How To Prepare Your Real Estate Clients For Mortgage Mayhem

How can real estate pros prepare their clients to survive the mortgage process?

While some sources suggest that getting a home mortgage loan is getting easier, it will continue to be a quirky and trying process until major innovations are implemented. Mortgage struggles are one of the most common reasons that real estate deals fall apart. With fallout ratios that can top 30% of all contracts signed; mastering this part of the industry can help optimize business, maximize revenues, and build a superior reputation. Acing this not only decreases the chances clients will drop out, but can make all the difference when real estate agents, investors, and others are buying and selling houses themselves. So what’s so difficult about getting a mortgage today? How can these challenges be navigated to a successful closing?

The Issue

For most, getting a mortgage loan is not an easy or fun process. The process is notorious for constant new demands by underwriters and changing terms. The final terms will almost invariably be worse than the original quote. Interest rates and monthly payments will be higher and buyers will have to bring more money to closing than they expected. Original ‘loan approvals’ are mostly worthless. Once a formal mortgage application is made, the real conditions start flowing. Few may appear to make common sense to borrowers. There may be extra insurances, explanation letters to be written, trips to out of area locations to acquire old paperwork, and lots of resending the same documents again. It’s enough to make even a zen monk get crazy. For the average first time home buyer, this is can be an extremely volatile emotional roller coaster. When underwriters ask for tough conditions and a parent has to explain to their spouse and kids they may not get their dream home, it can get ugly. No one wants the stress. The headaches, extra money, and wasted time may all be palatable, but when it comes to causing emotional stress to their family members, many will draw a firm line in the sand. So how can real estate agents, investors, and sellers, help minimize these issues and keep more deals together?

Setting the Right Expectations

All too often, real estate professionals try to make the process of buying a home sound easy. They promise a perfect, glitch free, enjoyable adventure in buying their dream homes. If that ever occurs, it is a miracle, and the exception. This can make it worse when challenges and new demands start popping up. It may well be worth over preparing clients and buyers for the worst. Tell them the process isn’t easy, that the end terms will probably be more expensive, it will take longer to close than expected, and they should expect bizarre sounding conditions from underwriting. If that doesn’t occur, then they will love you and rave about you to others. When it does happen, they won’t panic and will understand that this is what you meant about it getting challenging.  That way, things won’t seem so bad and your clients will be confident that you will help them through the process.  This also helps them to be prepared to ace any hurdles. If buyers get extra documentation ready before they even start, they’ll be ahead of the game. That sure beats being asked for a tax return the day before closing and finding out the IRS is backed up for 90 days.

Help buyers understand and know where they will and won’t draw the line in advance. If they are applying for a loan with 3% down at 4% interest, will they still stay in the deal if rates hit 5% and they have to put 5% down and bring an extra two thousand dollars to closing? At what point will they have to call it a day?

Stress Management

Never underestimate a client’s stress level. For those buying homes they plan to live in, they will often spend many sleepless nights thinking about the deal. Their whole family’s hopes and dreams – and cash – is riding on this. You might not be able to do much, but you can offer a sympathetic ear and encouragement. Simply dismissing their calls and emails is not going to help get things to closing. They don’t do this every day. So take the time to make them feel better.

Other Solutions

Not every deal is a nightmare. Some will close more easily than expected, but it is smart to be over prepared. These issues can also be minimized by working with better lending partners, choosing better qualified clients, and considering alternative sales processes. Can you seller finance, or at least partially seller finance, your properties to avoid these issues altogether?


Mortgage Brokers VS Banks: Which Is A Better Option For You?

If you are looking for financing on your next deal you shouldn’t discount your local bank or mortgage broker. Even though traditional financing has received a bad rap in recent years it is still a viable option for the right borrower. The two main lending options are a local bank and a mortgage broker. While they both perform the same basic functions how they go about it is often much different. A local bank is confined to in house guidelines and programs while a broker has access to several lenders. There are pros and cons with using each that are based on your specific credit profile, available down payment and debt to income ratio. Deciding on who to work with can be tricky. Here are a few pros and cons of each to help with your decision.

