Read the Best Residential real estate investing article


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All the things that you need to do in Residential Real Estate Investing

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Read the Best Residential real estate investing article

  1. 1. Strategies To Win At Residential Real Estate Investing By: Ryan G. Wright – CEO DoHardMoney.comWhat does square footage has to do with the resale price of the property?This is a bit of a technical question and I would try my best to give you the right answer. I think it issomething that you should consider but I don’t think it’s an overall guiding principle.As we have talked before, I would really like to have 3-4 actives and 3-4 solds in the similar area. I don’treally care about the style.I think cost per square footage is a good guide, meaning that you can look at it and it can help you knowthat if you are on-base or off-base. But I don’t think it’s the ultimatum. With the cost per squarefootage, you are not able to compare apples to apples. The reason for that is not every house has thesame square footage or same number of bedrooms and bathrooms or same garage or carport. That’sgoing to be something you’ve got to take into consideration as well as you are trying to look at the costper square footage type analysis because it’s not going to come out exactly what you may be thinking itis able to do.But it’s a good guide. It is a way to get you into a ballpark and it also might be able to help you in makingsome initial offers because you might be able to look at something and say, “Hey, you know what, costper square footage typically in this area is going to run $89 a finished square foot on a resale price and Ishould be buying it around $76 square foot.”These things obviously could be helpful for you as well as you are trying to figure it out. But it’s not afinal word because there would be some people who would be saying, “Based upon cost per squarefootage, this thing is going to sell for $76.” I think that’s unwise,The quick answer to the question is:You should use it as a guide if you are going to use it but you shouldn’t use it as a defining value. Youreally need 3-4 active and sold comparables all in the similar area and using those as your comparables.The problem with the square footage as we have talked before that it is all over the area and doesn’tnecessarily reflect ….. ©2012 – – All Rights Reserved
  2. 2. How do I find out about foreclosure information?Typically in most states, what they really do for foreclosures is that they require doing publications.When they published this, they typically have to publish this for a certain period of time in a commonlycirculated newspaper.What these guys do is that they put it in the cheapest thing that they could possibly find. Therefore, youwon’t be able to find these legal notices in expensive big papers like Tribune or Daily News. Sometimesyou can find them in there but most of the times you won’t find the majority of foreclosure legalnotices.In every state, it is going to be a little bit different. For example, in Arizona, its foreclosure listings ofArizona or in Colorado, it is Daily Default or Info Service. These aren’t like your normal newspapers. Allthey are is for publications and you will have to pay for it and they will mail it to you or you can get anonline access. That will help you in finding the publications of any of the foreclosures that have beentaking place within the state.There is a simpler way to do that. If you will go to our website and click and subscribe to the find aproperty service. This will provide you with the newest potential properties that are out there, whichcould be helpful to you.What’s the difference between a mortgage and the deed of trust?I don’t want to get too geeky on you with verbiage here but if I have to say this, they are both securityinstruments. There are two different things.When you go and sign a loan, you are going to sign a mortgage, deed of trust and you are also going tosign a promissory note. The promissory note is your promise to pay whereas the mortgage and deed oftrust is called the security interest and that security gets recorded against the property.You cans sign a promissory note without having a deed of trust or mortgage because the promissorynote is simply saying, “I will pay you back the money that I owe you.” ©2012 – – All Rights Reserved
  3. 3. Now, what a deed of trust or a mortgage does is that it ties it to the property. It says, “I promise to payyou or else, you could take this property back from me.”Mortgage and deed of trust are a little bit different in a way that they have to be foreclosed. You havealso got another element here, which is judicial and non-judicial foreclosure process. Judicial foreclosureprocess means that you have got to go in front of a judge to seek their permission while non-judicialforeclosure process means that you don’t have to go in front of a judge.Joint venture agreementsFor finding properties, you have to work with a bunch of different people, such as bird doggers orwholesalers as they are commonly known. They are the people who go out there and find properties butthey don’t have the resources or money or they don’t know where to find the money and they end upgetting rehab loans.You don’t work with those guys but lots of times, you run into a situation where those guys think thatthe value of the property once it’s repaired is worth more than you do. I find that quite common. So, mysolution to that is to do joint venture agreement with them.What I commonly say is, “Hey, here is the deal. We will give you a couple of thousand dollars and we willclose on the property. What we want is to get first $15,000 – $20,000 worth of profit and anything overthat, we will give you a 10-20 % of profit over that. But you are a silent partner and you don’t have tosay what should happen or any of that type of instructions.” I have done that several times and it hasworked out really well.The other thing that I have done is that if I think that the property is going to sell for $150,000 and theysay that it is going to sell for $170,000 once it’s fixed up. In that situation, I have often gone and said,“Hey, anything over $150,000, I will give you half of that as long as you get me the purchase price that Iam wanting. In that way, you will have a lot of upside if I would have just bought it and paid you whatyou were wanting.”I think that could be helpful as well in making deals happen. That’s really what it all about. It’s aboutmaking the deals happen and finding good resources and finding properties. Basic joint ventureagreements just establish your business relationship. You need to make sure how you are going to getpaid. You want to make sure that you say that if there are profits or losses, who is going to get the ©2012 – – All Rights Reserved
