the last ten years. Then check with the local authorities to see if the the number of housing units they’ve issued permits for is more or less than the expected population growth.
  2. How many homes are for sale on the market? A lower supply of homes for sale means upward pressure on prices. This indirectly drives up rents as well, which makes for better investing.
  3. How’s the rent and vacancy level in the area? Are rents high enough to justify investing? Are vacancies low? I remember an investor friend of mine telling me of when he moved to Tucson. Every building had vacancies, and he saw a man holding a sign that read, “Apartment – $250 Per Month.” Great place for renters, but not a great place to invest in real estate.
  4. Is there a lot of buildable land?  Less is better for future appreciation. When the land runs out, the prices start accelerating upwards.

You can use these questions to compare various towns and cities, and you’ll see the differences more clearly. You’ll see how housing demand compares to supply in each. Finally, you’ll see where it is better to invest in real estate.

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Where is the demand in your market

October 4th, 2009 by loumil No comments »

One of the most common hurdles for beginning investors is to figure out where to start investing. Most people choose to start in their back yard, and that’s not necessarily a bad thing.  But there are some facts to look into to figure out if it is indeed a good place to start investing.   One of the most telling statistics to look into when picking a market, is the demand/supply ratio.  Let first talk about questions to ask for to determine demand:

  1. Is the population expanding quickly?  Check the US Census figures online, or ask the local government if they have the statistics. Stay away from areas that have little growth.  After all, you don’t want to buy a property where everyone is heading out of town.
  2. Is there some decent job growth activity? Again, you can ask local authorities or use the census information. You want to see job growth equal to, or exceeding population growth. The people have to have money to pay for housing.
  3. How is the quality of life?  You want it to be decent. This is subjective, but important. Are there theaters and bookstores? Count coffee shops and cafes. Trendy areas usually have increasing demand for housing. It’s also a good indication of a high quality-of-life if people are willing to take lower-paying jobs just to live there.  Working class neighborhoods are usually best, and unless you’re an experienced investor, stay away from war zones.
  4. Is there any wealth in the area? It is always a good sign when there is some degree of wealth in a town. Count rich homes. Wealth means everything doesn’t die when the economy slows.  Now, that doesn’t mean you should start investing in very exclusive neighborhoods.  You’re just looking for signs that this is a place where people actually want to live.

Knowing the demand  for the property will help lower the risk that you can’t sell or rent your property once you buy them. 

On the next post, we’ll cover how to determine the supply in the market.

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7 Beginner Tips for Flipping Houses

October 3rd, 2009 by loumil No comments »

Even in today’s turbulent times, flipping houses is still one of the best ways to make money in today’s market. However, there are many different kinds of “flippers” out there, and some are just plain irresponsible with their rehabs.  If you are going to do this business and make a living at it, you want to establish a good reputation.  You establish that reputation by producing quality results.  Here are a few tips to keep in mind as you’re getting started building that reputation.

  1. Complete the job.  Don’t cut corners, and put the family that buys your home in personal or financial risk because of your shoddy work.  You want the family or person that buys your home to feel safe in it.  That won’t happen if you take shortcuts and don’t produce quality workmanship.
  2. Don’t spend money that you don’t need to.  This means, don’t spend money creating more work.  Many beginner ‘flippers’ do this because they decide that they want build a new addition, or rip out good walls, or create a whole new floor plan.  Leave those changes to the buyer unless those changes will drastically increase the asking price on the house.  Otherwise spend your money where you will really increase value, which is in the kitchens and baths.  Those are the locations that will bring you the bigger profits.
  3. If it’s not broken, leave it alone.  You should never go fix something that doesn’t need to be fixed unless you’re sure doing so will greatly improve the value of the house to its buyers.
  4. Always create a budget and stick to it.  Most “flippers” set a budget when starting the rehab, but most blow through that budget at a certain point and time. Staying on budget is the key to making the profits you anticipated. Otherwise you’re putting a lot of risk into your project.
  5. Build a home for your buyer and not for you.  Don’t ever rehab a home or plan the rehab according to your tastes; this is the potential for a major disaster.  First, the buyers who you’re most likely targeting will not be able to afford it. Second, you’re setting yourself up for bad feeling if a potential buyer rejects small details about your work. Third, it often raises the asking price so that you can cover the higher costs of decorating and designing it the way you like.  Finally, you’ll end up with a lot of unnecessary expenses; and the whole point of quick rehab type of projects is to make the most money possible in as little time as possible.
  6. Time is money.  Always remember that.  The longer it takes to rehab the home, the more it’s going to cost and the less money you’re going to make.  Plan small changes that you can do quickly and will have the biggest impact on your profit potential.  This will allow you to get the most out of your rehab.
  7. Never try a Luxury rehab unless you have a Luxury budget to back it up.  Just like it’s not a good idea to rehab above the market, it’s also not a good idea to flip a property that is underneath your target market.   So don’t try to a rehab in an upscale neighborhood, if you can’t afford the upscale building material and appliances that you’ll need to make the flip successful. 

While there is no guarantee to success, these tips will help you avoid some of the most common traps for beginner rehabbers.

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