by: Jay Bauder
Consider these parameters for a real estate deal:
Property Value: $250,000
Purchase Price: $160,000
Repairs: $2,500
If you analyze the numbers, you see that the equity available in this deal is $87,500 (Property Value minus Purchase Price minus Repairs).
So here's a hypothetical question for you: Assuming that the information above is accurate, and the property is located in an area that you view as acceptable and/or favorable, then:
If I offered to give you this deal in exchange for $10,000 in cash, would you do it?
Remember - this is hypothetical. The real question here is this:
Would you exchange $10,000 in cash for $87,500 in equity?
For most savvy investors, the answer is: Absolutely YES!
This is called "Wholesale Real Estate Investing" - the process of buying a lot of equity at a very significant discount from another real estate investor who has already done the hard work of finding a deal and getting it under contract.
Just think about that - consider how easy real estate investing would be for you if you had a network of real estate investors in your area (and maybe even all over the country) who, several times each month, offered you the opportunity to purchase significant amounts of equity for a severe discount...
...It would be quite easy to become wealthy, fairly quickly, wouldn't it?
The answer again, is: Absolutely Yes, it will.
It is through smart "wholesale real estate investing" that you can increase your net worth by $20,000 to $100,000 on every real estate deal that you do.
...Now the burning question becomes, "Where exactly do I find these wholesale real estate investing deals?"
I know of at least 3 solid sources...
You've got to admit - it will be a pretty wonderful thing when you know how to find great real estates deals in which you can trade a small amount of cash for a large amount of equity without even having to find the deals yourself...
...And that's exactly what "wholesale real estate investing" is all about.
So let's get right to it. Here are 3 places to find wholesale real estate deals:
1.) Visit the local real estate investing club in your area. Almost all of these clubs have networking opportunities to work with other investors who wholesale deals regularly, and this is an easy way to find great opportunities.
2.) Watch for ads in the newspaper, television, and in other media that advertise slogans like, "We Buy Houses", or "Sell Your House in 9 Days" or anything similar to that. Most of the time, these people are real estate investors, and they are happy to wholesale deals to people like you.
3.) Watch your email-box. Why? Because if and when you choose enrollment in various free e-courses online, such as that via tm-RealEstateInvesting.com, you'll be provided with automatic notification about great local and national deals as they become available. But be forewarned - you've got to act quickly whenever these deals are announced, because obviously the response is always significant.
About The Author
Jay Bauder is the web owner of http://www.homes-in-california.com California Homes: Buying or Selling, a website that provides information on California real estate buying, negotiating, financing, and more. You can visit his website at: California Real Estate
Friday, January 19, 2007
Friday, January 12, 2007
Where Are The Really Good Real Estate Investment Deals?
by: Bruce W. Ford
In writing my last article about the neighborhoods where I find the most profitable rehab real estate investment deals, something occurred to me.
In that article I described investing from what I've found is typical in doing this business. I wrote about where I TYPICALLY find the deals. Well, what IS typical in this business?
No two deals are the same, that's for sure! Every rehab itself is different with different problems to solve. So, in describing a typical deal, I'm referring to the spread involved. The spread is the different between what I can buy the house for, and what it's value will be when it's brought back up to standards.
The next big question is, "What will the rehab going to cost."
For instance, if a property in my market has a $25,000 spread between what I can buy it for and what I can sell it for (the as-repaired appraised value), it's a "maybe" in my book depending on how much rehab it needs. If it needs much, I would probably pass unless some external factor makes it a good buy, like the neighborhood. In other words, if it needs much rehab, I'd have to be convinced enough to put some of my own money into it.
I typically look for houses with a $30,000 spread or better. You have to decide for yourself, based on values in your area and what is the minimum you want to make, what spread you'll be happy with.
So, what is a rehab real estate investor's "homerun? "
Homeruns occur at the outer edge of what is typical. My homerun deals have occurred one of several ways.
- The spread is stellar. Let's say the spread is $45,000 and the rehab is a manageable $5-10,000.
- The spread is good, but the rehab is very light. Wham-bam, I'm looking for tenants within days of closing.
- The cost is exceptionally low for a given area. Sometimes the spread on paper will not be anything to get excited about, but the property has a huge lot, extra bedrooms, or is located an area that is in serious demand.
- There is NO rehab, and the spread is sufficient that I can buy it with none of my own money.
True story - I've only had one NO rehab deal. Wow. This house had been recently rehabbed, clean and didn't need a thing! This was a homerun just due to the ease at which I added this property to my inventory! The spread wasn't great, in fact, I had a local hard money lender make up a story about being out of money because he thought the spread was too narrow and didn't want to lend on it. He wrongly assumed there was a significant rehab. (Being straight up with me was too hard, I guess.) I consider this a homerun because I bought this property, changed the locks, put out a sign and had it rented within two weeks. Mind you this is a beautiful well-built brick/block home in a great neighborhood. Cost to me…nothing. This house has one of my best cash flows month-to-month.
