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The 9 Best Tips on How to Find a Property for Profitable Investing

Over the years real estate has proven to be one of the most profitable investing strategies. Unfortunately, this doesn’t mean that just any investment property will bring high return and success to its owner. The secret to making money in real estate is finding profitable rental properties. If you are a new real estate investor with no experience in the business, don’t worry because you’ve come to the right place. In this article we will provide you with the best tips on how to find a property for profitable investing.

Tip #1: Buy a Property in a Top Real Estate Market
Anyone in the real estate industry will tell you that location is the first and foremost factor for a profitable investment. Where your rental property is located will determine the price you have to pay for it, the rental demand, the best rental strategy, the type of tenants you can expect, the rental rate, the occupancy rate and vacancy rate, and ultimately the return on investment. Thus, the first thing which any investor preparing to buy a property should do is to read about and research the best places for real estate investing in the US housing market. Don’t make the mistake of many beginners who focus on large cities only. Sometimes small towns and even villages offer a much higher return than major cities. For example, according to data from Mashvisor, a real estate data analytics company, the census-designated area with a population of about 7,000 people, Joshua Tree, has been one of the top locations for Airbnb rentals in the past few years.

Tip #2: Don’t Spend More Than What You Can Afford
As a beginner investor, you should always start with a small, cheap, easy-to-manage property. After all, the best investment property is the one which you can afford and which you can manage. To find such a property, you should prepare a budget. On the one hand, factor in your savings, the income from your full-time job and other sources, and the money you expect to make from your rental property. On the other hand, make a list of all the one-time and recurrent costs associated with buying, owning, and managing an investment property such as the property price, appraisal cost, home inspection fee, closing fees, fixes and repairs, monthly mortgage payments, property tax, insurance, property management, maintenance, and others. In this way you will be able to figure out exactly how much you can afford to spend on a property without risking a foreclosure.

Tip #3: Find the Best Financing Method
One of the great things about real estate investing is that you have many financing options to choose from. You can go for a conventional mortgage, a hard money loan, a private money loan, a syndication, or a partnership, to mention a few possible choices. You should study each option carefully and decide on the best one for your particular case, based on their pros and cons and your specific situation.

Most probably, as a first-time investor, you will end up taking a mortgage loan. In this case, it is advisable to make the down payment as big as possible, without overspending on it of course. The higher your down payment is, the faster you will be able to repay your loan and the less money you will end up spending on repayment. Figuring out the best financing method is crucially important for profitable real estate investing.

Tip #4: Use Different Sources for Your Property Search
To find a property for profitable investing, you should put efforts into searching for properties for sale far and wide. Now that you know where you want to buy an investment property and how much you can afford to spend on it, start checking out local newspapers and real estate websites with both MLS listings and off market properties, talk to your friends and acquaintances, network with other investors in the area who might be selling a property, and connect with a local real estate agent. Each one of these sources will have access to a different kind of properties, and you should check them all out before deciding on the best type of investment property for you and narrowing down your choice.

Tip #5: Consider Investing in a Foreclosure
The most lucrative investments in real estate are those properties which you can buy below market value. Thus, you should consider investing in a foreclosed property. Forget the popular myth that foreclosures are always houses in a dire situation which makes them bad real estate investments. To the contrary, it is feasible to find a foreclosed property in a good shape which will bring you high return on investment. The reason is that you will most likely pay only a fraction of the fair market value of the property as the bank or other financial institution is trying to get rid of it quickly, while you can still charge full market value rental rate.

To find foreclosed properties to invest in, talk to the banks in the area, search for specialized real estate websites with foreclosed property listings (including government agencies’ websites), and look for agents who work with foreclosures.

Tip #6: Hire a Real Estate Agent
Avoid the mistake of many first-time real estate investors who think they can manage the whole process of finding and buying a property on their own. It is recommended to look for an agent who works mostly with property investors and hire him/her to help you along. Your agent will be able to help you find lucrative properties for sale, connect you with lenders, prepare the offer, negotiate the best price, and close the deal quickly and smoothly. Moreover, you don’t have to worry about inflating your budget as agent fees are usually covered by the property seller and not the property buyer.

Tip #7: Conduct Thorough Property Analysis
An indispensable step in the process of making the most profitable real estate investments is performing an investment property analysis. Once you have narrowed down your choice to a few top properties, you should study them in detail to calculate exactly how much return on investment you can expect from them, based on your preferred rental strategy. Find out the cash flow, the cash on cash return, and the capitalization rate which you can expect. To beat the competition in the local real estate market and find the best property for profitable investing, make sure to use real estate investment tools such as a rental property calculator. This will save you a lot of time in analyzing properties and allow you to make an offer before the other investors in the area.