Local Banks:

The most common starting point if you are seeking a loan is your local bank. It makes sense to reach out to the institution where your accounts are held. However you should also know what benefit they provide. Before you seek any type of financing you should have an idea of how strong your application is. You can get a pretty good idea by obtaining a copy of your credit report. In addition to your score you can see what liabilities are listed. By taking the minimum monthly payments for these liabilities and dividing them by your gross monthly income you have your debt to income ratio. This is one of the most important factors for loan approval. Where local banks have an advantage is by catering to borrowers that have a strong credit score, significant down payment and low debt to income. This is magnified if you are an existing account holder in that institution. It is not out of the question to find interest rates a half point lower than you would find with a mortgage broker with an excellent credit profile.

Where local banks falter is with any sort of application that is out of the box. Most local lenders have a strict set of guidelines and underwriting rules that must be followed. There is little margin for error or ability to make exceptions. If you are less than perfect in any one of a number of areas your application will be rejected. Another potential with this is the length of the transaction. A good number of local banks do not do their underwriting in house. If they do this is a major advantage and will expedite the process. However, most loans are shipped off where you are at the mercy of strict underwriting guidelines. Because of the red tape involved it is not uncommon to stretch the process out a few extra weeks, or more. A local bank is best served for “A” borrowers who know where they stand and are willing to wait a little longer to close.

Mortgage Brokers.

Many fingers were pointed at mortgage brokers when the market collapsed. Like any other profession there were a handful of good brokers coupled with a few bad apples. Fast forward almost ten years later and the industry has undergone sweeping changes. The biggest change deals with the requirements to hold a license. Not only are there local and national exams in order to get licensed but annual continuing education requirements. When you work with a mortgage broker today you should feel confident that they know what they are doing. The next major change deals with how fees are charged and disclosed. There is a cap on how much they can earn and a fee sheet required before you get too far in the process. If these fees change by more than just a few percentage points the loan is re-disclosed and subject to a mandatory three day wait to close. All of these changes were done with protection of the borrower in mind and have revitalized the industry.

The biggest benefit that mortgage brokers offer is their ability to work with several different lenders at once. It is not uncommon for a broker to have a few dozen different banks they can work with at any time. Each of these lenders offers something a little different that can make the transaction appealing. Some take a higher percentage of rental income while others allow for self-employment less than two years. They work with lenders that can stretch guidelines where local banks can’t. This allows borrowers with slight credit dings a better chance at getting approved. Another benefit is that brokers work with lenders on the wholesale level. This affords them access to lower interest rates than what you may find locally. They also have the ability to offer interest rate credits that can reduce your bottom line needed at closing.

The biggest knock on mortgage brokers is that they think they can close every deal that comes there way. By working on a deal that ends up falling out you run the risk of losing your deposit and missing out on the property. No two loan scenarios are exactly alike. What works for one borrower may not work for another. With an overzealous mortgage broker they may think they can do everything. This can end up costing you in the end if it doesn’t work out.

A common misconception is that your credit score drops every time it is pulled. The reality is that you are allowed, and expected, to shop around when searching for a mortgage without lowering your score. By knowing everything you can before you get started, and asking a ton of questions, you can pick the best type of financing for you.

The Basic Steps Of A Real Estate Transaction

Every new investor wants to dive into the business as quickly as possible. They watch their favorite investing show on TV and think things will be just as easy. Without knowing what steps to take you will run yourself into circles and not get very far. Regardless of what type of investing you want to pursue the steps to purchase are basically the same. It is important that you follow these steps and avoid taking shortcuts on a given deal. All it takes is one oversight or incorrect figure to turn everything upside down. Whether you are looking for your first deal or simply need a refresher here are the basic steps for any real estate investing transaction.

Property Information. Numbers and data should dictate your buying decisions. You may personally fall in love with a property but if the numbers don’t make sense you need to pass. The first step of any deal evaluation is the actual property. You need to assess the current condition as well as what improvements are needed to maximize your return. Some of the improvements can be cosmetic while others will be more large scale. You need to put a price tag on whatever updates you plan on making. If you are not versed in estimating these numbers you need to reach out to a contractor that can provide real figures. If you notice we did not mention the current list price. That is because this is often just a starting point and not a final number. A homeowner can list for whatever they like but ultimately the market will determine how much it sells for. Only when you are finished evaluating every aspect of the property can you move on to step two.

