Home foreclosures and fixer-uppers have long been a focus of many real estate investors looking to make big profits. Of course, if the target property doesn't meet certain criteria, an investor can lose their investment as well as any profit that was to be gained
Use a step by step mind set. "Go by the numbers" when reviewing all the areas of the investment that you want to focus on here are a few things to think about and add to your list.
Keep in mind...this isnt listed in any particular order. Its just things to keep in mind The target real estate should meet at least one of the criteria, but not be too heavy in any other areas.
Doc's List:
WHY THE ASKING PRICE
Price is the first thing an investors sees.
They search for properties they think are selling below market value. This makes sense?buy low and sell high right?? However think about the reasons behind the sales price? What is their motivation? Are they relocating or in financial duress? The 3 D's come in to play here most of the time. (Death 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 Structural problems such as a cracked foundation or outdated plumbing and electrical wiring. The last two are VERY common in older craftsman homes from the 30-50's. CONSIDER HOLDING COSTS
My personal opinion is that the holding cost are the number one profit killer. YOU HAVE TO BUDGET THEM IN. Commissions to agents, mortgage, closing costs taxes, all repairs...and dont forget the gas and electric.
If your not up on the market your shopping in...your going to loose money.
YOU MUST ANALYZE similar properties in the area. Keep in mind that prices are set at the margins and may reflect the extremes of a particular housing market environment.
TAKE ADVANTAGE OF TERMS AND CONDITIONS
While price and location are important; dont discount other profit leveraging tools like the terms of the financing.
In some cases a full price purchase can allow you to leverage the terms to mean a lower intrest rate or smaller down payment.
RESEARCH THE LOCAL MARKET
Learn everything you can about the market your shopping in. What are the schools like? How close is the local hospital? Is there a local police station or sub-station? Also look at the floor plans of surrounding homes. How many bed/baths? whats the average price in the area? What are the prices of the last homes sold in the area? Etc..etc.
LOCATION IS NO TO BE OVER LOOKED
Location is usually seen as the most critical component of finding a good deal next to price. In reality, this matters much more if you?re looking in terms of finding a long-term residence than it does for a quick sale. It's more critical to focus on the potential profit margins than the area it's located in. If the ugly home by the dump is more profitable than the fashionable condo downtown, then it's a better deal, aesthetics aside.
FIXER UPPERS AND FORECLOSURES
In the case of a fix andflip and some times a foreclosure. It is the job of the investor to facotr in the repair costs. A keen eye can save you lots of money in a very short time. (Not to mention a good understanding of home repair work)
Distressed property is a gold mine. IF you know waht your looking at. How old is the roof on the property? How much will it cost to repair/replace? How is the plumbing? Is the foundation/slab sound? Once you have asked alot of the basic questions...and you have an idea how much it will cost to fix/correct, do your self a favor. Add 5% as a buffer.
GET IN A ZONE WITH ZONING
Sooo you want to add a third bedroom and second bathroom huh?? Is it zoned for that? worst thing in the world to have happen is to find out you could have made a pretty penny profit IF you had know what the land was zoned for. ALWAYS ASK.
Think of it this way, what could make you more money...a single small house on the land you just invested in...or a duplex on the same land? One tennet or two? Zoning is a gift or a curse depending on your plans with the property...make sure you know before you buy it.
Garages converted with out permits, Granny flats that get added..etc..etc. These are common examples.
Use a step by step mind set. "Go by the numbers" when reviewing all the areas of the investment that you want to focus on here are a few things to think about and add to your list.
Keep in mind...this isnt listed in any particular order. Its just things to keep in mind The target real estate should meet at least one of the criteria, but not be too heavy in any other areas.
Doc's List:
WHY THE ASKING PRICE
Price is the first thing an investors sees.
They search for properties they think are selling below market value. This makes sense?buy low and sell high right?? However think about the reasons behind the sales price? What is their motivation? Are they relocating or in financial duress? The 3 D's come in to play here most of the time. (Death 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. The last two are VERY common in older craftsman homes from the 30-50's. CONSIDER HOLDING COSTS
My personal opinion is that the holding cost are the number one profit killer. YOU HAVE TO BUDGET THEM IN. Commissions to agents, mortgage, closing costs taxes, all repairs...and dont forget the gas and electric.
If your not up on the market your shopping in...your going to loose money.
YOU MUST ANALYZE similar properties in the area. Keep in mind that prices are set at the margins and may reflect the extremes of a particular housing market environment.
TAKE ADVANTAGE OF TERMS AND CONDITIONS
While price and location are important; dont discount other profit leveraging tools like the terms of the financing.
In some cases a full price purchase can allow you to leverage the terms to mean a lower intrest rate or smaller down payment.
RESEARCH THE LOCAL MARKET
Learn everything you can about the market your shopping in. What are the schools like? How close is the local hospital? Is there a local police station or sub-station? Also look at the floor plans of surrounding homes. How many bed/baths? whats the average price in the area? What are the prices of the last homes sold in the area? Etc..etc.
LOCATION IS NO TO BE OVER LOOKED
Location is usually seen as the most critical component of finding a good deal next to price. In reality, this matters much more if you?re looking in terms of finding a long-term residence than it does for a quick sale. It's more critical to focus on the potential profit margins than the area it's located in. If the ugly home by the dump is more profitable than the fashionable condo downtown, then it's a better deal, aesthetics aside.
FIXER UPPERS AND FORECLOSURES
In the case of a fix andflip and some times a foreclosure. It is the job of the investor to facotr in the repair costs. A keen eye can save you lots of money in a very short time. (Not to mention a good understanding of home repair work)
Distressed property is a gold mine. IF you know waht your looking at. How old is the roof on the property? How much will it cost to repair/replace? How is the plumbing? Is the foundation/slab sound? Once you have asked alot of the basic questions...and you have an idea how much it will cost to fix/correct, do your self a favor. Add 5% as a buffer.
GET IN A ZONE WITH ZONING
Sooo you want to add a third bedroom and second bathroom huh?? Is it zoned for that? worst thing in the world to have happen is to find out you could have made a pretty penny profit IF you had know what the land was zoned for. ALWAYS ASK.
Think of it this way, what could make you more money...a single small house on the land you just invested in...or a duplex on the same land? One tennet or two? Zoning is a gift or a curse depending on your plans with the property...make sure you know before you buy it.
Garages converted with out permits, Granny flats that get added..etc..etc. These are common examples.
About the Author:
Doc has been a investor and project manager since early 1990's. In 2006 he started a online real estate investing information website. He hopes to help or investors by giving m information on real estate services that will help m
Posts
No comments:
Post a Comment