Category: Guest Posts
Buying Investment Properties To Flip
Real estate moguls used to be able to flip a property quickly. They would look for some home that maybe needed some repairs. They’d make a minimal investment to get the house up to par, and then they’d sell in a month or two for a $15,000 or $20,0000 profit. Since 2008, this has simply not been the case. Getting anyone to consider a home purchase is a challenge. Putting in $10,000 or so in repairs on an empty property that isn’t generating any income is not something that many investors have been willing to do. At least not until the market improves. Well, there is good news and bad news. And if you’re like countless Americans, who are tired of bad news and just want to get it over with as soon as possible, then you’ll probably want to hear the bad news first.
Things have not bounced back
Interest rates are still at some of the lowest they have every been. Home prices and rental property prices are still depressed. More people are renting and less are buying. And of course, it is harder for people to get loans today than it was ten years ago. With all these factors in place, the ability to flip a home – or buy and sell it quickly for profit – is at a low. If you are an investor, and you need money right now, then you may want to avoid any fixer-upper type situations, unless you have the money to sustain you until the market improves. And therein lies the good news.
The market is set for liftoff
In the last six months or so, the unemployment numbers have improved significantly and the Federal Reserve has started to experiment with higher interest rates, which could in turn ease some of the standards that banks place on the ability for one to own their own home. In short, it’s getting to be a more buyer friendly environment, but it’s not quite there yet. For one, homes and rental properties are still undervalued. Luckily, they’re on their way back up, too. But if you’re an investor, who wants to earn significant money quickly, then that means you need to take advantage now. Most of the experts think that once the November presidential election is decided, there will be an explosion in value across the housing market. That means if you buy in now, you may be able to “flip” a home within the year for a significant gain.
The market is definitely ready for a change, and it’s starting to show signs of it. If you have the investment capital, then the time to take advantage of the existing opportunities is now.
Phoenix Real Estate offers some of the best cash flow opportunities. Make sure you to consult with a local Phoenix AZ Real Estate agent who understands the principles of investing in real estate.
Mortgage Jargon in Simple Terms and Definitions
Mortgage Term Glossary
When purchasing a property for the first time, the information that you receive is a little overwhelming. The terminology is foreign and not made for easy reading. But, these are terms that you should know. These terms and conditions are essential to understand if you are purchasing a new home. But, there is not a dictionary out there, so I will lay out the most common terms and what they mean for you here.
Adjustable rate mortgage: This is a mortgage term that is used commonly. The mortgage with adjustable rate mortgage itself periodically based on the current percentage rate. It does it once in three years or five years. This is an outstanding mortgage option if you plan to sell your home before the 5 year limit.
Amortization: This is the basic schedule of payments that you will make on the mortgage over the term of the loan.
Credit Score: This is the number of your risk level and how well you pay your bills. It shows the lenders your credit worthiness as the ability to pay off the initial loan.
Equity: This is a term used to value the current property. To calculate the equity of a home subtract the cash value from outstanding loan balance and it will be the worth of the home. If, you make extra mortgage payments a year your equity will grow substantially.
Fixed Rate Mortgage: Just as it sounds this is a mortgage that has a fixed payment from month to month over the lifetime of the loan. The payments do not rise or fall like with adjustable rate mortgages.
Home equity loan: this is a loan that people take out on top of their mortgage payment. The home owner will borrow against the current equity in the home for things like school or medical bills.
Home equity line of credit: Is the same as a home equity loan but is processed when the home owner needs it using a debit card or check book to withdrawal money.
Interest-only mortgage: Buyers pay on the interest for a set time limit. After it expires payments increase to start paying off the principal amount on the loan.
Loan origination fees: these are costs associated with finalizing and setting up the loan referred to as “points”
Mortgage insurance: This is typically given for the first time home buyers in that once a loan is originated if something were to happen the lender would not loose and money due to a homeowner not paying. So it is a protection for the lender in giving you a loan.
Mortgage points: this is the lenders fee for giving you money for a loan. Usually equal to 1 percent or less and is due at closing.
PITI: Pronounced “pity,” it is an acronym for principal, interest, taxes and insurance, the four components of a mortgage payment.
Prepayment penalty: this is a fee the lender will include in the contract usually for 30-90 days due to the lender wanting to receive some interest payment from the loan that was originated.
Principal: This is the actual outstanding loan balance on the loan that you received. If, you make payments towards the principal of your loan you can save money on the interest payments you will end up owing.
Refinancing: This is when you want to re borrowed money from the same or to a different lender to pay off one mortgage and get another with a better interest rate.
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Buying Cash Flow Rental Properties
Are you uncertain about the future? Do you have money saved up for investment, but are too worried about the future to release it? You shouldn’t be. There are some ways in the real estate market – even in one as down as the current one – that you can take your money and make more, while also fighting against the threat of job loss. By buying cash flow rental properties, you can build an investment for yourself that will go a long way towards your retirement, while also making an income that you can live on now. As the owner of the property, you set the standards on what rent will be. While you do want to be competitive, you don’t want to bargain price your facility either. The more available units that you can fill, the more your income will go up. And the more your income goes up, the faster you can pay off the rental properties and have an equity machine that also earns you an income.