Seller Motivation. There is often a big difference in what you think the property is worth and the estimation of homeowner’s value. Ultimately the homeowner is the only opinion that really matters. You can support your argument with facts and data but if they don’t want to hear it they don’t have to sell. Generally speaking the best real estate deals are done with motivated sellers. These are sellers who have a desire to sell based on a pending short sale, foreclosure, divorce, death in the family or change in employment. As you evaluate the property you need to gauge the motivation of the seller. If they are not ready to sell now there is nothing you can say or do that will change their mind. You can follow up with them from time to time but you shouldn’t devote all of your efforts in trying to get them to change their mind. They will respond when they are ready and you can’t get too caught up or angry with their inability to act. Without motivation you should move on to the next deal.

Financing. How you plan on financing the deal often has a huge impact on your offer. There is something to be said for the ease of transaction. If you have access to capital or hard money funds you can offer a little less with the ability to close quickly without having to wait for lender approval. On the flip side if you are using a lender you need to have all of the items for the loan ready to go upon submission of the offer. In most cases you only have 30 to 45 days to get your offer approved and cleared to close. Without financing in place you cannot make an offer and even if you can the seller will not accept it.

Offer Amount. Your offer amount should be based on three factors: seller motivation, market demand and comparable listings and sales. You should always know who your competition is and what the demand is like. On properties with little demand you never want to bid against yourself and offer too high. You can always come up but it is difficult to go down. Properties with high demand your offer needs to be as close to asking price as possible. Always run your own numbers and come up with a price that works for you. Keep in mind that you need to have enough room to make a profit. Make your offer and if it is not accepted move on to the next property.

Closing Process. Getting your offer accepted is only the first part of the process. Many would argue that your work starts after your offer is accepted. Regardless if you are using hard money or lender financing you need to get an inspection done immediately. Never skip this process just to secure the deal. Even the trained eye of a contractor can miss something with the foundation or structure. If you skip the inspection you are opening yourself up to risk. If you are using a lender you need to submit all loan items as soon as possible. The quicker you supply your lender with tax returns, full bank statements, business licenses and anything else they need the quicker they can start the process. It is important that you find an attorney who practices real estate and knows how to work with other attorneys and lenders. You never want to lose a deal because your attorney dropped the ball.

You should see the deal all the way through closing and be as involved as you need to be. There are always unexpected curveballs in real estate but these are the five basic steps towards closing.

5 House Flipping Mistakes Newbies Must Avoid

Not every rehab and flip deal you get involved in will be successful. With poor planning and unrealistic numbers you can and sometimes will lose money. As much as investors don’t want to hear this they need to recognize the possibility. All it takes is a few small mistakes to turn a profitable looking property on paper to one you struggle breaking even on. In a perfect world the mistakes you make will be small enough in nature that you can use them as a learning experience. However the bigger the mistake the more costly it will be. Instead of making mistakes on your own it is best to learn from the mistakes of others. Here are five house flipping mistakes you need to avoid.

Planning As You Go. Once you make your plan you need to be committed to it. It is ok to make minor tweaks as you go but you have to avoid wholesale changes. The middle of the project is not the time to decide that you want to switch up the layout of the property. Not only does this add days to the process but money to your budget. Adding amenities does not always improve your bottom line. It can be easy getting influenced by what your contractor or someone else says you should do with the property. These are simply suggestions and should not be taken to heart. If something does not work out you are the one that will feel the repercussions. Adapting to an unexpected item is different than scrapping your original plan and starting from scratch. If you spent time planning for the property you need to trust your gut and stick with your plan.

Unrealistic Budget. Your budget can be anything you want it to be. It is not uncommon for novice rehabbers to fudge the budget to make the deal appear more attractive. By doing this all they are doing is creating a bigger problem down the road. There is nothing wrong with passing on a deal if the numbers don’t make sense. Getting into a deal is not the goal. The goal of any rehabber is to make a profit on the end sale. If you are over budget your bottom line won’t be as high as you anticipated and you will regret getting into the property. Your time could have been better spent on another property with much higher upside potential. On your budget you should always go with the worst case scenario. If things work in your favor you will be pleasantly surprised but at least you protect yourself from the downside. The budget and numbers should guide every decision you make with the rehab. Only use numbers you are confident in.

