Profiting From Flipping Properties

Flipping is a fast-growing investment option for those who have the ability to find a great mortgage loan for a property that requires repairs and updates, and quickly turn the property for a great profit. This is a very profitable business if done correctly, but there are some things that novice investors should be aware of before diving in head-first.

This practice is legal and ethical, but a few bad apples have caused some to believe it isn’t. Any flipper that inflates a home’s market value or falsifies documents is attempting to defraud potential buyers, and this is not okay to do.

However, truly flipping a property requires finding an undervalued property that can be sold for a profit even after repairing required items in the house. Most of these homes need at least some cosmetic and mechanical work, but some may simply be occupied by a seller that needs the property to sell quickly.

Professionals in the real estate and home finance industries should be your first line of contact to keep you informed about possible flippable properties. Or, you may choose to focus on a specific area and simply take a leisurely drive looking for properties in the area.

Another option for finding these properties is to review public records available at your county recorder’s office. These may show you any properties that are in trouble of mortgage loan default, or those which have been damaged in such events as a fire and have been abandoned.

Double-escrowing a flippable property will not even require your name to ever be placed on the title. This is achievable by finding a property where the buyer wants to live there while repairs take place. A period of longer than 90 days is attached to the escrow, and the idea is to sell it before this period ends.

Before even looking for or making an offer on a flippable property, mortgage loan financing should already be in place. Time is money in this business, and an investor needs to have the ability to move quickly.

Another option that never requires you to take ownership of the title is by entering an agreement to buy it, then finding a buyer or investor to purchase it prior to closing escrow. Profits ranging from $500 to $5000 can be made this way in a short amount of time, and it never requires you to finance a mortgage.

There are very basic skills which must be developed in order to be successful at flipping. First, you need to be able to spot a viable property to flip for profit. This includes knowing the local market well, as well as knowing what your budget will always be.

Another skill requires you to be active and able to negotiate with several different types of people. If you will not be repairing the properties yourself, you’ll need to develop good relationships with contractors, real estate agents, home loan lenders and other associated professionals to help you along your path to profitability.

Professional Inspections Can Save You from Financial Ruin

Real estate is perhaps one of the most expensive investments around. However, it can also produce higher rates of return than other things you may purchase. This is why it’s so important to ensure your purchase is sound and correct through a professional inspector’s report. This report may allow for further negotiations to a lower purchase price, or persuade you that it isn’t the right property for you.

One of the first things you will need to look for is termite damage. Any wood construction runs the risk of being damaged by these pesky little insects, and can become a very costly repair now and in the future. A special inspection is required for this service, but will save you money in the long run.

A home inspector will check the entire property and home or building for structural and safety issues. Yes, his service comes with a fee, but can be negotiated in the purchase agreement, and will save you a lot of headache down the road; virtually no property is without its hidden flaws until you move in and live there a while, so you may as well know what you’re getting in to.

Foundation cracks or unlevel concrete can present a huge problem, and may even be noticeable to the naked eye. Any flooding or water that finds its way under the property will feed mold and can lead to other issues such as a failed septic tank.

The foundation of a house supports all floors and thus walls in the house, so any type of damage to it will directly affect the entire structure. Mold and mildew will also be noted; these can affect your health and the quality of the structure, too.

Electrical and plumbing systems are checked for water pressure (lower psi in the system clues the inspector into a possible leak underground or in a wall), damage or zoning violations that would also need to be addressed. Any pipes found with rust, lead in the paint on the walls, or other viable concerns will be noted.

Not only are these inspections important to you, but your mortgage company may refuse to finance homes with certain kinds or levels of damage. This is because they know that if you default on the loan, they will be left with the responsibility of fixing it.

Fire risks such as faulty or corroded electrical wiring, incorrect wiring methods, inadequate circuit breakers or uncovered switches will all be noted in the electrical inspection.

Attics and roofs are also looked at, and if there is added strength needed in an area, your professional inspector will include this in his report. Roofs which need replacement are also another costly expense and a tool to negotiate a lower price or require the seller to fix it prior to closing.

These inspections can cost a few hundred to several hundred dollars, and may also include all well or septic systems if you so choose. Hire a professional investigator to ensure you’re not about to pay too much for the home you fell in love with!