Tip #8: Choose the Best Rental Strategy
You can rent out your investment property on short-term basis as an Airbnb rental or long-term basis as a traditional rental. The optimal strategy in each case depends on the location, the demand, the rental rates, and other factors. So, in your investment property analysis you should see which rental strategy will bring you a higher return on investment. If you decide to go for a short-term rental, don’t forget to study the local regulations carefully as many places have adopted major restrictions on this type of rentals in recent years. Ideally, you should look for a location where both owner-occupied and non-owner occupied properties can be rented out on short-term basis in all residential neighborhoods. For example, the Dallas real estate market is one of the major cities with the least Airbnb legal issues in the US at the moment.

Tip #9: Select the Best Property Management Strategy
Profitable investing in real estate doesn’t end with finding and buying a property with a high potential for return. Afterwards, you have to manage your rental property in the best possible way. If you invest in your local housing market, have some free time, and exhibit the right personality (welcoming and kind but also assertive), you can become a landlord and deal with a rental property and tenants on your own. However, before you decide to manage your property by yourself, you should know that this can take a lot of time and efforts and can turn into a real headache.

If, on the other hand, you invest out of state, have a busy job and a family to take care of, and/or are simply not fit to be a landlord, you can hire a property management company to deal with your investment property. You should be prepared to pay them a monthly rate, but it will be worth it as they will be able to maximize your profit while you can enjoy the positive cash flow in your free time.

How to find a profitable investment property is the first thing you have to learn as a real estate investor in order to make money. The good news is that it is absolutely feasible and doable if you follow our 9 tips above.

Position Realty
Office: 480-213-5251

4 Real Estate Investor Tips For Buying Your First Property

By a virtual show of hands, how many of you are hunting and searching for your for investing deal this weekend? For those of you that raised your virtual hand as a “yes” to deal-hunting, do you feel anxiety about buying an investment property? Do you feel like you might not be able to keep up the payments, or afford the rehab necessary to get the property ready for resale, or afraid of any problems that might come up with inspection?

“Most people only buy a couple homes in their lifetime. This lack of experience leads many investor buyers to feel woefully unprepared. You’re not getting married. You don’t have to make a lifelong commitment to a property, and that you can always sell later. If you fall out of love with your long term investment, as long as you buy right.

There are a set of rules that to rely upon when buying an investment property, and that these same rules can be used by anyone buying a house. Here are some great tips:

Tip #1. Get the Facts:

The number one rule is “do not overpay for a property”, and says that he never buys on future value (and refers to that as an illusion that got many of us in trouble). Being realistic if estimating the cost of repairs the property will need. Conversely, we cautions you not to let a home inspection “scare you away from a good deal”, and here’s an example of someone who had the opportunity to purchase a $650,000 home at a short sale for just $520,000, but walked away after the inspector “found a laundry list of items that needed repairs”. Albeit a “scary” looking list, as he called it, it was about $20,000 of work, leaving the remainder as over $100,000 in equity. Remember: “Get the Facts!”

Tip #2. Don’t Fall Completely in Love:

“When remodeling a home for a resale flip and being faced with a decision to either improve the home’s insulation or make the home more beautiful, I’m almost always forced to beautify.” People who lack experience will rely on their emotions. Real Estate agents are well aware of this, and this is why they try to “decorate and stage a home so that people fall in love and forget the facts”. If you fall prey to your emotions, you can get into “bidding wars and overlook discrepancies that need more attention”. The final point to be made on this tip is that “It’s much easier to replace kitchen cabinets some time down the road than it is to reinsulate a home. But people aren’t concerned or willing to pay for what’s behind the walls. They should be.

Tip #3. Get Professional Help

Real Estate Agents, Home Inspectors, Appraisers, Lawyers, Surveyors and Contractors are all valuable resources but they’re no good if you disregard their advice., and the key here is “to trust but verify. In terms of a Real Estate Agent, speak with many different agents and ask for references, until you find one that you are comfortable with. Once you are working with an agent, ask your agent to go over comparable sales with you, and “not just spit out a value”, since this will “help you feel confident about your offer and reduce the risk of complications from a low appraisal.”

Tip #4. Don’t Be Afraid to Pull the Trigger or Walk Away:

OK, so you have all of the facts about an investing deal or property that you are incredibly fond of, and if the price is fair and affordable then don’t be afraid to seal the deal. On the flip side, if the price is above the market value or the price does not take into account the amount of work it needs, you remind yourself that there are plenty of other houses to choose from.

Certainly some great tips here, but sometimes, when in the heat of battle and bidding for a home; it’s easy to lose perspective. What your mindset should be during the process; Remember a house is just sticks and stones and there are plenty of them out there.

Position Realty
Office: 480-213-5251

Four Different Ways To Flip A Property

Flipping real estate is a buzz term that has come screaming into mainstream media in the last few years. Its growing popularity is evident by the magazine articles, TV shows, and Average Joe teams trying to break into the business. Is it easy? What is it? How does it work?

Flipping real estate simply means purchasing or acquiring a property then reselling it quickly while attempting to turn a profit on the sale. Flipping can be handled several different ways and when done properly, each of them can be very profitable for a real estate investor.