Overinflated ARV. Your budget and after repair value (ARV) typically go hand in hand. Getting a good deal and staying under budget only helps if you can sell the property the price you anticipate. A common mistake rehabbers make is thinking that the work they do will have a greater impact on the value than the market suggests. When estimating value you need to look at the property from potential buyers prospective. Giving the property a complete makeover will give your value a boost but maybe not as much as you think. Doing work just for work sake does not make sense in every market. If there are no substantial comparable sales or listings you could be throwing money away. Buyers do not care about the condition you bought the property in or all the great work you may have done. All they look at is the finished property and how it stacks up to other homes in the area. Having an overinflated value will cause the home to stay on the market longer than it needs to ultimately sell for much lower than you thought.

Holding Costs. There is more to your bottom line than simply the purchase and end sales price. On every rehab deal there is the time from acquisition to the end sale. The hidden fees during this time can greatly impact the profitability of the property. In addition to the interest repayment of the loan there are also payments for the insurance, property taxes, licenses and utilities. You are on the hook for these every day you own the property. Some of these will be more costly than others but over a few months these can easily equal thousands of dollars. It is important that you fully know and understand all of the potential expenses prior to making an offer.

Lost Work Days. As we mentioned time really is money in the rehab world. It is critical that you keep things moving throughout the process. Before you take ownership you and your contractor should sit down and make a work list and schedule. Reach out to everyone you plan to work on the project and confirm the dates you are requesting. Reiterate the importance of sticking to these dates and ask if they anticipate any conflicts. It is up to you and your contractor to keep things going so you hit the dates on your end. Waiting a week for materials may not seem like much but pushes everything back accordingly. One lost week can turn to two and before you know it you are 30 days past your projecting finish date.
Flipping a house means staying on top of the little and not so little things. Whatever you do avoid these five common mistakes at all cost.

Flipping Real Estate with No Money Down [Myth or Reality?]

There’s all types of courses about building a real estate investing business today or developing an empire or rental properties but what if you don’t have much to get started with and you’d just like to get started flipping real estate in your spare time?

Can you do it part time, can you really pocket $10,000, $40,000 or more from each deal and is flipping real estate with no money down really possible or is it all a myth?

If all you are looking for is an extra $10k a month, flipping real estate can easily be done in just a few hours a week with the spare time you have in evenings or weekends. With the right systems and tools you can even make quite a lot more than that without ever making it a full time job. Though how much do you really need to get started?

One thing you certainly shouldn’t try to skimp on is your real estate education but once you know what you are doing and have the right plan you’ll find flipping real estate could be a lot easier than you thought. In fact you’ll probably be kicking yourself for not getting started a lot sooner.

When it comes to money you’ll soon find out that not only can you really buy and flip real estate without using your own money that’s how the pros do it again and again even once they have millions in the bank. And if you aren’t putting your own nest egg on the line there really isn’t anything for you to lose.

How can you get started flipping real estate without draining your savings? There are actually a number of ways to finance properties without using your own cash from tapping into private mortgage lenders to hard money loans to transactional financing.

Don’t Forget These 5 Hidden Rental Property Expenses

A buy and hold rental portfolio is one of the building blocks of long term real estate investing success. Regardless if you have one single family property or a pool of apartment buildings it is critical that you understand the numbers.  Omitting or miscalculating a few expenses can quickly cause a profitable looking property to turn negative.  A rental property with negative cash flow will weigh on your portfolio and make you second guess buying rental property in the future.  In most cases all of the expenses are black and white however there are a few that are often overlooked.  It is these overlooked expenses that make all the difference with your cash flow.  Here are five overlooked rental property expenses you need to be aware of.

