Real Estate Investing Articles

When it comes to real estate investing those who are looking for unique methods of investment that are radical departures from traditional methods will be sorely disappointed. No, that does not mean that there are no new innovations present in real estate investing. Actually, new spins on traditional investment strategies are developed by innovative minds everyday. However, there are a finite number of basic methods of investing that have worked in the past, work today and will work in the future. Such is the case with the renovation of a downtrodden home in order to increase its value for resale.

This is a very simple concept: a home that has fallen in disrepair will be acquired at a cheaper rate than one that has been properly maintained. Then, the new owner fixes up the property which will increase the equity of the home. Hopefully, the costs of the repair will be below the equity value of the home making this a quick profit. Then again, a quick profit is not even necessary as long as the value of the home increases over time and this value exceeds all costs associated with the home.

Does this mean the process of repairing a home is easy? No, this can be an involved process depending on your personal situation. So, if you have never entered into this type of repair work then you probably would not want to swallow a project that will require tons of renovation work. Perhaps a home with a few renovation needs would be best to start with such as a home that needs a roof, new aluminum siding or a paint job as individually the costs of these repairs will be less than a collective of all these repairs.

Now, if you are able to perform the repairs yourself you are in a very strong position. For example, if you are able to paint a home yourself the costs associated with this venture will be the raw materials required for painting. If you hire a painting company not only will you have to pay for the raw materials but you will also have to pay for labor. Additionally, if someone else is performing the labor you are not in control of the amount of time required to finish the job. This statement is not designed to dissuade people who wish to outsource their repair needs it is simply designed to place the costs into their proper perspective. It is also designed as a way of motivating those who have the ability to do repair work themselves to get into the real estate investing game.

Many homes in need of renovation are not disaster areas. They simply are the result of benign neglect probably because of budgetary constraints, age of the owner, etc. But someone with the desire to renovate the home and restore its previous grander can do well in real estate investment. It has been done successfully before and it will continue to be done successfully in the future. Let that act as your inspiration.

A.M. Caro is a freelance writer from Southern California.

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Posted by RENVEST under house flipping & real estate investing | No Comments »

Real estate investing has always been considered a safe investing plan. Unless you were a “sucker” looking to purchase swampland in Florida, real estate investing was considered a winning strategy because barring unusual events the equity of a home would generally increase. But, the current subprime mortgage crisis has seriously impacted the current real estate investing landscape. However, this impact may actually be good for some people.

Some may wonder if the subprime mortgage fiasco has had a massive negative effect on the real estate investment market. Well, it would be foolish to assume that all the bad publicity generated by the subprime mortgage crisis has had a ripple effect on real estate investing. The prices of houses have fallen dramatically and loans have proven harder to secure. However, this can be considered a blessing as opposed to a negative.

First, let’s get something straight right off the bat: people are still buying and selling real estate. Yes, the subprime mortgage crisis has had a dramatic impact but it has not had such an impact that it has ended real estate transactions all together. So, as long as the real estate market has not completely collapsed and buying/selling real estate has become a thing of the past, you can always find an avenue for earning income in real estate. Barring something along the lines of the Bolshevik Revolution where the government seizes all land you will still have real estate investment options available. Therein, lay the key here: real estate prices will invariably rise in the future. If you are able to weather the storm until it reverses course you will be able to come out of the depreciation problem the subprime mortgage crisis created.

Here is a fact: if you currently do not have a subprime mortgage, and do not have a property that is being foreclosed upon, then you are not feeling the brunt of the crisis. If the equity of you home has fallen because of the ripple effect of the crisis but it is still more than what you paid for it, then you still are ahead of the game. In fact, when the real estate market eventually makes a comeback you will probably regain some if not all of your lost equity. In fact, you may even discover your equity increasing again depending on how much time passes. Patience here is the true key to success.

Additionally, you could even use the current subprime mortgage crisis to your advantage in the sense that this is currently a buyer’s market. This can give you the option of buying real estate in short sales, foreclosures or through other avenues which would provide a cheaper acquisition price. If you are able to purchase these homes on fair fixed interest rates, and not with interest only mortgages, no down payment loans and other such nonsense, you probably will avoid a host of problems that the subprime crisis has yielded. In a way, you could even airlift an old worn out cliché and apply it to this situation: “one door closes and another door opens.”

A.M. Caro is a freelance writer from Southern California.

