Guidance and Tips
As an investor / Realtor, I continually get calls from other areas of the country and from overseas regarding interest in purchasing a house or multi-unit building in my area. Rarely have I had a request for analysis of the investment potential. Outsiders see a $10,000 - $25,000 figure on property and get very excited. They are ready to purchase the traditional “As Is” property. Their way of thinking, I presume, is that if it is cheap enough, they can automatically “flip it” or just put some minor investments into it (paint, yard cleanup, interior cleanup, etc.) and make a killing! Maybe and maybe not!
Things are not as simple and straight-forward as that. I have reviewed great looking listings many times, only to find that when I arrived at the site, things were not as advertised or as they appeared. If it looks to good to be true, it most probably is.
Suppose that you do a national search (Realtor.com, etc.) for low-priced houses with 3 bedrooms, 1 and ½ baths and detached garage and you find a beautiful home for $26,000. The listing describes the home as needing some TLC, but has great potential, central air, full basement, 220, etc. It sounds great. You may say that, as times are tough, most probably, the Owner simply needs to get out. You feel that it is a good house and anyway, how could you possibly go wrong with a price of $26,000. You are very handy and can take ownership, paint the interior or exterior, and add some simple features, clean up the yard, and plant some new shrubs, etc. Perhaps you can even negotiate down on the price, as you are a cash buyer! You call the Agent for the Owner or the Owner and discuss an offer of $20,000 in “as-is” condition. You do this because you are low-balling the offer. You should not be surprised if the owner accepts it without restraint. What is wrong with this picture, you ask?
The listing shows all the positives, but none of the negatives. Never tell yourself that if the price is low enough, you can always make a profit, or that you will always be able to rent it, bring it around in time, or live in it yourself. This is not necessarily true, if you plan to make a profit. I have seen pictures and details on homes that appear great. When I arrive at the location, the house has no services (no furnace, no water, the plumbing is gone, the gutters are minimal or non-existent), and as a result, the house reeks of mold, mildew and water damage, not to mention the foundation is bad. When I look at the tax record, there are outstanding debts on the house. The water bill is over $1,200 (unpaid), the area sales are not good….no sales have been shown in the area over the last two years, or those that have are very low-priced.
There are many savvy investors across the country looking at all properties for sale in a given area. It is a livelihood for many. If a property is on the market for some time, the price is either still too high-priced to make it a workable investment or there are one or more issues, flaws, or defects which are affecting its workability. Remember: You are not alone in this business. It would be very difficult for you to discover that beautiful property (gem) for a very low price. It simply does not happen that easily. Your lesson: Beware; what you see (in the listing) is not necessarily what you get. Always review the physical property in person! From the Latin: practice: Caveat Emptor! not Carpe Diem!
General Guidance:
* Work with a Realtor to provide you low-prices property
options in good areas.
* Work with Bank Realtors who focus on foreclosures and
bank-owned properties.
* Scout out 3-5 potential low-market properties which are
privately-owned, HUD or bank-owned, but are in reasonably
good areas. Track their progress and make low-bids over
time. Sellers are more agreeable, given time.
* Contact property owners just prior to a Sheriff’s Sale. Sellers
are getting desperate for better options than foreclosure.
* Attend Sheriff Sales, but be aware that the odds you will be
able to purchase property for a workable price may be
minimal. Less savvy bidders may take the property for more
than it is worth.
* Join an investment club and seek others working areas
similar to areas of your interest.
* Seek out small real estate investor LLCs who are liquidating
their properties. They are willing to release good properties
for great value.
* Read books and attend training on best techniques for
getting properties at wholesale value.
In Summary:
You must know enough about any area you investing in, to make a logical and educated decision on your purchase. If you are working from a great distance (i.e. greater than 100 miles), then you need an advocate, Realtor, investor friend with whom you develop a trust relationship to act as your consultant on any purchase. This person must also have good management support and skills to support you through the duration of the purchase, development, and / or sale. For more details, go to my web site: http://www.globalrealestateinvesting.com/.
