Real Estate Ebook

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  • 1. Special Report Build Real Estate Profits with eBusiness Pioneer David Early Unique experiences and past performances do not guarantee future results! Testimonials are not representative of all clients. The testimonials included in this program have not been selected randomly and are intended to demonstrate individual customer satisfaction only. The returns indicated in these testimonials likely do not represent typical returns and should not be construed as endorsing any particular auction strategy. We do not have adequate data to determine what is a typical experience or return when using this product by a typical user. Accordingly, customers should assume that they will achieve results that are more modest than those expressed herein. No representation is being made that any software or training will guarantee profits or not result in losses from online auctions. 1
  • 2. Build Real Estate Profits Overview According to Andrew Carnegie, “90 percent of all millionaires made their money in real estate.” Now, I can’t guarantee that you will ever become a millionaire by buying and selling real estate, but, it does sound like you can increase your odds. The old stock market adage of buy low and sell high also applies as a sound strategy in real estate. With real estate being a fast-growing category on eBay, it follows that it is a good place to be a seller. According to eBay’s own statistics, over 2,200 real estate properties are sold on eBay Real Estate every month. Imagine that you have a lump sum of money you would like to invest. It doesn’t make any difference what the amount is. It could be $1,000, $5,000, $10,000, or even $1 million. The amount is not the relevant consideration here. Where would you choose to invest your money? If you choose the stock market, averages suggest that you could reasonably expect 3 to 6 percent (based on averages from 2003, per the Wall Street Journal.) If you choose real estate, averages suggest that you could expect 7 to 11 percent as a return (based on averages as of December 2003 from www.bankrate.com). Will every property increase in value? Of course not. Some will go up and some will go down. Consider a desirable vacation spot. Did prices go down in that area? Probably not, but there will most assuredly be individual examples in that area that did decline. On the other hand, consider a small town somewhere in the back of nowhere. It may be a township that supported a long-abandoned oil well or a now-closed nuclear power plant. It is more likely than not that the properties in this town did not go up by the national average. The most important factor to consider when deciding what properties you should buy and sell: location, location, location. Below is a list of the current top-10 market locations according to eBay: 1. Colorado 2. Los Angeles 3. Florida’s gulf coast 4. West Texas 5. Lake of the Ozarks region 6. Blue Ridge Mountains 7. Big Bear and other Los Angeles recreational areas 8. Southern Wyoming 9. Cascade Mountains 10. Grand Canyon and Lake Mead Any surprises here? They are vacation and/or retirement spots. Does this mean that you are guaranteed to make money on properties in these locations? No, it does not. Does this mean that you won’t make money at any other location? No, 2
  • 3. Build Real Estate Profits it does not. It simply means that wherever you decide to look for property, do some research on how other properties in that area are selling. Overcoming Obstacles to Purchase Property Everyone has obstacles to overcome in reaching a goal. Some of the more common ones in real estate are listed below. Obstacle — I am not a millionaire and don’t have thousands of dollars lying around to invest. Solution — You may be surprised which banks and institutions will lend 90 to 100 percent of the appraised value of a piece of property. Check your current bank and others both in your town and on the Internet. You’re looking for institutions or investors that will give you the most money with the most favorable terms. Typically, when the loan-to-value ratio exceeds a certain breakpoint, the lending institution will require mortgage guarantee insurance — usually referred to as private mortgage insurance (PMI). But there are ways to avoid PMI. • You could take a mortgage for 70 percent of the purchase price and then take a second for the other 30 percent. • You could take a mortgage for 70 percent of the purchase price and borrow the remaining amount against your own home. • You could take a mortgage for 70 percent of the purchase price and ask the seller to carry the remaining balance at 5 or 6 percent for five years. Be creative in thinking through this. The possibilities are almost limitless. Obstacle — I don’t live in an area or even close to an area that seems to be a good location according to current eBay listings. Solution — Property is certainly about location. There can be no denying that. However, nothing says that you have to buy property where you live. As I scan the listings in eBay, I find sellers all the time that tell me they live in one area and their property is several hundred miles away. Some will even disclose this in their ad by telling you that they have never seen the property. Also, there may be tax benefits for you to travel to property, even if you don’t wind up buying or selling. Of course, that particular matter is something that is a side benefit and should be discussed with a tax specialist. We will leave that last part for another discussion. The point here is that your current location is not an obstacle to your ability to sell real estate through eBay. 3
