Reasons Behind Generating Inconsistent Profits From Real Estate

Posted by admin in Uncategorized on April 15, 2012

There is enormous scope for amassing wealth in real estate but most investors do not earn consistent profits because of a variety of reasons. One key to earn consistent profits from real estate investing is your ability to recognize market trends and implement strategies that are best suited for that market conditions at that time.

Most real estate investors are misled into believing that profit from real estate is derived only from buying very low and selling at overly high prices in an appreciating market. This may be the ideal proposition but it does not work always. You have to also focus on marginal deals where the profit margin may be low but still they are deals that are not to be missed. Buying prime properties at high prices and trying to sell them at much higher rates can be risky and best avoided.

You should aim at a series of quick transactions for your profits to consistently grow and there should be no lull period in between. If you want to invest in a property and then wait for the property value to appreciate well before selling then you can certainly follow that strategy. But instead of idly holding the property, you should rent it for a particular period of time to earn back the initial investment. This form of making profit is easy and will also be consistent if you have enough investment capabilities.

Yet another way to earn profits consistently will be to buy houses that are in disrepair. Most of these houses you will be able to buy at much below market prices. You should develop a team of highly reliable repairers (construction workers, masons, plumbers, carpenters, electricians, interior decorators etc) and use them to renovate the property and then sell for a whopping profit.

You can find valuable information about the latest real estate market trends on the Internet and in various real estate publications which can guide you about all the latest trends. You should always be on the lookout for a property, which is high in demand and will fetch very handsome returns on selling and will give you optimum profit. In fact, you should line up a series of such properties if you want to earn consistent profits in real estate investment.

If you are going to focus only in one area, you may not get enough opportunities to buy and/or sell. You should expand your area of marketing operations to a few prime neighborhoods. Try to concentrate only on the residential or commercial properties and do not try to mix.

Please understand that dealing in commercial properties calls for large investment and your money might get blocked. Chances of your earning consistent profits may not be possible. If you are not operating as a team of investing partners, then it is preferable you concentrate on the residential segment.

The most important thing is to assess your financial position from time to time. Take a look at all your available finances, your current property holdings, your loans and your capacity to take further loans for buying a property.

Dealing in real estate has been a very profitable investment for many people in the past and will continue to be so in the future. The important thing is for you to do your homework and learn the art of consistent profit-making.

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Do You Know What You Are Buying?

Posted by admin in Uncategorized on April 15, 2012

What is the difference between buying a Foreclosure, a short sale, an REO property or a standard Sale?

If you are going to be in the home buying market, it is very important that you understand the difference between each type of sale. All sales are not equal. There is a huge difference between a Foreclosure and a standard sale.

When you buy a foreclosed property you buy the property on the courthouse steps, you have to bring cash or a cashier’s check and you buy the property “as is” with all its faults and no repairs are made. You do not even get a key to the property and if the tenant is still in the property you have to evict the tenant. The condition of the property is your responsibility and you do everything at your own risk.

Buying a REO property which is commonly referred to as a bank owned property which did not sell at the foreclosure sale and the bank took it back. In most cases the bank will clean the carpets or replace them and add repaint. They will clean up the property to have some emotional appeal. You are also buying a REO property “as is” and the bank will not make any repairs. Most REO properties have gotten rid of the existing tenant and you normally don’t have to deal with an eviction. You accept an REO property” as is” with all its faults and they will not make repairs. Many REO bank properties charge you a penalty if you do not close on the contract date. They do not accept offers with contingency of sale of another property. Check out REO properties very carefully as the sale price is usually close to the standard sale price in the area.

A Short sale property is another matter. The seller must approve the sale on the standard form. The offer is then transmitted to the bank for bank approval. The bank sends out an appraiser to evaluate the property. If the offer is within 10% of the appraisal price the bank will accept the short sale. If there is a second trust deed on the property the bank offers the second holder 10% of the note amount to get their agreement to release the second trust deed. Short sales can take up to 2 years to go through. The difference is that sometimes the bank will pay toward a termite report and repair. They usually do not pay for repairs. When the transaction is approved the buyer may have to deal with the existing tenant. Sometimes the bank will ask for a contribution to be paid by the seller, buyer, or agents. Short sales can be a good deal sometimes when the buyer gets the property for a very good price.

