How to Flip Houses Quickly for Profit

January 9, 2010

Real estate investing tips

The word investment here denotes the financial process that commences with a well structured financial planning…..and ends with profitability. Real estate investing (flipping properties) is considered as one of the most profitable investment vehicles, and requires commitment from the flippers. As locating and selecting a potential property can be challenging, educating yourself with real estate investing tips will prove valuable to your success. If an individual feels this investment of searching for a property themselves is time consuming, he can seek the help of real estate agents who can invest their time and efforts to give you the best deal in the market. An investor should obtain complete information and an understanding of the current real estate market, if he wants to generate huge profits from his property flips.

Researching the property

Real estate investing tips help a flipper make hansom profits. It’s always advisable for an investor to conduct a research on potential property himself. This enhances confidence within him and helps him in pricing, when the property is sold. On the basis of this research an investor can analyze his profits from a particular property. Although the outside of a property might look like a great, a profitable flipper should not do away with the fundamentals. He should take into consideration the total condition of the property, like if there are any leakages, how old is the roof, oil heat vs. heat pump etc. Moreover an investor should compare his selling price to that of the homes that are quite similar in his general location. He can adopt the same strategy with his overhead / carrying cost.

Identifying requisitions and budget

Many of the flippers face heavy losses from their investment because of their inability to chalk out their needs and budgets. They often close a deal only on the basis of calculations conveyed verbally by the seller. This is the most important reason, why a flipper is expected to identify his needs and plan out a budget. Following this real estate investing tip, you should have a beginning point which will result in profitable returns.

Identify needy sellers

The most important real estate tip is to remember that you are not in the Real Estate business…….A true Flipper is in the people business.

Frank Purcell

Host – Expert Showcase

Click here to use our Short Term financing for your Flips-

http://www.100k4ever.com

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Is Buying a House a Good Investment?

December 25, 2009

Intended Audience

Individuals looking to purchase a home for personal use or as an investment. As well, looking into conventional wisdom’s statement that buying a house is one of the best investments someone can make.

Summary Points to Take Away

Analysis

Conventional wisdom states that buying a house is one of the smartest and best investments an individual can make. This article is geared towards challenging this conclusion to see whether this statement rears any truth to it.

Why a House is a Good Investment?

Forced Savings Plan

Most individuals claim that the purchase of their personal home was the best investment they’ve ever made, which is true in most cases because it is the only investment they’ve ever made. The general public struggles with saving for retirement; thus, purchasing a house assists in that problem as it forces individuals to continuously pay down the mortgage (or lose the house in a foreclosure to the bank); therefore, allows the storing of equity for the owners. This built up equity (i.e. market value of home minus remaining mortgage) can be borrowed against during their retirement years or they can downgrad into a less expensive house in order to provide some retirement funds to the owner. If individuals take a disciplined approach to saving, then the benefit of being forced to save in order to pay for a house diminishes

Leverage

Typical real estate purchase require only a 5% deposit, while the remaining amount can be borrowed through bank debt. Few alternative investments outside of real estate can the acquirer obtain such significant leverage, which can enhance investment returns.

Example, suppose that you purchased a home for $200k, for which you made a 5% deposit down ($10k). During the next few years the house appreciates in value and you sell it for $220k (10% higher than the level you purchased it). Though the return on the house is only 10%, the return to the investor based on invested funds sunk into the home ($10k) is 200% ($20k earned over $10k investment) –  that is the power of leverage. On the negative side, more debt means higher fixed monthly mortgage payments; thus, higher risk of being able to make the monthly mortgage payments. As long as cash flow is not a concern and the mortgage payments can be met – investments should be leveraged to maximize returns to the investor. Could you imagine walking into a bank and asking for $100k to invest in equities while only putting 5% down – likely to never happen, this is a major benefit of real estate ownership.

Inflation Resistant

Real estate holds its value during inflationary periods; thus, acts as a hedge against the investors other assets that aren’t protective against inflation (ex. Currency). The asset will continue to hold its buying power (store of value), which is difficult to get outside of investing in precious metals. The reason real estate holds its value is there is the same number of houses that the increased monetary supply of dollars are chasing; thus, it’ll take more dollars to purchase the houses as the supply of houses stays stagnate while the demand rises (due to the increase in the number of dollars in everyone’s hands). This can become critical given the current economic times and numerous expansions of monetary supply across many nations, which will have the aftermath affect of higher inflation.