  • 4. Build Real Estate Profits Obstacle — I don’t know what to look for in an investment property. Solution — You don’t have to be an expert. I will provide a list of things to look for and check out. I will even point out places that you can investigate to find discounted property prices. Obstacle — I do not want to be a landlord. Solution — You don’t have to be. There are numerous times that you can buy property at discounted prices, spend little to nothing in repairs and upgrades, and turn around and sell the property for a handsome profit. Obstacle — What if I make a mistake? Solution — Property is very forgiving of mistakes. I can’t guarantee that you will never make a mistake, just as I can’t guarantee that you will always be successful. What I am offering is a way for you to avoid some common mistakes and take advantage of the knowledge it has taken me years to develop. In the end, however, even mistakes can have exceptional tax advantages. Okay, enough on obstacles. I think you get the idea by now that you can sell real estate through eBay. Will there be challenges? Absolutely! Will everything go smoothly? I can’t guarantee that anymore than I can guarantee the weather. I can tell you that you can certainly stack the odds in your favor by following a well laid out plan. 4
  • 5. Build Real Estate Profits How to Begin Good deals are out there. Do not let anyone tell you that you have to be an insider to find good deals. The sad reality, however, is that it takes work to find good deals. It takes a lot of work! You will probably have to look at 20 properties, analyze 10, and then make offers on five properties. And then, keep in mind that making an offer on a property and having it accepted are two entirely different things. So, let’s get started. Find Property The decision of where you might look for property should be based on where property is selling and what kind of property is selling. eBay can be your source for where hot properties are selling and what kind of properties are selling. Locating a source of properties is the difficult part. Here are some of the best places to look: • Newspapers — buy a local newspaper where you would like to find property (weekend papers are typically the best for this). Go through the “Homes for Sale” section and circle any ad that says “For Sale By Owner” (FSBO), “Owner Financing Available,” or anything close to either one of these. Now, go through the same paper looking at the rental section and circle any ad that lists a phone number that is in a different area code than the property. The reason for this one is that often an absentee landlord can be a very motivated seller. • An online foreclosure company — there are many of these available. Some are free; some charge for information. Go to your favorite search engine and type in the words real estate foreclosure and start finding properties. One such site is www.foreclosurefreesearch.com. You click on a state where you would like to find property and a picture of the state appears. Remember the eBay list from earlier? The gulf coast of Florida was indicated as a hot spot. Example Screenshot of Foreclosure Information 5
  • 6. Build Real Estate Profits As you can see, there are 110 foreclosures in Pinellas County, Florida. Foreclosure means that the owner(s) have defaulted on the payments and the lending institution is trying to get money from the liquidation of the property rather than become a property owner. Looking at this particular site, notice that no exact address is given. That is because on this site, to get that information, you will have to pay for it. I only used this as an example to point out that you can find foreclosures without ever leaving your home. • Government records searches — some counties have available public tax records that can be searched. One such place to look is www.netronline.com. This site allows you to select public record availability by county in each state. Specifically look for lis pendens listings. When a note holder begins foreclosure proceedings, this is what they must file with the public records office in that county. Now understand that there are other things that will fall under lis pendens, but this will help you begin to locate properties. Also, consider federal mortgages and federally insured mortgages. Browse www.hud.com to see HUD mortgage foreclosure listings. Analyze the Property Once you find a property that appears to be a good candidate, you need to analyze all the data you collect to make the most informed decision about proceeding with this transaction. Collect basic information about your subject property and record it on the form on the following page. Then collect data on comparable properties in that area and record it on the fair market valuation form. 6
