Archive for July, 2009
Bargain Properties ? How To Play This Game.
by Doc Schmyz
Home foreclosures and fixer-uppers have long been a focus of many real estate investors looking to make big profits. Of course, if the target property doesn't meet certain criteria, an investor can lose their investment as well as any profit that was to be gained.
A cautious and methodical approach is best in this decision making process. Keeping that in mind, here are some critical area's that must be considered when looking at real estate bargains for investing purposes.
Please Note: The following elements discussed are not listed in any particular order. Nor do they all hold the same value in relation to each other, but they must ALL must be considered in their entirety. The property should meet at least one of the criteria, and should have no unjustifiable issues in any one single area.
Here is the list to used:
KNOW WHY THE PRICE
Most investors focus on price first.
They search for properties they think are selling below market value. This makes sense buy low and sell high right?? However think about the reasons behind the sales price? What is their motivation? Are they relocating or in financial duress? The 3 D's come in to play here most of the time. (Death Divorce, Debt)
Are there problems with the property that will cost a small fortune to fix? Out dated plumbing? Poor electrical wiring? In older houses these problems are VERY common. Don't forget to consider holding costs.
Holding costs are one of the biggest profit killers to investors. Taxes, mortgage, commissions to agents (both selling and buying) gas, and electric...all these things add up...and FAST.
A poor understanding of the current market value is another major deal killer. Remember market value is an educated guess at best. No one really knows until the appraisal is complete.
Price other property in the area. Come as close to the size/style/lot size you are looking at buying.
PAY ATTENTION TO TERMS AND CONDITIONS
What areas can you leverage besides price and location? Financing?
In some cases a full price purchase can allow you to leverage the terms to mean a lower interest rate or smaller down payment.
STUDY THE LOCAL MARKET
Good investors get in the habit of understanding the lay of the land. What is the local community like? Where are the closest fire/police/EMS services? How good are the local schools? Don't rule out these questions. Make sure to look in to the last houses sold in the area as well as any selling trends you can find.
As the Man Said...It is All About Location.
If your shooting for a long term tenet or residence then location is the second most critical thing to look at...however if you have a chance to turn a good profit for a ugly house in a less than 4 star area...that profit might out shine a nice little bungalow on the beach.
FIXER UPPERS AND FORECLOSURES
In the case of a fix and flip and sometimes a foreclosure. It is the job of the investor to factor in the repair costs. A keen eye can save you lots of money in a very short time. (Not to mention a good understanding of home repair work)
Fixer upper properties are a treasure trove to a savvy investor. If you have a good eye for details and can spot maintenance problems you can make a nice return on your investment. Things like a bad roof, poor plumbing or a bad foundation can be very costly to repair. Once you have an idea of what you're looking at for repair cost, do yourself a favor and add a little buffer say 5%...just to be safe.
Know What it is ZONED For
Make sure you research the zoning for the property BEFORE you buy it. If you are thinking of adding a second floor or a granny flat...is the zoning available? Make sure you know before you commit to doing anything that will add or change the square footage of the property.
Think of it this way, what could make you more money...a single small house on the land you just invested in...Or a duplex on the same land? One tenet or two? Zoning is a gift or a curse depending on your plans with the property...makes sure you know before you buy it.
Classic zoning "no-no's" are garages converted to bedrooms. Non-permitted mother in-law apartment and detached garages.
About the Author:
Doc has been a investor since the early 1990's. In 2006 he started a real estate investing information website. He hopes to help other investors by giving them the information on real estate services that will help them
by Gary Z. Bryant
While many people begin worrying about how many foreclosed houses are appearing on the market during times of recession, smart investors know that these are often the best times to make some serious profits.
What Exactly are Foreclosures?
Foreclosures occur when the home owner has fallen so far behind on mortgage payments that it leaves the bank or lender with no other alternative than to try and sell the house to recoup some of their own money. While most banks are reluctant to begin foreclosure proceedings, if the home owner is making no attempt to catch up those delinquent payments then the lender will notify of their intention to begin foreclosure proceedings.
Why Invest in Foreclosed Properties?
When a bank is beginning foreclosure proceedings, they simply don't care how much the house is really valued at on the real estate market. They only want to recover the money they lent out to the home owner. This can mean that smart investors have an opportunity to purchase properties at prices far below their real market values.
There are three options if you're considering buying foreclosed property. Each opportunity comes with distinct advantages and disadvantages.
Finding Foreclosed Properties
The first option is to try and buy property during pre-foreclosure. Pre-foreclosed properties are homes that are still owned by the home owner. This means the bank hasn't taken possession as yet. The current owners are very motivated to sell the house to get themselves out of trouble, so you could easily pick up a great bargain.
What is a Court Auction?
The second opportunity during a court auction after the property is foreclosed. The disadvantage is pretty obvious. During an auction, depending on the potential value of the property, the price can skyrocket. The advantage is that the property is now free from all debts.
Purchase Directly From Lenders
The last opportunity is when the property has been fully acquired by the lender. Lenders are usually banks and are not involved in the business of real estate. This can be the most hassle-free way to acquire foreclosed property. Usually banks agree to negotiate the price of the property. This is the opportunity to get a good deal without the burdens of other options.
Whichever option you choose, it's always vital that you inspect the property thoroughly and investigate the true extent of any debts outstanding against the home.
Once you're sure the numbers stack up the right way, you could easily be purchasing an investment property that is valued so much higher than the price you paid for it. Wise investors also understand that by keeping purchase costs low, they also have the opportunity to build an ongoing source of income as the rent can often exceed the costs associated with owning and maintaining the investment property.
A wise investor will realize the potential value of buying a foreclosed home at a discounted price to its real market value, especially in light of the recent reduction in real estate values. This can represent a double-benefit to a clever investors portfolio. Not only are you gaining extra equity in the form of higher market value than the original cost, but its also possible to keep your purchase costs low enough so that any rental income derived from the property will easily cover all the associated costs of the mortgage and operating costs of maintaining an investment property.
About the Author:
Scared to invest in real estate? This is wrong. Ask Gary Z. Bryant. Learn more about Real Estate Investing and Real Estate Foreclosure Investing
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The Pre-Foreclosure Property Investor's Kit: How to Make Money Buying Distressed Real Estate -- Before the Public Auction List Price: $24.95 Sale Price: $8.99  |
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Pre-foreclosure real estate is one of the hottest investment opportunities on the market. The Pre-Foreclosure Property Investor?s Kit offers step-by-step instruction and no-nonsense advice on how to find great deals, estimate fair market value, negotiate with sellers, sell your property on your own, and win big in real estate... |