Buy it, Fix it, Flip it

Likely the most common form is the tried and true “fix and flip”. This involves a real estate investor picking up a property at a discounted rate, doing the necessary work to get the property up to acceptable standards, and then selling the home on the market – generally to someone who will live in the property. This type of fix and flip can get you anywhere from $15k to $50k on a closure depending on the market and of course how good the bargain was on the home when you bought it. You can set yourself up for failure if you underestimate the cost for remodeling and repairs or do not consider the cost of a real estate agent when listing the property for sale.

The Wholesale Flip

The fix and flip is a very popular method of doing business, and that means there are a large number of real estate investors looking for remodel properties. If you can get a property at a relatively good bargain, you can turn around and immediately sell the home to a real estate investor who is willing to put all the work in and take the project the rest of the way. You can make several thousand in this manner on each sale. While the number is small, you can quickly see how it would add up after quickly reselling multiple houses in this manner.

Buy it & Flip it “As Is”

Fix up work is not for everyone, and some real estate investors want to quickly move a house without sinking money into a professional contractor. If a house is in sellable condition and requires little immediate maintenance work then you can consider just selling it as is. Even if a home is in poor condition, you can make a quick sale if the real estate market is in good shape and the property is in a transitioning neighborhood.

Buy It, Refinance & Lease

Instead of tossing the property for all cash right away, you can try and sell for terms. Once the remodel and refinishing is completed, refinance the property. Provided you were able to punch the math up right, you should not have any money tied up in the deal (or very little at least). You can turn around and sell the real estate investment on a lease, with option to buy. Any rent payment that you make from your renter (buyer, hopefully) can be used to handle the mortgage payments. This way, when the tenant goes for the option to purchase you’ll end up reaping a larger profit – mainly because you don’t have to pay a broker fee.

There Is More Than One Way to Flip a House

I’ve identified the ways to flip a property for virtually every real estate investing scenario. These methods all work extremely well, so it is only a matter of determining what works best for your real estate investment strategy and your overall goal.

***Gain access to our deeply discounted list of flip properties: CLICK HERE

Position Realty
Office: 480-213-5251

How Much Does It Cost To Flip A House?

It’s impossible to put an exact figure on the cost of flipping a house. House flipping comes with so many variables so it’s hard to tell how much it would cost. It can cost you anything from hundreds of dollars to thousands of dollars depending on your market, rehab costs and plenty more factors.

If you are interested in flipping houses, CLICK HERE to gain access to our deeply discounted list of investment properties.

The ARV

First, you need to know how much the property will be worth when you are done rehabbing. Once you know the value, all other costs that come with the rehab will start to make sense. This is what is known as the ARV or the After Repair Value.

The best way to get an estimate of the ARV is to compare prices of similar properties in the same area of your target market in the past three months. Get a local realtor to help you determine the ARV faster or alternatively, you can do the research yourself by visiting websites such as Realtor.com.

Keep in mind the following things when determining ARV:

Only look at sold houses and not those still on sale
Only look for recently sold houses. They should have been sold within the last three to six months.
If there are no recent sales then this could be a sign that perhaps properties in the area are not on demand.

You can square footage to determine ARV. All you have to do is divide the sales price of property in the area by the square footage of the house. From there, use the square footage in your house and multiply it by the price of per square foot. Although this is effective, it’s not as great as doing a price comparison of the homes in the area.

You can adjust the price accordingly depending on the number of bedrooms and bathrooms in the property.

Factor in water views and look at other properties that have similar size lots

Factor in updated features such as new baths or new roofs, heating systems, kitchens, etc then adjust your price accordingly.

A List Of Things That Determine How Much A House Flip Costs

Rehab Costs

The amount of money you will spend on rehab will depend on how much work needs to be done. If you do not have extensive experience in rehabbing, I would advise you to first start with projects that do not require extensive repairs. Here’s a formula that you can easily follow:

Set A Budget

First, you have to get a budget repair form. It’s not a complicated document and is basically an Excel document that itemizes all the repairs that need to be done within the property. From there, request your contractor to fill out the form before you begin the rehab process.

If you plan on using a general contractor, ask them to get an estimate from other subcontractors like painters, finish carpenters, roofers, framers, plumbers and electricians.

Set A Time Line

Once you have a budget, you must do everything with your contractor to ensure that your subcontractors are held accountable for the cost estimates they gave you. If issues that you had not anticipated come up, (and they do so a lot) get a second estimate as soon as possible to ensure that you do not go over and beyond your budget.

The idea here is to ensure that you avoid running into unexpected issues by having a solid budget that can accommodate them whenever they arise.

Use A Scope Of Work

To ensure that your project goes as smoothly as possible, organize a meeting with all your subcontractors and the contractor and discuss the entire project. Your discussion should mention which is the best logical order for doing the work.