  • Maintenance. Every rental property will need maintenance at some point. In fact if you are not getting maintenance calls your tenants may be hiding an issue with the property. Maintenance doesn’t necessary mean replacing the furnace or hot water heater. It can something as basic as getting the locks changed on ever lease or repairing a clogged toilet from time to time. Individually these items will not break the bank. However added up they can be much more than you may realize. You also need to factor in seasonal items such as cutting the grass and snow removal. There are also costs for seasonal maintenance on the furnace, HVAC and house cleaning after every lease. It is not a stretch to say that these costs can quickly exceed a thousand dollars or more annually without having to deal with a major problem.
  • Vacancy. No landlord ever expects a vacancy. However the longer you own rental property the more realistic it becomes. With every property you own you need to ask yourself what you would do if your tenant suddenly stops paying. Most landlords think they are protected by eviction laws but they don’t work overnight. Even with the courts help you are still looking at multiple months without income coming in. Without capital to help bridge the gap until you can find a new tenant you will be looking at trouble. At least some portion of the rent received should be placed in a reserve vacancy fund. You should plan on not touching this money for as long as it takes to have a vacancy. Ideally you won’t need this money for several months, if not years. However when the inevitable vacancy pops up you will be glad you have these funds available. Unexpected vacancies can happen with any tenant and to any landlord.
  • Fees. There are several fees that are unrelated to the property. Everyone is aware of property tax and insurance fees that come with owning a property. However many towns have begun charging their own set of fees. If your property is located near a number of colleges and universities the town may impose a student housing permit fee. This is required as long as you are currently renting or may want to rent to student tenants in the future. Like most other town fees this won’t break the bank but must be accounted for. You are looking at a few hundred dollars annually on top of inspection fees every few years or so. You also need to make sure you have good tenants in your property. If your student housing tenants are rowdy and cause excessive damage you may be stuck with a bill or a fine from the town. It is a good idea to reach out to the town planning and zoning every few weeks or ask to be put on an email list to be notified of any changes.
  • Eviction. An eviction is truly one of the worst things that can happen as a landlord. Not only do you lose your only source of income but you also need to pay to have the problem rectified. Dealing with an eviction means first reaching out to an attorney. Even if you have some idea how the process works having an attorney helps speed things up with the court and make things as smooth as possible. Your best case scenario is having the court set an eviction date a few months down the road. When that day finally comes you can bet that your property will not be in the condition you desire. You will also need to have money to fix any repairs to get the property ready for your next tenants. If at all possible you should try to reach some kind of an agreement with your tenant before you get that far. If not you will be looking at a stack of expenses that will fall on your lap.
  • Equipment. There are many rental property owners who decide to self-manage their property. The thought process is that they can save money on management fees by taking care of the property themselves. While this is true to some extent you need to factor in the cost of management. If you are going to cut the grass you need to have a good lawnmower at the property. It is also a good idea to have a reliable snow blower as well as anything else you need to take care of the exterior of the property. You should also invest in a good set of tools and other basic items needed to manage a property. When all is said and done you could be looking at an investment of at least a few thousand dollars.

A well run rental property can be the gift that keeps on giving. Understanding all of the numbers associated is big part in rental property success.

Borrowing Money From Family & Friends: A Viable Option?

It seems like everyone wants to be involved in real estate. You probably have a Great Uncle, co-worker or someone you went to school with talk to you about investing in real estate. You may have even discussed all the success you could have and maybe even a little about how you would go about things. They throw out a number they are comfortable contributing and proclaim the rest is up to you. Before taking the next step and making any commitments you need to step back and think about your business. Whether you are investing with someone you have known for years or someone you just met at a meeting last month you need to follow a process. Without taking the proper steps to protect yourself and your business you may end up in a situation you could have easily avoided. If you are considering investing with friends or family here are five important tips you need to follow.

Determine A Strict Repayment Plan. The more you treat borrowing money like a bank the easier things will be. Having the mentality that you will figure things out as you go doesn’t work. Money has a way of changing the way people think and sometimes even act. Even if you are close friends you need to have a firm payment arrangement in place. Without knowing the interest rate, payment frequency and everything about the numbers of the loan there will be some disagreements down the road. Eventually there will problems that alter the finances of the deal. Your friend or family member may want to keep things relaxed and simple but real estate investing doesn’t always work that way. When problems happen expectations may change. You may not feel you have to make a repayment or the repayment will be reduced. By treating your lender like a bank there will be no misunderstanding.

Be On The Same Page. You need to have multiple conversations with your financial backer prior to any financing agreement. As unbelievable as it may seem some financial partnerships are thrown together with nothing more than an idea in mind. Your family member may have been sitting on some money just burning a hole in their pocket they are eager to invest. Their only source of real estate investing knowledge and strategy is based on what they see on TV but are ready to act. Investing without a plan is a recipe for disaster. You need to know exactly where, when and what types of deals you will pursue. There should be an understanding of the timeframe and projected return. You never want to have your partner question why you entertained a certain deal or what you plan on doing with it. Even if they want to be a silent financial partner you should seek their input before you make a single offer. There should be no second guessing your plan of attack once you get going.

