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Looking to invest in Properties? Consider these points in your search.
PREFERRED HOUSES.Very nice home with a minimum of 3 bedrooms, 2 baths, 2 car garage in a superior neighborhood. Seller willing to sell 20% below what the house would appraise for. Seller willing to wait for you to find a buyer and will be happy with a few thousand dollars in his pocket. ACCEPTABLE HOUSES.Maybe a little lesser home, still having 3 bedrooms, 2 baths, 2 car garage in an average, but nice neighborhood. Seller would settle for 10% less than what the house would appraise for if he can move in 30 days and will be happy with a minimal amount of money in his pocket. This is not an "ideal" deal, but ideal deals are very rare. The more houses you buy, the more ideal deals you will get. Simple as that. You have to develop an "eye" for real estate. Remember, buying the house is only the first step. You have to SELL it to make money! Here comes the most important point: If you bought it right - using what I recommended above, selling the house will not be that difficult! ABSOLUTELY "NO GO" HOUSES. Properties in high crime or run down areas. After you have been buying and selling homes for a few years, I will teach you how and when to buy in these neighborhoods and how to make a fortune on the properties. But NOT now! You should only get involved in nice homes, with nice landscaping, clean, no repairs required. Houses should have at least 3 bedrooms, 2 baths, 2 car garage because this is what the buyers are looking for! One bathroom is an absolute NO-GO. It is obsolete. No garage is a NO-GO. Small square footage - 1,000 sq.ft. or less - is a NO-GO. There are lots of people, even those with kids, who don't want to live across the street from a school or have their backyard back up to a school yard. A house by a railroad track with a freight train going by every 15 minutes is a NO-GO. Other problem houses are those that are located on a busy street, near the airport, or next to commercial properties like shopping centers. Anything out of the ordinary can be a problem to resell the house. Is it a Dump, would you want to own it? Or is it a true "NO-GO" property: Even though they say "there's a sucker born every minute," stay away from these properties until you have some experience under your belt. Always keep in mind that you have to sell the property in order to make money, so buy something someone else would want to buy. For every property I call on, I fill out a Property Information Profile sheet. Get a Property Information Profile and use this on each and every property. Ask for more financial and seller motivation information rather than actual property information. Keep focused so you don't forget to ask important questions. All the information on this sheet is very important. If you don't know the balance on the underlying loan, the payment, and the interest rate, I cannot talk to you about the property. I must see comps from a Realtor, Title company, or a recent appraisal ... if the property is over-priced, I'm not interested. Depending on the information your county tax assessor puts on the Internet, you may be able to get comps that way. You'll have to go to their website - if they have one - and search around. If you are planning to buy houses - you have to know everything. LEARN THE WORD "NEXT." If the seller doesn't like your offer, say "NEXT." If you see a house and you don't like it, say "NEXT." If a buyer calls about the house you are selling and you don't like the buyer, or you are uncomfortable with his ability to make the payments, say "NEXT." If you are unsure about anything regarding the deal, say "NEXT. " There are thousands of houses, thousands of sellers, and thousands of buyers. It is no big deal to say "NEXT." Whenever you are in doubt, say "NEXT." You have to exercise the intuition you were born with -- your sixth sense -- to keep you out of trouble. You make your biggest profit when you BUY the property. If you buy it wrong, you cannot make a huge profit. THE NUMBERS MUST WORK:If the numbers don't work, you'll lose money. You can stretch them, tweak them, close one eye on them, you can overlook a little. But in general, the numbers must rhyme. You buy a nice home which is worth $100,000 for $92,000. This is only 8% less than market value, so it's no big deal for you to get this discount. Further, if the seller listed the home with a Realtor, he will net the same amount after paying commission and closing costs. The monthly payment is $629. The loan balance is $90,000 amortized over 30 years @ 7.5% interest. The monthly impounds for taxes and insurance is $104.In some states taxes and insurance are handled differently or paid separately. You must fulfill your contract