From my experience, the best way to purchase property is through a Standard Sale. You do not have to assume all the liabilities of a bank owned property. The Seller will fix things that are wrong with the property and if the seller does not disclose all faults in the property the buyer can come back to the seller and request to have it fixed or take the seller to court. In most cases a property that is sold in standard sales is better taken care of than a bank owned property. In a standard sale you know up front when you will close escrow and can plan on a date.

Whenever you can, I suggest you try to find a regular sale and not deal with a short sale if you can avoid it. It will make life so much easier.

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How to Finance Your Real Estate Investments

Posted by admin in Uncategorized on April 15, 2012

Real estate investment is a good way for building wealth. There are many advantages of investing in real estate: portfolio diversification, stable cash inflows, and future appreciation. However, you do not want to use cash to buy houses even you have a full bank account. You may want to use other people’s money to finance your investment in order to buy as many as properties with limited money. Before you can make a real estate investment, you need to understand the most common mortgage types available in the markets:

Conforming loans: A conforming loan is a mortgage that meets the criteria set by Freddie Mac and Fannie Mae. To ensure the money is available for the consumers, Freddie Mac and Fannie Mae purchase the loans from the lenders, issue securities that are backed by these mortgages and sell the securities to the investors. To qualify a conforming loan, the borrower must have verified income, enough cash for down payment and a good credit history. There is also a limit of a conforming loan. A conforming loan limit is the maximum amount of dollars Freddie Mac and Fannie Mae will pay for a mortgage. Conforming limit is not a fixed value, It is set by the office of Federal Housing Enterprise Oversight (OFHEO) according to the average home prices in different areas.

Nonconforming loans, Jumbo loans and Hard money loans: A nonconforming loan is a mortgage that fails to meet the criteria set by Freddie Mac and Fannie Mae. Reasons include the loan amount is higher than the confirming loan limit, lack of verified income and poor credit history. A Jumbo loan is a loan that its amount is higher than the confirming loan limit. Hare money loans also referred to as Bridge loans, they are typically short-term loans with high interest rates. These kinds of funding enable the borrower to obtain funding in a hurry and to get larger and longer-term financing later. Bride loans are frequently used before construction funding are replaced by permanent funding.

Conventional loans: A conventional loan is a mortgage that is not guaranteed or insured by any government agency, including FHA, VA and USDA. Therefore, conventional loans could be either conforming or nonconforming. Conventional loans usually have fixed-rate terms, large down payments and high interest rates. They also have penalties and clauses that federal lending do not have. The advantages of these loans are the loan fees are negotiable, and you can use collateral for a mortgage rather than the property.

Government loan programs: There are two government loan programs: Federal Housing Authority (FHA) and Veterans Administration (VA) loans. They are loans that the government used to support the industry and are usually available for first-time home buyers. The government also offers loans to borrowers to assist in rehabilitating properties. They give borrowers access to funding that banks, and private sectors do not want to provide.

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Top 5-Reasons to Invest in Rental Property Now

Posted by admin in Uncategorized on April 15, 2012

Recession

The R-word has finally been accepted and embraced by the economists. The country, and for that matter, the world in undergoing a recession of unprecedented proportions. This has led to massive job losses and under-employment in many industries. By the way, did you get your bail out like some of our “too big to fail ” industries received from the federal government? The explanation was that if these extra-ordinary measures had not been taken, the country would have gone into an even worse depression than that of the last century. Desperate times called for desperate measures.

Personal Net Worth

There was a time when the major portion of a person’s wealth was determined by the equity he has in his home. Many homes were bought at the height of the inflation for very high prices. However, since 2005, when the housing bubble burst, home values have been drastically revised downward, leaving most people with drastically reduced equity or underwater mortgages, which means, they owe more than the house is worth.