  4. 4. profits and losses. You want to make sure how it comes apart if you have to and I think it is alsoimportant that you talk about how much involvement would be there.The problem with me in the joint ventures is that I don’t like anybody telling me what I’ll have to do; Iwant it to do my way. I don’t want a partner. I just want to get a better deal on a property and if I amwrong and it sells for more, then we are both happy but if I am right, I want to protect my interests. So,it’s just a way of negotiations, which I think is really helpful.Direct marketing!Direct marketing is going to people who don’t have their property listed. There are really 3 differenttypes of properties: 1. Listed properties 2. Unlisted properties by direct owners or banks or credit unions 3. Foreclosures. They are technically aren’t listed properties in lots of cases but sometimes they are listed. How to do direct marketing?I think that you have got to hit the hot topic and you have got to find the right people. For example, if Iown a property and I live out of that state and I have got some tenants that are causing me some issues,it’s probably a good time for me to sell my property and get out of it. But what I want to know at thattime is that you are going to pay cash, so I can get rid of the house and never have to deal with it everagain.Another thing that you may want to consider doing is going out to people that are in the middle of aneviction. You should know that the eviction is not by an owner because they are not going to evictthemselves out of their own house. It’s obviously a rental property. During an eviction, people just hatedealing with the property.Evictions are matter of public record in most states and you can find out who is having an eviction done.You could go to the tax records department and find out who the owner is. You can contact the ownerand say, “You would probably be sick and tired of these stupid tenants and want someone to buy theproperty and pay cash. I will take over your problem of getting the tenants evicted.” That could be a ©2012 – – All Rights Reserved
  5. 5. great solution for you in finding properties, depending upon how long eviction takes. Then, you need tofind an attorney who could finish up the eviction. That could work out really well for you.The other thing, when it comes to direct marketing is that you have got non-owner occupied, who arethe people that live somewhere else other than where the property is located. You have got out of stateowners, who live out of state. The way you may know all this is through tax notice. If the tax notice ismailed somewhere other than the property address i.e. out of the state, then it is considered as out ofstate owner.There is another funny thing, which is known as zoning violations. Just a few minutes ago, I have got acourtesy notice about the zoning violation because the city has an ordinance that says that the cars can’tbe parked at the side of the house or something stupid like that. If that was more of a severe notice which will cost me a significant amount of money or one that just mean that I have got problemtenants, it might be a great opportunity.There are particular cities and counties that record the zoning violations and you could check that inpublic records. You can visit their office and inquire about the zoning violation of that particular area.The other important thing that you can do is to send direct mail campaigns. If you are using directmailing, I would recommend a three-step approach. You don’t mail them just once but you should dothat for three consecutive times. I would recommend that you will mail them once a week for threeweeks.Probably, you can start with a post card and after that, you can post a letter and after that, you can do afollow-up letter. You can also do that in reverse order.The other thing is doing classified ads i.e. throwing ads in the classifieds. You can either publish them inyour major newspaper or Tribune or Daily Herald or whatever the case is. You also need to post them inyour local Thrifty Nickel, which could turn out to be really helpful as well. ©2012 – – All Rights Reserved
  6. 6. How do I know if something’s a good deal, other than loan to value?First of all, I need to make sure that the property is located in an owner occupied neighborhood. If I geta report back, which shows that 90% of the people are renters, it means that’s not a good neighborhoodto flip a house in.You have got to think who has the money to buy the house. If you are trying to flip a house to real estateinvestor, you are heading down the wrong path because real estate investors don’t get emotionallyinvolved in properties. They can hold out forever. They are not in a hurry. They don’t have to move outof their lease or their landlord isn’t going to kick them out or whatever the case is.Real estate investors don’t get emotional and everybody else buys a property based upon emotions andnot logic. Therefore, you need to get them emotionally tied to the property but you need to have a littlebit of logic to get them through the door and emotions can take them to the rest of the way. It’s animportant point that lots of people miss. But with that, when you are buying a property, you have got tomake sure that you want to fix it up because you are going to sell it up and somebody is going to moveinto it.If you are planning to sell it to the investors, I think it is a tough strategy. I think it’s a bit difficult one andyou need to be quite a bit more experienced to be able to do that. That being said, you want to be in apredominantly home owner neighborhood and not a rental neighborhood. That’s one question that youshould ask yourself.Number 2 is what about the crime rates? Is it a high crime area? Would you feel safe there at night? Oryou can revise that question to; would I feel safe sending my wife there at night all by herself unarmed?If the answer is yes, then it’s probably a decent neighborhood and you should be looking at it.Other important questions are; does the house looks like everything else in the neighborhood? Is it thebiggest in the entire neighborhood? If so, you are going to have a problem. Does it blend well or is it adome house because the house needs to blend well with the entire neighborhood.You want the conform. There is a real estate term called, “functional obstacle absence” and you want tomake sure that it doesn’t have stuff that just doesn’t make any sense. That’s another question that youshould really ask yourself. ©2012 – – All Rights Reserved
