Only Realty: Real Estate

Real estate investing can be simple in theory. You buy rental properties for a price and terms that provide positive cash flow, or you buy a home which you can fix up and sell for more. In practice, though, applying these simple principles involves a lot of educated guesses. Nobody really knows precisely what a house will sell for once it is fixed up. You also can’t say for sure how many vacancies you’ll have in an apartment building.

Fortunately, with experience your guesses get better. But then there are the tricks and outright lies that some sellers will throw in your way. Bad information makes good guesses difficult to make. How do you protect yourself? Watch for the following dirty tricks that some sellers have been known to use.

The most common tricks involve simply hiding facts about a property. This may be illegal, but only if the seller actually knows about a problem. How do you prove that a seller knew there were foundation cracks behind the paneling in the basement? You probably can’t. Unless you know a lot about the building trades, you should normally pay for a home inspection - preferably by someone with some building experience.

However, not all sellers are so careful about what they say. If you sense there is a problem with water in the basement, for example, ask about it. If the seller denies there has ever been flooding in the basement, get him to write “There was no standing water in the basement during the time I owned the property.” The point here is that if you later find water, and the carpet cleaner who sucks it out for you mentions doing the same job there a year before, you have evidence that the seller was lying.

Income And Expense Tricks

With rental real estate, the more dangerous tricks are the ones involving the reported income and expenses. You can have a property inspected for physical problems after all, and a rotten roof is hard to hide. On the other hand, it is more difficult to prove that a seller paid cash for snow-plowing to keep the expense off the books prior to selling, or didn’t really collect as much in rent as he said.

Why is it so important to watch for this in real estate investing? Naturally, you would be upset if the expenses are higher than they should be on your rental, or the income lower. But this goes beyond your cash-flow problem. Rental real estate is valued according to net income, so if this was reported incorrectly, you may have paid much more than you should have for a property - and much more than you can sell it for.

This gets into the area of capitalization rates, or “cap rates.” A simple explanation: If investors in an area expect a return of 8% on a property before debt service, this is the expected cap rate. So if a property produces net income of $50,000 before debt service, it is worth about $625,000 ($50,000 divided by .08). Now, if expenses are hidden and income exaggerated, so the seller can show a net income of $60,000, you could pay $750,000 ($60,000 divided by .08) - a big mistake, right?

How then, does a seller exaggerate income and reduce the reported expenses? Expenses can be paid for in cash or with a personal check in order to keep them off the books. That’s fairly easy to do, but it does leave clues.

If the property is in a northern area and there is no expense listed for plowing, that is suspicious. Of course it may be that the owner of an apartment building shovels away the snow himself. But since most owners wouldn’t do this, you better add a reasonable expense for this and adjust your projected net income figures before putting a value on the property.

Look carefully at the books and note the expenses shown for maintenance, repairs, advertising, cleaning, management fees, supplies, taxes, insurance, utilities, commissions, legal fees and any other expenses. If any of them seem unusually low, ask about that, or better yet, just estimate a reasonable amount and use that to adjust your net income figures. Also compare the vacancy rates shown to the average for the area and ask questions if it seems too low.

Reported income is also easier to manipulate than you might think. Suppose an owner of a 30-unit apartment building plans to sell it. To show more income, he starts playing with the books a year before the sale. First, he reports income from non-paying and even evicted tenants (watch for those unusually high occupancy rates).

Then, several months prior to putting the property on the market, he raises the rents to $100 per month over the area rents. He knows that people take time to move, so the income spikes up temporarily, and by the time apartments start going vacant you have bought the building. Now you face an exodus of tenants.

Another common trick is to include items that are not part of the normal rental income. This might mean one time income, for example, like the sale of an extra lot or company vehicle. It can also be income from vending machines or laundry facilities. In the latter case, subtract out the income, figure the property value based on the new net income figures, and then add back the replacement cost of the machines. (There is some debate as to whether it is fair to include this type of income when figuring the value of an income property.)

You might think that an owner would hesitate to show extra income or lower expenses. He does have to pay more in taxes after all. But look again at the example above. Showing an extra $10,000 makes his property apparently worth $125,000 more. He might be willing to pay a few thousand in taxes to get that - and you might be stuck with a property that loses money and can’t be sold for anywhere near what you bought it for. Real estate investing can be tricky.

If you are considering getting into real estate investment, one of the most important things you can do is to learn what exactly makes a good real estate investment return. Your return is actually what money you will make on the investment or your profit. In order to maximize your real estate investment return, there are several things you should do.