Maximizing Your Returns on Real Estate Investments

The most general investment strategy used in any realm is to buy low and sell high – but unfortunately, most markets don’t behave this straightforward normally. However, when investing in real estate, you want to make a profit – here are a few ways to maximize the money you get to put back into your pocket.

Real estate investors need to focus on the fact that their properties are business ventures, and not their personal home. This means that the home doesn’t need to be designed with the most expensive tastes in mind to suit him or her. Costs should always be kept as low as possible, and buyers that aren’t afraid to spend some money need to be brought to the table.

A great way to keep costs very low is to do most if not all repair and cleanup work on your own. This will save on labor costs, and allow you to track material costs first-hand.

Another area where you can save is inspections. If you or a friend has background in building homes or remodeling them, you may have all the expertise you need. You can also find a quick course or material to study to ensure you’re not missing anything. This one action can save thousands a year if you purchase several properties.

Low-cost home loan interest rates are also easier to find at smaller community banks. This will lower your fees as well when it comes time to close. Always refuse to pay an application fee to any home mortgage lender; do the same with any and all title and insurance companies. There are plenty of companies out there willing to approve you at no cost.

Searching for your own title and insurance policies, rather than simply using those that the lender or agent recommend, will also save you quite a bit of money when buying. Call around and ask for rates, or contact businesses you currently do business with to inquire about available discounts.

It will also behoove you to learn to do your own accounting and taxes. Although it sounds complicated, it can definitely be done. You’ll simply need to check a few books out of the library and invest in a computer accounting system.

When it comes time to sell your property, you also want to reduce your costs in marketing and selling your home or building. Foregoing the aid of a real estate agent can significantly lower your financial obligations, but can also limit the market of potential buyers who see your home.

However, several online databases offer this option at FSBO (for sale by owner) Web sites and the like. Also, take ads out of any local papers and pay to add a picture; you may also have a custom yard sign to attract attention from drive-bys.

Ensure your asking price allows for wiggle room and a nice profit, and get the property ready for sale. Make sure that the price you’re asking is reflected in the appearance and state of the property before listing and accepting bids, or you’re likely to be disappointed with your results.

How to Use Market, Limit and Stop Orders in Forex Trading

In order to understand all of the tools available and options included in the world of Forex trading you should first be familiar with the concept of market orders. Market orders are placed by you, the investor, to execute your buy or sell requests at the current market price when it is filled. This means that the price may not be exactly what you see on your screen at the time you place the order, and this is an important factor when Forex markets are fluctuating at an exponential rate.

High volatility of these Forex exchanges means that you could place a buy order at $1, let’s say, but when it is filled, your actual price is $1.50. Depending upon the size of your market order, this could prove to be a costly variation!

Due to the odds of selling and buying at significantly different prices than intended with market orders, many Forex trades are conducted using limit or stop orders.

Limit orders essentially guarantee you will not buy above or sell below your stated limit price. This way, you are likely to complete your Forex trade very near or exactly at the price intended. Just remember that no Forex broker will be able to guarantee it will be conducted at the exact price you choose to limit it at!

For example, let’s say you bought yen at $1.2314. You place a limit sell order at $1.2324, but the market rises to $1.2334. This will allow you to lock in a pre-determined profit; yes, you’ll lose out on the additional gains, but at least you don’t risk losing significantly.

You could also place a limit buy order: If yen is currently at $1.7805 and you feel this is too high, but you want to buy it when it hits $1.3214, you place the limit buy order for this dollar amount. Now, the Forex broker knows you don’t want to pay more than this price for yen.

So, what if the price never reaches your limit order? It simply expires unfulfilled, and you’ll have to wait for an opportune time to place another.

Stop orders, also known as ‘stop-loss’ orders, can significantly reduce your chances of losing a ton of money in the volatile Forex currency exchange market. The difference between a limit and stop order is that a limit order is entered to buy or sell at a stated price or better. Stop orders buy and sell when a stated price is reached.

For example, if you buy yen at $1.3245, and you expect it to rise but want a buffer, you can enter a stop order at $1.2256. If yen hits this threshold, your Forex broker will sell it to cut your losses short. If it doesn’t, you can enter a market order to sell once it hits a high enough price, or increase the level to sell at.

Ensure you understand how these orders work before using them; research and study the Forex market and its behavior to determine how a limit, stop or market order can help fulfill your Forex trading needs.

