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.

5 Tips To Help You Get A Great Deal On Your Mortgage

There is a lot that goes into buying a property. Regardless if you are buying as a primary residence or an investment you need to find the right type of financing. There are times when the best financing is through a traditional lender. Anyone that has closed a deal with a bank over the past five years knows that the process has changed. The basic steps and requirements are the same but the amount of paperwork and documentation has increased dramatically. This has tacked on additional days to the closing which impacts the interest rate and at times even the loan approval. Getting the best financing deal does not have to be an intimidating process. Here are five tips to help you get the best possible mortgage deal.

Know Your Options. With any loan you should always have a good idea of exactly what you are getting into. Most buyers are so consumed with finding the right property that the mortgage is often the last thing they think about. As you start your property search you should take some time to research your mortgage options. Start with all of the loan program options available. A traditional 30 year fixed mortgage may not make the most sense given your goals for the property. There are times when a short term adjustable rate mortgage (ARM) can be a much better alternative. Even if you plan on using the property as a rental you should at least explore a hard money option. This type of loan may not make sense for the current purchase but you never know when you may need it at some point down the road. The better you know and understand all of your loan options the easier it is to get things started when a good deal comes your way.

Be Ready To Act. If you are thinking about making an offer you need to be ready to act. You never want to have to scramble around with your financing if a good deal comes your way. The best way to avoid this is by having all of your loan items in place well before you start your property search. Items like your tax returns, business license, social security card and driver’s license do not need to be updated regularly. Keep these items in a dedicated file on your laptop or in a secure place in your home. Other items such as your bank statements, rent checks and income documents can be updated on a monthly basis. You should also keep an updated pre-qualification letter on file as well as a copy of your credit report. The more items you can supply your lender or mortgage broker the easier it is to get the process started. Cutting a few days off of the process can speed up the projected closing date which can give you the inside track on the deal.

Shop Around. In a perfect world you would have an established relationship with a lender you can turn to when financing is needed. If you haven’t had a need for lender financing in some time this may not be the case. It is important that you shop around everyone involved in the transaction. Obviously the lending company you use is most important but you can also shop the attorney and homeowners insurance company. Like anything else in business you are shopping for a mix of price, experience and efficiency. If you know that your loan approval may be difficult simply getting it closed is the top priority. You may have to pay and extra point to use a mortgage broker who has access to a certain program with a lender. Don’t nickel and dime everyone in the process but don’t give anything away either. Whatever you do you should give yourself peace of mind knowing that you spoke with at least three people and were able to compare apples to apples.

Lock. All buyers want to get the best possible deal. However you always need to remember that there is another side to that coin. Interest rates are a moving target. They can move every day and at times even multiple times a day. As much as you want to lock at just the right time trying to squeeze an extra eighth of a point may end up costing you if rates go up. Always lock when you are comfortable with the deal you have. Interest rates have a way of going up much quicker than they will go down. On larger loans a quarter point can have a tremendous impact on your monthly payment. Once you lock you cannot get a lower rate but you also eliminate the risk of getting a higher one. Always lock when you are comfortable regardless of where you think the market may be headed.

Ask Questions. This is your transaction and you should be in control of every aspect of it. If you have a question about something or someone in the process you need to ask. Sometimes by simply asking a question you can get a better deal. It is not a stretch to say that you can shave off as much as $1,000 in the transaction by using the right attorney or questioning a fee from your broker. If something doesn’t look or feel right speak up and ask about it.

Any fees with the loan must be disclosed at the time of the application. You can be confident that the deal you sign will be the deal you see at the closing. Use these five tips to help you get the best possible mortgage deal.

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.
k
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.

How To Achieve Your Biggest Real Estate Goals

How can aspiring entrepreneurs streamline the way they achieve their biggest real estate goals?

