Tuesday, July 2, 2013

Property “Flipping” That’s Good for the Soul

Below is a guest post by Frank Bateson.  This is a continuation on our discussion on real estate investing.  If you would like to write a guest post, please contact me.  Click on the About Me link for my contact info.

Frank Bateson is a retired appraiser who is now dipping his toes into blogging. He is considered an expert on Windham NY real estate.  When he's not plugging away at his keyboard, Frank enjoys tracking the stock market and lowering his golf handicap. 

When the great subprime mortgage crash broke in the fall of 2008, I doubt there was anybody working in real estate, banking and finance, development, construction and contracting or any related fields (which means just about everybody) that didn’t feel at least a little sick. For many of us that sensation was the result of several concurrent reactions: anxiety/fear/panic, bewilderment, a mistrust of government and private sector financial prognosticators and experts, apprehension and insecurity about the future, and perhaps the most pervasive (apart from worry) – anger.

In the months that followed a flurry of blame swept through the media and population in general. Who was responsible? Was it Alan Greenspan and his support of deregulation or his replacement Ben Bernanke’s failure to see it coming? Was it President G.W. Bush for likewise backing and pushing deregulation or supporting his Treasury secretary Henry J. Paulson’s 2007 prediction that the subprime crisis was “contained”? Was it the banks and/or Fannie Mae and/or Freddie Mac? Standard and Poor’s, Moody’s and the other rating agencies’ apparent good-ratings-for-profit racket must have played some role in the collapse, right?

All of these entities and individuals mentioned no doubt contributed to the collapse, of course. However, for months if not years after the crisis there was pretty much a 100% chance that any story you encountered on the Great Recession would inevitably contain or close with a high-handed critical rebuke from the story’s author that really, when you got down to it, we were all to blame. If we’d just been a little more responsible maybe we wouldn’t be in this mess. The lion’s share of that blame often seemed to find its way to a particular breed of everyman- the property “flipper”.

Although there are several different subclasses, the species of flipping practitioner most people are familiar with, and the sort that now populates about a dozen television shows (with at least two more reportedly planned by CNBC), is the “fix and flip” artiste. The fix and flipper buys a property listed for less than that property’s value would be if all things were equal. Those unequal things include a house that’s in bad shape or looks like it is, is being foreclosed on, has been seized for whatever reason or often some combination of those. The flipper then fixes the house up and sells it for a profit.

Flippers got a bad rap for a few reasons. They were often considered a predatory symbol of the real estate market’s woes- flash in the pan slicksters who leeched off of honest people by artificially ratcheting up the value of properties that “honest” homeowners would have to pay more for. And unfortunately, there were indeed some scammers who’d work in collusion with each other and either dishonest or inexperienced mortgage brokers, appraisers and loan officers to inflate a property’s real value for shady flipping schemes.
Plus, it’s certainly not unheard of for underhanded hustlers to buy a property with major issues, make some superficial or cosmetic repairs or additions and sell a faulty product as a sound one. One of the most common admonitions of the fix and flip investors, however, was that a house just wasn’t a product meant for the making of a quick buck like doing so with other commodities like electronics, clothes, jewelry or even cars. Houses are meant to be homes and long-term investments that pay off when you move.
There’s something to be said for that perspective, certainly. That being said- even nowadays, with the market the way it is, prospective flippers can buy properties and turn them around for a profit without sacrificing one’s ethical deportment, spiritual commitment, moral code or integrity. In fact, when done right, flipping can do a great deal of good while turning a profit. The keys to doing it right is: having patience, being discerning, being honest and forthright with everyone involved in the process and making a commitment to legitimate property improvement.

Once you’ve gotten into property sales that aren’t costing you sleep at night (at least not because of your conscience) you’ll start to see the positive impact a good flip can have on your community and pocketbook. For instance, every successful real estate turning entrepreneur has an established network of subcontractors and maintenance people in their rolodex. That’s a huge link in the profit chain and obviously you’ll want to establish connections whose credentials, work ethic and honesty you’re sure of. Whenever rehabilitating a property everyone you employ in that network makes an honest buck; and an honest buck that contributes to the quality of a neighborhood.

