EZ Real Estate Guide
Your Guide to the REAL ESTATE MARKET
Buying Investment Property - Rules to Follow
It really important to have some guidelines to follow when you are starting your career in real estate investing. If you follow the rules, you can never really lose. On the other hand, with experience you may be able to bend the rules and still make good deals.
Investing Rule #1 - Not All Deals Are On MLS
Most small unit residential property gets listed on your local multiple listing service (MLS) website, but not all. This is extremely important in the more competitive markets because the more people who see a deal means the more competition for you. As a new investor, you may not have the ability to compete against the big players, so you may want to focus on alternative methods of finding deals:
Auctions - Just like MLS, auctions have good real estate deals and bad deals. The number of potential buyers at an auction is much lower but everyone there is an investor. Additionally you will need to have enough cash available to pay.
FSBO - Some owners list their properties without the help of a real estate salesperson and these go on a 'for sale by owner' website. Often these websites are full of overpriced real estate listings, but occasionally you can find a gem truly worth adding to your investment portfolio.
Word of Mouth - "I heard John over there on Rose St. is looking to sell his property soon." Any time you can get make an offer before a property hits the market is a win. If they accept, you can possibly pay far less than market value.
Driving for Dollars - You know that property at the end of the street that is always overgrown and needs some maintenance? It may be worth your time to go knock on their door and find out what's going on. When you have free time you can drive through neighborhoods you're interested in and possibly find deals.
Investing Rule #2 - Asking Price is Not Related to Market Price
Browse through listings for just a few minutes and you will find a property that's twenty thousand dollars more than others. You can also find properties asking for far less than what they could get.
Unlike typical homeowners, investors are generally a very rational group of people who really understand real estate. They may be asking for top dollar but they probably know the lowest number they will accept. Do not be afraid to offer what you think it's worth. It's rare, but investment properties can and do sell for half of their asking price.
Investing Rule #3 - Due Diligence and Inspections are Mandatory
You don't want to close on a house just to find foundation problems or termites so do the inspections up front. If you do find something, you can usually negotiate a more favorable agreement.
Also, don't forget about a proper title search. Ensure the title company is going back 50+ years or to the last instance of government ownership. Why? Well, imagine you get a phone call one day finding out a great grandparent died with no will leaving the equity to their 7 children and now some of those children have since passed away. You find out there are 15 potential claims against the property! This is a true example, so it can happen!
Investing Rule #4 - Run The Numbers
"Well, that kitchen may only cost $10,000 instead of the $12,000 I originally thought. Now the numbers work."
If it's not a good deal then walk away. Do not adjust the numbers to make them work. People get attached to their own ideas so they may lie to themselves to make it work.
When you run the numbers, don't forget to include everything. Besides common monthly expenses don't forget to include hidden expenses:
Vacancy - 5-10% of rents for vacancy depending on your area. Your property will have vacancies so don't forget to include them.
Capital Improvements - Major things will require replacement such as heating systems, the roof, etc... Add 3-5% of rents for these future expenses
Property Management - You don't want to personally manage the investment forever. Don't forget to include 8-12% of rent for your property management
Reserves - It is extremely important to have a cash reserve just in-case. Add another 3% or more for cash savings
General Maintenance - Add 3-6% for day-to-day repairs such as the leaky faucet, new door knobs, lights, etc...
Investing Rule #4a - 2% Rule
It's really good to look at deals rationally, so there are a couple rules to help quickly analyze a property. The first is the 2% rule. Simply put, if the monthly rent is 2% of the sale price, or higher, it's a good investment. If you are paying $200,000 for the property then you should aim to receive $4,000 or more per month.
This is probably one of the hardest rules to follow. It can be very hard to find a deal that meats the criteria.
Investing Rule #4b - the 50% Rule
Assume that 50% of your rent will go to expenses before you even count the mortgage. This rule really feeds into the 2% rule. If half of the rent is immediately gone, you are left with only 1%. Then take the mortgage out of that and you are left with very little.
This number is to help you quickly analyze properties without having to sit down and do a spreadsheet on every property. Also, it's a good way to check for accuracy. If you find your expenses are only 15%, perhaps you forgot something.