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Posted by RENVEST under mortgages & real estate investing | No Comments »

You can put the blame for the concept of restricted land use and zoning laws directly on the Manhattan skyline. Almost a century ago, in 1915, when the Equitable Building’s 42-story shadow cast almost seven acres of land into perpetual gloom, New York City residents started complaining about property devaluation (and haven’t stopped since). A year later, the first zoning laws were enacted, and have since changed numerous times to accommodate an ever burgeoning populace.

The real estate investor who does not know or understand the zoning laws for the area in which the investment or rental property lies does so at his own risk. Laws vary broadly from city to city, even within the same county. The intention of zoning laws is to help property owners and their tenants to peacefully co-exist, with the full backing of the law.

But zoning laws can and do change over time, and an investor should understand that what a tenant may or may not legally do today, may not be the case in the future. In some instances, the misbehavior of your renters, especially if you are the owner of a multi-dwelling complex, can generate complaints to zoning officials, resulting in changes to the existing laws. You, as the property owner, have the obligation to ensure and enforce the applicable zoning laws.

What you can do:

First, be aware of the zoning laws yourself. Contact the local planning board, and get a copy of the statutes, even before you purchase a property for rental usage. Consider how possible changes to the zoning laws might affect you.

Second, clearly understand the demarcation of zones; as urban sprawl continues to spread, you may find that a potential rental property complex is actually in a zone designated for commercial use. That may be a risky investment; if it was brought to the attention of the Planning Board they have every right to deny its continued use as a residential property. While you might think you can apply for a variance after the fact, the big “what if” should be foremost among your considerations.

Third, advise your tenants, in writing, that the property is zoned for residential occupancy, and a home-based business may not comply with the zoning requirements. All tenants should seek permission from you first, and not just assume that because they’re “quiet or won’t bother anyone,” that it wouldn’t be a problem.

Fourth, zoning laws are not written in stone; there are circumstances which may warrant a variance, which is an exception to the existing law, or for an application for zoning change. The approval of a variance to existing zoning laws is generally simpler to obtain, usually requiring only a statutory review of the specified criteria. On the other hand, a zoning change application is a lengthy procedure, since you are suggesting that the highest and best use of the property is other than the one it’s designated for. The appeal for re-designation may test the resources of the property owner, both in terms of time and money. Under either the request for variance or the zoning change, a property owner should be prepared to argue his point in front of a public hearing of the planning board, and be ready to refute any opposition.

Residential zoning laws can be a major obstacle for property owners and investors, but provided that you’re aware, up front, of what you can and can’t do with your property, you won’t be caught in a property zoning nightmare. Property owners must be proactive with respect to the zoning laws, and should bear in mind that what they assume to be the legal permitted use of a particular, potential investment property, may in actuality be an illegal use of the property. That wonderful duplex you visited at an open house, and have your eyes (and hopes) set on, may be zoned for single family dwelling. The onus is on you to verify that information before you buy. “I didn’t know,” won’t carry much any weight, with the local zoning board.

Barb Zigah is a freelance writer covering real estate and business topics.

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Posted by Barb Zigah under due diligence & real estate investing | 1 Comment »

The typical real estate investor may be a “jack of all trades,” but that doesn’t necessarily make him successful, it just makes him tired. The successful investor knows that in order to succeed, he has to surround himself with people who are smarter than he – those individuals very knowledgeable in the business and with a good track record. That’s a proven concept, employed by successful businessmen as well as politicians (though not necessarily “good” politicians, just successfully elected ones).

The key to establishing a great team is to put together players who are successful in their own right or have the potential to succeed. Your real estate investment team can have as few or as many individuals as you need – unlike a sports team where you can’t exist without your pitcher, power forward or wide receiver, you can get along with only a couple of players and still succeed.

First String Team Members

Investment Advisor or Certified Financial Consultant – This individual is going to manage your entire investment portfolio, ensuring that the retirement goal that you’ve set remains in focus at all times, and makes recommendations towards achieving that goal. He should always have your best interests at heart.

Real Estate Attorney – A good attorney is invaluable for reading, drafting and understanding legal contracts, knowing the legality of your property deals, and understanding the laws in the state or community in which you own the property.

Certified Public Accountant – Your number cruncher should be well versed in real estate-related accounting transactions. He’s going to be your go-to guy when tax time comes around, and you’re wondering about your deductions and write-offs. This individual may also be an excellent source of referrals for property acquisition.

Real Estate Agent – Unless you have access to the latest MLS updates, your realtor will be your best asset, alerting you to new properties coming onto the market; a realtor with BPO (broker price opinion) experience, provides even more of a benefit.