With the first month of 2016 coming to a close, many people have probably set resolutions. Whether they were personal or business oriented, there is probably a large population that has already given up. However, I can assure you it’s not too late to get back on track. If you are intent on seeing your goals through to the end, I recommend trying the following:

1. Take Action: Everyone has ideas, but achievers act on them. They act intentionally, and with purpose. It is never the perfect time, you may never know absolutely everything, it will never all be easy, and longer term plans or features may change, but regardless of all this, achievers step out and take action. Do yourself a favor and take action. Nothing will come to fruition if you don’t take that first step.

2. Know What You Want to Accomplish: It’s hard to achieve your goals if you weren’t clear in establishing them int he first place. So what is it that you want to accomplish? If it’s monetary; how much? If it’s helping someone; who is it? If it is a certain number of real estate deals; how many is it? If it is simply being the best; what measurements and metrics will you achieve to demonstrate that?

3. Plan: It sounds basic, yet so few real estate professionals have a real meaningful plan. Going through the motions of creating a lifeless business plan just because you have to doesn’t really count. Layout the really big vision you want to achieve. Make it engaging and inspiring. Look at any major architectural feats, the creation of ancient empires, historic works of art, and even the rise of Facebook and Uber; they were planned. The framework was drafted out in advance. So get a real plan.

4. Identify: Making the finished product come to life also requires you to put the right pieces in place. Uber literally needed vehicles and an app to unleash its empire. Facebook needed code and servers. Michelangelo certainly needed paint and ladders to craft his masterpiece on the ceiling of the Sistine Chapel. The Empire State Building required many materials, and logistics to be worked out. What will you need to learn about real estate? What software tools, building materials, and other resources will you need to make your masterpiece?

5. Create a Model: Facebook started off at a single school. Before you build and sell a massive new real estate development, you’d probably commission a model built to scale. Before you try to buy a portfolio of 100 homes, you’d probably want to work out the quirks and get familiar with the process. However you plan to get into real estate, find a way to begin with a model you can scale efficiently. I can’t stress this enough. It is much better to fail at a smaller level than at a larger one.

6. Break Down Your Action Items and Timeline: Entrepreneurs typically overestimate what they can achieve in a year, but far underestimate what they can achieve in ten. Achieving your biggest lifetime goals doesn’t have to be a sprint, it’s a marathon. You do need to get going, but giving yourself some time can take off a lot of the pressure, and ensure better decision making. So break down your own timeline, break up our actions into easy bite-sized pieces, and roll with it.

7. Where the Magic Happens: It’s time to find those that can help, and to gain leverage by leveraging other people. Who can help you on your mission? How can you leverage the time, knowledge, connections, and finances of others? It’s when you start connecting with others in this way that real estate pros can really gain traction, and make big leaps to their goals.

Summary

Those that achieve big things take action, have plans, take inventory, build scalable models, allow time for results, and look for others to help drive them forward. So put the above into play, stay focused, make the consistent steps, maintain your passion, and look for leverage to hack time.

Remember These Five Important Credit Items If You Are Applying For A Traditional Loan

It is no secret that the loan application process can be time consuming and stressful. The last thing you need to deal with is an unexpected item with your credit report.  What most borrowers aren’t aware of is that the credit score you have at the beginning of the process may not be the same come the end of it.  Lenders have the right to re-pull your credit right before closing to verify the score and liabilities.  Just one missed payment can lower your credit score enough that it falls below program guidelines.  When this happens weeks of gathering documents and getting all of the items of the loan can be for naught.  If you are applying for a loan here are a five items with your credit report you need to keep in mind.