and pay the seller $2,000 and move a buyer in within 60 days. This is not an "ideal" deal, but it IS workable. You market the home at $114,950 - slightly above the market price. You run an ad similar to this:NO CREDIT NEEDED! NO QUALIFYING, NO JOB VERIFICATION$7,950 DOWN, $823 A MONTHBeautiful 3BR, 2BA, with 2 car garage. Ideal location, everything near by. Call 555-5555 for information and appointment. (Please note I did not include the impounds in the payment. It will depend on your area and/or the underlying lender whether these are included in the monthly payment or not. If they are, just add them in.) VERY IMPORTANT - Here's the MATH of the deal: Seller gets $2,000, you keep $5,950. You receive monthly income of $194. After 5 years when the new buyer refinances, you'll get a minimum of $17,000. Your total profit on this property:A) Down Payment - $5,950B) 60 Monthly Payments - $11,640 C) Payoff on your Note - $17,500 (est.)TOTAL PROFIT - $35,090 If the average home price in your area is $75,000 reduce the example by 25%. If the houses sell at $150,000, increase the example by 50%, and so forth. If you find a house in a high priced neighborhood - $500,000 and up - you are in the wrong neighborhood for doing deals HOW ARE YOU GOING TO SELL THE HOME?The next- and most important - step after putting a house under contract is finding the right buyer. You must actively market the home. If you don't sell it, who is going to pay the mortgage due on the 1st of the month after the deal was signed and agreed upon with the original seller?? That's why you have to sell it BEFORE you buy it! Here's one more tool you are going to need. You'll need a financial calculator. Yes, you can use your computer or amortization books the lenders/title companies may give away for free. But what do you do when you are sitting down with the seller or buyer and need to figure out the payments? You must be able to structure your new loan on the property using different months of amortization and interest rates. What do you do if it doesn't fall into their tables? You have to act as a professional. In 1990 I bought a Texas Instruments calculator that does all the financial calculations you'll need and it is very simple to use. I believe the name of the calculator is the Executive Business Analyst, item # BA-II. I think I paid around $30 for it. There is a more complex calculator you'll see a lot of Realtors and mortgage brokers using made by Hewlett-Packard. It is model # HP-12C. I have one but it is so complicated because you have to do the calculations backward! My vote goes to Texas Instruments! In the example above, I created a new note on the house of $107,000 amortized over 30 years at 8.5% interest to give you a payment of $822.74 (principle and interest). Sometimes you have to tweak the numbers, use less years, a higher or lower interest rate, a higher or lower loan amount. There will be times you have to play with the numbers until they work. The numbers must work before you close the deal with the seller. Therefore, you need to have your calculator with you. A $3 calculator won't do the job. You need to have a Financial calculator. Before I summarize things for you, I want to give you something to think about. Recently a lot of people lost lots of money in the stock market, especially the Nasdaq which had dropped 65%. Not in one day, it took one year to drop that much. All the investors heard about this every day on the news, read about it in the paper and on the Internet. Nobody took any action! Probably 40% of the people are still sitting with stocks worth 65% less than they were a year ago and are still waiting. Waiting for what??? A miracle? You cannot just buy stocks and sit and wait. You must be highly educated about the companies, their inventory ratios, their earnings and losses ... and you have to act. Cut the losses as soon as you can. If you are investing in the stock market, you MUST educate yourself every day and act accordingly. If the Nasdaq drops 10%, sell, sell, sell. Don't wait until it drops 65%! Real estate is the same. You must educate yourself all the time. You must watch what is new, what is happening, if real estate is going up or down in your area. You must learn about new laws and regulations. Everything is important. This is your business. If you don't pay attention to your business, you'll lose it. KNOWLEDGE IS POWER! IN SUMMARYYou need to know the basics of what kind of properties to buy or not to buy. You should make sure you have all parts of the transaction covered. You need to complete a Property Information Profile sheet for each property. You need a financial calculator or at least an amortization schedule booklet from a lender or title company. 
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