Every year at this time as Americans, we celebrate Thanksgiving. It's a tradition that is good for family and friends to come together, share a meal and enjoy the company of each other. Many travel and others stick close to home. As a real estate agent, I am thankful each and every day for the opportunities I'm given to help families realize their dreams, upgrade or just get a fresh start in a new location. I always take this very seriously because it's such a large purchase, a little stressful and affects families on a daily basis. I'm fortunate to have a wife that enjoys this as much as I do and takes the same approach with customers. As a team, we work well together, support each other and can now, after 34 years of marriage, finish each others statements.
We so fortunate to have this kind of career because it doesn't feel like work. I consider this as a 'retirement' because I love looking at houses, coordinating the transaction and walking the customers through this process. This could be done til the day I die!!!!!!!!!
My hope for you is that you have the career of your dreams. That you love what you do as much as I do mine and your family and friends are health and happy. Take the time to enjoy your world and enjoy your family this Thanksgiving holiday. We have only one life and you should live it to the fullest.
Thank you for taking the time to read my blog and hope you will come back and get some more information how a real estate agent can help you save money, time and headaches on your real estate transaction.
Mark
Wednesday, November 27, 2013
Tuesday, November 19, 2013
Investment property continued
Last week, I talked about just a few things to consider when determining if investment property is right for you. This week I wanted to give you a couple of real life examples of properties that were purchased last year and let you see the difference just 1 year can make:
Example 1: Located a 3 bedroom 2 bath single family home in a quiet suburb town outside of Springfield. This home was a foreclosure and listed for $75,000. House was built in 2003. Brick front, vinyl siding on the remainder and no privacy fence. HVAC equipment in good shape, roof in excellent shape, interior needed clean up and paint and new flooring. Other than that, its move in ready. We offered $73,000 and got the house, closed in 30 days. The new owner installed a new fence, painted, put in new laminate flooring and did some clean up. Advertised the house for rent on Craigs list for $775 per month. After 3 days, an older retired couple called and rented the place. They described a situation we hear all the time. They were caught in the economy, retirement investments evaporated just at the time they were retiring, lost their home so moved to the area to be closer to family. The husband said they will remain renters until they go into the nursing home. Both draw a social security check every month. The owner informed me they pay the rent on the 20th of the previous month due to make sure it's on time. He's not had one issue with that house. Just this past week, another realtor in our office listed the house immediately across the street from the rental. It had a couple of upgrades over the rental like granite counter tops but exact same floorplan, square footage, etc. List price for that home is $113,000. Now, in 1 year, the owner has received positive cash flow from the house, will depreciate the house on taxes, AND conservatively pick up $35,000-$40,000 in equity. By my calculations, the investor has picked up $45,300 for his $7300 down payment, not to mention again, the depreciation he'll get to claim on his taxes. Not bad for 1 year of investing on 1 house.
Example 2: Same investor came across a house for sale that is not in his normal area he's interested in but to him, it seemed like a great deal. 3 bedroom 2 bath house on a corner lot with good visibility from a secondary through street. Neighborhood not bad but low middle income. House is a frame house, vinyl siding around and square footage is a little small. Asking price was $50,000. We offered and was accepted the $50,000 for the REO property. This house needed work and quite a lot which is why I was shocked he wanted the house. It needed new flooring throughout, kitchen cabinets needed redone, of course paint throughout along with a new fence for the back. After getting into the house, the inspector didn't find it needed a new HVAC which set my client back a few bucks unexpectedly. While he was working to get the house in shape, every day, people would stop by the house to see if he was interested in renting it. He would say he was but wanted to finish the house first so he'd take their name and number and call them back when it was completed. He wasn't even sure how much he would rent it for at that point. He only had a range in mind. Once completed, he started calling back the prospects. All returned and was ready to rent......all 14 of them. Yep, he had 14 prospects with no advertising. He rented the house for $675 per month which was about $50 more than the neighbor next door with the exact same house. This house happens to be his best cash flowing house of his group right now.
These are just 2 examples of how investment property can work for you if you're ready to work for the deals. It may seem these deals just popped up but there is some work and research done on a daily basis. The key is knowing what a good deal looks like when you see it. Know the market, know your limits and comfort levels and get a good, honest realtor that can help you find those gems that are out there. Additionally, they'll help you navigate the sea of paperwork on the REO's and do the heavy lifting on negotiations and coordination to make the closing day smooth as silk. A good hard working realtor can be a key asset in your stable of people getting you leads on houses just on the market or those worn out from over exposure because of having too high price for the property.