Traditional Lender or Mortgage Broker – Face it, you can’t do anything without financing; you need to know where or who to turn to for the amount you need, at a competitive interest rate as soon as you find a property.

Insurance Agent – For an investor with a good number of properties, your agent can help you set up policies, advise you to ensure that you have adequate protection at all times, and help you through the red tape of filing a claim.

Title or Escrow Agent – This individual will make your property closings infinitely smoother and relatively stress-free. A competent agent will ensure that your transactional information is accurately recorded, and that you pay only the appropriate fees. They should be looking out for your best interests.

Second String Team Members

Property Manager – When you can’t be everywhere at once, and find the day-to-day tasks of numerous property ownership overwhelming, a qualified property manager will be the best option to run the operation on your behalf, leaving you time to pursue other opportunities.

Property Handyman – A handyman kept on retainer may be a good alternative to a property manager; however, they should have a basic knowledge of what makes a home tick and be available to fix minor repair needs. Your goal is to hire a Ty Pennington or Bob Vila, not a “Tim ‘the Toolman’ Taylor” from the old television comedy, Home Improvement.

Contractors – If you are beyond the need for basic home repairs, and intend to buy and flip properties that may need some “updating,” you need a reputable contractor to assist you with ongoing and new projects. Finding a contractor that contains costs, works to specs, and finishes within the agreed time, is crucial.

Finally, though not officially part of your team, they are the ones who are your real support: your family, friends and mentor. Without their encouragement, would you really be where you are today?

Putting a successful team together may take some time, and it’s important enough a concept that you don’t rush or “settle” for just anyone. Where do you find your team players? Some you may already know, but see them in a different light – as a member of your community, swim club or religious affiliation. You need to ask around, pass around your business cards, get referrals and then interview your candidates.

It’s important to remember the immortal words of the great philosopher-cum-basketball player, Kareem Abdul-Jabbar, “One man can be a crucial ingredient on a team, but one man cannot make a team.”

Barb Zigah is a freelance writer covering real estate and business topics.

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Posted by Barb Zigah under Real estate investor resources & due diligence & real estate investing | No Comments »

Investing is often a product of the times, and real estate investing certainly falls into that category. In the past, domestic oil drilling was a huge source of investment windfall profits. In today’s day and age, domestic oil drilling is not what it once was and those who invest in oil drilling rarely see huge profits. Yes, there are exceptions but that is the common occurrence. Oil, however, is a speculative investment and it is somewhat understandable that there are significant risks involved. Real estate investing can be far more conservative an approach to investing since it seeks to gain a value of equity over time and can include fairly stable cash flow. This safe approach is what attracts many people to real estate. Then again, huge potential profits attract people as well, but for most the safety of a secure investment over an extended period of time is what catches many people’s eyes.

Of course, there are a number of short term real estate investment success stories. During periods of real estate growth it was not uncommon to see properties appreciate 20% in one year. Those who sold their properties during such boom periods ended up making a ton of cash. And, yes, it would be intellectually dishonest not to mention that there have also been periods of time where people have invested in real estate and suffered losses due to depreciation. That is the nature of real estate investing: values goes up and down.

This brings about an important point and that is that probably the best way to make the most out of a real estate investing is to stick with it for the long haul. In other words, over an extended period of time the ups and downs of the market may average out to a figure that is in your best interest. For example, some years may yield 14% growth and others may yield -2% growths. The average of the two over time is 6% growth, not a bad return on an investment considering that some years saw depreciation of the property value. Also, it’s possible that positive cash flow may contribute to making that return even higher.

In a way, the odds of a successful real estate investment lie with staying with the property over time. Markets will go up and they will go down and if you ride the down cycles you may find yourself in a good position eventually. Now, this is not to make light of situations were the bottom falls out or one is paying more on a mortgage than what a property is worth. Instead, it is to point out the conservative nature of a real estate investment and how time can often be an asset.

Then again, there also comes a time when one has to realize that a property value will never increase. If a neighborhood is suffering from declining real estate value year after year because of local job loss and depopulation, it may be smart to sell off the property before its true depreciation gets out of control.

Ultimately, unless one is in such a situation where a geographic location has become economically depressed and depopulated, such as Detroit, there is usually opportunity to weather the storm. If you purchased a property with the right fundamentals, time will be your friend.

A.M. Caro is a freelance writer from Southern California.

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Posted by A.M. Caro under real estate investing | No Comments »