How to Succeed at Real Estate - Installment 1

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.

Have you ever seen those people who drive big expensive cars, seem to have no worries in the world and envy them from the moment you first lay eyes on them? Do you wish you could live their life? What do you think when later you find out they are so successful due to real estate? I am going to help those average Joe’s amongst us find the information and tips they need to become successful at working in the real estate field. No, I am not talking about going and studying for a Real Estate License, I am not even talking about doing handyman work. I am talking about plain and simple real estate investing.

How nice would it be to own numerous pieces of property that are all able to make you money? It would be wonderful to most people. Real estate investing is not something for everyone however, often times you must be ruthless and calculating to actually succeed. As with any other business, you really need to set goals and attempt to meet those goals as much as possible.

With real estate, there are some characteristics that will help lead to success, and others that tend to lead toward failure. Characteristics like desire and drive, optimism, courage, discipline, determination, commitment and dedication, perseverance, high self-esteem, and organizational skills. Some of the characteristics of failure include procrastination, poor self-control, lack of willpower, and lack of resolve, pessimism, low self-esteem, as well as disorganization.

While these are not sure signs of either success or failure, they are good indicators of whether or not a person will succeed. I am sure you have noticed that the characteristics to succeed in real estate are quite similar to the characteristics in other fields and business opportunities. Perhaps you wonder why should someone invest in real estate instead of investing in the stock market, or perhaps even a savings account?

Quite simply real estate offers something real and tangible that can be liquidated should the need for quick funds come up. Real estate also offers something real that can be used as collateral to continue building your real estate business. I am going to take some time to help educate people in ways to make money from real estate.

Keeping in mind the purpose of a business is to make money, you must use some discretion as to what properties you choose to buy and invest in. Remember that if you are able to pick up a piece of property for a very low price, it may not be worth it depending upon what is wrong with the property to make it appropriate to either sell or rent. We are going to spend the next several installments teaching as much as possible about the real estate market in a beginners course so that those who are interested in learning can learn without spending a small fortune to learn.

How to Succeed at Real Estate - Installment 2

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.


We are going to start investigating everything that is possible to help the average person succeed in a real estate market. Please realize that this guide is not meant to replace the information that a legal attorney can give relating to the legal issues involved in real estate. Also realize that to really succeed in real estate it is a good idea to have a real estate agent or two that you are comfortable working with, who will call and let you know about properties as they become available that fit into your interest groups. Whether your interest group focuses around the number of bedrooms, location, or the style of the house, or even the asking price.

While some real estate does plummet in price after it is purchased, most real estate goes up in value. If a piece of property is well cared for, and maintained then it is very hard for the value to go down. If however, you do not provide maintenance on your property, and allow them to become rundown and abandoned looking, they will quickly lose value. As with any business, you want your property to be worth as much as possible to see the best financial rewards.

Real estate shows a huge income potential. I will explain several of the ways in which real estate can help increase your income and net worth. Most people think that real estate is only good for buying and selling, however real estate has so much more potential than just being bought and sold.

One option is purchasing property to use for rental property. Rental property if it is properly managed. Being properly managed is so much more than just making sure the roof doesn’t leak and the floor is not caving in. Managing property involves making sure that remodeling is done at times to keep the property modern and up to date. Property at times need new paint, a door replaced, windows replaced, new water heaters, landscaping and so much more to go into the property itself. Responsible property management also includes carefully screening the potential tenants to make sure you choose responsible tenants who will treat the property with respect instead of destroying the property.

Another option with real estate is asset growth. What this means is the property is most valuable to you, simply because you own it. You have no real interest in selling it, but keep acquiring property to increase your portfolio. Most who are interested in this aspect of real estate do typically end up renting their property out. This way the property is able to support itself in rental fees, as well as increase equity for the owner.

Yes, another option exists; with the right accountant, you can save loads of money on your income taxes. To see the best results from this you need a good accountant who is able to find as many deductions possible to save you the greatest amount of money.

One of the biggest advantages to having numerous pieces of property is the fact that once they begin to gather equity, you have several options to pull equity out without having to sell the property which will be the best financial option overall. It is important to pull as little equity out of your property as is necessary, everything that you take out in equity is lost against your assets, as well as the fact that it must be paid back. When you pull out equity there are interest rates and fees associated that could potentially eat up your benefits if you do nothing but continuously pull out the equity.