  • Know Your Score. The loan application process starts with your credit score. You can be strong in other areas but if your credit score is weak you will have trouble getting approved. As a borrower you need to know where you stand even before you apply for a loan. There are many places that you can find a copy of your report. In addition to the score you can also find all of the liabilities listed as well as any delinquent items. Knowing where you stand and what is on your report gives you time to fix any potential problems. Paying down a balance on one account or removing an old item can give your credit score a quick boost. Improving your score by as little as just 20 points may push it over a threshold that will produce better terms and even a lower interest rate. Without knowing your score you can be caught off guard when you apply and start the process behind the eight ball.
  • Work On Delinquent Items. As you view your credit report you should always see if there are any collections, charge offs or liens currently listed. Even though you may think you have always paid everything on time there may be an old account that has slipped through the cracks. An old credit card from college can single handedly weigh your credit score down without you even knowing it. Collections and charge offs are not the end of the world but must be dealt with as quickly as possible. The older the accounts are the more difficult they can be to remove. Not only do you need to find the account holders information but you need to produce a receipt of payment. Many collection accounts switch hands constantly with the original account holder having no idea who or when it was sold. Any collections or charge offs must be paid off prior to or at the closing. The quicker you can start finding out who and where to pay it is one less thing you will have to worry about in the process.
  • Avoid Excessive Credit Pulls. Every borrower wants to get the best possible deal. In the mortgage world you need to be careful how you go about that. You can’t let every mortgage broker or lender you talk to pull your credit report. A few credit pulls a month are fine but once you go over three you will see a dip in your scores. Excessive credit scores are seen as a sign that you are having trouble getting approved. Even if this is not the case it will be reflected in your score. The solution for this is to pull a copy of your credit prior to shopping around. If a lender asks to pull your credit you can provide them with your scores and any liabilities they need. They won’t be able to issue you an official pre-qualification but they can give you a pretty good idea of where you stand.
  • No New Debt. Once the loan process is started you need to keep things status quo. The average loan time is roughly 45 days. During this time you should avoid opening up any new debt. You may be tempted to take advantage of low rates if you are shopping for furniture. This is one of the worst things you can do. By opening up new debt you possibly lower your credit score but you also add debt to your liabilities. An increase in debt can increase your debt to income ratio. If your debt to income ratio is above program guidelines your loan will not be approved.
  • Make Payments. As obvious as it sounds you need to continue to make your monthly payments on time. As we mentioned just one 30 day late payment can throw your credit score for a loop. Your scores will continue to suffer until you are caught up with that account. There are many borrowers who think they are out of the woods once they receive loan approval and do not have to do anything else. They are in for a gut punch when their credit is pulled right before closing and they are not approved. You only need to make timely payments for one month, maybe two, when you apply for a loan. Don’t make the mistake of thinking you can be a few days late with a small payment just because your loan is approved.

The loan process starts and ends with your credit score. Don’t let a small mistake with your credit report impact your loan approval.

 

Flipping Houses: The Most In Demand Home Feature

What will be the most in demand home feature from now through the next three years?

For a variety of reasons, including changing neighborhoods and rising crime rates, there remains a soaring demand for homes that feature increased security measures.

For those flipping houses, measures taken to secure a home may serve as one of the most important aspects in promoting appeal and facilitating the sale of the property. However, the addition of a security home feature may assist those placing their property on the market and real estate agents promoting said property.

It doesn’t matter who you are selling to, or even if you are attempting to lease out rental properties, enhanced security measures can make a big difference in value.

Many real estate investors have shied away from investing in these types of home improvements in the past to keep costs down and profit margins up, but they can no longer be ignored or their importance underestimated.

So whether you are renting out apartments, sprucing up your property for a quick sale, flipping houses full time or even building spec homes; enhancing security features could prove to increase the value of the property in question.

High-end properties may even benefit from the addition of a panic room or disaster shelter.

Of course, lavish home features like these are not always a viable option for the majority of homeowners. However, that doesn’t mean you can’t make an effort to provide an increased sense of security. Any home can benefit from today’s new breed of advanced alarm systems that offer high tech remote monitoring. They are great selling features that can simultaneously boost value and provide its occupants the protection they deserve.

Even on a tighter budget; items like reinforced security doors, basic alarm systems, secure windows and flood lights on the exterior can make a big difference.

