Many real estate investors take the buy and hold approach to real estate investing. And this of course means renting the property out.
If you are buying multifamily property or properties that are typically rentals, this represents no problem.
However, if you are buying a single family property in an area that is represented by a homeowner’s association, there could be problems.
Here is why… More…
One of the challenges of buying a home - either to live in or as a rental - is the hidden expense time bombs due to the aging of mechanical portions of a house.
While the structure of a house can generally last for decades and in some cases even centuries with nothing more than occasional maintenance work, the mechanical parts of the house generally don’t fare as well.
Mechanical components include appliances - refrigerator, dishwasher, garbage disposal, etc. - as well as things like the hot water heater and the air conditioning/heating units. More…
Junk fees are fees that a mortgage broker adds to a loan that are not specific to the actual loan costs. These fees represent charges the mortgage broker is charging for services they are providing. Some are legitimate and represent real costs to the mortgage broker. Some are simply ways to pad the bill and extract more cash from the buyer.
Junk fees can include:
Some fees are certainly justified as the mortgage broker is performing a service and deserves to be compensated for it. But others really should be under a lump free - like the processing fee. For instance, the notary fee or the documentation review fee are in my opinion complete junk fees that don’t offer value to the customer. The processing fee should include the cost of a notary (who is most likely a staff member who gets paid whether or not there are documents to notarize) and the cost of a document review. After all, what are they doing with the processing fee if they are not processing your application and making sure all your documents are correct.
A big challenge with junk fees is that you may not know all of the ones a broker will hit you with until you are at the closing table. It can make it very difficult to negotiate any away. After all, if the mortgage broker and you both decide not to budge at the closing table, you ma not be buying that house.
With the market the way it is today, assuming you are credit worthy under the current tight mortgage standards, you actually have a bit of leverage though.
While money is definitely tight right now, a qualified buyer is golden in this period of lean times for mortgage brokers.
So if you are qualified for a mortgage, insist on a list of all fees at the very beginning of the lending process and question the broker about each fee. Any fees that don’t sound like they are giving you good value are points that you can negotiate. You should also get an agreement signed that states that the fees presented are all the fees that you are going to be charged at the closing. (The only exceptions should be prorated fees - like prorated interest and prorations for taxes and such that can only be set based on the actual day of the close.)
Not every lender will negotiate but by insisting on all the details up front, you can make the decision to do business with that lender or seek another mortgage broker while you still have time.
If you have ever been to the google search engine, you’ve seen the ads on the right column of the search results. These ads are called Pay Per Click (PPC) ads and anyone can buy them.
They are targeted by keyword so they only show up when a visitor to google types in a specific keyword or keyword phrase. And that is all controlled by you when you set up your PPC ad campaign.
At this point, you may be thinking that this offers you no value. After all you are local. And google is worldwide. You hardly need someone in Australia clicking on your ad when you live and invest in Akron, OH.
But there is an answer. Google offers the ability to show your ad to specific regions. They call it targeting by location. They offer several options to do location targeting of your ad:
For your purposes, you would be interested in the last three options. They let you pinpoint exactly where your ad will be seen. So if you live in and invest within 30 miles of Akron, OH, you can create a series of ads in the google PPC system that only show up when the keywords you selected show up AND only within 30 miles of Akron.
Just think for a second how powerful this is.
You can take advantage of all the people in your area (and only your area) who are using google to search our real estate -and funnel them into your website where you can educate them on the value of being your customer.
Thats right, these ads are just as targeted as ads that you place in your local newspaper.
So if you were thinking that internet advertising doesn’t make any sense for your business, it might be time to rethink it a bit - because if newspaper or any other type of local advertising works for you, the internet can be just as effective if not more effective right in your own home town.
This is a little tip that can work really well when you are making an offer to buy a property. It applies to both real estate investors and regular buyers of real estate for their own use.
Most deals are between the buyer and seller and a licensed real estate agent. The agent prepares the contract with the person wanting to buy the property and hands it off to the seller’s agent for presentation.
The contract in this case is already preprinted and has a few fill in the blank spaces for things like name and address and price and a few checkboxes for various other standard clauses - like damage clauses fro problems found during inspection.
And then at the end, there is a blank area where you can write in other conditions for the offer.
For investors, this is the place to put in all the "subject to" clauses that they use that are not covered by the standard contract.
But it can be used for more - and here is where it gets really powerful.
You can use this section to ask for seller concessions - things like a credit for new carpet in the house or a redecorating allowance or for the furniture to be included or for the seller to pay a few points on the mortgage at the closing, etc.
Asking for these things opens the door to further negotiations.
For instance, you may ask to have the seller pay two points on the mortgage, give a credit to cover replacing all the carpets and pay for your lodging and storage of your goods while the new carpets are being put in.
While you may be asking for all these things, perhaps all you care about is getting the seller to pay two points.
This gives you the opportunity to negotiate because there are a basket of points in the offer that can be discussed. If you just asked for a single thing, the seller could just say "no thank you." When you ask for multiple things, the seller - if interested in the offer in principle - is more inclined to give in on at least one of the points.
So for taking a few extra minutes up front when preparing the contract with your real estate agent, you have the opportunity to get thousands of dollars in additional concessions.
You made the plunge and now you have your first rental unit. Or perhaps you have many rental units or an entire apartment complex.
Whatever the situation, it has probably crossed your mind, at least briefly, to hire a property management company to manage your rental properties. And you are probably wondering if this is a good idea.
There are many factors to consider before making a decision to hire a rental management company.