Get Everything In Writing. It is easy for feelings to get hurt in the real estate business. Regardless if your partner feels comfortable with it or not you need to get everything in writing. Even on a small scale you are probably looking at borrowing tens of thousands of dollars. You want both sides of the transaction to feel protected and comfortable moving forward. It should not be viewed as an insult for your partner to read your partnership agreement. In fact you should insist that they have their own attorney take a look at everything. If there are any problems it is much better dealing with them at this point rather than at the end of the transaction.

Discuss Downside. Every new business or partnership has dreams of wild success. The odds are that you will not reach the heights you anticipate. In your discussion about how to run your business you also need to discuss the downside. Very few people in real estate are comfortable talking about the worst case scenario. They feel if they bring up bad thoughts eventually they will happen. The reality is that the best way to avoid the negative is by talking about it before it happens. You and your financial partner should bring up what you would do if things don’t go the way you plan. What is your exit strategy and what would you do if there are unexpected expenses? The more equipped you are in dealing with negatives the easier it is to react when they come your way.
Length Of Commitment. How long do you plan on working together? Is this a one time commitment based on a deal you found in your local area? Are you looking to build a long term partnership? What would happen if you found a new deal that doesn’t require outside financial backing? Your real estate business doesn’t stop as you work together on your transaction. You need to discuss how long you intend the partnership to last. It is easy for a friend or family member to think things one way while you have a completely different perception. There is nothing wrong with seeing if you are a good fit together on one transaction and taking things from there. You can’t be so worried that you are going to upset your financial partner that you are scared to ask or talk about important questions.

Getting money from friends and family can be uncomfortable at times but doesn’t have to be. By putting as much as possible on the table before you get too far you can avoid dealing with negative items down the road.

5 Keys To Look For In A Successful Rental Property

All investment properties are not the same. You can’t buy any property in any location and expect rent checks to start rolling in.  Like any other aspect of real estate it takes a number of items to be successful.  Without all of these items in order your ideal rental property can end up being a lemon.  The best rentals are those in high demand areas that can weather any dips in the market.  They will be filled with useful amenities and have solid numbers to support them.  As obvious as this sounds many overzealous investors disregard these principals and look to buy the next best thing that hits the market.  If you are interested in buy and hold real estate here are five keys to a successful rental property.

  • Location. You don’t need to be a full time real estate investor to understand the importance of location. Without question location is the single most important factor in any investment property purchase. You can get a great deal on a property but if tenants don’t find it appealing you will not get the return you anticipate. The location of the property will not only influence demand but also the rent price and the amount of management needed. In evaluating location you should do your homework on other rental properties in the area. Compare your subject property to what is on the market. A common mistake that is made is thinking that the work you do will greatly influence the rent you can charge. Improvements are always nice but tenants are not willing to pay 15-20% higher than fair market value. You may be able to justify a higher rent based on the desirability of the location. A good location has a direct positive impact on everything else with your property.
  • Numbers. A good property is one with strong numbers. You can’t get caught up in how much you love the neighborhood or the layout of the property. The numbers should tell you how to proceed. When evaluating cash flow you need to dig deeper than just the mortgage, tax and insurance payments. You need to account for vacancy, maintenance, property management, utilities, license fees, snow removal and lawn care. Overlooking or ignoring just one of these items can greatly reduce a positive monthly cash flow property to an average one. Cash flow isn’t the only reason to buy investment property but it certainly is a major factor. If there are any questions with the numbers you should do your homework until you are comfortable with the answers. Don’t be afraid to ask your real estate agent or to go to town hall to get the information you need.
  • Management. It is not enough to find a tenant and hope you receive your rent every month. The most successful rental properties are also the most well managed. Prior to even starting your property search you should have an idea of how you plan on managing the property. There is really no right or wrong way to approach management. For every landlord who is comfortable self-managing there is another who will only use a property manager. The two biggest factors in your decision are time and cash flow. You first need to acknowledge how much time you can spend at the property. If something unexpected comes up can you drop everything and immediately get on it? If the answer is no you are better served using a property manager, regardless of the cost. Not taking care of issues as soon as they pop up will cause your tenants to lose faith in you and eventually begin neglecting your property. They will get out of your house as soon as the lease is up and you may lose a valuable tenant you could have held onto long term.
  • Tenants. The strength of your tenants often determines your success. While you can never tell what kinds of tenants you will get there are some items you can use as indicators. If your property is located near a college or university you can realistically expect student tenants. This can increase the amount of rents received but it can also make your management more difficult. If you are looking at a multifamily property you should anticipate dealing with multiple tenants. Increased tenants have some definite advantages but also mean more than one person calling you every time there is an issue. Before you get too far with your purchase you should have a few ideas and strategies lined up for how you plan on finding tenants.
  • Remember The Little Things. Whatever you find appealing with a property the odds are your tenants will as well. Seemingly little things like a dishwasher or washer/dryer in the basement can push your property over the top. Look at how you can improve things rather than how they are currently being used by the seller. The seller may have used the garage as storage but with a days’ worth of cleaning you can turn it into a functional parking space. Tenants who have children or don’t want to have to worry about scraping their car off in the winter this can be a big deal. A swimming pool or even a fireplace may feel like a big deal but in most cases a nice deck is more important. A rental property with amenities and feels like home has a better chance of finding good tenants.