While owning real estate has great financial benefits, some people also enjoy adding the property to their portfolio. They enjoy finding that special piece of property that ads something they desire to help increase their overall worth. Some investors stick to single-family units, while others focus on multi-family units. The choice is up to you, and the area in which you live. I personally recommend purchasing property near where you live so that you can learn to manage your property yourself instead of having to pay a property management company to do it for you.

However, this is not to say that if you find a good deal you should pass it up because it is not in your area. If the deal is good enough, then the hassle of it being in a different area can be worth it. Check back in the next installment for more information on building your real estate business.

How to Succeed at Real Estate - Installment 3

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.

While it is a wonderful idea to get into the real estate business, it is important to stress the fact that you must make goals to help guide your business. Your goals need to be long term as well as short term. While you are making goals, you must make sure you are making plans to actually help you achieve your goals.

If you are trying to make a good business from real estate you need to invest in a planner to help you keep your contacts organized, as well as make sure you schedule time to actually actively look for property. If you do not schedule time to actually look for property then you are mostly relying on luck and chance to help your business grow.

You must also schedule some time to start looking for good repair companies. At some point in your real estate career, you will need the services of a plumber, electrician, and a handyman. If you have already done the grunt work of finding someone who you like and trust, then you will save yourself a lot of time and effort as well as wasted money when you are trying to quickly find someone at the last minute to handle your repair emergency.

Repair staff is one of the most valuable contributions to your real estate business. Whenever possible seek the advice and referrals of other real estate investors and real estate agents in your area. If you have used any repair companies with your own personal house then they often make a great place to start with if you are satisfied with their work.

While you are working on building a schedule, make sure you are scheduling time to find a good attorney and accountant. If you have any questions or concerns about any property transactions these people should be one of the first that you seek advice from. Often your accountant can show you good financial reasons to either finish a transaction, or walk away from a transaction.

Take the advice from professionals that you retain to help your business grow. Most of the time they will not steer you wrong, their success relies upon your success and repeat business as well as the good word of mouth advertising that you are worth to them. Use them to your benefit whenever possible.

Now that you have your organizer and know what you need to do to get started, make sure you actually take it with you! The planner will do nothing for you when it is sitting on your desk at home while you are out scouting for property and meeting potential repair staff. Use your planner to take notes about the things you see, and who you talk to that may be useful to you in the future. Even if you dislike a piece of property or a person, make note of that to save yourself time looking at the same property or speaking to the same company in the future.

We have now covered the organizational needs for a real estate business. We will return in the next installment to discuss credit matters and how they can affect your real estate business. I highly recommend checking my article entitled Financial Tips for Those Looking to Buy a House for more information to help improve your credit.

How to Succeed at Real Estate - Installment 4

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.


Many people are able to become successful at real estate and never use their own credit. However, those people are rare. Most people will look at your credit at some point, if not for the mortgage them for a credit account at the local hardware and building supply store, a repair business, and various other uses. Your credit will speak volumes about your business, especially in a high dollar field like real estate.

Your credit does not have to be stellar to purchase a piece of property. However, it is always wise to know what is on your credit before even beginning a business like this. Go and pull your credit at all three bureaus and ensure that all information is correct and accurate. If you find inaccurate information, ensure you do a timely dispute to get it corrected.

Once you have a nice and clean corrected credit file, you are going to need to keep close tabs on your file to ensure it stays accurate. Remember one false mark on your file can cost you thousands of dollars in interest fees. There are numerous credit monitoring services that you can sign up with that will assist you in keeping tabs on your file. The best offers I have seen, typically offer free unlimited copies of your report through the bureau in which you have purchased the membership.

For example, Equifax offers a 3 in 1 monitoring package that costs less than $13 a month, this includes one free 3 in 1 report and then unlimited free Equifax reports. Most bureaus offer this type of package. The rates will vary depending upon the bureau and the benefits that are offered along with the monitoring service. While it may seem like a waste of money, it is important to make sure all information is accurate on your file, and well worth the expense to an investor.

One useful tool, which will help your credit as well as help with emergency expenses, is a good credit card. A good credit card with the lowest interest rate possible will assist in paying for repairs as they come up, as well as help build your credit rating as long as the card is paid off and kept in good standing.