Anytime you have questions or suggestions for an article, drop me a note or make a comment on a post and I'll respond. Hope you have a super week this week.
Mark
Example 1: Located a 3 bedroom 2 bath single family home in a quiet suburb town outside of Springfield. This home was a foreclosure and listed for $75,000. House was built in 2003. Brick front, vinyl siding on the remainder and no privacy fence. HVAC equipment in good shape, roof in excellent shape, interior needed clean up and paint and new flooring. Other than that, its move in ready. We offered $73,000 and got the house, closed in 30 days. The new owner installed a new fence, painted, put in new laminate flooring and did some clean up. Advertised the house for rent on Craigs list for $775 per month. After 3 days, an older retired couple called and rented the place. They described a situation we hear all the time. They were caught in the economy, retirement investments evaporated just at the time they were retiring, lost their home so moved to the area to be closer to family. The husband said they will remain renters until they go into the nursing home. Both draw a social security check every month. The owner informed me they pay the rent on the 20th of the previous month due to make sure it's on time. He's not had one issue with that house. Just this past week, another realtor in our office listed the house immediately across the street from the rental. It had a couple of upgrades over the rental like granite counter tops but exact same floorplan, square footage, etc. List price for that home is $113,000. Now, in 1 year, the owner has received positive cash flow from the house, will depreciate the house on taxes, AND conservatively pick up $35,000-$40,000 in equity. By my calculations, the investor has picked up $45,300 for his $7300 down payment, not to mention again, the depreciation he'll get to claim on his taxes. Not bad for 1 year of investing on 1 house.
Example 2: Same investor came across a house for sale that is not in his normal area he's interested in but to him, it seemed like a great deal. 3 bedroom 2 bath house on a corner lot with good visibility from a secondary through street. Neighborhood not bad but low middle income. House is a frame house, vinyl siding around and square footage is a little small. Asking price was $50,000. We offered and was accepted the $50,000 for the REO property. This house needed work and quite a lot which is why I was shocked he wanted the house. It needed new flooring throughout, kitchen cabinets needed redone, of course paint throughout along with a new fence for the back. After getting into the house, the inspector didn't find it needed a new HVAC which set my client back a few bucks unexpectedly. While he was working to get the house in shape, every day, people would stop by the house to see if he was interested in renting it. He would say he was but wanted to finish the house first so he'd take their name and number and call them back when it was completed. He wasn't even sure how much he would rent it for at that point. He only had a range in mind. Once completed, he started calling back the prospects. All returned and was ready to rent......all 14 of them. Yep, he had 14 prospects with no advertising. He rented the house for $675 per month which was about $50 more than the neighbor next door with the exact same house. This house happens to be his best cash flowing house of his group right now.
These are just 2 examples of how investment property can work for you if you're ready to work for the deals. It may seem these deals just popped up but there is some work and research done on a daily basis. The key is knowing what a good deal looks like when you see it. Know the market, know your limits and comfort levels and get a good, honest realtor that can help you find those gems that are out there. Additionally, they'll help you navigate the sea of paperwork on the REO's and do the heavy lifting on negotiations and coordination to make the closing day smooth as silk. A good hard working realtor can be a key asset in your stable of people getting you leads on houses just on the market or those worn out from over exposure because of having too high price for the property.
Anytime you have questions or suggestions for an article, drop me a note or make a comment on a post and I'll respond. Hope you have a super week this week.
Mark
Monday, November 11, 2013
Investment property - is it right for you?
Over the past few years, with the real estate market being soft, there has been a lot of interest for many to want buy investment property. Some have stayed away because they didn't know how low the market was going to drop, while others threw caution to the wind and jumped in with both feet wanting to take advantage of the market. Believe it or not, both can be right and wrong at the same time. Here's how.