  • 7. Build Real Estate Profits Basic property information — Begin your analysis by collecting the following basic property information: Sample Only Property Address: ________________________________________________ City, State, Zip: __________________________________________________ Property Appointments: Sq. Ft.: __________ Year Built: __________ # of Bdrms: _______ # of Baths: _______ Carport/Garage/None (circle one) Type of construction: Brick/Block or Frame (circle one) Property Contact: ______________________ Phone: ____________________ Property Owner: _______________________ Phone: ____________________ Why is this property being sold? _____________________________________ Any offers? _______________ How long on the market? _________________ What do you feel are the best price and terms you can accept for a quick sale? ________________________________________________________________ What is the fair market value† of the house? ____________________________ What is the property potential assessment score‡? _______________________ † Determining fair market value — fair market value compares the property you are considering to similar properties in that area. The comparable properties should be similar in location, size, and age to your subject property. Choose properties from the same subdivision and record the same information you did about your subject property. I have included a fair market valuation form on the following page for you to record this information. You can obtain comparable data from local real estate agents, the local tax assessor’s office, or possibly online from public records as described previously. ‡ Determining the property potential assessment score — this is a rating that you assign to the property under consideration to help evaluate whether the property is a good candidate or whether you should pass it up and keep looking. A property potential assessment form is provided for your use in determining this score. 7
  • 8. Sample Only FAIR MARKET VALUATION FORM Build Real Estate Profits Subject Property Comparable 1 Comparable 2 Comparable 3 1. Address 2. Subdivision 3. Sales Price 4. Living Area Adjustment Adjustment Adjustment (square feet) 5. Price/Sq Ft 6. Age (years) 7. Lot Size (square feet) 8. # of Rooms 9. # of Bedrooms 10. # of Baths 11. Carport/ Garage 12. Air Conditioning (window/wall/central) 13. Special Features 14. Adjustment to Price 15. Indicated Value Range of Indicated Value: $ 8
  • 9. Build Real Estate Profits PROPERTY POTENTIAL ASSESSMENT FORM Each of the five categories below represents a particular aspect of a given piece of property. Honestly rate the property you are considering in each of these categories. If you are in doubt on a particular point, always pick the lower value. This is designed to help you remove your emotions from the buying decision. Poor Average Excellent 1. Location 1 point 2 points 3 points No pride of ownership. May be clean, older Easy accessibility to all Junk and debris in neighborhood. Close to necessary amenities and streets. High crime rate. shopping, churches, transportation. Middle- Abandoned buildings schools, etc., but not class neighborhoods not and boarded up very appealing. Working- on busy street. properties. Close to class tenants and/or Properties nearby very major streets, industrial neighbors. May be poor similar in price. Good areas, or commercial location on the upswing foliage and landscaping. zones. with pioneer fixer- uppers. 2. Property 1 point 2 points 3 points Condition Needs major cosmetic This is a true fixer-upper. Newer property or older and structural Cosmetic improvements property with recent improvements. At least would be nice but are renovation. No 10 percent of purchase not necessary. Costs for problems, clean inside price will need to be improvements should and out. Good spent immediately to not exceed 5 percent of landscaping and make the property purchase price. This structurally sound. Solid sellable. would be the worst property. house in the best neighborhood. 3. Price 1 point 2 points 3 points 10 percent or more Between 5 percent At least 10 percent above fair market price. above and 10 percent below fair market price. Consider this property below fair market price. only if financing terms are great. 4. Financing 1 point 2 points 3 points More than 15 percent Traditional institutional Seller willing to carry down. Seller needs lots financing required with some or all of financing of cash. Consider this less than 15 percent and requires less than 5 property only if the price down. percent down. is excellent. 5. Seller’s 1 point 2 points 3 points Motivation and Won’t budge on price or Might consider a small Needs cash for terms. Doesn’t need to discount price. Needs immediate crisis. Could Flexibility sell. Not anxious at all. cash for new house, be behind in payments, property, or other bills. retiree needing cash, May carry second or divorce settlement, etc. contract. Add up the numbers in each of the five categories. The lowest possible score for considering properties should be nine. In fact, to get the most profit, the property should score somewhere between 12 and 15. 9
  • 10. Build Real Estate Profits Make an Offer Remember looking at 20 properties to find 10? Once you have at least one of the 10, you have to make an offer. Let me be clear about making an offer. Almost no offer is too low. Seriously, if you don’t feel at least a little bit embarrassed about the offer, it is not low enough. Now, that doesn’t mean you should make an offer that will insult the seller and negatively affect your credibility as a buyer. The point is the offer should be as low as your research will support. Always make the seller negotiate upward from your price, never negotiate downward from theirs. The essential elements of a real estate contract will vary from state to state. The elements listed below are those generally required as the minimum in most jurisdictions: • Both the buyer and seller must be of legal age and must not be suffering from any mental defects that would render them incompetent. • There must be a “meeting of the minds” where