Doom and Gloom

Many people have walked away from their houses. The banks have foreclosed on many others, due to their inability to pay, due to unemployment or under-employment. Others have made a business decision, vis-a-vis, the current value of the house and the size of their mortgage payment. There was a lull in foreclosures being processed due to the banks were taken to task over their robo signings. This is where the paperwork was rushed through, without thorough review and a lot of information omitted, resulting in people being displaced, sometimes unlawfully. Recently, there was a lull in foreclosure processing but it was announced a few weeks ago that foreclosures are now scheduled to return to the heightened pace. This means more houses will be on the market for the smart investor.

Hope and Optimism

During the last major depression, more millionaires were created, up to that time, than at any other time in the history of the United States. More innovative product and service ideas seem to come to life during that period of perceived economic doom and gloom.

In 1849, there was the California Gold Rush, there was gold in those hills. Many people had dreams of making a fortune, prospecting for gold. Many people did and many didn’t. Some found their fortunes in other things, selling mining equipment, like shovels and pick axes, heavily marked up. Others like Mr. Levi Strauss, found that he had too much of the tent making material left over, so he created the coveralls, now known as Levi Jeans.

Great Opportunities

So it is with this recession in the housing industry. There is a new gold rush in rental properties, taking place right now, as we speak. There is a glut of newly constructed and recently vacated houses available for a quick sale. Many of those bank foreclosed houses and empty, new, contractor built-houses, are available at great prices. This is a great opportunity for an individual to now create riches with rentals. People have to live somewhere and the owners of rental properties will do very well in this new landscape.

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Found The Best Rental Property? Get The Tips On Purchasing It

Posted by admin in Uncategorized on April 15, 2012

Now that you will have completed a load of upfront work to uncover a region and type of rental property to purchase, it’s time to settle down and invest in the correct one. Here are some final tips you need to be familiar with before you take off ahead and place in an offer.

First, compare how much the home you’re serious about is selling for compared to similar buildings in the neighborhood. Remember to examine the growth forecast, exactly what others are charging for rent, as well as the historic vacancy rate of the area over the last several years.

It’s essential to hire a good home inspector to go through the home you are involved in. The individual you select must have experience with rental property. They must be available to provide you with an estimation of what it is going to cost you to have the unit available to rent out.

On the other hand if your particular rental property is currently being rented out, or has in recent times been, you need to check the maintenance records from the last several months. See what has only just been fixed and what will need to be fixed in the future. Most of this will bite into (and sometimes help to increase) your bottom line.

Since you are not purchasing the rental property for your own personal use to live in, you need to examine the rent rolls. The rent rolls need to match up with the rent which has previously been collected. This will ensure that the tenants are paying exactly what they are supposed to pay. In addition, there are some cases where certain tenants are not forking over the standard price, as a result of an agreement with the previous owner. If this is occurring, you have to find out about it! This will influence your profit.

The following step before you go ahead and make that purchase is to audit the leases. You have to know and anticipate when the units shall become empty. It will help you plan your advertising and marketing.

In various cases, the particular rental property you happen to be interested in may also get income from things besides rent. Possibly you will discover vending machines, parking spaces, and other things tenants pay extra for. These should factor into your choice as to whether or not to jump for the property.

An additional important consideration is what contracts the particular unit has out and whether or not they might be canceled. Perhaps they have agreements with firms they are marketing with. It could be the case that they have ongoing service contracts with certain firms. You have to be aware of all of these contracts to know if it is possible to run the business the way you wish to run it.

It will be utterly important to examine the financials of the rental property. It will not always be true that the preceding landlord was profitable, do not let that scare you away if you know you can do better (which you should be in a position to accomplish after reading this information). You have to consider just how much you will be paying out every month for the mortgage to determine if it’s going to cover your entire set of expenses, as well as those that will not be as noticeable at first glance.

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