If you are skeptical about the market because the timing wasn't right for you financially, you probably made a good choice. However, there are a ton of different ways to overcome that financial fear. If you had jumped in with a good plan, worked the plan and stayed true to your own abilities, you should be in good shape poised for continued growth and equity in your property within the next 5 years. If you jumped in and are neck deep with abandon recklessness, you can bite off more than you can chew and get upside down very quickly causing a ton of financial stress and burden on you and your family. Bottom line, to become involved in investment property, the VERY first thing you should invest in is your education. There is MUCH more to investment property than just buying a house, fixing it up and selling it or renting it. MUCH MORE. Here's just a few things to consider before you jump into investing:
1. What's your goal? Every business, venture or investment should have a goal. Short term and long term goals should be established early and reviewed often. Don't be afraid of goals changing because they probably will. You want to be flexible as the market changes, adjustments in financing, pricing, etc. Main thing is have goals and work toward them.
2. Look for a mentor. It's difficult to admit that you don't know everything but a mentor can be invaluable for you as a real estate investor. You will find there is a ton of rejection in this business. You have to have some tenacity to stick with your plan and not become discouraged. A mentor won't be in the trenches you are in. They will and should be a source of encouragement for you, be a sounding board and resource of knowledge. With that in mind, a mentor may not be in real estate! They may be from any walk of life that helps you develop and are encouraging. A mentor needs to be honest with you, someone you trust and listen to. You may not agree 100% of the time but giving you a perspective that helps you make the most informed decision you can make.
3. Learn your market. If you don't know your market and invest in property, your flirting with disaster!!! Learn the market your investing in. Are prices going up, going down, stagnant? How is new construction in your area? Are there new industries moving into your market or are they leaving? How is the unemployment in your area? What resources do you have for vendors, contractors, suppliers? If you have an REI club in your area, it could be a great source of networking with other investors and realtors helping you with this information.
4. Self assess your finances. With any investment, there is always risk and reward. You need to know what your tolerances are and how much your willing to invest. How do you want to structure your financing of investment? All cash? 100% financing? (yes, that is very possible) Hard money or private investors? The list can keep going but studying each of these and the pros and cons of how to finance your deal will plan a key roll in your success. Having a plan B or alternate can give you some comfort hedging your risk.
5. How much time are you going to spend? Unlike buying stock where you push a button buy your stock and pray, real estate requires you to be more involved. How much or little your involved can determine your success or failure. If you work full time and only have the weekends, you can still make it work but you don't get double digit returns without being active. It's a business and you want to treat it like that.
The more you know and educate yourself on this business, the more success you will have. A word of caution about education. Don't think that you will read books, get a mentor and become wildly successful with just that. Education gets you started and motivated but ACTION is the best education. Alternatively, you can get 'analysis paralysis' if you do nothing BUT educate yourself. So, don't fall into either trap. Educate yourself, get with a good Realtor, study yourself, the market and finances and TAKE ACTION.
Next week, I'll drill down on some of this information and give you some real life examples of some investors I've worked with to show you how investments can work. Have a super week!
If you are skeptical about the market because the timing wasn't right for you financially, you probably made a good choice. However, there are a ton of different ways to overcome that financial fear. If you had jumped in with a good plan, worked the plan and stayed true to your own abilities, you should be in good shape poised for continued growth and equity in your property within the next 5 years. If you jumped in and are neck deep with abandon recklessness, you can bite off more than you can chew and get upside down very quickly causing a ton of financial stress and burden on you and your family. Bottom line, to become involved in investment property, the VERY first thing you should invest in is your education. There is MUCH more to investment property than just buying a house, fixing it up and selling it or renting it. MUCH MORE. Here's just a few things to consider before you jump into investing:
1. What's your goal? Every business, venture or investment should have a goal. Short term and long term goals should be established early and reviewed often. Don't be afraid of goals changing because they probably will. You want to be flexible as the market changes, adjustments in financing, pricing, etc. Main thing is have goals and work toward them.
2. Look for a mentor. It's difficult to admit that you don't know everything but a mentor can be invaluable for you as a real estate investor. You will find there is a ton of rejection in this business. You have to have some tenacity to stick with your plan and not become discouraged. A mentor won't be in the trenches you are in. They will and should be a source of encouragement for you, be a sounding board and resource of knowledge. With that in mind, a mentor may not be in real estate! They may be from any walk of life that helps you develop and are encouraging. A mentor needs to be honest with you, someone you trust and listen to. You may not agree 100% of the time but giving you a perspective that helps you make the most informed decision you can make.
