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Pump Up The Value Of Your Rehab Real Estate Investment

Oct 13

Posted by admin in Real Estate

There are two legal ways to increase your wealth.

1. Keep more of what you have (e.g., tax strategies, rehab efficiencies, cost savings)

2. Add value to something (e.g., a real estate investment, stocks, bonds)

Let\’s focus on adding value to your rehab investments.

The most obvious is certainly bring it back up to standards. We HAVE to do the obvious things such as:

- Ensure there are no plumbing leaks and the entire plumbing system is in good working order, including potable water and sewage/septic and water heater.

- Ensure the electrical system is safe and working. This may require an upgrade. This includes all outlets, breakers, heat and AC.

- There can be no leaks in the roof! Obvious, but sometimes this is hard to determine if it isn\’t a rainy season. You might have to take a garden hose to the roof to be sure. Station someone in the attic with a flashlight.

- Get rid of any rotted wood or termite damage, repair walls, etc.

Those items I\’ve listed and others like it are no-brainers. But how do we really add value to the eye? We make it pretty!

- We paint all walls and ceilings (usually bright white)

- We replace flooring, or if there is acceptable carpet or tile, we professionally clean and restore it.

- We hang mini blinds on the windows.

- We trim trees and bushes, paint the outside make the exterior look fresh.

Now, to get the sale, or to get it rented immediately we do some of these things that really make a difference (notice the emphasis on kitchen and bathrooms!):

- Replace or refinish the kitchen cabinets, sink and countertop.

- Replace the toilet, vanity, and resurface or replace the tub.

What if we want to really make OUR property stand out on the market? What if we want there to be NO question as to what a great house this is in the buyer\’s mind? What if want TOP DOLLAR? Try these inexpensive upgrades!

EXTERIOR

- Put a decorative fence in front. Plant some shrubs along the front of the house with attractive landscaping bark around it for color

- Replace the front windows with something more attractive.

- Install lighting along the walkway

- Plant a tree

- Install a new mailbox

- Build a deck in the back

- Increase the exterior lighting. Motion sensor lights are a nice touch.

INTERIOR

- Install a security system. Sometimes the system is installed free with a year\’s monitoring. Make the first year of free monitoring (prepaid by you) a selling point.

- Install a garage door opener

- Install a used hot tub. You might be surprised the amount of folks who no longer want their hot tub!

- Include a microwave.

- Buy new appliances. Kind of expensive, but a deal maker. Try making this an incentive for a full price offer.

- Lay ceramic tile instead of vinyl.

- Go with snap-and-lock hardwood flooring instead of carpet especially in a great or living room.

- Upgrade the faucet to something sleek and modern. There are hundreds to choose from. Go with an extra large sink.

- Replace the cabinet and drawer hardware to something extra fancy. This can make an average kitchen POP for little extra cost!

- Add ceiling fans instead of just new overhead lighting fixtures.

- Add chair rail molding in the dining and living rooms.

- Buy the attractive switch and outlet covers instead of the basic contractor grade covers.

We, as investors, need to make the rehab fit our strategies. If we want to rent the property, you probably won\’t add as many upgrades. If you are looking to sell, and you need to get that property noticed, you should add as many of the upgrades as possible within your budget, especially the visual upgrades.

I hope this list has got you thinking creatively about how to pump of the value of your next project!

Bruce W. Ford is the editor of Rehab-Real-Estate.com. Get his important Special Report entitled \”12 Things Real Estate Investment Gurus Won\’t Tell You\” at Rehab-Real-Estate.com.

Writen By : Bruce Ford

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Buying Foreclosure Property

Oct 11

Posted by admin in Real Estate

Every investor who wants to buy a foreclosure home has the sole objective of optimizing the value of the property. Usually, investors go about this by buying out the equity from the homeowner. This act relieves the owner of payment problems and also allows the investor to obtain equity in the property. This method is called ?subject to\” purchase, which implies that the current financing is maintained, with your purchase \”subject to\” that financing.

Evaluating properties

One key point to note in the assessment of an offer is that you should match your profit margin against the owner\’s net equity and not the gross equity. For instance, if a homeowner has a property valued at $100,000 that requires $5,000 worth of repairs to obtain that $100,000 value, and has $75,000 loan due (including 2 past due payments), how much equity is left in the property? Clearly, there is only $10,400 left. This value becomes so, because after deducting $6,000 sales commission, realtor charges of 6%, $1,500 closing costs upon resale and closing fee of $5,000. So a gross value of $100,000 is practically $10,400 after deducting all these costs and this is a key point you should note if you want to buy foreclosure home.

