How to Get Started With Real Estate Investing

One of the first things that you must do to get started as a real estate investor is to know what is taking place in your market. You must know what is happening in your market so that you can tailor your investing strategy to your market. You need to approach your real estate investing business as a business. Think about this idea for a moment…

When a new major retailer (Walmart, Home Depot etc.) is looking to open a brand new facility in the area, they will do market research beforehand. They are going to do some demographic research to see if the store would be able to sustain itself before they move forward. In a similar manner, you are going to need to do a little bit of research to ensure that you are using the right techniques with your real estate investing business.

Once you know what is happening in your market, you can adjust your strategy accordingly. Based on what is going on in your area, will seller financing be a good strategy? What about wholesaling or lease options? Each of these strategies are more effective under certain market conditions and when you align your strategy with your market conditions, you will increase your success significantly.

So, the real key is to know which indicators will provide you with the most useful information.

Key Indicators

Jobs – Employment s a key factor that drives the real estate market. Generally speaking, people will want to live nearby their employment. So, as jobs are moving into an area, this will increase the demand for housing and rentals. If the area does not have many jobs coming in, you will also see a decreased demand. Since the real estate market is controlled by supply and demand, the number of jobs coming in to an area gives you a very good idea of the demand. You have to know this to know what is going on in your area.

You can obtain a lot of information from the city planner. They can tell you about new companies that are moving into the area, how many jobs they are creating, and the income range for those jobs. This is valuable information to have as a real estate investor.

Occupancy Rate – A factor to understand the demand for rental properties in the area is the occupancy rate. Vacancy is a key factor to know whether rental properties are in demand in your area or not. This is another perfect example of why you must know your market prior to investing. If vacancy rates are very high for your area, investing in rental properties is probably not the best idea for you. You would have a harder time finding a tenant. The property would be vacant for a while and you would continue to make mortgage payments. This is why it is critical for you to start your investing business by knowing your market. This will save you a lot of time, money, and heartache later on.

Property management companies are a good place to obtain occupancy rates. Call them and let them know that you are an investor and considering several properties in the area. They will see you as a potential client and they will usually be happy to provide you with the information that you are seeking. Another alternative is to look in the newspaper each week to see the homes for rent section. Over time, this section will give you an idea of what the demand for rentals is for your market.

Rent Incentives – Rent incentives can be a key indicator of the balance between the supply and demand for rental properties. As a general rule of thumb, the fewer rent incentives you see, the more demand there is over the supply. When the supply of rental properties is greater than the demand, you will see many landlords offering some sort of incentive or promotion. They are trying to give a potential tenant a reason to choose their property over the rest of the competition. So, when you see a lot of rent incentives, it means that the supply of properties is greater than the demand for rentals. You will see incentives like a low deposit, a few months of free rent, cash towards buying a home, or some other sort of offer to get them in the property.

Incentives are easy to spot as you are looking at properties on the Internet, in the newspaper, or any other method where you can find them. The important part is that you see a lot of incentives. It will not just be one here or there.

New Units Permitted – When someone is going to build a home, they must obtain a building permit from the city. Your city will have information on the number of new building permits that have been issued over the last month and the last year. Every home that is built adds to the inventory. Since supply and demand are the factors that are driving the market, the building permits add to the supply.

As an investor, if you see that there are a lot of jobs coming in (demand) and there are not very many units permitted (supply), then that means that you have found a hole in the market. You could start looking at developing some land and building new houses to meet the incoming demand. See how this information can help you get started on the right foot and see the opportunities in your market?

The city planner has the information on the number of new units that have been permitted. As you might have noticed, the city planner is an extremely valuable resource for you as an investor. Most real estate investors overlook the value of what the city planner can offer. It is highly recommended that you spend a little time with your city planner to know what is happening in your area. You can make a lot of money using their market knowledge coupled with your investing strategy.

Inventory for Sale – This indicator refers to the existing homes that are currently on the market. We are trying to measure the supply and demand in the area. The supply is going to be the total of new units that have been permitted and the existing homes for sale.

The existing homes for sale are an easy indicator to measure. Any real estate agent with access to the Multiple Listing Service can tell you how many homes are currently for sale in the area. I highly recommend tracking this on a monthly and yearly basis. This will help you measure whether inventory is rising or falling.

Average Days on Market – The days on the market will tell you how long (on average) it is taking for homes to sell in your market. This will give you an idea of the activity taking place in your area and how quickly a home will sell. Market activity affects the balance between the supply and demand. The days on the market (DOM) can help you know how long it will take for the demand to catch up to the supply and vice versa.

The days on the market can also be obtained from your real estate agent that has MLS access. Let them know the areas that you want to focus on and it can give you that information. You will also want to track this monthly so that you can see changes going on in the market.