A good rental property can set you up financially for years to come. Use these five keys as a guide in your search for the right property.

Everything You Need To Get Started In Real Estate

One of the most popular questions in the real estate community is “how do I get started as an investor?” There are thousands of would be investors all across the country who want to dive right into the business but aren’t exactly sure where to start. They may have read a few books, watched a few shows or heard tales from a friend or family member but don’t know exactly where to begin. What makes real estate investing so great is that anyone can do it at any time. You can get started while you are still in college or on a part time basis as the president of a local company. What is fairly universal is that without a plan you will find yourself in trouble. Here are four important items that you need as you begin your career as a real estate investor.

Education. There are dozens of ways to invest in real estate. Before you get too far you need to have a good idea of what you can and cannot do. One of the things that will help decide the best path to take is education. If you are interested in real estate you probably have a favorite house flipping show or two you watch on a weekly basis. In most shows there is usually a point where the deal looks like it will turn South but the investor ends up saving the day and walking away with a profit. What these shows don’t show you is that sometimes you may not be able to rectify a bad situation. As the saying goes you can and sometimes do lose money investing. Education is usually what can help you get out of or avoid a negative situation. It is the basis for almost every decision you will make moving forward. Education will help steer your business and give you the confidence moving forward.

Goals. What you want out of the business may be completely different than someone else. As you think about how you want to invest you need to consider your goals. Your goals will lead you to specific property types, markets and price points. A short term rehab property may not make the best purchase if you want to get into buy and hold rentals. Different goals will lead to different properties. With your goals you need to consider your timeframe, available capital, how much time you can commit to the business and long term desires. There are many investors who only want to be involved with one deal a year while others are looking to make real estate a career change. Either option can work in the right situation. Without goals in place you will bounce around from deal to deal without getting exactly what you want. As you build your education and learn the business you need to think about your investing goals.

Financing. If you are serious about getting started you need to have financing in place. Without financing your real estate business won’t get too far off the ground. With financing you have a few different options. The first is with traditional lender financing. It wasn’t that long ago that lender financing was the used to fund roughly 95% of all investment transactions. Changes in loan programs and guidelines have certainly changed things but they can still be a viable option. Lender financing is best used for long term rental properties where you have a good idea you will hold the property for the foreseeable future. The other main option is hard money lending. Hard money lending acts as a bank but without the traditional lender red tape. They lend to their own set of guidelines and criteria. They are usually much more flexible and for that have a higher set of interest rates and fees. In the past hard money lenders were seen as a last resort but today can be a great short term option for flips and rehabs. Either way you go you need to seek out as many financing options as possible.