A real estate who wants to buy a foreclosure home should be wary of the net value of a property. For this reason it is a useful thing to do a thorough analysis of all the factors impacting on profits including an accurate assessment of rehabilitation after sale.

Assessing offers

An investor who wants to buy foreclosure home will find it prudent to give a homeowner a 50% net equity offer. Although this percentage might not sound as a lot of money, it is a fair offer looking at our example in which the total net value of the property is actually $10,400. A property may be valued at $100,000 but that value does not take into account fees and costs of rehabilitation. A homeowner will find this offer attractive as it will be a better option than losing everything if the property enters into a foreclosure. Again, it relieves him of so many negative encumbrances associated with servicing the foreclosure process and avoiding a blemish to his credit history.

John Appleseed is contributor to
Bank
Foreclosure Listings, where is insider knowledge of
Bank REO strategies are freely shared.

Writen By : John Appleseed

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What I Look For In A Neighborhood When Buying Investment Real Estate

Oct 10

Posted by admin in Real Estate

I often get the question, ?What do I look for in a neighborhood??

My answer is always the same. ?Easy. Value!?

I usually get a strange look, but it\’s true. In a neighborhood, I am looking for clues to assess the value of the property, plain and simple.

Well, maybe not so plain and simple, I know. So let me explain.

Normally, my rehab properties are not in the expensive areas of town. It\’s rare that you\’ll find a rehabber meeting his or her investment goals buying in the expensive parts of town. There are generally fewer homes needing rehabbing and the fixer-uppers that are there are going for top dollar. It\’s safe to say the bulk of the investor activity is taking place in the mid-to-low range of home prices.

That\’s not to say I wouldn\’t look in, or buy in, the swank neighborhoods. Occasionally there are bargains to be scooped up there, but not with enough regularity to focus on.

But, there are some places I definitely WON\’T invest in.

I won\’t TOUCH the urban war zone. Let me describe what I mean.

?You don\’t go there because it\’s common knowledge that you shouldn\’t. If you happen to wander in that area, you are given suspicious looks by all the folks walking the streets and sitting outside their houses. Your car definitely doesn\’t belong there! It seems nobody takes any pride in their dwelling, and trash seems to be a normal part of the d?cor.?

Do you know of places like that? If you are living in a town of any size, you probably know of a neighborhood that fits the above description.

Watch out for is neighborhoods in serious decline. If the area looks like it soon WILL BE an urban war zone, pass on the deal. You don\’t need a property that is hard to rent or sell. The holding cost can take your good investment into the red! You can drive through and pick up many clues in this regard.

- See if there seem to be a high number of ?for sale? signs. If a mass exodus is in progress, you DON\’T want to be where everyone is trying to get out.

- Check crime statistics with the local police

- Check recent real estate sales if you can get a peek at the MLS.

- Ask an appraiser about what values have done in that area over the last couple of years. Areas in decline usually stand out in your appraiser\’s mind, so an appraiser can be a wealth of information.

- Talk to other investors and wholesalers.

- Talk to your title company contact?they often know trends for a given area very well!

Another tactic is to work it the other way. Find out what\’s hot before you start driving and looking!

Talk to your investor friends, wholesalers, appraisers, and title company contacts about what areas are hot for investors these days. That way, you start learning positive areas and you have the benefit of someone else having gone before you. Of course, do your own checking but find out where investors are putting their money will give you clues about where you want to invest.

I would recommend against asking family and friends not related to the real estate industry about neighborhoods. This is often the worst assessment of value you\’ll ever find. The reactions you\’ll get to areas from uninformed family and friends will often be negative based on hearsay. Get your information from reliable sources and ensure it is based on fact.

True enough, there are LOTS of neighborhoods that are much better than war zones, yet not in the expensive areas of town. That\’s where my best investments live.

So, what do I mean by value?

If a property is in an area where you WILL invest, it comes down to the deal itself. For me, the better the deal, the less I worry about the neighborhood. As a refresher, here are the basics of property analysis:

- What can I buy it for?
- What will it be worth all fixed up?
- How extensive is the rehab?

Those are the basic questions that must be answered in an individual property analysis, but that\’s an article?perhaps a book?for another day.