As you have seen, having good credit is essential to building the best financial opportunities possible. However, even those with bad credit are able to have a real estate business. If you have bad credit, you may need to start with a secured credit card in order to start building your financial future. Seek the help of a credit counselor if you have bad credit that is in need of repair to get the best possible advice. Another option is to seek the advice of your attorney and accountant in regards to cleaning up bad entries on your credit. They can assist in making a payment plan, or securing a settlement offer for bad accounts that appear on your file.

In our next installment, we will be covering a support system that you should have in place. Remember the purpose of this guide is to help the average person who is looking to help improve their financial state and build a steady real estate business, one successful transaction at a time.

How to Succeed at Real Estate - Installment 5

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.

When you are first starting out in a real estate business, you need as much support as possible. This support includes your repair staff, the attorney, and accountant you are using, and even the space in which you work. While this may seem like common sense, many people avoid and overlook the most basic support systems in favor of saving money.

One of the first things you need for any business is an office, or at the least a desk. Many people have suggested over time a closet; I personally do not like the closet idea since it tends to be so small as well as dark. To be an effective office, most people need good lighting as well as a positive atmosphere.

If you are using a space for an office that you are unhappy with, you will tend to avoid it like the plague. You must make sure your office has a few touches in it that you enjoy looking at so that you will not make any excuse possible to leave and avoid working. Your desk is the same thing, if you are not happy with it, you will avoid it like the plague as well.

Your organizer is another piece of important support equipment. This will become your scheduler, address book, and note pad all at once. It will help you organize that vital information in which you need to access quickly to make informed decisions. Your planner needs to have plenty of writing space so that you can make notes on all of the properties that you scout. Regardless of your purchasing decision, you need to keep the notes on the property for future reference.

A phone is a very much necessary item to have in any business. Real estate is no exception. Remember the real estate agent I talked about before. If you have developed that crucial relationship then you need a phone so that they can quickly get in touch with you in the event that a great piece of property appears on the market. Being able to get in touch quickly means an increased chance at nabbing wonderful pieces of property.

Computers are now also a great piece of support. Having software that will help keep you organized is also necessary. From a word processor to write contracts, to a spreadsheet software to keep a spreadsheet of your properties and their expenses computers can do so much. Software is available that will help you manage your cash flow for each property, as well as all of your properties overall. Never scrimp on a computer, with today’s changing technology buy the best computer you can afford so that you are not out of date immediately upon purchase.

Internet access is also very important. Being able to access the internet from your home and office will enable you to do some much needed research into property values, scout some properties without leaving your home, and even search for repair staff. With internet access, you will likely receive the next important item- e-mail. E-mail is something that is a great time saver to so many, and having it will speed up your response time and enable you to work more efficiently.

If you are choosing to do rental with your property then you are going to want to decide if you want to use the services of a property management company. They will save you loads of time; however also eat into your profits. If you so choose to use a management company, you need to shop around for one, in which you feel completely comfortable and confident in their ability. Ask about their rates, hours of operation, how quickly they arrange for repairs when necessary, and how they screen potential tenants.

Title Insurance is another important investment for the real estate investor. Consider that you will be doing a lot of business with the person; you need someone you enjoy working with, who is honest and willing to work with you to always insure the title of any property you bring. The better the relationship with the person, the more likely you are to have smooth transactions.

An appraiser is also an important person to work with, they can assist greatly in the appraisals of property you are interested in purchasing. While most sellers have had their property appraised, you never know how honest and trust-worthy their appraiser is. Having someone you, trust is important so that you know for sure how much the property is potentially worth.

A banker is also an important contact; this is the person who you will be working with quite often when mortgages and other financial needs appear. You need someone who works at a good reputable bank that treats you with respect. You will want to avoid banks that are rigid, and unwilling to develop a good working relationship with you and value your business.

To make sure your potential property is safe, and see exactly what needs to be potentially fixed with the property, you need to find a property inspector. You need someone who is honest, good, and skilled. You do not want someone who you have to follow around constantly because you do not trust them. You want someone who is able to put you at ease. A good property inspector can help you make very informed decisions about all of the property you are considering buying. Some houses are hiding very major problems underneath the foundation that the average person is not able to notice.