One of the first things you will need to do is learn how to figure out whether the property will give you a good real estate investment return. If you are looking at rental property to invest in, you will want to make certain the property will give you a positive cash flow. The cash flow is the amount of money left over after you have paid the expenses on the property. Expenses will include taxes, operating costs, and maintenance costs.

For example, if you have the opportunity to purchase a three-unit rental for $150,000, the rents are $750 a month; you will have $2,250 coming in. However, after you deduct the taxes, operating costs, and maintenance fees on the property, assuming those amounts add up to $500 a month, you are left with a positive cash flow of $1,750 a month or $21,000 per year. This would give you a good real estate investment return.

If you, however, can purchase the three-unit rental for $150,000 and it needs repairs, such as a new septic disposal system, a new heating system, and a new roof, you may find the property will not give a good return on the money you’ve invested. It is simple a matter of factoring in every detail possible that will have an effect on the money you will receive for the property rentals.

If you are looking to get a good real estate investment return on a property by flipping it, meaning you buy, fix, and sell quickly, you will want to verify several things before committing yourself to such an endeavor. The first thing you’ll want to do is consider the price of the property and what it could be sold for after it was fixed-up properly. You’ll do this by researching properties that have been sold over the past year. You’ll want to look into things such as the price it was listed for, the price it sold for, how long the property was on the market before it sold, and analyze the information received. If you find the property to be priced below the fair market value, the property does not need much work to make it saleable, and the properties are selling well in that particular location, you may be able to get a good real estate investment return on this property. In order to get the best and most up-to-date information in a certain area, you may want to work with a real estate agent in the area.

If you are hoping to maximize your real estate investment return, the fact is you have to do your research thoroughly and effectively. Depending upon whether the property is for you to rent out or to sell after being fixed-up, you’ll want to make certain the figures you get are accurate. Without accurate figures, such as a cash flow statement from the current owner of a rental you are interested in, you have no way of knowing exactly what your return will be.

The global real estate industry is going through a lull period. But, if you go by the experts’ advice, it is just the right time to invest in some good property. Real Estate investors in various counties in the US such as Collin County, Dallas County, Tarrant County, Rockwall county, and Denton County are also making the best deals in real estate properties. Similarly, the region of Forth Worth, Texas is in great demand for property investment. You can invest in Fort Worth wholesale real estate and earn good profits.

Forth Worth, Texas has many advantages. These include a relatively low cost of living, an exceptional educational system, an efficient economy, a diversified business environment, pleasant temperate, climate, and friendly community atmosphere, and reasonably priced real estate properties. This region has been rated amongst the best places for residing and business purposes in the nation. Thus, investing in Fort Worth wholesale real estate properties can be beneficial. You simply need to follow the following steps in order to crack the best deals:

•Do some follow up with wholesale dealers in the region: You can do this weekly via emails as well as with the help of phone calls. Do not expect the dealers to inform when they get hold of a deal. You should be the one to initiate such communications.

•Contact advertisements in newspapers that declare that they purchase houses: You will realize that such advertisements are usually placed by investors. Find out which properties or homes they are seeking to sell and whether they are wholesale in nature.

•Surf online for the best deals: You can specify your search to the region of Forth Worth, Texas and locate the best deals in Fort Worth wholesale real estate.

•Attend club meetings of real estate to obtain first hand information: In this way you can know about the most active investors in and around this region. You can also get to know about dealers who are interested in wholesaling.

It is true that the real estate in the region of Forth Worth, Texas has not experienced the same level of price gains in the last few decades as the rest of the United States. Nevertheless, it has witnessed decent gains with regard to properties during the same time period. Moreover, it is seen that prices in real estate in this region has continued to remain steady and even revealed marginal gains whereas prices of homes in the rest of the nation continues to decline. Thus, if you invest in Fort Worth wholesale real estate, you will not suffer any losses.

It has also been witnessed that many other regions of the United States is experiencing a sharp drop with respect to consumer expenditure and citizens are getting trapped in various forms of debts whereas Forth Worth, Texas is still enjoying enthusiastic and stable consumer expenditure. Furthermore, this region is going through a stable growth in terms of new jobs thereby bringing with it an influx of new residents without hampering the commercial sectors. This is yet another reason why investing in Fort Worth wholesale real estate can be worthwhile.

Hence if you are looking to set up any industrial or property or buy homes, you can consider investing in Fort Worth wholesale real estate.