The first is cash flow. Does the property or group of properties throw off enough profit to pay the cost of hiring a property manager. If it doesn’t and you don’t want to pay the difference out of your pocket, you have your answer. Hiring a property manager wouldn’t work for you.
But what if there was enough cash flow or if you were comfortable selling out extra money to hire a property manager?
The next decision point is to see if you can find a property management company that has a good reputation in your community and fits your budget. This step is really important as a bad property manager can end up costing you a lot of money whereas a good property manager can actually put extra cash in your pocket by finding more stable tenants and dealing with problem with their network of contractors at known fair prices.
Assuming you have the cash flow and can find a firm that checks out OK and that you are comfortable working with, it is probably a good decision to move ahead and put your properties under the umbrella of their management.
Now that you have a simple decision tree to decide if you should hire a property manager, it is a good time to reflect on why you might want to do this. After all you will be paying this company money that can go into your pocket.
So what we have here is the typical time vs money equation.
If you do it all yourself, you are taking time away from finding new deals and away from your family when you get those 2AM calls about a stopped up toilet or a leaky roof and all the other chores that come with managing your own properties.
If you let a property management company handle everything, you are acknowledging that your time has a value. And that is a very smart decision. That extra time can be invested in finding more good deals, growing the value of your real estate empire. It can also be invested in knowing that you will have no late night emergency calls to deal with. And the sort of peace of mind that can bring is tremendous.
So is a property management company right for you? Only you can answer that question.
If you’ve been a real estate investor for more than 10 minutes you’ve heard of bandit signs. You know - the signs on the side of the road with catchy phrases like "home for sale by owner" or "we buy houses." If you ask another more experienced investor if they are effective, the answer is generally "They sure are." Ask if the investor is using them regularly and you will probably get a less positive answer. Usually something along the lines of "They are great but I just don’t have time to put them out."
The simple truth is that barring laziness on the part of the investor, bandit signs can work really well for you - and when you consider the cost, the return on investment can be phenomenal.
So the question is what can be done to make your bandit sign advertising as effective as possible?
There is no mystery. But it does involve a bit of work.
Your bandit sign results can be dramatically improved by testing.
What are some of the things you can test?
By testing these elements, you will find the combination of all these factors that produce the best results on a consistent basis. It can be quite a bit of work to handle all these situations and track the results. But what if it means that you get three times more calls per bandit sign you put up? How much is that worth to your bottom line?
No doubt about it. Bandit signs can be your most effect advertising method on a cost basis. And with testing, they can be your most effective advertising method bar none. So next time you see a bandit sign on the side of the road, study it and see if you can make a better one for yourself.
By Vernon Brabham
As most of you know, the quickest way, and sometimes the only way, to sell property is through use of seller financing.
When a seller takes back a note for part of the purchase price it is much easier to conclude a sale. Why? One reason is that it makes it easier for the buyer, since banks have fairly strict lending rules, even if a buyer has a good credit rating. Another reason is that the seller can often give more lenient terms.
What if after the sale the seller decides that he really needs part, or all, of the selling price now instead of waiting months, or years. He doesn’t know what the money will be worth in the years to come and he doesn’t know if the buyer will make payments as promised. Of course, there is always the option of foreclosure, but who wants that?
In such a situation, what many sellers do not know is that the note can be sold. If the note-holder does not need all of the balance he can sell only a portion of it and still have income in the future. This can be done, and frequently is, no matter what he has been told. This can result in something like having his cake and eating it too! There are many reasons that a note-holder may need money today rather then in the future; a health issue, sending a child to college, an investment opportunity, and similar situations. So, if any of this applies to you, the reader, or to anyone you know you should investigate the possibility of selling your note and getting money today instead of a long drawn-out future.
About the Author:
Vernon Brabham is a long-time entrepreneur and writer. If you liked this article and want more information go to www.IWillBuyYourNote.com for a free report.
Investing in real estate can be very exciting. A single deal can earn you as much as or more than most people make working an entire year at a a regular middle class job. And there are many deals available the will earn you less but still a very handsome ‘paycheck’ for the amount of work invested. And of course there are deals that are bought for cash flow rather than a ‘paycheck.’ Deals that can give you a nice monthly bump in your standard of living.
As a beginning real estate investor, you are pumped - primed for your first deal. And that can be a two edged sword. If you jump too soon, you could get stuck with a deal that sours you on the idea of real estate investing as a way to wealth. And if you are too slow, you can find that good deals were grabbed by competitors while you were thinking about them.
So what do you do? How do you know what deal is going to work out for you?
While there is no way to be 100% sure of any deal, knowledge will help you avoid many of the pitfalls of the typical novice investor. That knowledge can be acquired in many ways:
All this pre-investing work may sound hard or even a waste of time, but consider this…
People go to college for four years and in many cases invest 10’s of thousands of dollars for their education. At the end of all this hard work, they graduate and get an entry level job for 30-50K/yr working 40 hours a week or more. All these people understand that you must invest in your education first before getting that job in their chosen career.
And real estate is no different. There is much to learn to become a successful investor. Fortunately for you, it can be done in a much shorter time period, for a lot less money and is a lot more fun - expecially when you get that first check from a successfully concluded deal.
Real estate is a classic case of supply and demand. When there is more demand than supply, there is upward price pressure. When there is more supply than demand, there is downward price pressure.
Aside from general population growth, what affects the supply/demand picture in a particular community? There are several elements:
Paying attention to these trends will help you better understand the cycles of the real estate market in your area. They let you forcast with a reasonable degree of certainty what is going to happen in an area over the next several years.