The point here is to give you an idea of what kinds of homeruns rehab real estate investors look for. But, here is a key point…
It's truly NOT worth my time, or yours, to wait around for the homeruns. I firmly believe that these kinds of homerun deals come about by being an active investor. Rehabbers that keep 1-2 projects going at all times, get calls from wholesaler with great deals. Personally, I make the best buying decisions decisions with what I have among the properties brought to me when I am in my "buy mode." Some of these turn out to be homeruns, some don't.
If I waited around for only the homeruns:
- I would waste precious learning time. Since there is no substitute for experience, I want all I can get!
- I would lose money over the long run as a buy-and-hold investor. If I'm buying and rehabbing with little or none of my own money anyway, it doesn't make sense to wait around for homeruns if I can add properties to my inventory that fits my investment criteria. If you're in the buy and hold business, the important thing is how much property can be controlled with as little money as possible.
Question: Is it better to have $1,000,000 worth of property appreciating or $200,000?
Hitting a homerun in rehab real estate, and anything else, requires these two ingredients:
- You've GOT to be "in the game." By this I mean you have to have prepared in advance for your turn at bat. In the rehab business, this means you have enough knowledge to get started, you have a decided investment criteria, you have your money source lined up, and you are looking for property.
- You are "swinging." In the rehab business, this mean you are buying property, rehabbing, learning and turning. It's not enough to merely stay on the sidelines.
Let me say that again…
IT'S NOT ENOUGH TO MERELY STAY ON THE SIDELINES.
About The Author
Bruce W. Ford is the editor of Rehab-Real-Estate.com. Get his important Special Report entitled "12 Things Real Estate Investment Gurus Won't Tell You" at http://www.Rehab-Real-Estate.com.
In writing my last article about the neighborhoods where I find the most profitable rehab real estate investment deals, something occurred to me.
In that article I described investing from what I've found is typical in doing this business. I wrote about where I TYPICALLY find the deals. Well, what IS typical in this business?
No two deals are the same, that's for sure! Every rehab itself is different with different problems to solve. So, in describing a typical deal, I'm referring to the spread involved. The spread is the different between what I can buy the house for, and what it's value will be when it's brought back up to standards.
The next big question is, "What will the rehab going to cost."
For instance, if a property in my market has a $25,000 spread between what I can buy it for and what I can sell it for (the as-repaired appraised value), it's a "maybe" in my book depending on how much rehab it needs. If it needs much, I would probably pass unless some external factor makes it a good buy, like the neighborhood. In other words, if it needs much rehab, I'd have to be convinced enough to put some of my own money into it.
I typically look for houses with a $30,000 spread or better. You have to decide for yourself, based on values in your area and what is the minimum you want to make, what spread you'll be happy with.
So, what is a rehab real estate investor's "homerun? "
Homeruns occur at the outer edge of what is typical. My homerun deals have occurred one of several ways.
- The spread is stellar. Let's say the spread is $45,000 and the rehab is a manageable $5-10,000.
- The spread is good, but the rehab is very light. Wham-bam, I'm looking for tenants within days of closing.
- The cost is exceptionally low for a given area. Sometimes the spread on paper will not be anything to get excited about, but the property has a huge lot, extra bedrooms, or is located an area that is in serious demand.
- There is NO rehab, and the spread is sufficient that I can buy it with none of my own money.
True story - I've only had one NO rehab deal. Wow. This house had been recently rehabbed, clean and didn't need a thing! This was a homerun just due to the ease at which I added this property to my inventory! The spread wasn't great, in fact, I had a local hard money lender make up a story about being out of money because he thought the spread was too narrow and didn't want to lend on it. He wrongly assumed there was a significant rehab. (Being straight up with me was too hard, I guess.) I consider this a homerun because I bought this property, changed the locks, put out a sign and had it rented within two weeks. Mind you this is a beautiful well-built brick/block home in a great neighborhood. Cost to me…nothing. This house has one of my best cash flows month-to-month.
The point here is to give you an idea of what kinds of homeruns rehab real estate investors look for. But, here is a key point…
It's truly NOT worth my time, or yours, to wait around for the homeruns. I firmly believe that these kinds of homerun deals come about by being an active investor. Rehabbers that keep 1-2 projects going at all times, get calls from wholesaler with great deals. Personally, I make the best buying decisions decisions with what I have among the properties brought to me when I am in my "buy mode." Some of these turn out to be homeruns, some don't.
If I waited around for only the homeruns:
- I would waste precious learning time. Since there is no substitute for experience, I want all I can get!
- I would lose money over the long run as a buy-and-hold investor. If I'm buying and rehabbing with little or none of my own money anyway, it doesn't make sense to wait around for homeruns if I can add properties to my inventory that fits my investment criteria. If you're in the buy and hold business, the important thing is how much property can be controlled with as little money as possible.
Question: Is it better to have $1,000,000 worth of property appreciating or $200,000?