There are many people out there, who have decided to stay out of the real estate market because they are afraid of the long term consequences. Well, improving unemployment and rising interest rates are indicative that America will soon be on its way out of this fix. The best thing a savvy investor can do is purchase real estate now while prices are still depressed. And if one chooses to focus on cash flow rental properties, the the chances of coming out ahead, and then having a property that will be profitable in the future are great. Through the housing turmoil, rentals still did very well because people had to live somewhere, and since buying a home has grown more difficult, rentals offered some of the only options.
Owning rental property created an almost instant cash flow so long as the investor priced the rent at a profitable rate of return. By being able to pay on the property through rental dollars and then set some back for repairs and/or a rainy day, the investor was able to take advantage of the real estate tax shelter that these properties represent while also earning income and equity. Creating cash flow through rental properties also gave investors a sideline income they could depend on in the event of job loss.
If you have not yet made the decision to buy cash flow rental properties, then you should soon. There are still some great opportunities in the Phoenix real estate market for those, who value the best of both worlds – getting paid today and tomorrow. But act fast, because the closer the presidential election gets, the more prices will go up.
Phoenix Real Estate offers some of the best cash flow opportunities. Make sure you to consult with a local Phoenix AZ Real Estate agent who understands the principles of investing in real estate.
The One Key to Selling Real Estate
I know it may sound like a derogatory term, but in order to be successful as a real estate agent or broker, you are going to have to sell some real estate.
But that doesn’t mean that you have to sound like Billy Mays with his infamous “ShamWow!” scream.
But it does mean you are going to have to focus on what really gets someone to say yes to what you are offering – your services and the property at hand.
So how do you do that?
Well, here’s the one simple statement to selling real estate (really anything for that matter).
Give them what they want, and you’ll get what you want.
The trick, though, is finding out what they want. So you have to really sit them down and ask them as many questions as possible in order to finely tune your marketing strategy. Yes, you need to ask them the basics like what kind of a house are they looking for, how much square footage do they need, how many bedrooms and bathrooms are they looking for, etc. But more than that, what is the one thing they want the most out of the house.
For some, it may be the kitchen. A large kitchen with an island stove may be the one thing that sells the house.
For others, a large porch may be the ultimate.
Or perhaps, they are looking for something on a lake or beach.
Whatever it is, if you can find out what they want, and scour the area to find it for them, you are going to be the hero in their eyes, instead of the greasy used car salesman that everyone dislikes.
So ask them the questions, and then listen to their answers. Get them prequalified for financing, so you can know how to limit your search criteria, and then go to work building a list of perspective houses, and mapping out a route to show them to your prospects, while saving you the most amount of gas possible.
Like with me, I am marketing Belton real estate, so when I am working with a prospect, I’ll talk to them about the school district, do the prefer Belton or Temple, do they want to be on the north side or south side of town, are they looking for a new home or an older home. Listening to their answers lets me know what they want, then I can hunt it down for them.
After that, all you have to do is take them through the paper work process, and close!
Becoming Your Own Realtor
Working with a realtor can be beneficial when it comes to searching for or selling a home. It can be helpful for someone to step in and facilitate the process of moving in or moving on, but maybe you’re interested in keeping all the glory – and profits – for yourself. If so, be wise about the venture you’re about to undertake. Utilize or pursue an online education that will allow you to make the best business decisions. School yourself in current market trends. Read up on real estate lingo. Research options available to you, as a seller, and research those that potential buyers will be looking for. You can never be too prepared.
Market your property wisely
Buyers are obviously going to want to know as much as possible about the home they’re interested in buying – including the great and not-so-great. Your boast about crown molding in every room and a custom-made cherry-wood staircase will mean little if the home also has water damage in the basement or a pest problem. Your online education will certainly include information about real estate disclosure forms, which supply potential buyers with information about known property issues. While not all states require this form, it’s best to – again – just be prepared. An interested buyer might, with good reason, assume you are hiding something if you fail to produce information about the home you’re so eager to sell.
Know your audience
If young parents are coming to your open house, be prepared with information about nearby schools and parks where kids can play. Every buyer will want to know about crime in the neighborhood, as well as nearby thoroughfares where emergency vehicles can be found sounding their sirens, but those with young children are bound to be even more interested. Don’t forget that everyone likes a night out – consider supplying information about babysitting opportunities in the neighborhood at the same time you happen to mention the hip new nightclub that just opened down the street. Listen to your buyer and speak to their needs, whether they’re establishing a first home near an elementary school or relocating after all the kids have gone off to college.
Be a detective
Walk your property with an eagle eye. Ideally, the home you are aiming to sell won’t need major structural repairs or any other costly fix that will delay its availability. Assuming you don’t have to pour money into fixing the foundation or replacing the roof, consider investing some cash on a fresh coat of paint or professional landscaping. Imagine that you are interested in purchasing the home you are selling – what do you notice? Would a flower-lined walkway get your attention more than shutters that complement the home’s exterior? While you can’t anticipate the desires of every buyer, making the home as inviting as possible will help potential buyers see themselves relaxing in the living room or gardening in the backyard.
As we said earlier, you can never be too prepared. Use online education opportunities to your best advantage; be a savvy seller who is ready to answer potential buyers’ questions. You care enough to put the physical work into the home you are listing – be sure to do the mental homework as well.