So you’ve made up your mind to start investing in real estate. Wonderful! But where do you go from here? Do you start by sifting through the data available in your market on what type of investing has the most return on investment? How about searching for the most current, hottest investment technique and jumping on that? No. When you make the life changing descision to start your real esteate investing career, you should start with YOU. That means you do what the Real Estate Heavyweights do: determine your Core Competency first.

You know you’ve found your Core Competency in Real Estate investing when it satisfies the following criteria:
1. You can do it almost perfect every single time
2. You can do it repeatedly.
3. It could almost be a hobby for you, i.e. you’re energized every time you get to work on it.
4. You get paid well to do it because you’re rendering a valued service.

Let’s go through each of these points…

The first is the most significant. It’s as simple as this, you may love doing lots of stuff, but if you can’t pull it off with near perfection every time than it doesn’t qualify as a Core Proficiency. You may have a passion for haggling with lenders while trying to work foreclosure deals, but if you can’t actually close a profitable deal, then you should NOT believe it to be a Core Proficiency. Many people miss this point. They tend to guess “the hottest trend in Real Estate investing right now is technique X, so that’s what I’ll go after.” Sorry, It doesn’t work like that. The bottom line is, If you can’t do it proficiently almost every time, without errors, it doesn’t qualify.

Being able to do a job consistently follows from the first point. If some method or skill is your Cor Proficiency, you should be able to get good returns on your effort each time you try it. Not only do you not make mistakes in deals as mentioned above, but you get good, gainful returns when you practice this method or skill. If you aren’t getting consistent results, move on.

Your Cor Proficiency has to energize you. As funny as it sounds, some investors don’t think about this step. I know I idn’t starting out. I used to work in short sales a just a few years ago, but I don’t anymore. Why? Because even though I was able to get some deals done, I didn’t enjoy any part of it! The very idea of having to negotiate with another person in loss mitigation made me long to do something else, anything else. So, I stopped wokring them. I know some people who get a real thrill from working short sales. Not me. It’ll never be my Core Competency.

The ability to get paid is obviously a critical point. What’s the point of doing something well in this business if you can’t get paid for it? Not only will you speedily tire of Real Estate investing, you’ll quickly run out of money to do it!

Once you determine your Cor Proficiency, you’ll have taken a big step toward winning in Real Estate investing. Discovering that “sweet spot”, that corner that you can do well, enjoy, and get paid to do, will put you head and shoulders above your competition. It’s the first thing the Real Estate Heavyweights do, and it’s the first thing you should do.

How does real estate investing work in building wealth? The answer is investment strategies of your own. This scenario can be considered as a long-term investment when you buy and hold property to rent or lease to a tenant together with an option to buying. Rent option involves finding a specific property, making its condition ready for rent, and then marketing it to possible tenants. This investing strategy offers plenty of profit opportunities. When the monthly rental given to you is more than the mortgage and other necessary expenses, you can create cash flow. Wealth will be built through tax advantages, tenants paying down your mortgage, and property appreciation. At the same time, lease options can be created by leasing the property for 12 months or more, also with an option to buy. Income from lease options includes tax advantages, profit from sale, monthly cash flow, and upfront option fee income.

You would not go out on a piece of land, anywhere and just begin to pour out some concrete, throw up a few studs here and there, plant a couple of bushes, then do some plumbing and so on. Taking this approach would probably not yield the home you have in mind, whereas, a strategic approach would. The same holds true for business operating chaotically without a strategic plan will not yield success but will leave you with far less than you initially envisioned or set out to obtain.

To make profit is the real objective of real property investing, to increase their profits investors are constantly coming up with new methods of creative real estate investing. Investments start first with a purchase of real property, when real estate investing property is purchased there are several things an investor can do with it. The quickest way to gain a profit is by reselling the property at a price higher than what was paid for it.

Most knowledge about investing in real estate only extends to the point that it has something to do with making money in houses only few people know what is real property investing entails instead many people have head about it. The simplest explanation of real property investing is that money is made through the purchase and resale of real property. Anyone who has an interest in property investing needs to know more than this to be successful in the arena. Strategically sorting through many properties for sale and purchasing that one in many that meets your goals, simply buying real estate is not real estate investing. Every real estate transaction should have one or more of the following to be called real estate investing, rather than real estate speculation Income, Growth, Tax Advantages and Leverage.

One of the real estate investing secret is to purchasing a distressed property is the most popular ways to purchase a property for cheap keep the properties on track and find the good ones and if you want success, you’ve got to have the interest and time. Because of the appearance, condition, or the financial situation of the owner distressed properties usually have some negative affect on their value. Real property investors can purchase distressed properties for a low price by doing some work to fix them up and then resell the property at market value for a profit.