Everyone should agree to a certain timeline that they expect to get the work done on time. all your subcontractors should have each other’s cell phone numbers so that they can communicate with each other. Ensure that everyone in your team is updated of any delays or changes in the project. All changes should be pre-approved by your contractor before they are implemented.

House Flipping Financing Costs

To avoid incurring extra costs, try as much as possible to ensure that your rehab goes as smoothly as possible. This will reduce the amount of time that you hold the property. To get an estimate of how much your financing costs will be, just look at the average number of days other properties in the area have been in the market.

The best way to sell a house quickly is to set the price slightly below market price. Your financing costs will also depend on your lender.

Banks

If you have excellent credit and you finance your flip through a bank, your financing cost will be much less than if you sourced for funds from a hard or private lender. You might just pay with 4-6% on the money you borrowed if you get financing through a bank.

Private Money

Most hard money lenders ask for a 14-20% and four to six points on top of the money you borrow from them. Hard money lenders are great sources of financing for beginners but there are many risks to be aware of.

For instance, if it takes you six months from close to close on a $100k loan at 18% and five points, your interest would be $9k to $5k for five points. That is over $14, 000 in financing costs. It will also cost you an extra $1500 for every month you hold the property above 6 months.

This may seem like a lot of money but if you factor in these costs into your house flipping formula, you will still make a profit.

Carrying Costs

You may need to figure out other costs such as:

Association fees and condo fees
Insurance
Water, gas, electricity
Property tax
The longer you hold on to this property, the higher your costs will be.

Realtor Fees

You will have to pay realtor fees once the property provides the market. This is about 5-6% of the income from the purchase of the house. So if you flip your house for $250,000 at a 5% commission, you will pay the realtor $12,500. Although this seems like a large amount of money to pay a realtor, you should not cheap out. Find a good realtor who will help you sell your flips much faster.

How To Determine Your House Flipping Financing Costs Summary

All the costs in this post will account for 95% of your financing costs but bear in mind that they may vary from one project to another. But provided you can factor in all the costs into your formulas and stick to the 70% rule, you shouldn’t have a problem making a profit.

Position Realty
Office: 480-213-5251

How Pros Choose A Fix-And-Flip Property

How To Flip homes For Profit

  • Shoot for 70 percent of the after-repair value (ARV) minus cost of repairs.
  • Look for homes with good bones (i.e., a solid structure)
  • Choose newer homes for faster, less thorough flips
  • Get all proper permits for repairs or additions
  • When starting out, get a mentor to teach you the ropes

If you’re looking to invest in real estate, one way is with a rehab project, also known as a fix and flip. The process entails buying a fixer-upper, remodeling and/or renovating it and then selling it at a profit. With home prices rising across the country, however, flipping homes can be tricky. It’s important to know what you’re doing when taking on a fix-and-flip project. If you make a mistake, your profitable investment could turn into a costly money pit.

How do you separate the winning properties from the losers? Fix-and-flip investors look at a number of factors to help determine whether a property is a good investment.

After-repair value
One of the most important things that investors searching for properties to flip must consider is the property’s after-repair value, or ARV, according to Nancy Wallace-Laabs, of KBN Homes, LLC.

“Typically, if you’re investing, you want to buy a house that’s 70 percent of the ARV minus the cost of the repairs,” she said.

For example, if you determine a house’s value after you make repairs will be $200,000, and you estimate the repair costs to be $20,000, you shouldn’t pay more than 70 percent of $180,000 (the ARV minus cost of repairs), or $126,000 for the property.

Wallace-Laabs said she evaluates each property she comes across and asks herself whether it’s better suited as a rehab project or a buy-and-hold (that is, a rental property). “On flipping, you really need to analyze and know your formula to know how much money are you going to make on that property?” she said.

Lucas Machado, president of house-flipping company House Heroes LLC in Sunny Isles Beach, Florida, near Miami, agrees that the flipping game is all about the numbers.

“What do you think the thing is going to be worth once you’re done fixing it up?” he asked. “What are you paying for it right now? What are you paying to buy it, and how much is it going to cost to get it to being worth that? It’s really about nailing those numbers.”

It’s important to analyze comparable sales in the area to get a good idea how much the property could sell for, he said. You need to make sure you’re comparing “apples to apples,” he added: If a property in the area sold for $300,000, but it had a pool and your property doesn’t, for example, the two properties aren’t comparable and you can’t expect to sell yours for that much money.

“Good bones”

Doug DeShields, president of the National Real Estate Investors Association, and an active rehabber himself, said he typically looks for homes that were built between 1950 and 1975.

“They have good bones, good structure,” he said. “They’re typically brick and we can tend to do well in those houses.”

Part of knowing whether a house has “good bones” or not is having some familiarity with what it takes to make necessary repairs, according to DeShields.

“You do not have to be the world’s best carpenter,” he said. “You don’t have to swing the hammer one time. But what you need to do is have a good feel for the various aspects. You need to know a little bit about construction, whether you can physically do it or not. You need to know what makes a good property.”