There’s no neighborhood on the planet that would balk at a house on their block being improved. Improving and beautifying any house, particularly if it was something of an eyesore, raises the property values for everyone in the area. Not to mention that a distressed property has been made livable. Finally, and most importantly, when the house is put on the market an individual and/or their family has a home waiting for them.

As my wife and I bought our first house from a flipper, I know exactly how comforting it is to know that the house you’re buying has recently been inspected, touched up, certified, improved upon and often brought up to code. Had my wife and I bought the house as-is before the flippers had and attempted to hire the various contractors, about whom we’d have known little, and/or work on fixing the house’s quirks and shortcomings on our own, I have no doubt that the money we put in (especially if the hours of labor we’d have spent are included) would have been far more than the final closing cost of the house itself. So all in all, house flipping investors saved us money on the house we bought. Not a bad way to make a buck.

Wednesday, March 6, 2013

What Your Lender Won’t Tell You: Hidden Secrets Coveted by Wise Investors

Below is a guest post by Tiffany Walker.  This is a continuation on our discussion on real estate investing.  If you would like to write a guest post, please contact me.  Click on the About Me link for my contact info. 

Tiffany Walker is a former real estate agent who now enjoys freelance writing.  She primarily focuses on the issue of real estate investing.  When she isn't writing, Tiffany enjoys dabbling in graphic design projects and oil painting.

Mistakes can be looked at as lessons in disguise and true knowledge is gained by either personally experiencing said mistakes or by living vicariously through someone else’s (my preferred method).  Regardless there is something to be said about the way you choose to look at your mistakes as well.  One popular notion that is attributed to this creed might be, “nothing ventured, nothing gained”.  And when speaking about the world of commercial real estate investments, this might be a good way of getting your feet wet in the business.

It’s true, commercial real estate investments offer a wide array of avenues to venture off into and for the savvy investor they can appear to make great choice after great choice, but how is this possible?
Let’s look at a few tips below to help the novice investor get a foothold in the real estate door:
  • Lender/Broker: First and foremost are your own finances.  If you are looking to branch out into the investment territory it will mean throwing in a bit of your own monies, whether borrowed or from savings/investments of your own.  Make sure that your own credit is also up to snuff, the last thing you want to have happen is to find an embarrassing or unknown blight on your report.  Being declined for your first loan is hardly an ideal way to get your investments tools in gear.  After speaking with colleagues and acquaintances, try to get a few names for potential brokers/lenders.  After all, having someone recommended by a trusting friend, might be reason enough to set up a meeting.  Make sure to have at least three candidates, it wouldn’t hurt to hear about other’s track records and approaches when it comes to investment opportunities.
  • Real Estate Hunting: Yes, you might go the realtor route, or you could get in the hunt yourself, sometimes hitting the classifieds and just walking through your target neighborhood can sometimes reveal that hidden gem.   Keep your ears open, you never know when a deal could literally fall on your lap, a friend of a friend could be in dire straits and wanting to unload a property quickly, but you’ll never be able to get in there without a little effort on your part as well.
  • Be Determined: Sometimes the difference between your bid and the next guys is persistence.  Be willing to work and compromise to make a deal that was heading south, climb out of the frigid waters of Failures Ville and into the calming pools of success!  And sometimes you just have to learn to walk away.  As a savvy investor, you will soon have the ability to pick up on properties that are worth the extra effort.
  • Tricks of the trade: This means having a good list of appraisers and inspectors, reputable people that you can rely upon to give an honest assessment.  If you are at a point that you are considering making an offer on, be smart and above all, patient.  The last thing you need for your profits is to get stuck with a property in dire need of major renovations; repairs you could have potentially avoided had you taken the proper time and techniques for fleshing out riskier investments.  Have a team approach to your investments and make sure you’ve got all areas covered, from finances and assessments to contractors and agents.

At the end of the day, purchasing commercial real estate can be a worthwhile opportunity to watch your saving grow and be an active participant in your own investments.

Be smart, patient and persistent.