While we are discussing important people, let us not forget one of the biggest key players. An insurance agent. You need someone who does not mind handling multiple properties, with various types of policies depending upon the exact needs of the property.

We have now covered the basics from who is important to helping you succeed, what essential equipment and supplies you need, as well as important credit matters. We are now going to proceed along in the next installment with much more information in Installment 6 we will cover how to find what investors describe as flexible sellers, what that means and how they can be very beneficial to the starting investor.

How to Succeed at Real Estate - Installment 6

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.

We have covered a great many topics and now we are going to move along to how to find flexible sellers, what that means to you, and how you can use a flexible seller to your benefit. While some people are fortunate enough to have enough credit, or cash on hand to outright purchase property, most beginning investors need to find those who are willing to work out special financial deals of some sort in order to actually get started. Most people do not have credit that is strong enough to hold two mortgages, not without putting down a quite substantial down payment, enter now the flexible seller.

Flexible seller does not describe a seller who is willing to sell on the weekend, or even in the middle of a football game. Instead, it describes the type of attitude that the seller has towards the sell of their property. A typical flexible seller is someone who needs to get some money out of their property quickly, as well as has no desire to continue owning the property for whatever reason.

Reasons why someone would want to quickly get rid of property can include but are in no way limited to; divorce, unemployment, impending foreclosure, job transfer, property management problems, and being unhappy with the purchase for some reason or another. The more desperate a seller is to get rid of a piece of property, the more likely they are to be flexible, which means the more likely you are to be able to work out a mutually beneficial arrangement.

Flexible sellers are typically flexible in either the price of the property they are selling, or the terms in which they will sell it. Those who offer owner financing are flexible sellers. Those who offer to hold a second mortgage on the property to cover the down payment are also flexible sellers. These will be some of your most valuable sellers over the course of your investment career.

If you pay close attention to ads, you will come to easily spot those who are flexible with those who are rigid. Those who are rigid will not negotiate any of the terms of the sell, they want their money, for the exact amount in which they have, the property listed for sale, and will not budge a penny from the asking price. Unless you find a very desirable piece of property that, you badly want for some reason these sellers tend to be more difficult to work with.

Remember the more desperate the seller is, the more likely they are to accept flexible financing options so that they can quickly close the sale of the house and move along. Flexible sellers are in for fast closings and do not want time wasted with a dog and pony show when they could be showing their property to other interested buyers. Make sure, if you are interested, you ensure the sellers realize how interested you are, but that you want to come up with a mutually beneficial arrangement for you both.

In the next installment Installment #7, we will cover what type of property is generally most desirable from an investment standpoint, as well as some tips and strategies on how to locate these desirable pieces. Continue taking notes, and start looking in the paper to get a feel for your local real estate market as you continue learning and growing as an investor.

How to Succeed at Real Estate - Installment 7

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.

For this installment, we are going to get right down to the nitty gritty business of determining exactly what property is the best for investment purposes. As I am sure, you know there are several types of property. One type is vacant lots; these are pieces of property that have nothing but a few trees, some grass and probably a few insects on them. There are no buildings of anything else on them that can give the potential to generate a cash flow each month.

Another type of property is commercial property; commercial property sums up anything and everything that has to do with businesses, and is zoned as such with your county. This can be something ranging from a bank, to a tattoo shop, to even the grocery store down the road. The types of commercial property range greatly from a parking lot, to a 100-floor building to almost anything in-between.

Next, we have residential property; this includes several subclasses of property. Residential property is any property in which it is zoned and fit for habitation, meaning people live there. The subclasses of residential property include single-family homes, apartment buildings, and multi-family homes such as townhouses, and duplexes. While single-family homes are more common and can be purchased cheaper, there are some great deals floating around the real estate market for multi-family housing units. The costs for multi-family units must be carefully weighted, especially since they typically cost so much more than the average single family home.