the seller must clearly articulate the offer and the buyer must clearly articulate acceptance. • The agreement must be for a legal act and cannot be against public policy. • Consideration must be defined in terms of what the seller is giving to the buyer and the buyer is giving to the seller. • All terms and subordinate concepts that are part of the contract must be clearly spelled out in the contract that is legally signed by both parties. • The contract must contain a description of the property. Generally, this is a legal description identified by the street address and the survey markings. You should always have an attorney review any contract prior to your signing it. Make sure that they include clauses for any unique circumstances surrounding your purchase, especially one that specifies that the contract is contingent upon you arranging financing. Arrange Financing So let’s assume that you looked at 20 properties, found 10 that are pretty good candidates, and you made offers on the best five candidates. Will all five offers be accepted? Probably not, however, if they were all accepted, what does that say about your offers? Even, if by the remotest of chances, they were all accepted, will this mean that you own five properties? Not unless you could arrange financing for all five. In all actuality, of the five offers you make, you will probably be lucky if one or two are accepted. Of these accepted offers, how many of these are you now committed to buy with no way out of the deal? The answer is none. In order to complete the deal you must first have financing. Even then, the deal is not completely sealed due to inspections and other contingencies. 10
  • 11. Build Real Estate Profits All right, you set out to arrange financing for the one or two properties that your offers were accepted on. For this example, let’s say only one is accepted. Remember our discussion previously about creatively looking for financing arrangements. This is literally where you should leave no stone unturned. It is reasonable to expect that only one of the financing arrangements you attempt to make will probably work out. It just usually happens that way for a number of reasons. Of course, if none of the financing attempts work out, how many more properties are you going to have to look at? Another 20. I told you this was a lot of work. The concept of looking at 20 properties in order to be able to buy one is a very daunting task for many people. Many of you who began reading this special report have already decided that it is more work than you are willing to put forth. It takes perseverance to make this work. Most people begin this process with great vigor. They buy a paper, circle a few ads, investigate a few properties online, and maybe even make a few phone calls. After realizing the amount of effort it took to just get 20 properties considered, their interest begins to drop off. Before you know it, the task has become something that can wait until you have more time. But let’s say that over the course of three months you put in 100 hours worth of work, find a property, and sell it for only a $5,000 profit. That means you only made $50 an hour for your efforts. If you made $10,000 on the deal you would have made a measly $100 an hour. You need motivation. Try this. On or near your desk, make and hang a sign that says, “You are working for $50 an hour.” You can put whatever amount you think is realistically achievable for you on that sign. Whenever you begin to wonder if all your hard work is worth it, look at that sign. Now, roll up your sleeves and get to work! You are working for $50 an hour 11
  • 12. Build Real Estate Profits Close the Deal Great! You’ve found a property, researched it thoroughly, made an offer, got the offer accepted, and arranged financing. Congratulations, you now own property. Well, not quite yet you don’t. You first have to arrange closing. Now this will be the easy part compared to what you have already done. Basically, the lender, title company, real estate agent, or a list of several others will help arrange everything. You really don’t even need to be present at the closing as long as you have made arrangements for taking care of necessary signatures in advance. After all, you will be way too busy creating your sale listing on eBay and researching another 20 properties to bother with being at the closing. Especially if the closing isn’t anywhere near where you live. 12
  • 13. Build Real Estate Profits Summary So, what will you have to do? • You will have to define where you would like to look for property to buy for resale purposes. • You will have to look through newspapers, Web sites, and government records to find 20 properties. • You will have to analyze the properties to determine which ones are good candidates. • You will have to write an offer, have it reviewed by an attorney, and present it to the seller. (Repeat as necessary until you finally get one accepted.) • You will have to arrange financing. • You will have to arrange closing activities (or delegate it to other responsible parties). • You will have to create a sale listing on eBay to offer your property for sale. Wow, it doesn’t look that daunting when you look at those seven bullets. Remember, perseverance is the key. After all, what is your goal? How much an hour do you want to earn? I wish you the best in your untiring endeavors. The MarketPlacePro support community will always be here to help you on your way. Good luck and happy hunting, David Early, eBusiness Pioneer 13