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 Doc Schmyz

First let's establish a few ground rules for this article.

1) The market has had a down turn before and people still made money.

2) Not every deal will fall into a cookie cutter format.

3) Not every tactic or idea works in EVERY state/province. Check local laws pertaining to real estate transactions.

Ok..now that we understand the rules...lets move forward.

So home values have fallen in your market, this doesn't mean that you, as a real estate investor/professional, are out of luck. It only means you need to add new tools to your real estate investing tool box. (Be warned I use "tool box" a lot.)

Finding and Marketing property

Besides the normal channels of RE agents and brokers (still the best way to find good investments in my opinion) you have a huge amount or resources at your fingertip with the Internet.

You can join website communities for investors, follow blogs, get in on group discussion etc. All of these things can lead to new and interesting deals.

Several investments have come to me via the web. I also have gotten many tips from other investors on investments and financing issues. Never over look the value of belonging to an "investor community website."

I truly feel that in the future the majority of investing will shift to being web related. Not just in finding investment projects but in doing the research for them as well as the funding process and the marketing/exit strategy as well.

Finance

Everyday we are hearing about how the current market and credit crunch is making getting loans harder for everyone. This is currently a fact. No way around it. The loan process has changed. So what options are left?? The answer is several.

Lease options. Assumable loans. Seller financing.

The above mentioned will become the big trends in the next couple of years. I am waiting to see the lenders change the loan guidelines in the next few months to "re introduce" the assumable loan. We are already seeing a HUGE trend in short sales. (This was a practice that was used only in limited capacity in the last 10 years by most lenders now it seems like every other distressed listing is a short sale in some cities.)

Please do not let the current market conditions scare you in to sitting this investment period out. On the contrary use it to inspire you. Take the time to do the research on finance options, look into building a LLC perhaps. Find out about buying real estate with your IRA. Etc, etc.

Buy books. Read investment strategies of the big names in investing. Use the time to educate yourself and above all be creative.

Don't Let Panic Drive You Off with Everyone Else.

About the Author:

Doc Schmyz has worked with investors all over the U.S.. His website gives thousands of investors up to date real estate investing information Get more info from across the U.S. on Doc's real estate investing resources page.