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 »

House flipping is the purchasing of property with the intention of quickly selling it for a profit. It’s no longer an unknown concept, thanks to popular television programs such as “Flip This House” and “Flip That House.” They make it look pretty simple and exceptionally profitable. In reality, it is simple, provided you know what you’re doing, and understand the associated risks; it may or may not be as profitable, depending upon many factors.

Most properties with flipping potential are bargain priced relative to the market. The buy-fix-flip option involves buying distressed property that is in need of some cosmetic or aesthetic improvements; perhaps the owners didn’t have the time, money or inclination to do it themselves. That’s a good thing for the investor, provided that it is only cosmetic, and not structural, improvements that are required. How smug will you feel when you find out that the parquet flooring under the worn out linoleum that you’d planned to replace, is actually rotted through the floorboards, and you need to replace everything.

So, what are some of the considerations you should be making to maximize your resale price?

1. Don’t spend too much money just acquiring the property. The less you pay, the better, obviously, and don’t assume that just because you got a low price that you got a good price. Do your homework and check comparably distressed properties in the neighborhood.
2. Unless you’ve got strong handyman qualifications yourself, consider hiring a home inspector to thoroughly check out the property. This may already be a requirement of your loan.
3. Calculate how much money your necessary improvements will cost for acquisition, installation, labor, etc. If you do the work yourself, factor in your cost of time element.
4. Calculate how much your carrying costs will be while you’re doing the repairs; what if you have to hold the property longer than expected? Include your mortgage payments, interest, taxes, insurance and utilities. Bear in mind that some insurance companies may not even be willing to insure a vacant house, especially one that’s under repair.
5. Consider the profit you’re hoping to obtain. If it’s 15 to 20% above your purchase price, will you be able to sell it for that? The improvements shouldn’t outpace the neighborhood. Don’t forget to factor in your selling costs, as well.

What if you’ve bought the property, made the improvements, calculated the price you need to sell it for to achieve the profit goal you’ve set, and the bottom drops out of the market? Don’t sweat it; you’ve created a wonderful rental property, haven’t you? And everyone has to live somewhere. Hold onto the property until the markets rebounds, and then re-price it, if necessary. Just be prepared for the fact that the rent check will likely be less than any mortgage payments you are making on the property.

It’s been said that you make money on your real estate investments when you buy your property, not when you sell it. That may or may not always be entirely true, but you’ll have a better likelihood of success if you make your property purchases wisely, especially as it pertains to the potential buy-fix-flip property. That can be easier said than done.

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

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Posted by Barb Zigah under house flipping | 1 Comment »

House Flipping is an aggressive real estate investment technique, that can lead to large profits, but can also come with some sizable headaches . While it has been said “home is where the heart is” a home is also an investment based on equity growth. In other words, it is assumed that over time a house’s value will appreciate beyond its initial purchase price. Yes, there are instances where a home can depreciate in value as evidenced by the current mortgage crisis but real estate. In general, real estate remains a safe investment centering on conservative increases in value over time. It is because real estate is a rather conservative (nee safe) approach to real estate investing that attracts people to it. The conservative approach is not, however, the only type of approach one can undertake. There are also more aggressive approaches. House flipping or flipping houses is an example of one of the more volatile approaches to real estate investing and is simply a real estate variant on the traditional concept of buying low and selling high quickly.

Basically, an investor who looks to flip houses will purchase a home below its market value and then sell it at a price that is greater than the initial market value. In some instances, a little “stimulation” is required on the part of the investor in order to make this plan work. For example, say the average sale price of a home in a particular neighborhood is $250,000 and you notice that there is a home selling in the neighborhood for $210,000. What is the reason for the $40,000 deficit? This particular home is in dire need of a new roof. However, the price of a new roof will run $15,000 and the owners are not in a position to make such improvements. So, the house flipper comes along and purchases the home at $210,000 and then fixes the roof for $15,000. This makes the total investment $225,000 but the repairs raise the equity of the home to $250,000. That is a $25,000 profit right off the proverbial bat and the home can be sold for a quick profit. Additionally, the value of the home will now appreciate as well and this means one could hold on to the home for a few more years in order to increase the profits on the investment.

This may sound like an easy venture and, to a certain extent, it is. But, there are still inherent risks associated with house flipping. For example, if you underestimate the costs of the repairs or even more extensive repairs are necessary then you may find yourself earning far less of a profit than you initially conceived, or maybe even losing money. Then, there is also the potential problem of the real estate bottom falling out as evidenced in the subprime mortgage crisis. In Florida, for example, a significant number of foreclosures were the result of people attempting to flip houses that dropped significantly in value.

There are also significant sales costs to selling houses. Taxes, commissions and escrow fees can add up quickly and eat into potential profit margins. That’s even before considering the costs of short term capital gains on any profits. Once again, this type of real estate investing does come with risks and flipping houses is best utilized during periods of real estate booms. Considering that the prices on real estate properties are lower now than ever before perhaps giving consideration to house flipping once again has value and merit.

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

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Posted by A.M. Caro under house flipping | No Comments »