The final property type that we will look at is called distressed properties. These are often the best place to invest money. They are pieces of property that have been neglected, and therefore need some serious TLC to help restore the property to the grander and honor that it deserves. Yet they are a gold-mind. At the hands of the right investor, distressed properties can have an incredible return rate on the investment. Consider for example, if you purchase a distressed home for $10,000, then put in another $10,000 in repairs, however you are now able to rent the home for $500 a month, it is only a matter of a few very short years before you have your money back out of the house entirely. This is something that many property owners pray for the opportunity to be able to do. However, single-family housing is not the only type of housing that can be distressed, multi-family units as well as commercial property can also be distressed. Less often vacant property can even be distressed, especially if the owner does not have the time to maintain the grass and the property becomes overgrown and the city starts complaining about its appearance.

As you are looking at property, you will begin to notice a price scale. This scale ranges starting at inexpensive, then progresses to moderately expensive, then expensive, and finally ultra-expensive. Most of the properties that will give you the best return on your money will be in the inexpensive to moderately expensive range. To determine the exact range for your area will involve a bit of research into current market value, as well as recent sale prices of other property in the same neighborhoods in which you are scouting.

As you have learned in this installment, the best option for investment is the lower price ranges of property. You want to keep your investment expenses low so that you can make as much money as possible, after all without making money you are not a very successful investor. Now that you know the best types of property, as well as the price scale you should be looking at, you now need to spend the time doing research in your area for the specific price scale you should be looking at, as well as starting to call some sellers in your area so you can gain valuable telephone experience.

How to Succeed at Real Estate - Installment 8

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.

Anytime you are looking to make a profit from any business you need to know some of the inside tips and suggestions on how to market the fact that they are looking to invest without spending loads of money on a marketing strategy. Everyone has personal preferences in how they prefer to do business, however these suggestions are ones in which they are versatile and able to offer the most flexibility to be adapted to each investors preferences.

Newspaper ads are an incredible tool. First, there are ads where you advertise you are looking for property to buy, as well as ads where you are looking to sell property, and even ads for renting your property you own. You can see how newspaper ads can be very flexible. In any business, you want things to be as flexible in your favor as possible, and few can compare to newspapers.

Another great marketing tool is business cards. If you have read my other articles, I am sure you are noticing this is not the first mention of business cards. These little buggers are very important to help people remember you, it is quite simple to design your own cards, or use a printing company to design and print your cards for you. Either option you choose should be viewed as an investment in your image.

Most people do not realize the impact that a flier can have. Fliers are great ways of getting as much information as possible out to people in an area that you are looking to invest in. Fliers are great to put up on power poles and other places where they are allowed to let property owners in your desired area know who you are, as well as a bit of information about what you are looking for.

If you choose to go with a massive flier campaign, then an option to look into would be the purchase of a good printer/ copier combo. This way you can save printing copies by doing the majority of your copy work yourself, instead of having to find your nearest copy center and pay more for the copies. This requires having a good quality printer to use if you choose to go the do it yourself router, bad quality printers will result in bad looking copies which will reflect poorly on your image as an investor.

In the next installment, we are going to cover how to interview sellers to determine which truly are going to be easiest to work with. Learning how to interview people is a skill that takes much time and effort to master; few people are born with a phone stuck to their ear with a natural knack for extracting information out of the shiest person on the phone.

How to Succeed at Real Estate - Installment 9

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.

For this installment, we will learn how to interview prospective sellers to find the best sellers for your needs. Remember those sellers who are flexible are most likely to work out a mutually beneficial agreement in regards to either price, or terms of the sale. While some sellers are flexible in both regards to price and terms, others will only be flexible for one or the other.

As you are speaking to different sellers, you will come to learn how to feel them out just based upon their attitude and tone of voice; however, until then you need to ask a few specific questions to help you determine if they suit your needs. Once you have asked the necessary questions to make your decision, you need to file the property as well as the sellers’ notes away in a file for easy reference. The sellers should be broken down into either good, flexible, inflexible, or rejected.

Obviously, you are not likely to desire working with a seller who is in your rejected pile, unless the property has an incredible either price, or has some other extremely desirable feature. Those who are in the good pile, as those sellers who tend to be flexible in both their price and the terms of the sale. They are the most desirable sellers, as well as a bit harder to find. Flexible sellers represent those who are flexible in either the price or the terms. They are not as flexible as the “good” sellers however, they are still useful.

The last and final group is those in the inflexible category. It is not worth writing these off entirely, after all circumstances may change and someone who was once rigid, may suddenly find themselves forced to liquidate property very quickly and suddenly they are very flexible. These properties can often make the best deal because the seller becomes desperate to get rid of it and move along with their life for some reason or another.