Thorough inspections
On the other hand, if you’re looking to do a less extensive flip, you should look beyond a property’s “good bones,” according to Travis Moore, owner of Fargo Home Solutions.

Moore said he sometimes prefers less extensive flips — the carpet-and-paint-fix-ups, as he called them — that require less expensive remodeling. According to Moore, for that style of flip, the age of the house can make a huge difference.

“If I’m doing a project like that, I really like to stick to homes that are built in 2000 and after, because you’re not going to find as many surprises,” he said. “When you get into older homes, you may think it looks OK — it’s got good bones, it’s got good structure — so this is probably a good candidate for just kind of cleaning it up. (But) on older homes, expect to have a few surprises.”

To get it right on older homes, according to Moore, it’s important to do a thorough inspection.

“Before you purchase it, really do a deep dive inspection on it … really beyond just looking at what’s visible,” he said. “Any home that old that I’m considering a lighter renovation, I really dig deep into its condition for everything, (such as) plumbing and electrical.”

Proper permits
When you buy a property, know that not every addition or feature may be permitted — and if that’s the case, it could cost you. Flippers should be cognizant of the permitting requirements for their specific location, according to Wallace-Laabs.

“If you end up doing work on a property and then (are) trying to sell it on the retail market … you have to provide proof that you pulled permits on that work,” she said.

This is not a requirement that investors should try to skirt, because it could end up costing a lot of money, she said. Wallace-Laabs mentioned that she knows an investor who bought a house and didn’t do proper due diligence before finalizing the purchase. It turned out that a previous addition to the property had never been properly permitted.

“So now my investor friends have to tear out all the sheetrock so the city can inspect the plumbing, behind the walls, the electrical, and even (check) that they put in the right size of window to call it a bedroom,” she said. “So instead of them thinking it was going to cost them $30,000 to fix this house, now it’s going to cost them $60,000.”

Get a mentor
Then, there are the big things you should look for when evaluating a fix-and-flip property — avoid foundation issues or termites for example, but there’s only so much a newbie can know. That’s why every fix-and-flip expert we spoke to recommended turning to an experienced mentor for help.

The investment advisers at Position Realty can help you with finding the perfect investment property (we have a list of wholesale properties), help you analysis the property to make sure it’s a profitable investment and help you inspect the property for issue you may over look. Give us a call today!

Position Realty
Office: 480-213-5251

Hard Money Basics: What Everyone Should Know About These Loans

When it comes to real estate lending options, there is no shortage of different types of loan products available in the market today. However, one of the most common, and often most misunderstood, are hard money loans. If you aren’t familiar with these loans they are a unique type of lending opportunity that can help both buyers and investors get the financing they need.

These transactions are most commonly used in fix-and-flips, rent-stabilize-refinancing deals, cash-out refinancing, land scenarios, construction deals, bankruptcy or foreclosure payoffs or transactions when the deal is particularly time-sensitive. In fact, one of the biggest perks of using hard money loans is how quick they are when compared to traditional banks.

So, What Exactly Are Hard Money Loans?
Hard money loans are fast—but there is more than that to these lending options. Simply put, hard money loans are an alternative to a mortgage and are designed for borrowers who need money quickly and who only wish to hold on to a property for a short period of time. Hard money loans can be used in a variety of settings, but are perhaps most common for those taking on fix and flip projects and who want to invest in real estate in an effort to make some quick cash.

Typically, these loans are meant for short-term only (most commonly 12 months), but that doesn’t always have to be the case.

These loans are also becoming a popular option for borrowers who are unable to get a conventional real estate loan. Lenders do not use a traditional underwriting process, and instead look at every situation individually. For borrowers who have had foreclosures or issues in the past, this can be great news as many hard money lenders won’t even look at the borrower’s credit history—they only concentrate on the property that is being invested in.

Hard money loans are financed by private hard money lenders. Typically, they are private individuals or small groups that lend money to those who need it. Since these loans aren’t funded by a bank, they are typically much more flexible.

The Loan-to-Value Ratio
When you apply for a hard money loan, chances are you will hear a great deal about the loan-to-value ratio. Hard money lenders will lend money based on the property you are buying, instead of your credit score and background. Instead of looking at assets or equity alone, the primary thing the lender will look at is the property being purchased. This is the main collateral that the lenders will use. This does make it riskier for lenders so they will typically look for a loan-to-value ratio of around 50-75%.

The term “value” in the loan-to-value amount is actually based on what the lender could expect to get for the property in a one to four month selling time. This is why these loans are so popular for fix and flip properties.

Important Facts About Getting a Hard Money Loan
If you think that a hard money loan may be the right option or you, there are a few things you should know about the application process and what goes into securing one of these loans.

