Investing In Real Estate
Article on Investing In Real Estate
Negotiating Thousands in Discounts
Once you own one home, the idea of owning another home as a money investment might pop into your head. With it being general knowledge that the real estate and housing market is in the tank, you might be a little hesitant to pull the trigger and invest in real estate. However, if you have some fortitude and some patience, now might be an excellent time to invest in real estate.
Interest rates have been dropping, and some say they may drop further. Foreclosure rates are going up, which makes some deals readily available and aids in lowering the median home prices. If you are ready to pull the trigger and invest in real estate, consider the following tips.
Creative financing
After you invest in real estate, a big part about profiting from it is making sure that the financing is in place. Real estate is not like operating a retail store where you buy something wholesale for $10 and sell it for $20. First, you must identify your goals and determine if you want to rent the house and ultimately, once paid off, have a nice annuity or if you want to flip the property for a more short-term profit. If you are looking to flip and you’re confident that you can find a buyer, consider an adjustable mortgage with a very low temporary interest rate. These adjustable rate mortgages have been the source of a lot of problems, but if you know you can sell for a profit before the mortgage resets (2 to 5 years), you can maximize your cash flow by paying only the interest and then making the principal the buyer’s responsibility. For longer-term real estate investments, fixed mortgages are better because they allow you to plan your cash flow accordingly and get by when things are tougher.
Many people who invest in real estate may be in a hurry to pay off, but remember; you are using rental income to help subsidize the mortgage payment. If you truly have a long-term horizon, you can rest easier knowing that someone else is paying more of the interest and principal each month than you. For rental properties or investment real estate, make sure you are also leveraging all of the tax benefits of depreciation and valid expenses.
Do it yourself where you can
When you invest in real estate, money is made or lost behind the scenes, not when the final deal is made. For example, you may have turned a $10,000 profit on the sale price after one month, but if you paid an attorney $1,000, your contractors $5,000, and your real estate agent $5,000, you lost money on your deal.
There’s a lot of common sense involved once you invest in real estate. Improvements to your property, such as new cabinets, landscaping or tiling are things that can really add some value. Hire professionals to do these things for you only if you need the help. For instance, changing locks, putting in new plants or painting the walls are things you can likely do. You certainly do not want to do something you are not capable of doing -- that can become even more costly than just hiring a contractor. In your deal, consider the skills you have and what really needs to be done to get the place up to par. In terms of other professional services, perhaps you should avoid hiring a rental agency that will take 10% to 15% plus the first month’s rent; you can place classified ads and answer your own phones.
You may be surprised to find out that you can do many tasks you used to pay for far more efficiently. If you absolutely must remain hands-off on everything, make sure that you budget accordingly so you do not chew up your profits paying service providers.
Use help where appropriate
Just as in any venture, it is tough to go it alone when you invest in real estate. Hire the real estate, legal and titling pros when it makes sense. For instance, if a real estate agent comes along and can find you a buyer three months sooner than you can on your own, paying that commission may be far better than paying two more mortgage payments. Hiring an attorney to handle some of the paperwork for issues pertaining to the contract and title might free up some more time to find the next deal or finish painting the investment property. More importantly, if this is your first deal, having a paid advisor might make sense to make sure you avoid any stumbling blocks or legal entrapments. Certainly, you should learn from this engagement as maybe you can handle it yourself the next time you invest in real estate and save yourself some fees and aggravation in the process.
Know market trends
You may feel like you are up on everything, but you will be surprised to learn how competitive the business is once you get into it. You will be in the mix with businesses and individuals that have been doing this for far longer than you have. While you cannot replicate that experience overnight, you can educate yourself on as many of the issues and trends as possible. Research home prices by following the sales in the newspaper and note the trend of home prices. Review the classifieds for fair rental prices and even visit homes that may be similar to the one that you are going to list. Visit the local banks and see what is really happening in terms of loan volume and required down payments. You can use this knowledge to avoid paying too much and perhaps even negotiate a better deal. Education is great preventative medicine against overpricing or under-pricing your targets.
making real investments
When investing in property besides your primary residence and building your real estate empire (regardless of the size), the most important rule is to just practice basic business principles. Your goal is to sell something for more than it cost you to buy it and fix it up. When renting, you are relying on rental income to subsidize a fair amount of your mortgage, but not the entire thing. Greed and dreams of quick dollars will likely lead you to trouble, but making sane, business-focused decisions should allow you to extend your real estate holdings outside of your home.