In conclusion, determine whether you will invest in a neighborhood, then evaluate the deal itself. You will probably find that there are some neighborhoods where you won\’t invest unless the deal is a home run. By the same token, there will likely be areas that you feel confident enough about that you\’ll take an average deal because you like that particular area.

You are the investor, and these are the kind of exciting decisions that investor get to make! Isn\’t that what makes this fun!

Bruce W. Ford is the editor of Rehab-Real-Estate.com. Get his important Special Report entitled \”12 Things Real Estate Investment Gurus Won\’t Tell You\” at Rehab-Real-Estate.com.

Writen By : Bruce Ford

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Where Real Estate Investing And Speculation Collide

Oct 9

Posted by admin in Real Estate

Some uninformed folks would describe someone who rehabs distressed property as a \”speculator\” or even a \”property speculator.\” Don\’t be fooled! There is a VAST CHASM of difference between rehabbing and property speculation.

Let me explain. According to Dictionary.com, the definition of speculation where business is concerned is:

\”Engagement in risky business transactions on the _chance_ of quick or considerable profit.\”

\”A commercial or financial transaction involving speculation.\”

While all investing…in anything… has some element of risk to it, I want to highlight a key difference between speculation and investment. When you speculate, risk is higher and by the nature of the word speculation, more risk than usual is implied.

So, in that context speculation doesn\’t fit what I advocate at all. I\’ll explain further, but first let me illustrate the difference between investment and speculation in real estate rehabber terms from something that happened to me just this week.

I got a call; a \”hot\” lead from my wholesaler. The property was located on the fringes of a hot area of my town called Riverside. Riverside is an area where historic homes are being bought at inflated prices and fixed up very nicely! Put simply, properties in Riverside at in demand. Well, that\’s in the heart of Riverside, but this house was on the distant edge of that part of town.

The house was 934 square feet. Great area, yadda yadda. My wholesaler needs $81,900 and he was the house\’s \”repaired value\” will come in at around $120,000. He continually repeated something he heard from an appraiser about values \”around\” Riverside being a great investment over the coming years.

I agreed to go and take a look. Before I did, I do some of my own checking. From the tax records available online, I learned that the house was built in 1942, just changed hands last year for $72,000 and was of wood construction with asbestos shingling on the outside.

It didn\’t look good when I looked at the numbers. IF…and in my mind a big if…the appraisal came back at $120,000, then the 70% I can get a hard-money mortgage for is $84,000. So, my mortgage would only cover a portion of my closing costs, but none of the rehab. In addition, a few months ago, I bought a property a few blocks away for $38,000. I\’m just not seeing the value in this property BEFORE I look at it.

When I looked at the property, it had some things going for it. It looked to be in pretty good shape and was on a corner lot. In truth, it needed $10-12K rehab. One negative is that it was square and there is no porch under the roofline to easily add square footage for increased value. The neighborhood is fair but two things jumped out at me:

- There is a couple of very old apartment buildings on the street. Normally this would not bother me in the least, but these will prevent the yuppie crowd from rushing into the area in a buying frenzy.

- Every other house within sight was also very small and of simlar construction. This means the houses on this street are not the architectural gems in the historic and sought-after areas of Riverside.

If the money situation would have been better, that is to say, if this was a better investment, I would buy, Buy BUY! If the spread allowed me to buy and rehab it with little or none of my own money, I would have.

But, if I bought this house and rehabbed it with considerable out-of-pocket investment, I would be speculating on the area, and I had my doubts.

Of course I didn\’t buy it, but if I had, that would be speculating!

So, how would I define speculating?

- Speculating involves taking on more than usual risk.

- Speculating involve banking on values that aren\’t there today, and aren\’t projected to be there based on NORMAL conservative appreciation rates.

- Speculating is banking on external or environmental factors to make you money.

***External and Environmental Factors (that pertain to property) are factors that are not part of the property itself such as neighborhood, infrastucture, city, the paper mill down the road, rental demand, etc. ***

What is investing, but not speculating?

- Buying property that you are \”safe\” in, meaning you could rehab it and sell it in the short term and make money.

- Buying property that will make you money based on what you bought it for, current environmental factors, and conservative appreciation rates.

- Buying property such that hope is not part of the strategy!

One of the key factors in STAYING a successful real estate investor is strict adherence to your investment strategy and criteria which are tied closely to your investment goals.