Hitting a homerun in rehab real estate, and anything else, requires these two ingredients:
- You've GOT to be "in the game." By this I mean you have to have prepared in advance for your turn at bat. In the rehab business, this means you have enough knowledge to get started, you have a decided investment criteria, you have your money source lined up, and you are looking for property.
- You are "swinging." In the rehab business, this mean you are buying property, rehabbing, learning and turning. It's not enough to merely stay on the sidelines.
Let me say that again…
IT'S NOT ENOUGH TO MERELY STAY ON THE SIDELINES.
About The Author
Bruce W. Ford is the editor of Rehab-Real-Estate.com. Get his important Special Report entitled "12 Things Real Estate Investment Gurus Won't Tell You" at http://www.Rehab-Real-Estate.com.
Friday, January 5, 2007
Refinancing Real Estate Investments
by: Steve Gillman
Why should you consider refinancing real estate investments instead of selling them? Maybe you've owned a rental property for years, you've paid down the mortgage, the value is up, and you want to cash in on that equity. You will do better to refinance. Here's why.
There are two problems with selling. First, selling means paying a large capital gains tax. You can avoid this if you reinvest through a 1031 exchange, but then the point is that you want your money, right? Second, you'll be giving up your inflation-indexed retirement plan. A good rental property generates more income as rents go up.
Refinancing Real Estate Investments Is Better
If you refinance, you can get much of your gain out of the property, without paying a penny in taxes. You see, borrowing money is not a taxable event. Take your loan proceeds and spend them however you want, and still keep your rentals. Doesn't that sound better than losing a big chunk of your equity to taxes?
Now, let's look at an example. We'll suppose you have owned a small apartment building for several years. Let's say you bought it for $340,000, with a down payment of $80,000. Interest rates at the time were at 9.5%, giving you a payment of $2,106 monthly on the balance of $260,00 (30 year amortization).
The property is now worth $560,000, and you owe $220,000. Your cash flow is around $2000/month. Now, how do you get at some of that equity? If you sell, you will give up the income, AND pay a big part of the profit in taxes. What happens if you refinance?
If a bank will loan you 70% of the value, that would be $392,000. Pay off the first mortgage, and you are left with $172,000. You can spend it any way you want, and no taxes are due.
It gets even better, especially when interest rates are low. If the new interest rate is 6.5%, your new payment will be $2295. In other words, you get $172,000 to spend any way you want, and you still have over $1,800 cash flow each month, from an inflation-indexed retirement plan.
Here is an even better scenario: Spend $50,000 of the loan for high-return upgrades to the property, such as carports and a laundry room, and raise the rents. You could have $122,000 left over to spend any way you want, AND have higher cash flow than before! Isn't that sound better than selling your retirement plan? When you want that cash, consider refinancing real estate investments.
About The Author
Steve Gillman has invested in real estate for years. To learn more, get a free real estate investing course, and see a photo of a beautiful house he and his wife bought for $17,500, visit http://www.HousesUnderFiftyThousand.com.
Why should you consider refinancing real estate investments instead of selling them? Maybe you've owned a rental property for years, you've paid down the mortgage, the value is up, and you want to cash in on that equity. You will do better to refinance. Here's why.
There are two problems with selling. First, selling means paying a large capital gains tax. You can avoid this if you reinvest through a 1031 exchange, but then the point is that you want your money, right? Second, you'll be giving up your inflation-indexed retirement plan. A good rental property generates more income as rents go up.
Refinancing Real Estate Investments Is Better
If you refinance, you can get much of your gain out of the property, without paying a penny in taxes. You see, borrowing money is not a taxable event. Take your loan proceeds and spend them however you want, and still keep your rentals. Doesn't that sound better than losing a big chunk of your equity to taxes?
Now, let's look at an example. We'll suppose you have owned a small apartment building for several years. Let's say you bought it for $340,000, with a down payment of $80,000. Interest rates at the time were at 9.5%, giving you a payment of $2,106 monthly on the balance of $260,00 (30 year amortization).
The property is now worth $560,000, and you owe $220,000. Your cash flow is around $2000/month. Now, how do you get at some of that equity? If you sell, you will give up the income, AND pay a big part of the profit in taxes. What happens if you refinance?
If a bank will loan you 70% of the value, that would be $392,000. Pay off the first mortgage, and you are left with $172,000. You can spend it any way you want, and no taxes are due.
It gets even better, especially when interest rates are low. If the new interest rate is 6.5%, your new payment will be $2295. In other words, you get $172,000 to spend any way you want, and you still have over $1,800 cash flow each month, from an inflation-indexed retirement plan.
Here is an even better scenario: Spend $50,000 of the loan for high-return upgrades to the property, such as carports and a laundry room, and raise the rents. You could have $122,000 left over to spend any way you want, AND have higher cash flow than before! Isn't that sound better than selling your retirement plan? When you want that cash, consider refinancing real estate investments.
About The Author
Steve Gillman has invested in real estate for years. To learn more, get a free real estate investing course, and see a photo of a beautiful house he and his wife bought for $17,500, visit http://www.HousesUnderFiftyThousand.com.
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