The first is that the applications are simpler. Everyone who has ever gotten a mortgage before knows how complex a mortgage application can be. The good news is, hard money loan applications are much simpler. This also means they can be approved much faster. In fact, many of them are approved in just 24 hours. Closing can typically happen within 10 days.

However, while hard money loans are significantly easier to get than mortgages, lenders are still going to need some basic information. This includes:

– The location of the property
– Recent appraisals
– Inspection data
– Purchase price of the property
– Planned resale price of the property
– Estimated remodeling costs—if applicable
– Borrower’s credit score
– Total assets and income of the borrower
– Level of real estate experience from the borrower

Once you are fully aware of what goes into a hard money loan and how it may be able to help you secure the finances you need—it is time to find a hard money lender. The good news is, there are many hard money lenders out there that are available to provide those who need it with the financing they are looking for.

Hard money loans aren’t for every situation, but they are a very popular and very reliable form of financial backing for those who need to quickly and easily get a large sum of cash.

Position Realty
Office: 480-213-5251

10 Rehab Tips That Increase The Value Of Your Property

You need to keep your investment property repairs to a minimum to stay profitable. You also need to keep your properties in good shape to attract tenants or buyers. There are the basic improvements, such as carpet and paint, but these can still costs thousands of dollars. The following are some inexpensive ways to improve your investment properties with very little cash.

10 Budget Rehab Tips That Boost The Value Of Your Investment Property

1. New Electrical Switch Plates

This is such a minor, yet overlooked improvement. Most rental owners and rehabbers paint a unit and leave the old, ugly switch plates. Even worse, some even paint over them.

New switch plates cost about 50 cents each. You can replace the entire house with new switch plates for about $20. For the foyer, living room and other obvious areas, spring for nice brass plates. They run about $5 each – not much for added class.

2. New or Improved Doors

Another overlooked, yet cheap replacement item is doors. If you have ugly brown doors, replace them with nice white doors (you can paint them, but unless you have a spray gun it will take you three coats by hand).

The basic hollow-core door is about $20. It comes pre-primed and pre-hung. For about $10 more, you can buy stylish six-panel doors. If you are doing a rehab, the extra $10 per door is well worth-it. For rentals, consider at least changing the downstairs doors.

3. New Door Handles

In addition to changing doors, consider changing the handles. An old door handle (especially with crusted paint on it) looks drab. For about $10, you can replace them with new brass finished handles. Replace the guest bathroom and bedroom door handles with the fancy “S” handles (about $20 each).

4. Paint/Replace Trim

If the entire interior of the house does not need a paint job, consider painting the trim. New, modern custom homes typically come with beige or off-white walls and bright-white trim. Use a semi-gloss bright white on all the trim in your houses.

If the floor trim is worn, cracked or just plain ugly, replace it! Home Depot carries a new foam trim that is pre-painted in several finishes and costs less than 50 cents per linear foot. Create a great first impression by adding crown molding in the entry way and living room.

5. Replace Front Door

You only get one chance to make a first impression. A cheap front door makes a house look cheap. An old front door makes a house look old. If you have nice heavy door, paint it a bold color using a high-gloss paint. If your front door is old, consider replacing it with a new, stylish door. For about $125, you can buy a very nice door.

6. Tile Foyer Entry

After the front door, your next first impression is the foyer area. Most rental property foyers are graced with linoleum floors. Many homes in Tampa, FL also have an outdoor porch that would benefit from new tile. Consider a nice 12″ Mexican tile. An 8ft x 8ft area should cost about $100 in materials.

7. New Shower Curtains

It amazes me that many landlords and sellers show properties with either no shower curtain or any ugly old shower curtain in the bathroom. Don’t be cheap – drop $40 and buy a nice new rod and fancy curtain.

8. Paint Kitchen Cabinets

Replacing kitchen cabinets is expensive, but painting them is cheap. If you have old 1970’s style wooden cabinets in a lovely dark brown shade, paint them. Use a semi-gloss white and finish them with colorful plastic knobs. No need to paint the inside of them (unless you own a spray gun), since you are only trying to make an impression.

Americans spend 99% of their time in the kitchen (when they are not watching TV). A fancy modern faucet looks great in the kitchen. They can run as much as $150, but not to worry – most retailers (Home Depot, Lowes, Home Base, etc) often run clearance sales on overstocked and discontinued models. I have found nice Delta and Price Pfister faucets for about $60 on sale. And don’t forget to check eBay!

9. Add Window Shutters

If you have ugly aluminum framed windows, consider adding wooden shutters outside. They come pre-primed at most hardware retailers and are easy to install. Paint them an offset color from the outside of the house – (e.g., if the house is dark, paint the shutters white. If the house is light, paint them green, blue, etc.).

10. Add a Nice Mailbox

Everyone on the block has the same black mailbox. Stand out. Be bold. For about $35 you can buy a nice mailbox. For about $60 more, you can buy a nice wooden post for it.

People notice these things and buyers love them! As a real estate investor in Tampa, FL or anywhere else in the world, staying mindful of these easy and cheap fixes can help your profitability soar.