Investing Rule #5 - All Rules Can be Bent
"Everything is Negotiable" goes the saying in real estate, and this is true for rules as well. For every 'rule' out there related to investing there is someone breaking that rule and making a fortune.
You may find that the 50% rule doesn't apply in your area which means the 2% rule can be lowered. Other people may find their best deals on MLS and others may live in such a competitive market that all properties sell above their asking.
Why Have Rules for Investing in Real Estate?
People tend to overlook things or get emotionally attached to a potential project. By having a checklist and set of rules to follow, it is much easier to stay focused and disciplined. These rules are a set of guidelines that will help you earn money. You can bend them and make money, but if you always follow the guidelines, you are far more likely to win than to lose.
I'm 30; I'm retired. You can be too.
I run a website dedicated to educating people in investing, real estate, and building passive income. I started investing in real estate at the age of 24 and now I'm retired at age 30. Please check out my website to learn about real estate. I also have a lot more interesting analysis about investing in real estate, stocks, and other sources of income.
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4 Crowdfunding Real Estate Trends For 2016
Given the recent interest in crowdfunding, it should come as no surprise to learn that it has become more and more popular in the most unexpected of places. For example, crowdfunding has become a popular choice for investors as well as real estate developers, with DealIndex predicting that it could have brought in more than $2 billion in 2015.
In part, this is because crowdfunding benefits real estate investors. First, it enables them to invest in properties even when they have limited resources, thus opening up new paths to financial success. Second, it enables them to choose what properties they want to invest in, thus empowering them with increased choice when it comes to their wealth. Finally, it opens up a whole new world of investments, thus opening up boundless possibilities.
However, it is important to remember that investment is reliant on the cooperation of both the investors and the entities being invested in, meaning that the success of crowdfunding real estate can be attributed to the benefits to the developers as well. For example, crowdfunding means that developers can access more capital from more investors than otherwise possible, which should come as welcome news for perpetually resource-starved companies. Better still, crowdfunding means that developers can get their capital faster than borrowing from banks and other financial institutions, making it that much easier for them to pour funding into their projects as needed to ensure their success.
Regardless, the existence of these benefits for both investors and developers means that crowdfunding real estate promises to become more and more popular for the foreseeable future. In turn, this means that interested individuals need to pay more and more attention to the latest happenings in crowdfunding if they want to maximize the rate of return on their portfolios.
4 Crowdfunding Real Estate Trends For 2016
* It is a recent concept, but it is beginning to mature. As a result, investors can expect to see the consolidation of crowdfunding platforms as bigger and better competitors begin to absorb their less successful counterparts. While this will result in some chaos and confusion in the short rate, said individuals can also expect better security and better services because more mature crowdfunding platforms mean more resources as well as more expertise and experience.
* As this particular field of crowdfunding matures, it is probable that debt-based investments will become more and more popular than equity-based investments. In main, this is because debt-based investment provide better rates of return, albeit at higher risks. However, it also helps that the maturation of crowdfunding platforms will boost investors' confidence in potential investments. It is possible that some crowdfunding platforms will even begin specializing in debt-based investments as opposed to equity-based investments.
* At the same time, investors can expect to see a bigger and bigger range of investments being made available through crowdfunding platforms for real estate. After all, as this particular field of crowdfunding matures, it can expect to see more and more investors looking in, driven by their sense of curiosity if nothing else. In response, it is likely that developers will begin offering more and more diverse investments as a way of attracting more and more diverse investors, thus increasing their potential funding.
* The Internet has eroded geographical boundaries of all sorts, so it should come as no surprise to learn that it is expected to erode geographical boundaries when it comes to crowdfunding for real estate as well. Expect more and more crowdfunding platforms to support investing in other countries, thus opening up more investing possibilities for investors as well as more funding for developers. Better still, this has the potential to improve the long-term health of the field since afflictions in a single regional market will have a much harder time shaking confidence in the whole.
Of course, these are but some of the trends expected for 2016. To learn more, interested individuals should continue keeping an eye on real estate news as well as other resources to make sure that they keep up-to-date on all of the latest happenings.
To know more about CrowdFunding Real Estate visit at: https://durise.com/
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Think Like a Millionaire: How to Invest in Real Estate
Many people fail to see that skills fade, but assets are forever.