When talking to sellers on the phone make sure, you are polite and listen to what they are saying. You should never call anyone unless you have a pen and paper with you so that you can take notes. You need to find out as much information about the property as possible over the phone so you know if it is worth taking the time to look at in person. If however you find yourself playing phone tag with a seller, take this as a sign that they are busy, and unlikely to have time to be rigid, and more likely to be flexible, or become flexible as they discover how hard it is to sell property when playing a rousing game of phone tag.

In the course of the conversation with the seller you need to find out where the property is located, what type of property it is, who specifically owns it, what is the asking price, the exact size of the property, and if a real estate agent or broker is involved in the sale. These are all very important pieces of information for a buyer and investor to ask of their potential seller so they have a very clear picture of the property they are considering.

Examples of the type of specific information you need to obtain include the sellers name (this is very basic, but often time the novice will forget this extremely important piece of information), the property, this includes location, size, type of property (i.e. multi-family, duplex, condominium, single-family house, etc), the price of the property is also important. Other important pieces of information include existing financing, sometimes great deals can be found on the market in the form of assumable loans find out if this is possible, and if it is who is the lender, how much is owed etc. Some sellers are willing to assist in financing, you need to find out if your potential seller is willing by asking, also ask if how much they would need in the form of a down payment, as well as how much cash they need at closing. Most sellers have specific needs that must be met in order to be satisfied with a sale.

At this point, you should be able to notice that a lot of information is required from the seller before you even consider going to see the property. Continuing along with other vital information is how long has the property been on the market, the longer it is on the market the more likely the seller is to be flexible. Property that has been on the market a mere days has not had time to begin wearing down the sellers with the numerous phone calls and property showings that accompany it.

From an investor standpoint, there are also several very important questions that must be asked to gather a good picture of the overall situation. How long has the owner had the property, as well as why they are selling, some are selling because the house is in need of too many repairs and they simply cannot afford it any longer. While some houses in this condition make great deals for an investor, it is best to know upfront so you can make an informed decision. Other good questions include what the seller likes or dislikes the most about the property, if there are any renters in the neighborhood, or is it strictly homeowners and finally if the seller would be willing to work out a lease option. A lease option is often a great solution to a need for flexible financing.

Remember your goal is to get as much information as possible about the property over the phone so that you can make an informed decision about whether it is worth your time to go look at the property. Not every property you call about will be worth going to look at in person, as well as not all pieces you look at in person will fit into your needs and what you are really looking to buy. By making good phone calls you will save yourself travel time and gas from running all over town looking at properties that do not suit your needs with sellers who you do not want to work with.

In the next installment, we will cover some of the methods used to value a piece of property. Remember often it is the value of the property that determines how good the investment will be. You do not want to ever pay too much for property, else your investment is a bad choice that is unlikely to make you much money, or reap many benefits for your investment business.

How to Succeed at Real Estate - Installment 10

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.

No matter how flexible the seller is, the property is useless to you if the value of it does not support what you are considering buying. For example, there is no point in paying $200,000 for a house in a neighborhood that has houses that sell in the average price range of $60,000-$70,000. The chances of making money in a deal like that where you are paying that much over the typical market value of a piece is very slim.

A business exists solely for the purpose of making money; without making money and being profitable there is no way that, a business will succeed much beyond the infancy stage. My goal is to help you make the most informed decisions possible so that you start the real estate market a step ahead of others who are having to do their own research instead of reading my guide that has all of these tips and suggestions.

Property has several different ways of determining value, different aspects of the value effect the value differently however. Objective and subjective factors both play into effect in the value of the property. Objective factors include how many bedrooms, how much square footage is livable, how many bays the garage has, how many bathrooms, and other factors.

Objective factors directly influence how much you can get from the property in return for what you put into it. Other than the building specifications, that help effect the value of a house, the condition of the property is in is also quite important. A house in poor condition is not worth nearly as much as a house that has been kept in tiptop shape over the years. Water damage, termites and ancient windows can all add up to big remodeling expenses that must be factored into the price of the property to determine how well the value holds up.