Summary

Now you can use this information to begin your real estate investing business. To be successful, you must know what is taking place in your area. These key indicators will help you understand supply and demand in your market. You will also be able to see opportunities in your market.

If you are tracking these indicators over time, you can also see changes that are occurring in your market. You will then be able to adjust your strategy to match the changing trend. Doing this research is very profitable, and it will make the difference between an average investor, and a great investor.

You can also get a real estate investing guide that will serve as a tool of how next steps to take beyond this article.

Probate Real Estate Investing and Agent Opportunities

Investing in Real Estate for flips, long term holding or just for tax benefits is nothing new. I have been doing this for 30 years. We all know you can leverage with Real Estate and earn fantastic returns along with tax benefits. The difference and what I want to talk about is investing in a special niche of Real Estate which most stay away from. This niche is Probate Real Estate Investing.

I have been Probate Investing since 1987. Let me explain the process and why it has been so lucrative but for so few. When a person passes, if they don’t have a living trust then their estate must be probated in order to pay off creditors and transfer the assets to the rightful heirs. This is a time consuming process which is very hard on the family and on average runs for 4 months plus.

Now, the real estate in an estate is usually the biggest asset and is going to be sold to settle the estate and disburse the net dollars to the heirs according to the will of the decease. Sounds simple doesn’t it but in reality this process is the most stressful and time consuming event in most people’s lives when they are the Executor of an Estate. The responsibility the Executor has is almost unbelievable especially when this person most likely has never had to do anything like this. There are time lines and requirements they must adhere to, assets to first find, then appraise, manage and finally disburse to the heirs. There is limited help from the Estate Attorney representing the family as most tasks are handled by the Attorneys Para-legal and the Executor is usually kept in the dark. I have seen this predicament a common denominator with Executors in probate.

There are two processes in Calif one may probate under. The old law is a dinosaur and basically handcuffs the Estate as far as the Real Estate to be sold is concerned from attracting only Wholesale buyers. The other process is the done under the Independent Administration of Estate Act which allows the Executor to treat the real estate to be sold like a regular home sale with a few exceptions. A much easier process and also enables retail buyers who have interest in the Probate Investing to bid. I could go on and on regarding this process but I think you can understand. States other than Calif will have a process equal to or less than Calif’s Probate process so once you understand Calif’s Probate process, it’s usually just a small adjustment for a different State. During the 90′s most estates where processed under the old probate process in my area and in my opinion it was to keep any liability off the attorneys for allowing a property to sell to cheap with a possible complaint later on form the heirs. There is really no other reason to go through the old court confirmation process when selling a home in probate other than this. In today’s Probate world, probably 50% are going through the I.A.E.A which is where we want to be but many are still being probated under the old process.

For those in the know, you can purchase probate property early in the process and control the sale. I can dictate which probate process the sale will conducted under in my offer and I’m usually the only one approaching the Estate. I’m there the week the probate file is opened at court which is before most tasks have been completed. This has produced many wholesale buys for my investors and I over the years and here is the reason why I love Probate Investing.

Executors want the probate RE off their plate. They are worried about a vacant property being vandalized, maintenance to be performed, and in many cases they have moved into the home during this process. What we bring to them is peace of mind by buying the probate real estate and taking the biggest head ache off their shoulders. Also, this is Free money and even though they are selling to me at a discount, the proceeds look mighty good to them and the heirs not to mention the biggest asset now in cash. Buying probate property with the right game plan and know how can mean $50K profits (90 days) if you know what you’re doing. Plus many don’t understand the Probate process or options so stay away. Unlike foreclosures there are no lists which tell you which properties to approach.

I also love Probate Investing because we don’t purchase blind like many foreclosures plus the properties are usually in great shape as it’s not a distress sale. For 20 years I have enjoyed probate investing and it still amazes me today that most of my fellow agents and investors shy away. I’m not complaining…

In my opinion Probate Investing is the best opportunity to purchase single family and 2-4 unit real estate at wholesale prices and flip. This can also be a great way to accumulate rental properties buying with a 15-25% equity position the day you close for long term investing.

For you Real Estate agents Probate Real Estate is a great way to increase your yearly commissions just listing and selling probates and providing help to the Executor in selling. I have kept busy from an investor and agent standpoint working probates. In fact through the 90′s I worked about 10-15 hrs per week and earned more than my real estate practice paid me working 60hrs per week.

Anyone interested in Probate Investing should research this real estate niche.