Marketing Your Real Estate Investment

Anything that has ever been sold to a human being had to be marketed prior to achieving the sale. If you are a seller or buyer in the real estate world, you already know how true and important this fact is. Marketing involves developing and carrying out all aspects of selling an item, including research, advertisement, promotion and sales.

In order to research a property before you buy or sell it, search online for recent comparable sales in the area. How many are there? Are the prices fair and comparable to your property in question?

It’s very important to know local prices before buying or selling a property. As a seller, you don’t want to ask for too little and leave money on the table. As a buyer, you don’t want to pay too much for the property.

Selling a property can take weeks or months, depending upon the level of energy exerted in marketing efforts and the economic climate in the area. As an investor, you need to know if the current market is in a state which will turn a profit should you sell your property. It will also let you know if there should be some room accounted for negotiations during the selling process as well.

Prior to agreeing to a sale price, determine which costs you are willing to cover, and figure them into the price you need to walk away with. Will you pay for closing costs such as the agent’s commission or title search? Will you offer a warranty or allowance for repairs at closing?

When advertising your property, you need to determine who your target audience is, then cater to them. In other words, don’t list you home as the ideal executive bachelor pad if it’s located across the street from a local school and surrounded by families!

Attracting as many potential buyers as possible will increase your chances of receiving the type of bid you’re looking for. Some advertising methods include word of mouth, newspaper ads, yard signage and Internet listings.

After listing the property and advertising it, track which method results in the most inquiries on the property. This can help you focus your advertising methods and drop the ones that aren’t working. Additional funds can then be used to purchase an upgrade on the Internet site that perhaps brought all of those previous offers to you.

If you are selling the property without the aid of a real estate agent, look for a specialized FSBO (for sale by owner) site dedicated to your area. Many buyers will look here first in order to find their new home.

Also decide if you will offer seller financing options. This allows you to pocket the down payment and have the new owner pay the payments owed, but will keep the mortgage home loan on your credit report. If the buyer defaults, you still retain the property. The buyer may also utilize this method for only a short time until he is approved for financing with a mortgage lender.

This is a great marketing tactic, as well. Many potential buyers are searching exclusively for these deals in order to find something they can afford and avoid having to find a home mortgage loan on their own.

Managing Your Risk in Real Estate, Part I

When investing in real estate, there are several steps involved in the process that grow from perusing local listings in the area where you want to invest to the time when you decide to sell your property. Real estate investing requires quite a sizable dedication in time and money, and there are several actions to take in order to protect it.

You first must determine how much capital you have readily available to you, the current housing market trends, and your personal level of experience in investing. In order to do these things effectively, you need to get familiar with the law. Federal and state regulations and codes will determine much of what you can and can’t do as far as financing a home mortgage loan or operating your investment as a business activity.

Investigating the market will involve becoming familiar with local price points of the type of property you’d like to purchase, as well as whether you are in the midst of a buyer’s market or seller’s market. This will give you great insight as to how much profit can be made on a property in the short or long term.

Ask yourself if the general economy is heading up or down, what the unemployment rate is doing, and how many new homes are being built. Five-year periods should be assessed, as this is the longest time you will probably want to be tied up into a short-term property holding. You need to determine if property values will decline, rise or stay approximately the same during that time.

After choosing and purchasing your property, there are several safety nets you can put into place to ensure it doesn’t go bust. Larger down payments will lower your financial obligations to your home loan financing company. At least 10% will provide a safe haven should the value fall; you’ll also qualify for a lower rate and have immediate equity in your property.

However, making a larger down payment will decrease the amount of money you have on hand for unforeseen expenses and repairs. You’ll simply need to remember that few other investment options will offer the same level of return, appreciation and low risk that your new investment property will possess.

Finding the best home loan rate will also be determined by the type of funding you need. What will the home be used for, and how long do you plan on keeping it? Adjustable rates may offer a lower rate upfront and be a great option for short-term investments. If you plan on turning it into rental income and possible retirement funds, a fixed rate is probably best.

Another way to greatly increase your equity in the home no matter what the market does is to make one extra full payment each year – perhaps when you receive your tax refund. This one actions will take years off of the life of the loan, and create more wealth for you and your family.

Managing Your Risk in Real Estate, Part II

Investing in anything requires much more obligation than typically meets the eye. Taxes, insurance, legal fees, security and liability are all involved in the process, and must be managed correctly in order to deal correctly in managing risk in real estate.