3. Learn your market. If you don't know your market and invest in property, your flirting with disaster!!! Learn the market your investing in. Are prices going up, going down, stagnant? How is new construction in your area? Are there new industries moving into your market or are they leaving? How is the unemployment in your area? What resources do you have for vendors, contractors, suppliers? If you have an REI club in your area, it could be a great source of networking with other investors and realtors helping you with this information.
4. Self assess your finances. With any investment, there is always risk and reward. You need to know what your tolerances are and how much your willing to invest. How do you want to structure your financing of investment? All cash? 100% financing? (yes, that is very possible) Hard money or private investors? The list can keep going but studying each of these and the pros and cons of how to finance your deal will plan a key roll in your success. Having a plan B or alternate can give you some comfort hedging your risk.
5. How much time are you going to spend? Unlike buying stock where you push a button buy your stock and pray, real estate requires you to be more involved. How much or little your involved can determine your success or failure. If you work full time and only have the weekends, you can still make it work but you don't get double digit returns without being active. It's a business and you want to treat it like that.
The more you know and educate yourself on this business, the more success you will have. A word of caution about education. Don't think that you will read books, get a mentor and become wildly successful with just that. Education gets you started and motivated but ACTION is the best education. Alternatively, you can get 'analysis paralysis' if you do nothing BUT educate yourself. So, don't fall into either trap. Educate yourself, get with a good Realtor, study yourself, the market and finances and TAKE ACTION.
Next week, I'll drill down on some of this information and give you some real life examples of some investors I've worked with to show you how investments can work. Have a super week!
Tuesday, November 5, 2013
When to invest in real estate
A couple of weeks ago, someone asked me when was the best time to invest in real estate. I know when someone asks me that, they typically have some alternative motive. My answer: ANYTIME is the best time. NOW is the best time. There is an old Chinese proverb I like that says the best time to plant a tree was 20 years ago. The second best time is today. That applies to real estate. If you look back over the past 30 years or so, look at the price of real estate and what was available then compared to what it is today. Now consider, if I had purchased that house, it would be paid off now and how much would it be worth? How much would I have collected in rent over these years? How much in taxes could I have saved with the depreciation? The list goes on and on.
Today, with interest rates being below 4% (5% for investment property), prices being flat for the past couple of years, you just can't get a better time to invest in real estate for long term returns or a residence. Consider what savings accounts will get you from banks on CD's. A local bank I was in the other day offered a 3 month CD a whopping .09%!!!!!!!! Yes, you can invest for longer for .5%. You'd have to get out to 3-5 years to get close to 1% interest. Now consider a small single family residence with a decent down payment of $5000 - $10,000. Assuming that property will give positive cash flow (NEVER invest in a house that won't either), you can expect to get modestly 5% - 8% returns. Yes, there is a commitment there. There is risk, potential expenses etc. But, that return is AFTER considering those risks. In a perfect world, you can and should get double digit returns on your investment. I'm just more conservative with my numbers.
There are so many ways to invest in real estate that are more secure than many other investments. If you ever consider doing that, make sure you employ a good realtor on YOUR side that helps you along the way. Having one on your side will be an invaluable asset that will help you along the way.
Have fun, enjoy the ride along the way.
Today, with interest rates being below 4% (5% for investment property), prices being flat for the past couple of years, you just can't get a better time to invest in real estate for long term returns or a residence. Consider what savings accounts will get you from banks on CD's. A local bank I was in the other day offered a 3 month CD a whopping .09%!!!!!!!! Yes, you can invest for longer for .5%. You'd have to get out to 3-5 years to get close to 1% interest. Now consider a small single family residence with a decent down payment of $5000 - $10,000. Assuming that property will give positive cash flow (NEVER invest in a house that won't either), you can expect to get modestly 5% - 8% returns. Yes, there is a commitment there. There is risk, potential expenses etc. But, that return is AFTER considering those risks. In a perfect world, you can and should get double digit returns on your investment. I'm just more conservative with my numbers.
There are so many ways to invest in real estate that are more secure than many other investments. If you ever consider doing that, make sure you employ a good realtor on YOUR side that helps you along the way. Having one on your side will be an invaluable asset that will help you along the way.
Have fun, enjoy the ride along the way.
Subscribe to:
Posts (Atom)