  7. 7. You need to look at the businesses near you. You need to look at the apartments and complexes nearyour area. You need to look at if it is in commercial area i.e. is there a commercial property right acrossthe street from this or is it in close proximity to the commercial needs.If the property is located just across the street of a grocery store, that’s probably not the best fix and flipbecause nobody wants to live across a grocery store.Let me give you an example of a property, which was right across the Burger King. I don’t know if youknow this but Burger King starts making burgers too early like 10 o’clock and from 10 o’clock, there is afreaking burger smoke start coming out of the billows and this house was pretty near to the Burger King.Eventually, we had to find someone who had a fast food addiction to sell the house.That’s why; you want to make sure that it really sits in there. Then, what you are really trying to do is toget the property to come under FHA standards. You want to look at the house and say, “Hey, I did all thework to this. Is it going to conform to the FHA standards?” You can Google FHA standards and get anidea about their different requirements.Along with finding out if it’s a good deal or not, other than loan to value, the question that I want to askis, “Can I get the rehab done in 45 days or less?” If it is going to take longer than 45 days to get therehab done, I shouldn’t be there and actually my deal is 30 days i.e. I want to get the rehab done in 30days or less. I give 45 for a little bit of extra time because you run into problems occasionally.If it’s a big rehab, we want to complete in 30 days or 45 days at most. If it’s not that big of a rehab, 2weeks is really what we are trying to get done on these things, which is really important because youneed marketing time. You are on a tight leash when get a hard money loan and you need to make surethat you get the property done, get it on the market and get it sold.You should know that you have 90-day sales price. Therefore, if you are looking at values or just lookingat some properties, where they are in the market for 200-250 days and if you are planning to invest inthose areas, you are going to make SIGNIFICANT price decrease in order to sell the property a lot fasterthan the average days on market. You may also want to walk away from a neighborhood like thatbecause you have to make a lot of price decrease; otherwise you want to make sure that you get out ofthe property within 90 days. ©2012 – – All Rights Reserved
  8. 8. Another important question is: Is it a good family home or is it in a good family neighborhood? Onething we always wanted to know is how many boarded-up houses are in the neighborhood? There are alot of people out there who don’t want to live in boarded up houses.Lots of people get emotional when it comes to real estate investing. That’s why; I think it is important tohave some checklist. Run through your checklist. Type up all the stuff like this: Do you want the boarded-up homes? Yes or No. Can I get the repairs done in 30-45 days or less? Yes or No. Does the property able to meet FHA standards? Yes or No.You really need to go through and make sure that its good investment before you get emotionallyinvolved. I can tell you that people have broken their own rules and ended up having problems. I knowthere is a clichéd that “rules are meant to be broken.” But when it comes to real estate investing, I think“rules are mean to be kept!” The reason for that is they keep you out of harm and harm meaning toyour money.How can I do real estate investing part time?It’s a GREAT question. I think it’s pretty easy. If you are only able to do part time real estate investing,which I am really an advocate of, that’s the best scenario. The worst thing that I have heard is that theseguys are going around and saying, “Quit your job today if you are really committed. Quit your job andstart doing real estate investing. We will not believe that you are serious about it until you get full timeinto it.”I think it’s bogus. I think that real estate investing can be done full time or part time and you can getsuccess in both. You need to keep in mind that there are a lot of benefits to a day job, such as insuranceor a paycheck is nice sometimes because in investing, you never know when your paycheck is going tocome.All those things are really nice. That’s why; I am not an advocate to tell you to quit your job today or youare a loser if you have a job. I don’t believe that. I actually think it’s great to have a job. I think even ifyou are a full time real estate investor, you still have two jobs. People usually forget about this. You havetwo jobs:Job #1 is to put food on the table. To pay your household and your family expenses. ©2012 – – All Rights Reserved
  9. 9. Job #2 is for your retirement. So, you have to work on job number 2 to provide for your retirement.You have two jobs even if you are into real estate investing. I have seen a lot of real estate investors whohave done fix and flip homes and they made enough money to pay for their family income. But theyhaven’t got enough money for their investment income. Therefore, if you have a day job, that can takecare of your family needs and then you use your real estate investing to take care of your investmentneeds. So, you have got a great retirement and it makes a lot of sense to me.I think part time real estate investing can make sense. Now, how you can make it happen?You will have to have a good team behind you. A real estate agent can help you in evaluating propertyand you should have someone who could you trust. You should have a good contractor, so he can getthe work done on the property.It is going to be a little harder for you to pick upon good deals if you are doing direct marketing.Therefore, if you want to do direct marketing, you should work with a call centre, so they can pick upthe phone, answer the phone and ask different questions related to the property.Then what they will do is the key, which most of the people screw up. The key is that they go to yourGoogle online calendar and actually book an appointment for you to go look at the house and then, theywill email you everything. So, when you get out of work, you can look at the house and all that type ofstuff. You have got to utilize the technology and utilize what’s out there to make these things happen.That could be a great way of working part time or you can work directly with an agent who is makingoffers and looking at properties all day for you. At the end of the day, you can give your approval onthat. ©2012 – – All Rights Reserved