Contractor/Realtor. The next step to getting started is putting a good team in place. The two most important team members when you are just starting out are your contractor and realtor. Your real estate agent will be able to give you a good idea of what is available in the market and if your goals are in line with reality. You may want to invest in short sales and foreclosures but if they don’t work with your market you may need to shift strategies. They will also help walk you through the buying process and work to get you the best possible deals. Your contract will help turn your vision into reality. Regardless if you are looking to do quick flips or add to your portfolio you need a reliable contractor you can trust. They will not only do the work you are looking for but help in budgeting and running the numbers. Any offers you make are largely reliant on the advice you receive from your contractor and real estate agent.

If you are serious about the real estate investing business the next step is to take action. There will never be a truly perfect deal or scenario. You will learn more from doing than by anything you will read or watch on TV. As long as you are comfortable in these four areas you should have enough confidence to move forward.

5 Ways To Generate Additional Income While Investing In Real Estate

Generally speaking real estate investing success does not happen overnight. There are occasional exceptions to the rule but typically there is a process to the business. One of the ways to keep your business going is by constantly funding it with capital. Increased capital opens up the door to new ways of marketing and lead generation which will bring a continual flow of leads to your pipeline. Finding this capital can be a challenge but it doesn’t have to be. Once you make the commitment to invest in real estate you can still be open to other revenue streams. Until your business really takes off you should always be looking for ways to make money. Here are five ways to generate income while investing in real estate.

Keep A Day Job. Investing in real estate doesn’t mean you have to make a full time commitment. There are thousands of investors who juggle their real estate business while still working full time. This can certainly be a challenge but with the increases in technology is much more realistic than in the past. Instead of having to physically talk on the phone and run to a fax machine you can do everything from your mobile device. There will be some tricky spots from time to time but you don’t need to quit your job before you have to. Not only does your full time job supply a bulk of your income but you also receive health care and other valuable benefits from your employer. Earning a steady paycheck also allows you to invest without having to watching every dime and worry where your next deal will come from. Investing full time and making it your business is great but only when you are ready to take the next step. Keep earning a paycheck from your employer as long as you possibly can.

Real Estate License. As a real estate investor you always want as many different revenue options as possible. While investing in real estate may be your long term goal obtaining your real estate license can help you get there. Real estate is very similar to investing in that you can do it on your own terms. If you find a broker who is on board with your plan you can use your license as often or as little as you like. With a license you can close just a few deals a year and generate extra cash flow. Think about all of the people you know that may have the need for a real estate agent. Outside of your network you can also make or save money on the deals you are directly involved in. Getting licensed isn’t free and certainly isn’t easy but if you look at the big picture not only is it a great way to learn the business but you can also generate extra revenue.

Wholesale Deals. You should always try to find ways to earn on every deal you are involved in. There are times when a particular deal may not be for you but it doesn’t mean you should walk away from it. If you come by an opportunity that may be perfect for a fellow investor you should consider trying to wholesale the deal. This is the process of finding a discounted deal and connecting the seller with and end investor. For your troubles the end investor offers you a flat fee. Once the contract is signed you collect your fee and simply move out of the way. You don’t have to worry about going through the closing process or what you are going to do with the rehab. Wholesale fees received won’t allow you to quit your day job but they can be a nice supplement until your next deal. The best part is that you can earn on a deal that you wouldn’t normally earn on.

Real Estate Blogging. There are several other ways to supplement your income while building your real estate business. If you have passion and knowledge of the business you should look to contribute to as many blogs as you can. There are many websites and individual investors who will pay for your blog posts. Not only is this a great way to learn about specific areas of the business but you may be able to expand your personal network. Earning part time revenue starts with accepting that most income received will not be a home run. With blogging you will hit many singles but for the time you put in it is worth it.
Bird Dogging. The more people you meet the better chance of finding someone you connect with. At one of your networking meetings you may bump into a fellow investor who tells you they are looking to expand into a particular market but are having trouble finding deals. Here is where you can offer to find deals for them. Bird dogging is the process of driving a market looking for vacant looking or distressed properties. With the address you attempt to find the owners information with the hopes of gauging their interest in selling. Any warm lead you get you can pass along to the investor you are working with. For your time and effort you may get a percentage of every deal that closes or a flat fee for the day. Either way you can make money doing something you may normally do anyway.
As a new investor there are plenty of sacrifices you need to make. If you really want to invest in real estate there are ways to generate income that will help achieve your goal.