They don't know their entire financial education in their lives is completely WRONG!
Too many people believe that a good job, good skills, and a positive attitude will make them great wealth. The problem is that it just doesn't work that way. People who make an hourly wage and an annual salary cannot build wealth. This is because their money doesn't work for them, and instead they work for their money. This idea keeps them from understanding that the only way to build wealth is to invest in multiple sources of income that you don't have to work for, but instead build yourself or purchase from someone else.
Another misconception of multiple sources of income and passive income is that people assume government and financial institutions offerings such as the stock market, CD's, and many other financial instruments are passive income. Most of the time however, unless it is a note or bond that pays you regular interest. It is not actually passive income or a stream of income. As a stream of income or passive income is income that you make every day, every month, and every year continuously as cashflow. Stocks and the like only make you money on the sale and never anything in the meantime. Meaning they don't ever actually cashflow. For example, it is the same as purchasing a piece of fine art and hoping that it appreciates the longer you hold onto it. Which is risky and locks your money up from better uses.
Real Estate as an Investment
Real Estate is the King when it comes to creating wealth for people. No other offering has the traits and abilities like real estate does. It is constantly appreciating and gaining value. It is always in demand because people need a place to live. And most important of all, it is a real asset that isn't going anywhere soon. Allowing you to borrow against it as collateral and even to write off all expenses and costs associated off on your taxes. Now let's not wait a moment longer to get into Real Estate as an Investment.
Real Estate You Can Buy as Investments
There is so many ways to invest in real estate and the major differences comes to how much capital you will need to put down to purchase them. This could be as little as $40,000 -$50,000 to buy a condo outright, to only $10,000+ to purchase a $100,000 single family home, or to as much as $20,000-$30,000 to purchase a multifamily home (2-4 units). All of which are Residential and can be easily financed.
Once you get past 4 units, small office buildings, and industrial properties. You're going into commercial territory and have a lot more hoops to jump through as well as have to start working with commercial lending which can require sizable amounts of capital before they will lend. In the rear, is my personal favorite of mobile homes and parks. Which are hard to sell, but can cashflow in all sorts of amazing ways from lending on the mobiles themselves to charging them for renting the use of the land. All of which is taxed as land which is the cheapest tax rate you can have on property.
· Condos/Flats - Condos and flats are some of the best to buy for cashflow as they give the best cap rates. The only issue comes on the resale as many can be hard to finance as an investment property, preventing a large portion of the population from being able to purchase them.
· Single-Family Homes - Single-family homes are easy to rent, easy to sell, and easy to finance.
· Duplexes/Triplexes/Quads - Small multifamily properties (2-4 units). These property types combine the financing and easy purchasing benefits of a single-family home with the cashflow benefits and less competition found in larger investments.
· Small Apartments - Small apartment buildings are made up of between 5-50 units, they can make great cashflow, but can be very illiquid on the resale.
· Small Commercial Office Space - Buying small commercial buildings and renting out office space to business professionals.
· Industrial Properties- Manufacturing, warehouses, distribution centers, etc.
· Mobile Homes - Inexpensive way to enter the world of real estate investing and can also experience significant cashflow.
· Mobile Home Parks - The entire park in which mobile homes are situated on can also be bought and sold. Rent the individual lots to mobile home owners, and as well as have corporately owned and leased ones.
Strategies in Finding Investment Properties
Just as there are a million ways to skin a cat, there is a million ways to find properties for investment. Of the many ways to find the properties for investment. The most common ways are to find the owner directly and give them a cash offer, to find properties that are owned by a lender or bank that they want to get rid of at a discount, or purchase a lien on the property so you can foreclose on the property yourself.
Lease Options - Buying the property and "renting" it with the legal right to buy it later.
For Sale By Owners (FSBO) - Private owners sell their property themselves with a sign or newspaper advertisement, they may want to sell their properties at a discount to avoid paying a realtor
REO's - Foreclosed Property owned by banks can be bought under market if the demand isn't too high
Auction at the Courthouse Steps - During the process of foreclosure, a home is brought to the courthouse steps to be sold to the highest bidder.