Subjective factors tend to be tied closer to the color of the paint, the style of the house and other highly personal things about the property. Some people may discover they only buy houses in which the driveway is on the left, and they dislike those that have right sided driveways. These are all subjective factors; however, it is not the complete list of subjective factors.

There are several methods to use to determine the value of property. These methods are Market Sales Approach, Reproduction Cost Approach, and finally the Net Income Approach. While these sound very complicated and scary, calm down and take comfort in the fact that it is technical terms and not as bad as it could be.

Market Sales Approach is used to determine the value of property based upon comparing it to other pieces of property that have sold in the area that are similar in size and location. For example, this method would state that if 5 houses all in the same neighborhood have been sold within the last few months and all sold for approximately $60,000 that were the same size in square footage and comparable in design and building materials that the property we are considering buying should be worth approximately the same thing. Obviously, such factors as condition of paint, appearance of the yard and other small details can make a huge difference in the actual asking price. Nevertheless, this should give you a guide to go with to help make the informed decisions of a smart investor.

However, if you are looking at purchasing a multi-family unit, this becomes a bit more complicated. To determine the value then, you would have to base the value off of either the selling price per unit, in which the total price of the property is divided by the number of units and then compared to other multi-family units sold recently, or by basing the value based upon square footage of the property. This is obtained by dividing the price of the property by the number of square feet in the property, and then comparing it to other multi-unit properties.

Seemed quite complicated at first, however as you can see it is really quite simple. To use this method you must be willing to put some effort and research into your local real estate market to make an informed decision. Next method to look at is a bit more complicated and does take quite a lot of research and attention to detail. Enter…drum roll please… Reproduction Cost Approach.

As I am sure you can guess, this method focuses on determining the value of property based upon what it would cost to you guess it reproduce it. This means find a comparable piece of property that is empty, as well as determine based off building materials and square footage how much it would cost to completely “clone” the existing property. Once you have arrived at the price to reproduce the property, you need to take some away to account for wear and tear that exists in the course of a lifetime for property, scuffed floors, a small dent in the siding etc. This is not your Reproduction Cost Approach. As you can see this method is much more complicated than the Market Sales Approach. Proceeding on to the final method, we arrive to Net Income Approach.

Net Income Approach simply takes into account the amount of income the property can generate for you. For example, if you have a house that rents for $600 a month, that is $7200 a year. Most investors are looking at a 10% return rate on their investments. This means that for a house of this standard, you do not want to pay more than $72,000 or else your return rate will be lower. As you can see, this method of determining value is of little use to the average homeowner who is purchasing a home for their personal use. However, it is very important to the investor who is looking to make money.

In the next installment, we will cover Cash Flow Analysis, and how to determine if a potential piece of property is good to invest in based upon this analysis. Cash Flow Analysis are very important reports that can tell you a lot about how your investments are doing, and as such important documents deserve their own separate lesson or installment on them. Remember, keep making those calls and taking notes. Now that you have the methods to determine the value of property, you can seriously look at some of the properties you have decided to look at to see if they are financially feasible.

How to Succeed at Real Estate - Installment 11

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.

As you start gathering momentum in your real estate career, you will begin to notice a steady pattern of cash going in and out of your pocket. This is considered cash flow in the most simplest form. Cash flow analysis can be as simple or advanced as your needs determine. The investor who has dozens of property will likely have a much more advanced and complicated cash flow analysis than the investor who has their first piece of property.

What this means for you, is there is no reason to start doing advanced and complicated analysis. This gives you the ability to start small and simple and work your way slowly towards the more advanced details that become required later on. This will help make sure you make good decisions because you are able to learn slowly and steadily what parts of the cash flow to focus on to maximize profits.

Your cash flow analysis should at the very least tell you how much profit you can make as well as how much it will cost for you to make that profit. The cash flow will analyze all money that is spent on each property, as well as all sources of income that the property presents to show hopefully if you selected a good piece of property a positive cash flow. A cash flow analysis has four basic areas to it to determine profit.

The first area is gross income, followed by expenses, with debt service and cash flow following behind. The first section is gross income; it is within that section that you will figure out your effective gross income. First, to begin you need to determine the Estimated Annual Gross Income for the property. For example if you are planning to rent the property, then the Estimated Annual Gross Income would be the monthly rent multiplied by 12, the reason for 12 is because you are trying to determine based upon a yearly basis.