Position Realty
Office: 480-213-5251

Seven Secrets To Successful Single-Family Rental Real Estate Investing

Real estate investing in general, and single-family real estate investing in particular, is very different from buying stocks, commodities or most other investments. Real estate is a leveraged investment that has the potential for delivering excellent returns because the cash down payment is a fraction of the retail value, yet it is also a hands-on venture where you make more decisions that affect your returns.

On the other hand, stocks and other investments increase or decrease in value solely based on market conditions, and the only decision you make that affects your returns is when to buy or sell. While tax law treats real estate as a passive investment, it is really more of a business venture. Both short and long-term returns on your real estate assets are directly affected by your knowledge and the choices you make.

Consequently, it is critical that you approach single-family real estate investments with a clear understanding of what it takes to be successful. You must evaluate your purchase options and make a selection based on criteria that have proven through the years to increase the odds of success.

Key Considerations As You Plan Your Purchase

When considering your first (or next) single-family real estate investment, keep these seven pointers in mind:

1. Don’t let emotion cloud your decision making.

If most or all of your real estate experience to date has been buying and selling your personal residences, keep in mind that you were purchasing for a different purpose with a different set of criteria in those instances. Buying a home for yourself and your family is an inherently emotional endeavor. You “love” the large kitchen, your spouse is “wild about” the main floor master bedroom, the kids are “so excited” about the pool.

With investment real estate, it’s all about the numbers. If the combination of the purchase price, estimated renovation costs, expected rental income and market conditions support a purchase decision, you can feel comfortable moving forward.

2. Buy based on current returns, not future appreciation.

Will the property have a positive cash flow the day the renters move in? That’s the evaluation criteria you must use. Trusting that area rents and home values will increase over time and that that is where you’ll get your return is a recipe for disappointment, if not disaster. Optimism is an excellent personality trait, but in single-family real estate investment, it can lead to big losses. The best deals make money from day one, and long-term appreciation is a bonus.

3. Budget realistically.

As a property owner and landlord, there are expenses you will incur in order to maintain the value of your asset, so you must plan accordingly. The most obvious of these expenses is the upkeep on the property. However, there are other costs you should budget for. One that is often overlooked is vacancy expense.

In a perfect world, your property would be rented continuously with no gaps. However, the reality is that you may lose a tenant on short notice and have to pay the mortgage for a month or two before a new tenant has moved in. If you have not budgeted for vacancy expense, this interruption in your cash flow can come as an unwelcome surprise and a hit to your financial planning.

4. Know your sub-markets/neighborhoods.

Choosing to make a single-family rental investment in a particular metropolitan area simply because a national article states the market, in general, is positive can backfire if you don’t get the details on the specific sub-market or neighborhood where you intend to buy. While the key financial indicators for a city such as job growth, population growth and others may be on the rise overall, that doesn’t guarantee that the specific community you are interested in is enjoying the same kind of upswing. In fact, one sub-market may be growing because businesses are moving there from the area you have in mind. Be sure you have an in-depth understanding of all the forces at work. The key to success in real estate has always been location, location, location.

5. Learn about local regulations and federal laws.

All forms of investing are governed by regulations. However, with stocks and commodities, understanding those regulations is your broker’s job. In real estate investing, the responsibility for understanding everything from local annual registration and inspection requirements to federal fair housing laws falls to you. The time to learn about these legal issues is before you make your purchase. Failing to understand your obligations until after you’ve missed a deadline or violated an ordinance can be very costly.

6. Build a relationship with a local handyman or contractor.

Every rental property will need repairs and maintenance — if not immediately, then certainly over time. Before you complete your purchase, you should invest some effort in researching and connecting with experts in the area that you can call on as needed. Waiting until a pipe bursts to find a plumber can increase both your stress level and your repair costs.

7. Set aside funds for capital expenses.

As a property owner, you will have a variety of smaller, ongoing operating expenses, everything from fixing dripping faucets to making minor repairs. But items such as rooves, HVAC units and driveways eventually wear out. These things have longer lives and higher price tags and are known as capital expenditures or “capex.” These kinds of expenses can run from thousands to tens of thousands of dollars, so it is important to budget and set money aside on a regular basis to cover them.

Preparation: The Key To Investing With Confidence

Investing in single-family rental properties can be intimidating, especially if you are new to the process. The key to forging ahead confidently as you identify, vet, purchase, update and operate a rental is having done all your homework in advance. The considerations above are a great start.

Source: forbes.com

Position Realty
Office: 480-213-5251

US Housing Flipper Make 50% Gross Returns

Property investors were bullish on the U.S. housing market in 2017, flipping more homes than in any year since 2006, when the real estate bubble that helped upend the global economy was still inflating.

Investors flipped more than 207,000 single-family houses and condos in the U.S. last year, Attom Data Solutions said in a report, which defines flips as sales that occur within 12 months of the last time the property changed hands. More than 138,000 investors flipped a home last year, the most since 2007.

