Investment Properties Guide

Posted: Buying Investment Property

Open houses are a good time to explore new properties

Look in newspapers, on the internet, and go through real estate brokers. When finding a real estate broker, respond to an ad that looks somewhat intriguing rather than call and ask them directly. You will find that the broker will be more willing to help you if you are a possible sell to one of his properties that he or she is already trying to sell to someone rather than try to approach him or her cold.

Do not worry about the commission that you will pay the broker. They will definitely earn it, as they can find better financing than you can. Also, they can especially find better property than you can. Think of real estate brokers as fetch-dogs. They can catch much more game than you alone can, but you must give the dogs treats for their work, or they will not be interested in helping you.

We must say a bit more about real estate brokers’ commissions. They definitely earn it. Many people think it’s a good idea to get their real estate license so that they do not have to pay commission to a broker. If you think this way you will get yourself into trouble. You are forgetting that you are investing. Investing involves spending money to make more money. You want the maximum back from the money you spent; you shouldn’t spend your time trying to find ways to spend less. You should instead want to spend as much as possible, because you are going to get plenty back on each dollar you spend. The more you spend the better. This is especially true with property and real estate brokers. They are in the market and have their eyes on it. They are much more likely to find you a good piece of property with good financing than you are. Let them have the commission and take your fantastic property which will be the beginning of your fortune. Surely you can pay them some money if they ensure you a much bigger head start to your fortune than without their help, can’t you?

Remember, when you go shopping, you should take a good, hard look at each property, rather than just skim though lots of them. You want to go inside, investigate the whole thing inside out, rather than just simply examine the property from the outside.

When you find a property that suits your needs, you should buy it as soon as possible. William Nickerson said it best: “You should start as soon as possible, with financing as heavy as possible, always with the safety proviso that the mortgage payments can be handled from the property income after expenses are paid.”

Posted: Buying Investment Property

Your property will be safe from fluctuations in the economy if you follow these simple rules

Your first property choice needs to be a good one; it is best to start out on a good foot. Luckily, picking a good property is neither hard nor does it require much technical knowledge. Remember our previous posts – you must always keep property improvement in mind. Look for property that is structurally sound (will not need a new foundation poured, does not have excessive dry rot or termite damage, etc.). When you find a property that is structurally sound but is in need of repair, you should estimate the cost of repairing; the cost of bringing the property up to good condition needs to be less than that of the new construction cost of the home.

When looking for property, you should also make sure that the income from the property be sufficient to pay the mortgage and operating expenses (insurance, tax, utilities if not paid by the tenant, etc.), and even then, it should still spit off enough extra money to give you a decent return. You will not get huge returns when buying small properties such as your beginning ones.

It is best, when looking for property, to find property whose rent is a bit less than that of the average rent in the area. Many people look for property that is a bit more luxurious; therefore, demand a bit higher rent, because they think they will make more money. That’s true; they will make more money, if they can rent it. While it is great when times are good, your less expensive properties will be much more likely to attract tenants when the economy is bad. You should always look for property that is a bit less expensive to rent than the average in the area.

Also, when looking for property, try to make sure that the rents do not exceed weekly take home pay for the average earner in the area. You do not want tenants who can barely afford to live where they are; you do not want tenants who are neck deep in expenses, because they will take off to a cheaper property when given the chance. So, these two concepts combined produce a valuable rule; this rule determines how you look for property: your property’s rent should be a bit below the average weekly take-home pay of the average worker in the area.

Given this, you want to buy the biggest property you can possibly afford; this will serve you better than being “safer” and buying smaller property. Remember, the bigger the seed you plant, the bigger tree you will have.

Remember the rules established in this post when buying property, and you will have very safe investments; your investments will be safe even from fluctuations in the economy.

Posted: Buying Investment Property

Apartment Buildings

When most people buy property, they think of good locations, and they hope the location they pick will appreciate. If it does appreciate (and it usually does), then their investment has been successful; this is their strategy.

Unfortunately for these people, this is a very poor strategy likely to produce only meager results. The reason is because appreciation is only third in importance. Ranking ahead of this is property improvement; property improvement is a sure way to increase your equity and guarantee yourself a profit. This is critical and must always be kept in mind when buying investment property. But, ranking ahead of even this is maximum financing. You should try to finance as much of your investments as possible. A 100% financed investment property is ideal; since you put no money into the property, the return is essentially infinite (you never put no money into property, but the principle is the point). However, 100% financing is a thing of the past now, as banks were hit hard by the riskiness of it. You should plan on putting about 20% down on all of your property.

Sometimes, instead of property improvement, you can improve the operations of the property. This includes raising rent, lowering expenses, paying employees the correct amount, etc. This discussion is more fitting to larger apartment buildings than it is to smaller buildings, which is the starting point in property investment.

Beginners will not focus on commercial property; commercial property is far too risky for the novice. Commercial property comes in many different flavors. There are warehouses and office buildings and strip-malls and many other types of commercial properties. Each one of them must have many employees (hotels included), and they are considered businesses, not real estate investment. On the other hand, houses and apartment buildings require very few employees to run and operate the property. This is your best friend. You want as little hassle as possible. This is not because you want to take it easy, but because you know very little about property investment and you should not get yourself in the middle of something that will go way over your head.

Residential buildings have very few vacancies. They are always in demand; people always need places to live. Office buildings might rent well while a business occupies them, but they might pose to you a problem finding new tenants after that business leaves. Residential buildings, however, are needed by anyone and everyone. Apartments are easy to fill, and they take advantage of the pie concept. The pie concept is that each piece of the pie, when sold individually, will bring in more revenue when totaled together than the pie sold whole would. With a single family home, you are selling the whole pie. But, with apartment buildings, you are selling the individual pieces.

Our strategy is sure to create success for you.