Real Estate Investing Tips
Real estate investing involves the purchase of real estate for profit. Profits are accumulated slowly by renting out properties in a cashflow method, or are generally improved and resold for a capital gain. In addition, real estate investors may wholesale properties as a means to make profits.
Investing in real estate can be very profitable — but you also risk losing money. Using creative real estate investing tips may help you increase your chances of making cash, but if you don’t understand any facet of a real estate transaction, ask an agent or attorney for advice. Lois Malone of Lois Malone Realty offers a free telephone conversation to review your questions about real estate investing. Call Lois today at 281-970-6605.
Here are a few tips when considering to invest in real estate property.
Ask a Current Investor to Carry Your LoanIf you don’t have the cash on hand for a down payment, or you already have too many loans on your credit history to qualify for another, find an investor who owns a property that you want to buy and is willing to carry the loan for you. The advantage for you is that you’ll only have a small out-of-pocket expense, and it’ll be easier to qualify for the loan. The benefit for the seller is that you’ll provide a regular income, and the headache of being a landlord will be gone. If you default, the seller will keep the money you paid to that point, and will still have the property. |
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You may develop a niche market in which you buy rentals and use a rent-to-own, or lease option, agreement with every tenant. Lease options are used for tenants who don’t have a downpayment, or whose credit rating is too low to qualify for a loan. The theory is that during the term of the agreement, the tenant will work on raising the cash and the credit rating needed to qualify to purchase your house. Depending on the agreement, a portion of the rent is set aside to help the tenant raise the down payment amount.
Contract to Fix Up a PropertyDue to the recent economic hardships, contractors have found that their business income has declined, or disappeared completely. Contract with a trustworthy and skilled contractor to buy distressed properties from banks, then fix them up and resell for a higher price. This is a very technical niche. You, and the contractor, must know exactly what a property needs and how much it will cost. Avoid real estate with serious defects, like a cracked slab, and focus on those with minor or cosmetic repairs. |
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No matter what type of investment property you buy, always use an attorney when making the deal. A good real estate attorney can help you with everything from determining a fair offer price to writing up the rental contracts. An attorney will also be able to seek out any liens, back taxes or other encumbrances, items you might miss if you try to perform the transaction on your own.
Run the Numbers
One mistake many real estate investors make is assuming that the property will always have a tenant. While in a perfect world the apartment building you buy will always contain paying tenants, the reality is rarely this simple. When evaluating a rental property, you need to run the numbers both with and without tenants. If you find that you will be unable to make the mortgage payment if the property sits empty for even a month or two, you might be stretching yourself too thin.
Before you buy a piece of investment property, it is also a good idea to look at vacancy rates in the area. If you are buying in an area with high vacancy rates, it will be more difficult to rent the property, and you stand a greater chance of having the property sit empty. If the vacancy rates are low, there is a greater likelihood that you will be able to find new tenants quickly.