Easy Action Steps to a Successful Start in Real Estate Investing

If you happen to watch cable or satellite television on the weekends, you can find between 20 and 30 channels early in the day with get rich quick infomercials hawking everything from books, tapes, seminars and even personal coaching services. Most are centered around real estate and I am not sure they are worth the time it would take you to order them by phone. I have spent thousands of dollars on real estate home study courses through the years and will continue into the future. I am always looking to further my education and understanding of what is really working in the investment real estate world.

Because of the time, energy and dollars that I have spent in the past, I have a pretty good idea of what a real estate investor wants to avoid as well as the best steps to take for a successful start. Education definitely plays a role in the success of a real estate investor as well as business savvy, attitude and at times, luck!

Here are a few detailed steps that an investor can take to improve the chances for success.

- Learn the basics of real estate in general.

As with any investment strategy or business, real estate comes with its’ very own lingo. There are terms and phrases that many of us have heard in the past, yet may not know the exact meaning. It is very important from the get go to do the research and learn the basics such as the meaning of the terms and phrases that are used in the real estate industry every day. You can start by using a search engine and searching the phrase “real estate definitions”.

- Begin home study education.

There are great benefits to home study and I do not mean the courses we eluded to on weekend cable T.V. At your local library, in the real estate investing section, there will be multiple titles recently written by authors with experience in their topic. Check out as many titles as you can read in a week and o to work reading. Write down sentences and topics that come up in the books that interest you and that fit into your reasoning for starting to invest in real estate. This will be the start of your plan for getting started.

- Develop a game plan.

By this point, you have an idea of the general terms and phrases for the property investing world and have begun to grow your interest and understanding of the specific strategies for real estate investing. It is time to formally develop your plan and start taking action. Each of the real estate investing books that you will be reading give specific advice about team building. It is a crucial step for your success and the best books offer advice about who to put on your team, where to find them and how important they are to your over-all success. Before you can start investing, you must have a plan for where you are going and how you are going to get there.

- Join local organizations for investors.

In every city, county and state there are multiple organizations whose missions are to assist real estate investors. Each of these organizations holds monthly meetings and some of the best even hold weekly meetings, where investors can network and learn. These meetings are crucial to a beginner investor because they offer the opportunity to build your team with experienced members. They also are fantastic groups to attend for tips, tricks and education. Join a group close to you and make your attendance mandatory. Attend as many meetings as possible each month. Often times, the simple step of surrounding yourself with like-minded individuals who are positive and re-enforce your determination to succeed, can have the biggest benefit on your future success.

- Find partners & Do not fall for get rich quick!

One mistake that is easy to make in the beginning is to set off on the path of “go it alone”. Another is to believe that just around the corner is a pot of gold if I can just find a deal like those guys on T.V.! One thing that is seldom talked about is the fact that most real estate investors have used partnerships in the past if they are not using them now. Partnerships are a great way to spread the risk of investing while learning the ropes. Those risks include using less of your available capital, credit and time. Partnerships can also be structured to be a simple 50/50 partnership splitting all costs and profits or a slightly more complicated partnership with one partner providing money and the other providing the deals, follow through and managing the investments. Either way, going it alone can be a lonely, long and expensive way to get started investing.

- Do not quit your day job!

This is a biggie and is a MAJOR mistake made by some first time real estate investors. Investing in real estate requires a total commitment – a “burning of the boats” mentality. There is no turning back when you decide to go all in. And in that statement lies the problem with leaving your day job first. Take time to develop your team, to build cash reserves, to learn the ropes. Take time to make small mistakes before you leave your full time employment and make a big mistake! Investing in real estate is a big picture endeavor and as an investor you have to be able to clearly see your future and plan accordingly.

These last two tips really go to the heart of why some investors not only fail, but fail miserably. Many times you can overcome the mistakes with the first few tips here by perseverance and a little luck. If you make one of the following two mistakes, they can quickly break a new investor and sour the experience for a good long time. Then again, if you follow all the previous tips, chances are you will have the team around you to guide you right past these last two tips and onto smooth investing.

- Once started, DO NOT under estimate repairs.

When you are estimating the repairs to a property for investment, unless you have an experienced contractor and trusted advisor on your team, you can miss the mark wildly. Even the best home study courses are not able to provide you with an accurate ability to estimate costs. It takes experience and time before you can accurately guesstimate repair costs. Missing the mark on estimated repairs can quickly break a bank account and take a property from profitable to money pit quickly!

- Do not purchase investment property for equity or appreciation

There is no bigger mistake an real estate investor can make today than to purchase property for its equity holding or future appreciation. Long-term investing today is centered around the ability of a property to perform with a positive monthly cash flow. In my home city for investing, Memphis, real estate investors purchase properties at extreme discounts, but over look those discounts if the property does not provide a high enough monthly cash flow. Equity and expectations of future home values are not good reasons to purchase investment property.