Prior to purchasing any investment properties, a proposed buyer should immediately take a look at the current state of the market. Determine what home sales are doing, if prices are rising or falling, what types of interest rates are available to buyers, and rates of new home construction. This will help to determine the best local area to look to for investment opportunities.

If you plan on building a new home or structure, risk can be managed by reviewing demand for the type of structure you want to build. Study the demographics and population in local commercial buildings, look at statistics found online, and compare your market with adjoining regions. You should also ensure you know, understand, and are applying all environmental regulations that are currently or will soon be in force.

Insurance is perhaps the best way to minimize risk. In the event of any drastic natural event or man-made damage to your property, ensure you have purchased enough insurance to cover anything which you cannot comfortably pay cash for on the spot.

Always remember to conserve cash when possible. Low rates are available on long-term mortgage finance loans, saving you additional cash. Also, find a balance between making a larger down payment, but without losing money needed for other expenses.

If your home loan mortgage provider offers you an ARM, or adjustable rate mortgage, walk away and find another one. This is, of course, unless you have terrible history and need a bad credit home loan. Then an ARM may be your only option. Also, if you have a buyer already lined up to flip the home, an ARM may lower your initial costs.

Forming a partnership or corporation to handle your investments may be one of the best ways to avoid undue tax liability at the end of the year. Investment properties do not qualify for the same deductions as residences, but as a legit business you’ll be able to write off repairs and maintenance expenses related to the properties involved.

Always demand the best in anyone you depend on for advice or work to be done on your properties. Calling just any contractor to fix that leak in the kitchen could end up in a botched job and thousands of dollars in additional repairs. Also ensure you have retained the services of a good real estate attorney, tax professional and insurance agent to guide you along the right path.

An attorney and CPA can take a look at your structure to advise how it should be changed for minimal risk assessments and tax liabilities, and your insurance provider should be able to find small improvements or other policies that can be written to lower your premiums significantly.

Manage Your Risk with the Proper Real Estate Insurance Policy

Although there has been a recent downturn in the economy and thus the housing market, there is still something to be said about maintaining the proper insurance policy to protect your wealth and safety. The market will resume appreciating in some manner of time, and your real estate investments probably represent a large part of your hard-earned wealth and money. Increased value of items always means you are at bigger risk of losing, so it’s a good idea to reevaluate your insurance policy every year.

Title insurance and liability insurance have nothing to do with the state of the current market, and are the most important forms of insurance for an investor to maintain. When purchasing a property, title insurance will cover any unforeseen liens or obligations which arise between the agreement to purchase and closing on the mortgage loan. This prevents you from being responsible for the $2000 water heater that was installed but never paid for last year!

Although title search companies are very thorough and present a valued service, human error or technical issues of public record can always become an issue. Title insurance is vital to ensure the title does not carry any added financial liabilities once you take ownership of the property.

Liability insurance coverage is important for any real estate owner to invest in; this type of policy protects against legal claims arising from injuries or other mishaps that may occur while on your property. Believe it or not, even if an uninvited guest slips and falls on your sidewalk or is bitten by your dog, they can still press charges against you as the property owner.

This type of insurance will pay for medical bills resulting from the injury and financial settlements. There are also different levels of damages covered, as well as varying definitions of the type of event that’s covered. This may cause you to pursue an added umbrella liability insurance to cover any differences between the limits of your homeowner’s policy and your susceptible wealth.

Liability is also important for the real estate investor who is renting properties and acts as a landlord. If a tenant slips and falls in the bathroom after spilling water everywhere, you may also be held liable; so, consult a real estate attorney and ensure you’re covered for all of these ‘what-ifs’!

Other types of insurance may or may not be required by your home mortgage loan company, but may be worth considering on your own accord. Hazard policies cover earthquakes, tornadoes, hurricanes, fire, wind and freezing structures. These may also be referred to as ‘natural disaster’ policies by your insurance agent.

Events which can damage your home that are caused by man may also be covered. If your tenant burns down your home after lighting a candle and leaving it unattended, you can choose coverage for this. Chemical spills, faulty plumbing or electrical wiring, theft and vandalism may also be included in your individualized real estate insurance policy.

Know the Legal Ropes of Real Estate before Investing

Real estate, whether used as a residence or investment property, is very tricky when it comes to the many laws and codes that regulate these dealings. Buying or selling a home involves using large amounts of money, and several different parties with interests at hand.