Capital Gain is Tax FreeIn Canada, every home owner is provided with a capital gain exemption on amounts earned in excess of cost for their principal residence. Only one piece of real estate can be claimed as the principal residence per individual. For example, if you owned a home and a cottage, only one of those houses upon selling could take advantage of the principal residence exemption. No other asset class has such advantageous tax reduction characteristics. Unfortunately this is a onetime event; thus, those holding numerous pieces of real estate can only apply it to one property.

Allows for Control over the Asset

Real estate is typically an investment an individual has control over (assuming you’re the majority owner – which is typically the case) by the means of the owner has the ability to increase the value of the asset, which may not be the case in most other investment opportunities. When purchasing real estate, owners can make capital improvements to the home (ex. Finished basement, new porch, etc.), which will increase the value of the property (capital appreciation) as compared to purchasing stocks or mutual funds as assets where the owner can’t take action to increase the value of those assets (unless they’re a significant owner, greater than 20% – which is typically unlikely). The ability to control an asset adds value to the owner through what is known as a control premium, as a real estate asset may be more valuable in the hands of some individuals over others.

Why a House is a Bad Investment

Lack of Diversification

Average individual thinks the stock market is very risky while investing in real estate is more of a certainty. Purchasing equities allows the owner to conveniently hedge their risk amongst various companies in numerous industries, countries, etc. The purchase of real estate doesn’t provide the ability to diversify risk away as easily unless an investor plans on owning numerous pieces of different types of properties (ex. residential, commercial, resorts, etc) across various markets (North America, Europe, etc) – which is probably very unlikely for the average investor. Purchasing real estate prevents the diversification of risk because it’s dependent on the economic, migration, and regulation trends of the local area.

For example, assume you purchased a home in Oshawa, Ontario – which is a town extremely reliant on the large manufacturing facility of General Motors (GM). Should GM cut back on production or move their facility housing prices would fall sharply as it is the biggest employer in the area; thus, demand from individuals will decline as unemployment rises and real incomes fall. With a decline in demand and supply staying stagnate (as you typically can’t “un-build” a house once it’s constructed) the price will have to shift towards in order to align demand with supply.

Real estate doesn’t allow the investor to diversify away the specific risks in the local area as compared to purchasing equities, which allows the investor to spread risk amongst investments that perform differently during different points along the business cycle. Most individuals when purchasing real estate have all their eggs in one basket.

Maintenance Costs

Transaction and maintenance costs are significantly higher for real estate investments than stocks, mutual funds, etc. When purchasing stocks costs are typically broker commissions ($20 per transaction if using an online discount broker), while when purchasing a home it is typically 2% commission on the transaction value, significantly higher than purchasing equities.

Once you purchase shares, no further cash is required from the investor unlike real estate, which requires constant annual expenditures that continue to increase the investors cash committed towards the property, such as property taxes, insurance, utilities, maintenance and repairs of the asset, etc. These are costs that real estate investors or home purchasers don’t factor into their expected return, but play a significant role as the payment of property taxes (etc.) doesn’t contribute to the value of the property for eventual sale in the hopes of capital appreciation.

Historical Lower Returns Compared to Equities

During any 20 year period throughout history, no other asset class has outperformed equities, which includes real estate. This is from the perspective of asset vs. asset without consideration of leverage and how that may enhance returns (as discussed earlier). While it is true that over the long run real estate prices go up in value, this is typically due to inflation incurred. Recent spikes in housing prices seen in the past 10 to 15 years has been due to changing demographics, specifically the baby boomer generation (who makes up largest segment of the population in North America) go through life stages at the same time (same goes for starting a family and purchasing a home and real estate investment property). The result was a large influx in demand without a corresponding increase in supply as construction requires lead time; thus, leading to rising real estate prices.

Will this high demand continue? That’s where the argument lies. Likely there will be softness felt in overall real estate demand as baby boomers already have their homes and they’re likely to either stay put, move to retirement homes or downgrade into a smaller place in order to obtain some retirement income. Immigration will continue into North America that will prop up demand, but likely not the extent to fulfill the whole in demand left by the baby boomer generation; therefore, the future appreciation in real estate properties is likely to flatten out.

Can’t Take Advantage of Available Opportunities

The purchase of a home or real estate property requires the individual to tie up a significant portion of their net worth into the property (in a lot of cases, all of it). Having all your net worth in real estate is a risky strategy as you’ll be severely impacted by movements in real estate prices as compared to having your cash tied up into several asset classes; thus, less vulnerable to swings in any one asset class. Similar to the discussion had under the “diversification” section of this article.

With the majority of an investors net worth tied up in a real estate property, there isn’t available cash to take advantage of other opportunities that come along; thus, significant opportunity costs are involved in venturing into real estate. This should be considered before purchasing an expensive personal home or making a real estate investment.

