home foreclosures and fixer-upper has long been the focus of many real estate investors looking to make big profits. Of course, if the target property does not meet certain criteria, the investor can lose their investment and any profit that is available.
careful and methodical approach is best in this decision making process. With this in mind, here are some critical areas that must be taken into account when looking at "real estate discounts" for investment purposes.
Note: The following items discussed are not listed in any order. Neither are they all hold the same value in relation to each other, but they must all be taken into account in its entirety. property must meet at least one of the criteria, and should not have problems in any one area without justification.
I give you ... LIST:
I know why the price
Most investors focus on price in the first place.
They are looking for properties they think they are selling below market value. It makes sense ... buy low and sell high right ??
But think about the reasons for the selling price ...
what is their motivation? Are they relocating or in financial duress? "3 D's" come into play here most of the time. (Death of a divorce, debt)
If not, there May be problems with the property that require major expense to correct. Structural problems such as a cracked foundation or outdated plumbing and electrical wiring. last two are very common in older craftsman homes from 30-50 years.
CONSIDER HOLDING COSTS
In my opinion the most over looked profit drainer is underestimating the liquidation costs of maintenance and asset sales. Things to keep in mind and budget in your holding costs are commissions to pay real estate agents, closing costs, mortgage payments, taxes, plus repairs and maintenance costs. Also, electric and water.
Poor determining the "true market value" is another obstacle to a successful business. Market value is essentially a subjective exercise where the true value is not known until someone buys the property.
you need to analyze similar properties in the area. Please note that prices are set at the margins and may reflect the extremes of individual housing market environment.
<] P] Take advantage of the conditionsAlthough the price and location are important, do not discount other profit leverage tools such as financing conditions
.In fact, used wisely, the investor can pay full price and use this positioning to negotiate lower interest rates or smaller down payment. Over time, the rental cash flow will be in red because of terms agreed upon by buyer and seller, combined with gradual rent increases and price appreciation.
KNOW local market
Experienced real estate investors try to learn all about the shopping in the market
Sometimes the little details that give the property you are looking for the best chance to appreciate. For example: How close is the nearest church? Is the area family? What is the local crime rate ... Is it near a good school? Where is the nearest Fire / police station? Does the neighborhood have a community watch program?
The next factor in the local floor plans that surround the targeted property. Was the last owner primarily related to vacancy rates, so they keep prices low, instead of upgrading the property? In contrast, your research shows that certain categories such as air-conditioning, second bathroom, or provide enhanced security for the vacancies in lower and higher rental rates.
Location is not to be over looked
The position is usually seen as the most critical component of finding a good job with the price. In reality, these questions a lot more if you are looking in terms of finding a long-term residence than for a quick sale. It is important to focus on earnings potential of the area is located in. If you dump the ugly house is more profitable than a modern condo in downtown, then it is better to wear, aesthetics aside.
fixer uppers and foreclosures
familiar territory ripe for the picking investment distressed properties or fixer-upper. Of course, these are houses that need repairs to some degree. A business investor is to discount the costs of those repairs enough so that the profit is still appropriate.
With minor repairs, such as painting, minor landscape, and the base flooring, you may be available, but not really worth the risk. Significant profits are extremely distressed properties. Plumbing is corroded, the roof needs to be replaced, the interior must be gutted and remodeled, but the seller is asking for 50% of market value, and you can fix it for much less. Always factor in the amount of work that you are looking at ... Once you have a rough idea of cost price ... add another 5% as a buffer.
to get in the zone with ZONING
spatial planning provides an opportunity to put assets into a higher or better use of the area and many investors are ignoring. Higher and better use means that the owner is getting the most out of the country. For example, if a lot zoned for three units, but contains a lot, then it gets its highest and best use. Or, if the lot zoned commercial, but has a three-unit apartment building sits on it, he gets his best and highest use, such as business or trade.
These are often low, because the price based on current use. Thus, one unit of housing price is low, while the double-unit duplex could be sold or rented out more. Harder to find as developers stay more aware of the zoning allowances these days.
Look for the "Owner conversion", where the owners, aware of the Zoning Ordinance, have made the changes without the supervision of local government buildings. Garages converted to second units on both sides are much more common examples.
Even if this is not your core strategy, zoning should be sought only to avoid negative consequences. Something look out for future zoning changes from residential to a business that could affect earnings rental properties.
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