A good real estate investor does what works over and over again and does not take on more and more risk as they go. Smart investors only ventures into other, uncharted investment areas (e.g., single family homes to commercial property) after careful investigation.

I think I can safely speculate that the most successful real estate investors incrementally decrease their risk as they gain experience. Not the other way around.

Bruce W. Ford is the editor of Rehab-Real-Estate.com and an ACTIVE rehab real estate investor. Get Bruce\’s important Special Report entitled \”12 Things Real Estate Gurus Won\’t Tell You\” at http://www.rehab-real-estate.com.

Writen By : Bruce Ford

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Distressed Homes – Real Properties for Real People

Jun 27

Posted by admin in Real Estate

With everyone thinking of saving money, it does not come as a surprise why distressed properties have attracted much buyer interest. By buying such homes, you get to enjoy real benefits. If you consider the state of the country, you know that to be real, you need to be practical. For this reason, it is only understandable why a lot of home buyers are considering distressed homes. The story behind these houses is quite sad. The original homeowners, who thought that they could afford their homes, find themselves in mortgage default. The banks that own the mortgage are then left with no choice but to repossess the property and hope that they could recover their loss by offering them to the public.

For those of you who have been wondering if these distressed homes could meet your real needs and provide you with real perks, consider their qualities:

If you compare these repo houses to other existing real properties for sale, you will be pleased with how big their difference is, in terms of selling price. Their affordability can easily be attributed to the fact that the banks sell them at a discount in order to get rid of them quickly. You will never find a foreclosure being sold based on its current market value.

Foreclosure investors have long since unearthed the great return potential that these distressed properties offer. These houses have actually become the logical choice for rental homes or fixer uppers. In addition, buyers enjoy instant equity as soon as they close the deal. For certain, you will never go wrong with these foreclosed homes especially in terms of savings.

Considering the tough economic situation, consumers have become more practical in their choices even when it comes to home buying. And with the many repo homes to choose from, home buyers find them very easy to search for. Most utilize an online foreclosure listing to hasten their search. If the listing is really good, they could discover really hot leads to the best distressed properties for sale in the market quickly.

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What you need to Know about Buying a Distressed Property

Mar 11

Posted by admin in Finance, Real Estate

Let’s face it: the Dallas real estate market is riddled with distressed properties. However unfortunate this is, the fact of the matter is, as a buyer, you may in a position to purchase a distressed property. Most distressed properties are labeled as such because they are either in foreclosure or are being sold as short sales. Short sales are different from foreclosures, as they involve homeowners who have made an agreement with the bank to sell the property for less than the balance of the mortgage, due to their inability to remain current on their mortgage.

You’ve no doubt heard that distressed properties are where the deals are. Although this may be true, don’t expect a “steal,” as most banks are interested in getting as much money out of the property as possible. Is it possible to get a great deal on a distressed property? Absolutely. Can you expect to walk away with the deal of a lifetime? Don’t count on it.

If you are interested in purchasing a distressed property, there are a number of things you should consider. First, expect more paperwork and processing time. Many short sales and foreclosures can take much, much longer to complete, thereby discouraging many potential home buyers. If you find a great property that is either in foreclosure or being marketed as a short sale, you will need to become knowledgeable about Dallas real estate and its distressed properties market:

• The seller will likely be highly motivated to sell the property. Banks are interested in selling a foreclosed property to get it off their books, while a homeowner is likely extremely interested in ridding themselves of a mortgage they can no longer afford.

• Many homes in foreclosure can go for a fraction of what they would have just a few years ago. However, in these cases it is common to become involved in bidding wars with other buyers, so be aware that you may not be the only interested party.

• Unless you are highly skilled in the foreclosure and short sale Dallas real estate market, find yourself a qualified real estate agent to help with your distressed property purchase. A qualified, experienced real estate agent will have the knowledge and the tools necessary to help you throughout the entire process.

• With more buyers entering the Dallas real estate market as of late, thanks to low interest rates and the first-time homebuyer tax credit, the selection of distressed properties in the Dallas region may be smaller than you think.

• The transaction process may be incredibly confusing and frustrating for many home buyers. Unlike traditional real estate purchases, distressed properties may come with their share of legal and financial hurdles.

• Distressed properties – in particular, foreclosures – may be in terrible condition, either from neglect or intentional damage. In fact, some foreclosures may have been literally stripped by the previous homeowner, either out of financial desperation or sheer malice. Either way, don’t expect a foreclosure to be in mint condition.

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