Limited Scope

Real estate is a local good, unlike gold for example – which can be bought and sold throughout the year for the same market price. An individual looking to buy a personal home or make a real estate investment doesn’t have access to all available properties as there are physical limitations to contend with. It comes down to wanting to live where you grew up or currently work or not wanting to buy a rental property far from your home in order to reduce logistical issues. For example, if you live in Toronto, Ontario and are looking to make an investment in a rental property, you’re unlikely to consider properties in Paris, France though the opportunities may be better than those surrounding Toronto due to language and logistic issues. Equities (and etc.) are globally traded and available; thus, users can take advantage of opportunities around the world; thus, their scope is not limited to the local area of their current surroundings like real estate is.

Additional Points to consider if you’re purchasing a Home for Personal Use.

Doesn’t Provide Any Cash Flow

An asset typically provides you with cash flow, i.e. puts cash in your pocket. When purchasing a home, cash only flows out (property taxes, repairs, etc.); some would argue that if it appreciates in value then it is an asset. In this instance it is only an asset when converted into cash and if that is the case, where will you live? Likely end up buying a new house, which has also gone up in value similar to your house.  This makes it difficult to realize the value of your personal home appreciation, which acts more like a liability than an asset since it takes cash out of your pocket instead of putting some in there.

Tax Deductibility of Interest

Interest expense paid due to bank loans taken to finance investment properties is deductable against income because the investor is pursuing income and tax legislation allows deduction of any expenses incurred in the pursuit of income. This is not the case for a mortgage taken out to purchase a house for personal use as the individual is not in the pursuit of income; thus, interest expense is paid with after tax dollars, with no tax shelter provided. If those funds had been borrowed to invest in equities or mutual funds, the interest would be deductable because again that would count towards the theme of pursuing income.

Can Get Personal Joy Out of It

Unlike equities and other alternative investments, the investor can’t personally use or get joy out of it as compared to purchasing a home, which the individual can live in and enjoy during the investment process. An investor who purchases shares in General Motors (GM) can’t exactly borrow and test drive cars whenever they please simply because they’re a part owner. This is a qualitative benefit that is difficult to quantify, but should be considered.

Where to go from here?

The main reason to purchase a house is to have somewhere to live and enjoy their life, don’t think of it as an investment. Buying a home isn’t a bad decision; it is the investor’s perception that may be tainted because it is important to realize that there are many arguments against a home as an investment to be considered. Don’t buy real estate property with the mindset that an individual can’t lose and that there is no better investment opportunity than to purchase a home, etc. Beware of conventional wisdom that states there is no better investment than purchasing a house.

THANKS,

SIMON GIANNAKIS

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Should You Rent Or Buy Your House?

December 12, 2009

Should you rent or buy your house? Is a question we often ask ourselves.
In this article I will try and show you the benefits of both, which should help you to decide.
Renting a home has benefits of its own. For example, if you don’t like your location, you can easily move to another one once your lease has ended.
There are also drawbacks to renting that lead many people to buy their own home. When you rent, you are paying to live in a space that will never be yours. Let’s consider the aspects of home buying versus renting a home.
Home Buying
The true cost of home buying, is more than the down payment and mortgage. There’s also private mortgage insurance (if your down payment was less than 20% of the home price), homeowner’s insurance, property taxes, and maintenance. These costs can increase your monthly payment by 40%.
In home buying, each payment you make on your mortgage brings you one step closer to home ownership. As you pay on your mortgage, you increase the equity you have in your home. This equity can be prove to be beneficial if you want to sell your home or use it to borrow money.
It’s a pretty well-known fact that mortgage interest payments and some property taxes are tax deductible. For many, this is a very good reason for home buying. Not only are you investing your money in a valuable asset, you get a break from the federal government for doing so.
When home buying, home and property maintenance is your responsibility. You will either have to maintain the home yourself or pay someone to do it. In either case, it is an additional concern that you must take into account.
Renting
Financially speaking, maintenance is not very much a concern. It is the landlord’s responsibility to fix the plumbing if something breaks down.
Moving is easier when you rent. Of course, this depends on the amount of belongings you have, but generally speaking, people who rent tend to have less “stuff” than people who own.
Extra fees are usually non-existent. While some landlords require tenants to have renter’s insurance, the premiums are much lower than homeowner’s insurance. When you rent, all you have to worry about is the rent and utilities.
You could rent a home for thirty years and, at the end of that time, not have accumulated any equity in the property. When, if you had bought rather than rented, in thirty years, you would have a pretty sizable asset.
Rent increases are inevitable. You can expect to continue to pay higher rent each year. The only thing you can do about a rent increase is move to a property that has a lower rent.
Both home buying and renting a home have their advantages and disadvantages. When you are making a decision about home buying, it is wise to consider both the good and bad of either choice. Ultimately, you have to decide if the benefits of your decision of home buying versus renting outweigh the associated costs, whether it’s a matter of finance or convenience.