Many individuals will purchase their first investment property in 2010. Some will view their purchase as strictly an investment and others will look for real estate to provide a new profession. Either way, it is extremely important that first-time investors seek all of the help, advice and experience they can get from other investors.

Real Estate Closing Procedure

Real Estate Closing Procedure in Florida

In Florida, the real estate sector is a large part of the local economy with a substantial number of residential and commercial real estate closings occurring on a continual basis. Although Florida real estate attorneys fully understand the real estate closing process as they are involved in real estate closings every day, many of the other participants in Florida real estate transactions often experience some confusion as to everything that happens between the time the purchase and sale contract is signed to the date of closing. This brief article is written to explain the closing process and the basic steps that are customarily followed in every Florida real estate transaction so that buyers, sellers, real estate agents, lenders and other interested parties will have a better understanding of the many actions taken by Florida real estate attorneys to successfully close a real estate transaction. Below is a brief description of the steps which occur in every real estate transaction.

Submission of the Title Order

After a purchase and sale contract is signed between the buyer and the seller and the initial escrow deposit is made by the buyer, the buyer’s lender (if the transaction is being financed) or the buyer’s real estate agent (if the transaction is a cash transaction) will submit a request for title to the closing attorney chosen by the buyer to start the process. Typically, the buyer’s lender or real estate agent will complete and send a one or two page form to the closing attorney which contains all of the relevant information related to the transaction such a party names, property description, purchase price, lender information and exiting mortgages. Most real estate attorneys also have pages on their websites where the buyer’s lender or real estate agent can electronically complete and send in the request for title. The buyer’s realtor will also typically send a copy of the signed purchase and sale agreement to the closing attorney at this point.

Processing the File

The processing stage of the transaction commences immediately after the closing attorney receives the request for title. As there are many third parties who must be coordinated with in order to obtain all of the necessary information and documentation in time for the closing date, an experienced Florida real estate attorney will commence the processing stage as soon as possible after the receipt of the request for title. The file processing stage includes ordering tax information that shows the status of current and prior years taxes, loan payoff statements, surveys, homeowner or condominium association estoppel letters showing maintenance fees and any assessments, inspection reports, and certificates evidencing hazard insurance. In addition, at this stage the Florida real estate attorney orders the title search report from the title insurance underwriter and the lien and judgment search report from the lien search company.

Title Search

During the tile search phase of the transaction a through search is made of the public records in the county in Florida where the real property is located. Records searched and located include deeds, mortgages, lis pendens, judgments, easements, restrictive covenants, liens, divorce settlements and any other documents recorded in the public records which affect title to the property. After all of the documents which affect title to the property are located, the title insurance underwriter prepares a title search report which includes all such documents and sends same to the closing attorney.

Title Examination

After the closing attorney receives the title search report from the title insurance underwriter, the title examination phase commences. The closing attorney will first issue a title commitment to the buyer (and if applicable, the lender) based upon the information contained in the title search report. Next the closing attorney will examine all of the documents found during the title search that affect the title to the property in order to determine the current status of title and whether any title clouds exist which need to be cleared prior to closing. The closing attorney also verifies the record legal owner of the property and makes note of any debts owed against the property.

Document Preparation

After any and all title clouds have been cleared and the parties are ready to close the transaction, the Florida closing attorney will proceed to prepare all of the documents in order to close the transaction, which includes the deed, bill of sale, affidavits, FIRPTA certificate, and closing statement. In connection with this, if the buyer is financing the purchase, the buyer’s lender will submit to the closing attorney its closing instructions so that the closing attorney can include all of the lender’s charges, fees and escrows on the settlement statement. An experienced Florida closing attorney will distribute drafts of all of the closing documents to all interested parties in advance of closing so that same may be reviewed, commented on, revised, if necessary, and ultimately approved well in advance of closing.

Settlement/Closing the Transaction

Once all of the closing documents have been approved, a date and time to close the transaction is scheduled. At the closing the closing attorney oversees all aspects of the closing of the purchase and sale transaction and answers any questions the parties may have which relate to the transaction and/or the closing documents. The seller signs the deed and the other seller documents, the buyer signs the buyer’s documents and the loan documents (if the transaction is being financed), and both parties sign the HUD-1 settlement statement. After the closing has occurred the seller, real estate agents, the attorneys and other parties to the transaction are paid and certain documents are sent to be recorded in the county in which the property is located.

The information in this article is of a general nature only and is not intended to be relied upon as, nor a substitute for, specific professional advice. No responsibility for the loss occasioned to any purpose acting on or refraining from action as a result of any material in this publication can be accepted.

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