“The long up-cycle that we’re in is giving more and more people confidence to try their hand at home-flipping,” said Daren Blomquist, senior vice president at Attom. Rising home prices are “pulling more people onto the bandwagon.”

Buy, Sell
Investors flipped more than 207,000 homes in the U.S. last year, the most since 2006.


Source: Attom Data Solutions

Today’s home flippers appear to be more conservative than bubble-era investors. The average flip generated gross returns of 50 percent in 2017, compared to 28 percent in 2006. Thirty-five percent of flippers financed their acquisitions last year, the highest share since 2008 but far lower than the 63 percent who used loans in 2006.

Still, red flags show up in local markets. Flippers in Austin, Texas; Santa Barbara, California; and Boulder, Colorado, earned gross returns of less than 25 percent (which don’t include the cost of renovating the homes), suggesting that investors in some markets are depending on slim margins. Flips represented almost 13 percent of home sales in Memphis, Tennessee, in 2017, more than twice the national average, a sign that some flippers are becoming overconfident, Blomquist said.

Source: bloomberg.com

Position Realty
Office: 480-213-5251

How to Avoid the Common Pitfalls of Real Estate Investing

Learning to invest in real estate is just like any other business or career: It takes time to get good at it. Too many people get frustrated very easily and give up, and this is not only the case with real estate.

Study and learn as much as you can about the process, the industry and the areas in which you’re interested in investing. As I’ve watched clients create, as well as lose, rental real estate fortunes, I’ve learned common strategies that have helped more succeed with fewer mistakes. Here are six concepts I encourage you to consider when investing in rental properties:

1. Have a master rental property analysis spreadsheet.
Create an Excel spreadsheet to analyze any and all possible deals. That’s right — you’re not going to buy the first rental property you see this year. Start with the Fair Market Value (FMV), money down, improvements and mortgage/carrying cost — then move it through rental income, expenses and wrap it up with a cash-on-cash ROI figure. Run every property through the gauntlet of your spread­sheet. If, after putting the numbers into all the columns, the ROI isn’t good or it’s not in your favor, move on to the next property. Base your decision on the key factors generated by your spreadsheet. This is why you took fifth-grade math — embrace it.

2. Remember, you are buying “numbers.”
Too many investors get emotional about their purchase and even envision themselves living in the rental property they’re ana­lyzing. This is a terrible mistake. In these situations, the investor often over-improves the property, investing far too much time or capital and blowing their ROI out of the water. Don’t think your rental property needs granite counter­tops; instead, realize you aren’t buying a property, you’re buying numbers. What do your dollars get you in “dollars and cents?” Remember, it’s not about your personal wants and needs; it’s about how much you can make off the property. Pouring a lot more money into the property to get a higher rental rate can backfire.

3. Do your research.
Let me say that again: Do your research, then do it again. I see so many new investorsbuy the first rental they see. Take your time. Also, don’t look at a property as to “Why shouldn’t I get this?” Look at it as to “Why should I get this property?” Make the numbers prove it to you. Don’t assume you’re going to buy it unless you find something wrong with it.

4. Buy local if you can.
The words “if you can” are the key. Don’t get hyperfocused on buying local so you can check on the property. It’s far more important to buy quality rental properties (good bones, reputable location, ease of upkeep, etc.) rather than local. But, if you’re living in an area where there’s a strong rental market with legitimate returns on investment (that aren’t dependent on putting down a fortune), consider yourself lucky.

5. Learn to manage your property manager.
Unless you’re a full-time real estate investor and one tough SOB, get a property manager. If you don’t have the temperament to be tough and start eviction proceedings three days after a tenant is late, have a personal intervention with yourself. You may not be cut out to be a property manager even if the property is local. You may not have the time, skills or system to be your own property manager. Be a realist. Your time could be better spent looking for other rentals, doing the books or running your business. With that said, always — and I mean always — have a budget in your rental property analysis for a property manager (approx­imately 10 percent of gross rents). Even if you have visions of grandeur and start managing, you want the budget to stick in a property manager.

6. Bundle.
I recently met with a client who had five properties in four states. They were great properties, but look at the inefficiency (and headaches) of registering an LLC in four states, doing four state tax returns, having four different prop­erty managers, four different trips to at least occasionally check on your rentals and four different rental markets to understand and follow. Perhaps when you have 25-plus rentals and can afford to make your full-time job managing your rentals and property managers, then you can tackle four or more markets. For now, purchase rental properties in just one or two markets, or “bundle” as it’s called. Using this type of bun­dling, your property managers can handle a few properties at the same time. You’ll also save travel time and expenses. Plus, you can familiarize yourself with a few good locations rath­er than having properties scattered all over the place. You can also be more efficient with your tax and legal planning and save a lot of time and money by bundling.

Position Realty
Office: 480-213-5251

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