Buying in Pre-foreclosure - Sellers on the brink of losing their home can be very motivated to sell their home and save their credit and their lives
Short Sales - A bank will often take less than the loan amount on a property to save from the hassle and costs of foreclosing and reselling.
Tax Liens - When homeowner's refuse to pay their taxes, the government can foreclose and resell the property.
HUD Foreclosures - When a US government ensured loan is foreclosed on, it often becomes the property of the department of Housing and Urban Development.
VA Foreclosures - Similar to the HUD foreclosures, the US Department of Veteran's Affairs sells their homes as well after foreclosing on one of their insured properties
Strategies in Buying, Renting, and Selling Properties:
When you finally have the property in your grasp, there are many techniques you can use to maximize your return. Some properties are great for buy n' holding. Meaning you buy them for cashflow, but are expecting to also make a sizable return on the resale due to appreciation. Next up is Fixing N' Flip/Hold, which is finding properties undervalue and fixing them up to either hold onto for cashflow or to sell immediately for instant profit. Then there is Turn-key-Investing, this is where you find the property, turn it into a profitable cashflow and sell it as a source of income to a big fish investor. For Big Commercial, there is NNN leasing that entails having the company renting the property takes care of all the trimmings of the property and pays you for leasing the space. Another Buy N' Hold strategy that can make decent money is to turn your Buy N' Hold property into a Vacation Rental and charge 3x as much than a normal lease. Then there is hard money lending, where you finance others in their fix n' flips, buy n' holds, or primary residence.
Buy-N-Hold - Buy real estate, rent it, and hold it until the market is up and a great buyer comes along
Fix-N-Hold- Buy below market value, remodel to force appreciation, and held until the market improves and sell it
Fix-N-Flip - Buy well below market value, remodel to market prices, and sell it immediately to get your return.
Turn-Key-Investing - fix-and-flipper, but sells remodeled properties to out-of-town individuals seeking a good place to keep their money moving.
NNN Lease - Big Businesses rent the building and pay all costs associated with the building such as maintenance, taxes, insurance, and more. We can own these buildings for highly-passive income.
Vacation Rentals - Buying vacation property and renting it out off and on season (Snowbirds)
Cash Purchase, Sell on Contract - Buy properties and immediately re-sell them to buyers who may not be able to conventionally qualify for a mortgage. Collect a large down payment when using this method.
How to Finance:
Financing is readily available to anyone who has a cash for a down payment. Below is the major ways you can finance your Real Estate Investments.
All Cash - Property with no mortgage attached is very stable and a safe return. May not be as great as when using leverage (like a mortgage)
Seller Financing - Seller owns a property free-and-clear (no mortgage), and can be negotiated with to find a finance deal
Unconventional Lending - There are many lenders who will lend on any deal you have as long as the number make sense, this can be anything from landlord loans, had money, and much more
Self-Directed IRA - If you have a 401(k), throw it out, it's time to put that money in a self-directed IRA and make that money finally work for you than expecting some money manager who is just trying not to lose your money than make you any. You can use your money in your SD-IRA to do all the strategies in buying, selling, and renting.
20%-25% Down Conventional Investment Mortgage - buy a real estate investment through a bank. Come up with 20-25% down payment and have the bank finance the rest
10% HomePath Investment Mortgage- These loan types are only available on Fannie-Mae backed bank REOs, but can allow an investor to purchase the home for just 10% down payment with other benefits.
Home Equity Line of Credit (HELOC) - With significant equity in real estate, M&T can borrow a line of credit off M&T Real Estate equity.
Small Business Loans - Banks often will finance a line of credit or loan for small businesses- to include a real estate investment company
If you have the mind for real estate or want to hire someone who does. Then you should forego a large portion of your portfolio to invest in real estate. It easily as one of the highest returns than any other investment in the world, the only caveat, like anything else, is that you need to do it right to be successful.
Lucas Thomas is an Investment Realtor wo helps people invest in real estate to create cashflow and passive income. As a Professional Landlord who owns his own properties and manages others, he enjoys sharing his experiences and expertise to build his client's wealth beyond their expectations so they can easily retire early and pursue their passions.
L. Thomas - http://www.rhmreal.com
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