Property law is extremely old, and is always evolving in modern times. Laws exist which regulate disclosures and actions of all parties involved in financing, selling, renting or buying a home. Considerations may include environmental issues, liability and tax considerations, not to mention legal descriptions of what is and what is not part of the property.

Most practices when you buy or sell your residence are well-known by your mortgage lender and agent, and can easily be referenced with your local recorder’s office. However, it does behoove real estate investors to become at least slightly familiar with the area of property law to prevent any business-busting mishaps.

‘Mutual assent’ is included in any real estate contract, and is simply a written agreement outlining what each party will offer the other for exchange. Today, even a verbal agreement with your best friend must be written down and recorded to hold up in the court of law.

Parties are identified by their legal names or entities, and the legal description and address of the property dealt with is included. A price that both parties have agreed to in order for the property to change hands is also clearly identified, and each party must sign the contract. Laymen may refer to this contract as a ‘purchase agreement.’

Property law states that the property in question must be valued at what both parties claim, and this is typically determined by appraisals and local comparables.

If you’re looking into flipping a house, or buying and selling quickly for profit, there are other statutes you must be concerned about. The act of flipping is perfectly legal, unless documents on a run-down property reflect an inflated price.

Commercial and rental properties, on the other hand, open a whole other can of worms for an investor to worry about. Tenant rights are clearly outlined in your state’s constitution.

Lenders are also constantly governed by new requirements as to how much they can charge you for a loan, types of insurance and other items they can require as a condition of issuing the loan, and how much of a home’s value they may finance.

This means that due to the recent downturn in the housing market, many home loan lenders will most likely not be able to issue second mortgages at more than 100% of a home’s current value. This means that many borrowers currently owe much more than what their home is worth.

Tax considerations also come in to play when investing in commercial real estate. Flipping does not allow you to take advantage of many tax advantages, but may allow different ones for maintenance and repairs as a business cost. Always consult a tax professional before deciding to invest in commercial real estate to assess these costs.

Investing in Commercial Property

Commercial real estate may seem like a straightforward subject and ideal investment, but there are many factors to consider. Yes, it can be very rewarding and profitable, but there are reasons that commercial real estate investment (CREI) equals only about a third of total investments in residential property.

Many are turning to real estate as an ideal investment alternative to stocks, bonds and mutual funds. Reasons are many, and include that this type of investment is real property that the owner always can see and know the location and status of.

Commercial properties are developed with business in mind, and this affects how any of these properties are valued or handled in a real estate deal. However, this doesn’t mean that commercial properties can’t also serve the function as a residence for someone.

Apartment complexes are a valued business, and the buildings are considered commercial real estate to those who own them. Other commercial properties, such as strip malls, still deal with tenants in each available unit. This sought-after commercial zoning status greatly increases the value of any property, and also changes the investor’s options for financing and tax or insurance obligations.

Commercial investments require a greater upfront commitment from the purchaser, usually upwards of a 20% to 50% down payment. Excellent credit scores will be a prerequisite, and the proposed investor should have an idea of what the capitalization rate and Gross Rent Multiplier will be.

Cap rates should be around 10%, though more recent investors seek an 8% cap rate. This rate is found by dividing the real estate’s annual net operating income by the purchase price. The lower the cap rate, the lower the return on the investment. This annual net operating income is figured assuming full tenancy as well.

The Gross Rent Multiplier (GRM) divides the same purchase price by the monthly gross operating income, before expenses are paid. The GRM, cap rate, value of the property, comparables and potential income provided from a property should all be carefully considered prior to buying commercial real estate.

This type of investment is much riskier than residential real estate opportunities, as the economic climate will affect it even more. Business tenants will go under and leave your building, leaving you to cover all of the associated costs.

If you are not a real estate lawyer and want to invest in commercial properties, it’s a good idea to invest in hiring one to point you in the right direction. There are an exhausting number of laws and codes that a commercial owner must follow, as well as considering added business costs and drafting rental agreements that are both competitive and protect the income potential of the building.

In addition, several large expenses will be required of the owner to accomplish this task. Fire extinguishing systems, alarm and other security systems, electrical, water and technology considerations as well as parking, lighting and landscaping must all be accounted for. Although commercial investing is much more complicated than some may originally think, it can also be far more rewarding than other investing options.

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