The installment of a secure home feature can facilitate the sale of property for real estate investors or even increase the appeal for a homeowners association.  However, security measures are more than just fancy assets. If a tenant or homeowner has been subjected to theft or injury after requesting a specific home feature, and the renter neglected to provide the security measure, they could potentially sue the owner for damages.

Want to go all out? How about developing your own community with security as one of the main selling features?

 

Discover Which Real Estate Niche Is Best For You?

There is no right or wrong way to invest in real estate. There are several different paths and strategies you can follow based on your target area and your individual goals.  When most people think of real estate investing they immediately think of rehabs and quick flips.  While this is certainly a viable option it is only one of a handful of ways to approach the business.  Figuring out which path is for you starts with knowing and understanding every available option.  Once you know what is out there you will tend to gravitate to the areas you feel most comfortable with and passionate about.  Here are just five of the many investing options available to you.

    • Wholesaling. Wholesaling can be a great way to break into the business. One of the things that makes is so great is the limited barrier of entry. Instead of needing ample capital and multiple financing options you can get started on a dime. Wholesaling is the process of putting together sellers with investors looking for a discount. As a wholesaler you basically act as a broker between the two parties. You find discounted deals, get the seller to accept your price and then match that price with an interested buyer. For your efforts you are paid a fee by the investor who agrees to purchase the property. These fees are typically between two and five thousand dollars but each deal is usually on a case by case basis. While you may not hit a grand slam as a wholesaler you can hit several singles throughout the course of the year. You don’t have money tied up in one deal allowing you to quickly move on to the next one. Additionally your risk is far less and your cash outlay reduced. For someone just breaking into the business wholesaling can be a great way to get started.
    • Rehab An Flip. As we mentioned there has been a surge in the popularity of fix and flip investing. You can probably find a home flipping show on TV almost any day of the week. Rehabbing is all about finding good deals, putting the right work in and then selling for a profit. Like any other part of the business this can be easier said than done. There are several steps in the process that must be executed to perfection if you are going to have success. Not only do you need to find good deals but you need to have a great team around you to put your plan into place. It is also important that you put the right work in for the market. Even though anyone can invest in fix and flip real estate it is not advisable to dive right in without properly educating yourself. As successful as your favorite investor may be on TV you can lose money in real estate if you don’t know what you are doing.
    • Development/Building. The longer you are in the business the more options that will become available to you. Instead of working on preexisting buildings and structures you can look for properties not yet available to the market. Working as a builder requires a different skill set and base of education but it can be a great way to take your business to a new level. As a builder and developer the potential for greater profits is much higher than with any other part of the business. With the right location and with the right work it is not a stretch to say that you can double or even triple your investment. These deals are not the norm but the potential does exist.
  • Single Family Rentals. Owning rental property is a great way to transform your portfolio. Most investors don’t think about five to ten years down the road but it comes much quicker than we like to admit. An investor looking to get started as a landlord should consider a single family rental property. Dealing with tenants is often the biggest adjustment, even if it is just one tenant. With a single family rental your monthly cash flow will be capped but you only have one tenant to deal with. Additionally you only have one set of items to take care of in the property. There is only one dishwasher, washing machine or roof to replace if things don’t go right. A single family rental will give you a good idea if like the concept of being a landlord and if you should explore the option of property management.
  • Multifamily & Commercial Investing. If you like the idea of being a landlord and are ready for a new challenge you can increase the number of units you own. You can take the logical next step and explore two to four unit properties. Once you go over four units you cross over into the commercial property classification. With that you can look for apartment buildings, strip malls and mixed use properties. The scope of your work is larger but so are the potential profits. Some of the wealthiest people in the country have made their wealth buying and leasing apartment and commercial buildings. This step usually takes years of contacts and sufficient assets available.

Many successful investors have one niche of the business that they focus on. Always educate yourself and know what other options are out there.

