Monthly Archives: March 2010

Can I really invest in real estate with no money down?

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Real estate is a great long-term investment, especially income producing real estate. The problem most people have when it comes to getting into real estate investments is acquiring the money to purchase real estate. The most common approach is to apply for a mortgage. The problem with this method is that the down payment can be substantial. For example a $100,000 home may need a down payment of 20% or $20,000. However, there are some strategies that can be used to purchase real estate with no money down. Assigning contracts, wholesaling real estate, and leasing with an option to buy are a few of the strategies possible.

Assigning contracts can be accomplished by placing an offer on a house and write up a contract on the property between you the buyer, and the seller of the home. Next you locate an investor who will be willing to purchase the property, so you assign the contract to the investor. The key here is to assign the contract for a sales price greater than what you negotiated with the buyer. So far example, you negotiate $100,000 offer to purchase with the buyer, and you negotiate an assignment of the contract to the investor for $110,000. At closing you will receive a check for $10,000.

Wholesaling property can be done if you have access to a hard money lender. The key here is to purchase the property at a discount. For example a $100,000 property you should offer to purchase for $70,000 or less. The hard money lender will supply 100% of the money to purchase and any fix up cost. Then you turn around and sell the property or refinance for a better rate and lease the property out.

The final strategy is leasing with an option to buy. What you do here is you negotiate a lease with an option to purchase with a homeowner, and then you turn around and sublease the home to a renter giving him an option to buy the property in 12-24 months on average.

So yes, you can invest in real estate with no money down.

Where is the profit in Real Estate Investing?

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One of the first questions a buyer has for a Realtor is, how do you make money investing in Real Estate?
The answer to this very complex question is actually very simple. Buy low and sell high.

Some of the best real estate investors are home owners. When a person has lived in a home that they own, they have a better understanding of maintenance and repairs.

To buy low, there is always a reason that a house has a considerably lower price than similar properties on the market. The most common reason is that the property is in need of repairs. This is where knowledge comes in to the equation. Working with a knowledgeable realtor can be extremely rewarding.

The most successful investors that I have worked with, over the years, do the majority of repairs on the property themselves. This reduces the bottom line considerably. The wise investor also knows when and where it is necessary to bring in a licensed professional. I have also witnessed the owner, prior to the arrival of the licensed professional, doing whatever is possible; to reduce the necessary time the professional has to contribute to the project. In short, they are prepared before the plumber or electrician arrives.

The easiest and most advantageous upgrades are painting the interior and exterior of the home, and adding new flooring. Cleaning inside and out, and a well maintained landscape, is also an inexpensive upgrade that makes the home more marketable, and increases the property value.

Before purchasing the investment property, a wise investor has to do their homework. This includes, investigating the condition of the property, and calculating the cost of each repair realistically. This often includes checking the cost of materials, and bids from contractors for bigger projects or repairs. Once the full cost of repairing the house is estimated. The buyer has to then check the historical high selling price of the similar homes in the area. This will give them a good idea of what they could re-sell it for as soon as the repairs and upgrades are complete.
In the initial calculations prior to the purchase, also have to include what it would cost to sell the property, which can be as high as 8-10% of the sales price.

The largest capital gain in real estate investing comes from owning the property for a number of years. The principal balance of the loan decreases, as the market values slowly increases. That would be in a normal real estate market. Some investors have tenants rent the property till the mortgage is completely paid off.

Currently, the US is not experiencing a normal real estate market. The property values are still decreasing in many areas. There are many foreclosures. When a house has been foreclosed on, the previous owner usually remove many of the fixtures and have even been known to take the kitchen sink. The empty houses are also subject to vandalism. This causes the property values to rapidly drop. Real Estate is definitely driven on the premise of supply and demand. When there are more houses for sale then there are people to buy them, the value drops. This is a buyer’s market. Even the country’s greatest economist, do not know when the prices will hit the bottom, and the market will turn around. In the mean time if you are looking to invest in real estate, it is a great time to do so. As a wise investor once told me, don’t be afraid to make a low offer, it is better than no offer at all.

Create lasting wealth by investing in real estate.

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investing-in-real-estateIf you are looking for a way to secure your future wealth and a way to make an income when you retire the real estate is definitely the way to go. Even though people will say that the stock market has better returns you can make real money and create lasting wealth by investing in real estate. The key is to make sure you know what you are doing and don’t fall for all the hype.

Yes there are people that lose lots of money in real estate but usually it can be because of lack of knowledge. If you do the research and learn before you invest you will come out fine. Don’t listen to gurus that tell you how to get rich quick, do the work and the pay-off will come. There are so many ways you can invest and make money that the sky is the limit.

Be patient and take your time, but don’t wait to long. The internet is full of resources that can show you how to become a successful real estate investor. The great thing about property is that it never goes away and it does, in most cases, weather the storms. You just have to make sure that you cover all the risks and have contingency plans in place. Also make sure you can actually afford to do it. If you can’t, make a plan and start moving towards your goal. Before you know it you’ll be building wealth that will last for generations.

I hope this has been a realistic look at investing in real estate because I really believe that it is one of the safest ways to make money, if you do the work. Remember that nothing can last that comes easy, but working hard is relative. If you love what you do it is not work. If you want to be passionate about something, why not real estate, it will reward you in the end. Read more about Profit in Real Estate Investing.