In's And Out's Of Bargain Property
Distressed real estate is the diamond in the rough that all RE investors are seeking. HOWEVER, without doing your research you may lose far more then you will gain.
Use a step by step mind set. "Go by the numbers" when reviewing all the areas of the investment that you want to focus on here are a few things to think about and add to your list.
Nothing on this list is really more important than anything else. Its just here to get you to think about what exactly you need to look for. While you may have an investment that excels in one area...it cant be problem heavy in another.
Doc's List:
HOW MUCH AND WHY
Price is the first thing and investor sees.
We are all looking for below market value. Buy for a little, sell for a lot. But why are they selling so low? Is it to solve one of the "3 D's"? (Debt, Death, Divorce)
Are there problems with the property that will cost a small fortune to fix? Out dated plumbing??? Poor electrical wiring? In older houses these problems are VERY common. Dont forget to consider holding costs.
In my opinion the most common over looked profit drainer is underestimating the liquidation costs of holding and selling the property. Things to keep in mind and budget into your holding costs are: commission payments to real estate agents, closing costs, mortgage payments, taxes, plus repair and maintenance costs. Also electric and water.
Poor determination of true market value is another obstacle to the successful deal. Market value is essentially a subjective exercise where the true value is not known until someone buys the property.
Check out other property near the one youre looking at investing in. what prices are they pulling in? Are they the same size? Lot size close to the one youre looking at? Same style of structure?
TERMS AND CONDITIONS CAN HELP YOU
What areas can you leverage besides price and location? Financing?
In some cases a full price purchase can allow you to leverage the terms to mean a lower interest rate or smaller down payment.
STUDY THE LOCAL MARKET
Good investors get in the habit of understanding the lay of the land. What is the local community like? Where are the closest fire/police/EMS services? How good are the local schools? Don't rule out these questions. Make sure to look in to the last houses sold in the area as well as any selling trends you can find.
LOCATION. LOCATION. LOCATION.
If your shooting for a long term tenet or residence then location is the second most critical thing to look at...however if you have a chance to turn a good profit for a ugly house in a less than 4 star area...that profit might out shine a nice little bungalow on the beach.
DISTRESSED REAL ESTATE
A familiar area ripe for investment picking is distressed properties or fixer-uppers. Of course these are the houses that need repairs to some degree. And the investor's job is to discount the costs of these repairs enough so that the profit is still suitable.
Fixer properties are a treasure trove to a savvy investor. If you have a good eye for details and can spot maintance problems you can make a nice return on your investment. Things like a bad roof, poor plumbing or a bad foundation can be very costly to repair. Once you have an idea of what youre looking at for repair cost, do yourself a favor and add a little buffer say 5%...just to be safe.
Know what it is ZONED for.
Sooo you want to add a third bedroom and second bathroom huh?? Is it zoned for that? Worst thing in the world to have happen is to find out you could have made a pretty penny profit IF you had know what the land was zoned for. ALWAYS ASK.
Think of it this way, what could make you more money...a single small house on the land you just invested in...Or a duplex on the same land? One tenet or two? Zoning is a gift or a curse depending on your plans with the property...makes sure you know before you buy it.
Classic zoning "no-no's" are garages converted to bedrooms. Non-permitted granny flats and detached garages. - 23208
Use a step by step mind set. "Go by the numbers" when reviewing all the areas of the investment that you want to focus on here are a few things to think about and add to your list.
Nothing on this list is really more important than anything else. Its just here to get you to think about what exactly you need to look for. While you may have an investment that excels in one area...it cant be problem heavy in another.
Doc's List:
HOW MUCH AND WHY
Price is the first thing and investor sees.
We are all looking for below market value. Buy for a little, sell for a lot. But why are they selling so low? Is it to solve one of the "3 D's"? (Debt, Death, Divorce)
Are there problems with the property that will cost a small fortune to fix? Out dated plumbing??? Poor electrical wiring? In older houses these problems are VERY common. Dont forget to consider holding costs.
In my opinion the most common over looked profit drainer is underestimating the liquidation costs of holding and selling the property. Things to keep in mind and budget into your holding costs are: commission payments to real estate agents, closing costs, mortgage payments, taxes, plus repair and maintenance costs. Also electric and water.
Poor determination of true market value is another obstacle to the successful deal. Market value is essentially a subjective exercise where the true value is not known until someone buys the property.
Check out other property near the one youre looking at investing in. what prices are they pulling in? Are they the same size? Lot size close to the one youre looking at? Same style of structure?
TERMS AND CONDITIONS CAN HELP YOU
What areas can you leverage besides price and location? Financing?
In some cases a full price purchase can allow you to leverage the terms to mean a lower interest rate or smaller down payment.
STUDY THE LOCAL MARKET
Good investors get in the habit of understanding the lay of the land. What is the local community like? Where are the closest fire/police/EMS services? How good are the local schools? Don't rule out these questions. Make sure to look in to the last houses sold in the area as well as any selling trends you can find.
LOCATION. LOCATION. LOCATION.
If your shooting for a long term tenet or residence then location is the second most critical thing to look at...however if you have a chance to turn a good profit for a ugly house in a less than 4 star area...that profit might out shine a nice little bungalow on the beach.
DISTRESSED REAL ESTATE
A familiar area ripe for investment picking is distressed properties or fixer-uppers. Of course these are the houses that need repairs to some degree. And the investor's job is to discount the costs of these repairs enough so that the profit is still suitable.
Fixer properties are a treasure trove to a savvy investor. If you have a good eye for details and can spot maintance problems you can make a nice return on your investment. Things like a bad roof, poor plumbing or a bad foundation can be very costly to repair. Once you have an idea of what youre looking at for repair cost, do yourself a favor and add a little buffer say 5%...just to be safe.
Know what it is ZONED for.
Sooo you want to add a third bedroom and second bathroom huh?? Is it zoned for that? Worst thing in the world to have happen is to find out you could have made a pretty penny profit IF you had know what the land was zoned for. ALWAYS ASK.
Think of it this way, what could make you more money...a single small house on the land you just invested in...Or a duplex on the same land? One tenet or two? Zoning is a gift or a curse depending on your plans with the property...makes sure you know before you buy it.
Classic zoning "no-no's" are garages converted to bedrooms. Non-permitted granny flats and detached garages. - 23208
About the Author:
Doc Schmyz has done real estate deals all over the US and Canada. His free website shares Real estate investing information for all over the US. Find real estate information by state
posted by X - Men @ 5:44 AM
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