Great Investment
Ready to Invest?
If you want to make money investing in real estate, you have to begin with a plan. Here are some ways to get started investing in real estate. Choose a plan that works for you.
If you don't currently own your own home, that's the best place to start. Many people never buy a home because they think they have to have perfect credit or a lot of money down. Talk to a mortgage loan officer. You may be surprised that you can buy a home with little money down.
Homeowners Are Real Estate Investors
Any home owner in reality becomes a real estate investor. Whether home owners want to stay in their home for life or just a few years, their home should make them money. Many families only own one home at a time, but they keep moving up. Some of these families have made money from their homes by taking out the equity to pay bills. Other families bought more expensive homes, which went up in value more than the first home. For instance, a family bought a home for $105,000, sold the home for $230,000 and then bought a home for $300,000. The more expensive home went up in value the next year more than the first home. You can build your real estate wealth just by owning one home.
However, if you split your mortgage payments with other people, you don't have to pay for all this equity on your own. Your tenants will help you make the payments and over time can actually buy the property for you!
How to Begin Real Estate Investing
Many investors start with a home to live in and then save money for a down payment for their first investment property. Here are some ways to skip the savings years, which most people never accomplish:
1. Refinance. If your home has gone up in value, refinance your home and use the equity for a down payment on an investment house. You must have sufficient monthly income to pay any negative between the rental income and the new mortgage payment. Some home owners have been able to purchase more than one investment house from one refinance transaction.
2. Move. Another way beginning real estate investors get their first investment is to buy a new home and rent out their first home. If you have great credit, you don't need to put a down payment into a new home to live in.
3. Sell and Move. You can sell your home and buy two houses. Use your equity to put more down on the investment house than your personal home.
4. Buy a vacation or second home. Our cabin tripled in value in three years. We refinanced the cabin to buy more houses and also kept funds to pay for the mortgage, twice. The cabin pays us to enjoy it!
You can make money investing in real estate. Make a plan of action and get started real estate investing.
Copyright © Jeanette J. Fisher
US Homebuyers are Paying Closer to List Price - but are Still Negotiating Thousands in Discounts
Florida home buyers again in August had the most negotiating power, with buyers in the Vero Beach metropolitan statistical area (MSA) paying 8.9%, or a median $20,974, less than the last listing price. Buyers in the Naples MSA paid 8% less than list price. The Naples, Daytona Beach, Miami-Fort Lauderdale, Ocala, Lakeland, Punta Gorda, Melbourne, Gainesville, Tampa, Jacksonville and Fort Myers MSAs also ranked, in that order, as the top markets for negotiation.
But in two California markets, buyers paid more than asking price during August. In the El Centro MSA, buyers paid 2.2%, or a median $2,479, more than asking price. In the Stockton MSA, buyers paid 1.3%, or $2,515, more.
“Negotiating power is a clear reflection of inventory levels, which dropped nationally in August. Tighter supply in some markets is translating into less of a discount off listing price,” said Zillow Chief Economist Dr. Stan Humphries. “Unfortunately, the brisk spring and summer home shopping season is drawing to a close now, and with foreclosures on the rise again, inventory levels will likely head back up in the coming months, leading buyers’ negotiating power to regain the ground it lost in August.”
For more information, visit www.Zillow.com.
Read more: http://rismedia.com/2009-10-08/u-s-homebuyers-pay-closer-to-listing-price-in-august-but-are-still-negotiating-thousands-in-discounts/#ixzz0UZkFldQI