 

5 Things To Consider Before Purchasing A Multifamily Property

There are pros and cons to almost everything in real estate. One segment of investors will tell you that multifamily rental properties are the only way to go.  Another camp will tell you that they are more trouble than they are worth and you should be focusing on single family properties.  The reality lies somewhere in the middle.  Multifamily properties are a great way to accumulate long term wealth but only in the right situation.  Before you get involved you need to know exactly what you are jumping into.  One bad rental property can weigh your portfolio down and become a burden on the rest of your business.  Here are five things you need to consider before purchasing a multifamily rental property.

  • Increased Price Of Entry. Over the past five years the multifamily market has grown in leaps and bounds. Once devastated by the mortgage collapse multifamily homes have seen an increase in home prices for the better part of the last decade. While this may be great as an owner it can cause some problems if you are looking to buy. Multifamily home prices are at a five year high point and in most markets considerably more expensive than the average single family rental. Rising home prices require additional capital for down the down payment, closing costs and property tax escrows. It also means that the rent generated needs to be higher to offset the rising monthly costs. There is a definite trickle-down effect to every aspect of the property solely due to the increased price of entry. Multifamily investing has its benefits but can make ownership a difficult hill to climb.
  • Higher Mortgage Standards. There is a tremendous difference in the loan items required for a multifamily property as opposed to a single family. With a single family property you can get away with around 10-15% down payment with credit scores considered good but not great. With a multifamily property you need to have excellent credit scores, 20% down payment and have low debt to income. Being strong in two of these areas is not enough. A two or three family property has stricter loan guidelines across the board. With home prices rising coming up with the 20% down payment is a difficult initial hurdle. This money needs to be in an existing account of yours for at least 60 days. Gift funds of any kind are not allowed. Credit scores must be at least 700 and in some cases as high as 720. You also need to look at how you generate income. Most lenders only use 75% of any rental income received and will calculate income based on the adjusted gross income. Before you do anything else you need to reach out to your lender or mortgage broker and find out exactly what you need to do to qualify.
  • Tenants. Having an additional number of tenants can be considered a blessing and a curse. On one hand more tenants increases your cash flow options. Instead of having just one tenant to rely on you can have two, three, four or more checks coming in. On the other hand more tenants usually mean more potential issues. A three family property has three sets of tenants each with their own set of problems and drama. If you decide to manage the property yourself you can expect a phone call from one of your tenants at least every week. This is one of the reasons it is so important to find quality tenants you can trust. If they don’t respect the property or each other you can have a continuous cycle of problems. There is certainly an upside in collecting more checks but you need to be weary of everything that comes with it.
  • Increased Maintenance. Yet another example of differing points of view with multifamily rentals is with the cost of maintenance. Investors that favor multifamily rentals will point to the economy of scale associated. Under this scenario you can cover multiple expenses at once. If the roof needs to be repaired there is only one roof on the property, not three. If the lawn needs to be cut or the driveway plowed there is only one item of each regardless of the number of units. The other side to that coin is that the cost of repairs is generally much higher. Additionally you also need to stay on top of multiple units. This means repairing or replacing multiple sets of dishwashers, dryers, stoves, toilets and more. With increased tenants and units the odds are that something will need to be fixed during every lease.
  • Limited Buyer Pool. Owning a multifamily property works in reverse when you are trying to sell. Even though home prices have jumped higher it still can be difficult finding the right buyer. Not every interested buyer will be able to satisfy the required mortgage guidelines. If, and when, you do find a buyer it will take some time to close. Single family homes are closing in roughly 40 days and multifamily homes take between 50-60. This increased closing timeframe makes it almost impossible to sell in a pinch if you needed to. It also stresses the importance of accepting the right buyer as opposed to the highest offer.

There is nothing wrong with pursuing a multifamily property but you need to know what you are getting into. There are pros and cons associated and it is important that you always form your own opinion.