As an investor / Realtor, I continually get calls from other areas of the country and from overseas regarding interest in purchasing a house or multi-unit building in my area. Rarely have I had a request for analysis of the investment potential. Outsiders see a $10,000 - $25,000 figure on property and get very excited. They are ready to purchase the traditional “As Is” property. Their way of thinking, I presume, is that if it is cheap enough, they can automatically “flip it” or just put some minor investments into it (paint, yard cleanup, interior cleanup, etc.) and make a killing! Maybe and maybe not!
Things are not as simple and straight-forward as that. I have reviewed great looking listings many times, only to find that when I arrived at the site, things were not as advertised or as they appeared. If it looks to good to be true, it most probably is.
Suppose that you do a national search (Realtor.com, etc.) for low-priced houses with 3 bedrooms, 1 and ½ baths and detached garage and you find a beautiful home for $26,000. The listing describes the home as needing some TLC, but has great potential, central air, full basement, 220, etc. It sounds great. You may say that, as times are tough, most probably, the Owner simply needs to get out. You feel that it is a good house and anyway, how could you possibly go wrong with a price of $26,000. You are very handy and can take ownership, paint the interior or exterior, and add some simple features, clean up the yard, and plant some new shrubs, etc. Perhaps you can even negotiate down on the price, as you are a cash buyer! You call the Agent for the Owner or the Owner and discuss an offer of $20,000 in “as-is” condition. You do this because you are low-balling the offer. You should not be surprised if the owner accepts it without restraint. What is wrong with this picture, you ask?
The listing shows all the positives, but none of the negatives. Never tell yourself that if the price is low enough, you can always make a profit, or that you will always be able to rent it, bring it around in time, or live in it yourself. This is not necessarily true, if you plan to make a profit. I have seen pictures and details on homes that appear great. When I arrive at the location, the house has no services (no furnace, no water, the plumbing is gone, the gutters are minimal or non-existent), and as a result, the house reeks of mold, mildew and water damage, not to mention the foundation is bad. When I look at the tax record, there are outstanding debts on the house. The water bill is over $1,200 (unpaid), the area sales are not good….no sales have been shown in the area over the last two years, or those that have are very low-priced.
There are many savvy investors across the country looking at all properties for sale in a given area. It is a livelihood for many. If a property is on the market for some time, the price is either still too high-priced to make it a workable investment or there are one or more issues, flaws, or defects which are affecting its workability. Remember: You are not alone in this business. It would be very difficult for you to discover that beautiful property (gem) for a very low price. It simply does not happen that easily. Your lesson: Beware; what you see (in the listing) is not necessarily what you get. Always review the physical property in person! From the Latin: practice: Caveat Emptor! not Carpe Diem!
General Guidance:
* Work with a Realtor to provide you low-prices property
options in good areas.
* Work with Bank Realtors who focus on foreclosures and
bank-owned properties.
* Scout out 3-5 potential low-market properties which are
privately-owned, HUD or bank-owned, but are in reasonably
good areas. Track their progress and make low-bids over
time. Sellers are more agreeable, given time.
* Contact property owners just prior to a Sheriff’s Sale. Sellers
are getting desperate for better options than foreclosure.
* Attend Sheriff Sales, but be aware that the odds you will be
able to purchase property for a workable price may be
minimal. Less savvy bidders may take the property for more
than it is worth.
* Join an investment club and seek others working areas
similar to areas of your interest.
* Seek out small real estate investor LLCs who are liquidating
their properties. They are willing to release good properties
for great value.
* Read books and attend training on best techniques for
getting properties at wholesale value.
In Summary:
You must know enough about any area you investing in, to make a logical and educated decision on your purchase. If you are working from a great distance (i.e. greater than 100 miles), then you need an advocate, Realtor, investor friend with whom you develop a trust relationship to act as your consultant on any purchase. This person must also have good management support and skills to support you through the duration of the purchase, development, and / or sale. For more details, go to my web site: http://www.globalrealestateinvesting.com/.
Wednesday, August 22, 2007
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