Wednesday, February 20, 2013

Best Practices For Investing In Real Estate

Below is a guest post by Doug Chapman from HomeDaddys.  As I mentioned in my previous post, real estate investing is a viable way of making good money; this post will give you some more insight on that topic.  If you would like to write a guest post, please contact me.  Click on the About Me link for my contact info. 

When you are thinking about buying real estate, it sometimes gives us all a little bit of an uneasy feeling of whether or not the investment is going to be profitable or not. It isn’t just about buying your dream home anymore; it has become something that many people have done on the side to make an investment both personally and professionally for their future.

I’m at stay-at-home dad but I also do real estate investing on the side, so I have direct knowledge of what are the best ways to go about investing in real estate. It is more complicated than we all think, but it also has the chance to make profitable gains. Don’t get me wrong, there are risks involved and not everything will always pan out, but if you follow the right guidance there is a chance for success.

When I first started an investing real estate gig on the side to help provide more financial support for my family, I got to pick the brain of Del Walmsley, who is big in and around the Houston area after he successfully made his real estate investments a major success in a very short amount of time. His advice, along with hours and hours of research online and in print, got me to where I can confidently speak about what the best practices are for investing in real estate.

Investments as a Rental Property:
This is pretty much the most common practice of investing in real estate. If you buy the property and are the landlord, you obviously are in charge of paying the mortgage, taxes and upkeep costs of maintaining the property. However, being the owner, you will charge enough rent to make up for the costs of these mentioned items as well as possibly making a small chunk of change above the monthly costs for general maintenance. One method that typically works though for the long-term investment is to exercise patience, charging the bare minimum at first to cover the definitive costs of the property and wait until the mortgage is paid off. At that time, the most profits come into play because not only will the property have upped it appreciation value over time, it will also have stood the test of time where it will be a more established property down the road.

However, there are risks as well that you will need to take it upon yourself to manage properly. The amount of time you invest into the property may become a factor, maintaining it appropriately to get the most of the investment. And you need to make sure you always have a tenant, because if not your monthly value cash profit diminishes. A good marketing plan is needed to ensure you always have a tenant, and a property manager, whom you would have to pay, can easily take on the basic upkeep and maintaining of the rental property.

In-Depth Knowledge of Property Investments:
This all sounds fine and dandy in taking the calculated risk of making profits on investing in real estate, but you need to make sure that you don’t just jump into the process before doing all of the proper research. And I’m not talking about just leafing through the internet and reading a few articles. I’m talking about gaining the expertise that will be necessary in making the most off of your investment. This includes understanding the laws and regulations of managing a property, as well as having someone who is already in the business in your back pocket to guide you along. Too many times people that have a few extra bucks and want to instantly try making a profit on real estate investing, and they turn out to have major financial losses because they didn’t do the diligent work on the front end to help in the long run.
You need to know whether you want a residential property compared to an office space, industrial or retail. There are so many minute details to each separate property that you want to make sure you focus on just one of the potential properties, rather than trying to explore many different options, at least from the start.

Investment Groups:
When you join an investment group, you are placing your property into a pool of investments with other investors, allowing the company who operates the investments run the many different properties among your group. This might alleviate the hassle of the daily/monthly upkeep of the property that you personally are invested into. The company will do the dirty work and take a portion of the profit, but by being in the investment group it takes away the pressure of having vacancy in your property while still making enough profit to survive in the short term.

In the investment group, members typically work together to understand the current market trends and how to best maximize the profits from them. The group also allows members to become more and more familiar with how to manage your property best, and you also tend to gain extensive information about investment practices.

To conclude this brief, Cliff Notes version of investing in real estate, please make sure you realize that there is definitely a ton of potential in investing, but you need to make sure your decisions are based on what you’ve learned throughout proper research rather than just making a knee-jerk reaction. Your profits will benefit greatly by taking the extra time to learn exactly what the ins and outs of investing in real estate are.

Author:  Doug Chapman is a staff writer for HomeDaddys, a stay at home dad blog.  He specializes in diapers and sippy cups, but is a successful real estate investor on the side.