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The Importance Of Finance When You Buy Your House

December 10, 2009

The financing is an important part of buying a house.
Do not be misled by low down payments. Although a few hundred dollars moves you in, just how deep are you in?
Some people get in a lot deeper than they expect to. Read all the fine print in the contract before signing.
How large are the monthly payments? How many years do you have to keep up the payments? Are the payments arranged to include the taxes and the fire insurance, as well as the principal and interest?
What is the interest rate? Can the entire amount be paid up at any time?
When you sign up to pay monthly for 25 years, remember that 25 years is a long time to make payments.
Sometimes people have to continue renting because they can’t get enough money together to make the down payment.
Where do people get building money, anyway?
Most of them borrow it. Ordinarily you can’t borrow very much, unless you have some money of your own to start with.
There are two ways to get money together.
One way is to earn more, the other is to spend less. At first glance earning more might seem to be the better, but since most people spend up to the limit of their earnings, actually the only way to save money is to spend less.
This is often difficult, but seldom impossible, if people really make up their minds to hang on to their money to get enough together for a worth-while project like getting a house.
If you postpone spending money as long as possible, often the need for spending it passes, and the money can be left in the savings account.
Incidentally, money kept in the purse or around the house will always get spent somehow. The only way to get money together to start building a house is to save it in a bank. It is very difficult to get a loan unless you have the lot paid for.
Even if sometimes you might borrow from a rich relative, often the thing that made him rich prohibits him from lending it to you, that is, his good business sense.
If for some reason or in some way you come into possession of a few thousand dollars, don’t fritter it away, or buy a new car; go out and buy a good building lot with it. If you later decide not to build, you can sell the lot, usually at a handsome profit.
During the last hundred years, money invested in good land has increased in value faster than almost anything else, when it comes to the long steady pull.
Land has always proved to be a good investment, and as the population increases, it becomes scarcer owing to the increased demand and should go up in price. Be sure to select your location with care, usually in the direction of growth. Poorly located land may decrease in value.
If you are lucky and have a few thousand dollars or a lot paid for, you can usually borrow what money you need to solve your housing problem.
Often since it is not possible to borrow enough money on a first mortgage, or trust deed, to do all you want to do, a second mortgage is necessary.
This second mortgage usually runs from three to five years, whereas the first mortgage runs from ten to twenty-five years or more.
Always use a mortgage calculator to help you get the best mortgage possible, this will save you a great deal of money in the long term.

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Learn About How To Buy And Sell Houses

November 25, 2009

The current time is one of the best times in history to invest in real estate. While the stock market is floundering you’ll do better to invest your money in real estate where you are sure to make a large profit. In fact real estate investing is one of the best ways right now to make a large amount of money. If you’re looking for an investment look for real estate investing. Real estate investing is a fun way to make money and has the potential to create millionaires. One great way to start in the real estate investing market is by finding out as much as you can about it before you start. Knowledge is power and nowhere is this statement more true than in real estate investing. The reason anyone fails is that they just didn’t know what to do or didn’t pay attention to the things they should have. The best way to find out about real estate investing is to learn from others who have experience and knowledge already. You can tap into information like this by looking for a seminar or webinar to attend. A great new way to take a seminar online is called a webinar. The real estate webinar provides you with all the great information about real estate investing but does so in an online format. This is the perfect format for those who value their time yet want and need the experience that a really good seminar provides. The webinar will help you by mentoring you in the things to do and not to do to save you from making mistakes that could cost you thousands of dollars. You can locate a real estate investing webinar online. There are also some other ways to learn about how to buy and sell houses online. Reading articles is a great way to get current information and learn many of the ideas about real estate investing. Look for articles that are from reputable sources. Good articles about real estate investing are almost like having a private mentor helping you along the way. Once you gather basic info about real estate investing it’s time to get serious. Additional training like advanced webinars will give you the guidance you need to get going. Look for a webinar that is taught by professionals who have lots of experience in the current real estate investing market. Expect to get some great tips and tricks that will help you know what to do and what not to do as you proceed forward. Avoiding some of the common pitfalls of real estate investing will help you make large profits more quickly. A real estate webinar will catapult you quickly into successful real estate investing. Since the real estate market is always in a state of flux you’ll want to be sure to get the latest and greatest information possible.

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