2007 March | Real Estate Investing Blog
Calculating potential cash flow is a very important step to take as a real estate investor before you commit yourself to the long-term of owning rental properties. How much rental income will it receive for each month if the property is rented? This question relates not only to the immediate level of income but also to longer-term investment feasibility.
For example, if you expect the property to grow in value only modestly, and for very little income coming in each month, is it really worth the risk? If you believe that your income from owning rental property will not be substantial, there might be other alternatives for investing your money. Read more
Once you’ve identified a property to purchase, you need to start thinking about financing. If you are looking at single-family homes or properties with four units or less, a good local lender may be your best choice. Banks are generally good as well, but they often tend to offer shorter term loans and or higher interest rates on investment properties. If you have a fairly typical property in an area with banks nearby, make a simple phone call to see what they have to offer.
In my situation when I purchased my first investment property in Las Vegas, I used a mortgage broker which was extremely helpful. Mortgage brokers generally charge 1% of the loan amount to help locate a quality funding source for you. My new mortgage broker charged a $500 fee upfront and then worked on getting a point or two on the back-end with whichever lending house or bank he ended up working with. Read more
Location location location. I’m sure you have heard this cliche many times before and for good reason. Location is the single most important factor that determines the value of a piece of real estate. While that statement is true in most situations especially when it’s your primary home, it’s not always the case for real estate investing. Let me clarify.
If I have a choice between a home located in a quiet neighborhood at the end of the street vs one that backs up to a busy street, I’d obviously take the quiet neighborhood house. This immediately gives me greater value. But if you plan on buying real estate as an investment (a place you will never live) you need to look at other key indicators such as cash flow, potential growth, and APODS (which I’ll explain in a later post). Location always prevails but should not be an overriding factor in your decision-making process. Read more
In my last post of secret ways to make money in real estate we talked about a variety of ways to make money in real estate which most people are not aware of. This post is part #2 of the series and I will discuss a couple additional methods that you could potentially use in your real estate investing strategy.
Now these methods are more suited for seasoned investors that have a good understanding of how real estate investing works. I’d recommend getting a few properties and at least three years of real estate investing under your belt before considering these options.
- Property Management – once you learn to manage rental properties, you can do it for other people. Property managers charge anywhere from 5% to 12% of the gross rents, plus various fees. Essentially you would need to hire a team of people to work for you to take care of the day-to-day work while you oversee the business. Read more
Today I’m going to talk about the many different ways you can make money in real estate. Before you get started with investing, it’s a good idea to know all the different options you have besides just buying a property and renting it out.
When I first got into real estate, I thought there was only one way to make money — borrow money to buy a property, fix it up, and rent it out. The tenants would then pay my debt and expenses, and the property would just appreciate. Now you’re probably asking what’s wrong with that? Nothing, and that’s how I have purchased and maintained a majority of my properties but I still wanted to familiarize you with the many different ways to make money in real estate.
The following list will give you a variety of ways to make money in real estate which most people are not aware of:
- Rehabbing Properties – this is the primary way most real estate investors purchase property. This is what I primarily do and highly recommend hiring a property manager so you’re not involved in the day-to-day details.
- Wholesaling – this is kind of a sneaky way to make a quick buck on a property that somebody else is already trying to sell. You basically become the middleman by finding a good deal and going under contract and then advertise it for more money that you are paying. I am not a big fan of this method even though the buyer and seller’s are both happy with their purchase and sale. To me it seems like you’d have to tiptoe around because if the buyer ever knew what you were doing he’d be pretty upset. Read more
There are many new websites popping up like zillow.com and auctioncloud.com which claim to give you a pretty good estimate of what your home or even your best friend’s home is worth. The technology out there today allows such sites to do this and are pretty impressive compared to the old days where you’d have to go around reading newspapers or speaking with real estate agents to find out what neighborhood homes typically sell for.
Here’s a quick list of the top home valuation (or home tool) websites I’ve recently come across listed in no particular order: Read more
When people get started with their real estate investing, they dream of creating a six-figure annual income stream, but deep down many of them have doubts that they themselves can make it happen. Understand that they’re still going to be naysayers out there, people who say you can’t do it in today’s market or in today’s economy. But you do have a choice. You can either believe what these financially stressed out individuals are preaching to you, or you can go outside your comfort zone and chase after the future you want and deserve.
Now tell yourself that you’re going to stick with it until you succeed. You are going to keep learning from your experiences and those of other seasoned investors until you succeed. You’re never going to take even a moment to talk with naysayers until you succeed. Then you’re probably not going to say a word to them; instead you’ll just smile. Read more
I’ve personally never invested in a foreclosure deal so I’m only writing about this based on a story I heard from someone else. It’s tough enough to find a gem like this but if you do, here’s how to play it out.
So you’ve stumbled on a piece of property and the owners invite you to come over and during the second cup of coffee they make a deal that can’t be beat. The only bad thing is that they are leaving town tomorrow and won’t be back for a closing for three weeks. Being desperate, you reach into your bag, pull out your laptop and printer and do a self-prepared deed and close the deal right in the kitchen. Read more
The tax advantages of real estate are staggering. You can own a rental unit, collect rent, pay operating expenses and loan payments, and come out with a positive cash flow, and then still get a tax break. When you own rental real estate, or even if you just buy and sell properties, you are classified as being self employed. You are also allowed to deduct operating expenses, which further reduces your income for tax purposes.
Been self-employed is one of the greatest tax savings tools that exist. You are able to shift a lot of your regular living expenses into the area of legitimate tax deductions. Of course, along with the advantages of preferred tax treatment, appreciation, and leverage, there is also monthly income that can be made, using a few simple methods of buying, renting, managing, and selling.
Nearly 80% of all real estate transactions take place in the lower — middle range of house prices. Specifically the average home in this range is a three-bedroom two bathroom house with a carport or garage and approximately 1100 ft.Â². Why are these bread and butter houses such hot sellers? Because they are the transition houses for people moving up and down the financial ladder of life. They are usually the starter homes for up-and-coming couples and May are the lifelong homes for the blue-collar backbone of America.
This area of real estate investing has several advantages. First these units represent the bottom end of the housing market. The sale prices are low the down payments are usually low, and the demand is high. These homes can be diamonds in the rough. By putting in some minimal fix up and cleaning, you can resell them at a fantastic profit.
An example would be somebody like John who buys single-family homes around $200,000 and renovates them. After he fixes up the homes he rents them out at an excess of $1850 per month. If you run the numbers, these homes are cash flow positive and slowly paying down John’s monthly mortgage. Now John can either hold onto the single-family homes and benefit from the rental income stream or you can try flipping a single-family homes to other investors and make a profit.
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