Once you have determined the value of the Estimated Annual Gross Income you can move along to Other Income. What this refers to is for example in multi-family units you will often find coin operated laundry services, drink machines, and pay phone, are an example of other sources of income. You want to add together Estimated Annual Gross Income as well as Other Income this will give you the figure for Total Gross Income.

We are not done with the cash flow analysis. You now need to figure a Vacancy Allowance; this is the average amount of time in which you expect the property to be empty over the course of a year. While you can hope to have the property always rented and occupied by paying tenants, there will be a time at some point where the property will either be vacant, or you will not be receiving the rent as agreed. For a single-family unit the approximate Vacancy Allowance should be between 4%-6%, for a multi-family property the Vacancy Allowance should be approximately 6%-8% because of the added units that must be rented. Once you have this number for the Vacancy Allowance, you want to subtract this from the Total Gross Income that we previously arrived at; congratulations, you have now found the properties Effective Gross Income.

Now that we have found our EGI, we are closer to being complete with the Cash Flow Analysis, however we are not done. For the next section of the Analysis, we must look at the expenses of the property. This includes taxes, advertising, maintenance, and miscellaneous expenses. These expenses must be taken into account carefully, for a good set of prediction numbers the average single-family house needs to have between $50-$60 a month, while a multi-family unit will only require $40-$55 per month. Your advertising expenses will be the expenses of advertising your property for rent when you experience a vacancy.

Now that you have arrived at each of the individual numbers for taxes, advertising, maintenance and miscellaneous we need to add those all up together. This number is our Total Expenses. We now need to subtract the number we arrived at for Total Expenses from the number we arrived at for Effective Gross Income. We now have the Net Operating Income. This is typically the amount of money you can afford to spend based off the income of the property on mortgage payments. The ideal situation is to not exceed the Net Operating Income amount when working out mortgage details, this way the property can pay for itself. If you are fortunate enough to own the property without a mortgage attached, then your Net Operating Income is the amount of spendable cash you will see from the property.

The last section to determine whether the property will be profitable after all the expenses are paid is the Debt Service. This is determined by doing an estimate of the mortgage payment, or if taking over an assumable loan, take the actual mortgage payment each month and multiply it by 12, remember this is for a yearly basis you want to know the total mortgage payments each year. Now you take this number and subtract it from the Net Operating Income. Assuming you have found a great piece of property with much potential you should still have money left over after paying the mortgage and other expenses this will create a positive cash flow. If however your Net Operating Income is not enough to cover the mortgage payment then you have a negative cash flow. If you have just enough to cover the mortgage payments then precede with caution, if you have made a mathematical error the property could easily end up costing you money out of your pocket, make sure you can afford to handle this if the situation comes up.

In the next installment, we are going to cover many of the ways in which you can obtain the funds to purchase property without always paying out of your own pocket. Make sure you are still scanning newspaper ads and calling about properties you are interested in. Remembering to keep the notes of all properties you call about, even the rejects for future reference.

How to Succeed at Real Estate - Installment 12

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.


In this installment, we are going to cover different financing options that are available. It is very important to note that not all methods will work for everyone, nor are these methods only limited to those doing investment. These methods are even possible to be used for those who are attempting to purchase a home for themselves. Make sure you carefully review all of these methods and determine which you think would work best, as well as being flexible in terms of which options may best benefit the seller. Remember to make a successful transaction, you need the buyer, and seller to both be happy and satisfied.

Some of the sources of money will likely surprise you; however, the best way to succeed is to keep an open mind and to work as many options as possible until you find something that works out the best for you. Remember you do not have to be rich or have stellar credit to become a real estate investor. Moving along let, we start looking over the various options.

Option #1. Private Lenders, this is the typical type of lending that probably pops into the head of everyone who is interested in purchasing property for any reason, whether investment or their own personal residence. This consists of the typical mortgages, whether conventional, FHA, VA, fixed rate, adjustable rate mortgage (ARM), balloon, or even a Home Loan Payment Relief Mortgage (HLPR).

Now we are going to cover some of the less known options that exist for financing your real estate purchase. Read closely, some of these will seem a bit strange, while others will make perfect sense, some you would never have thought of, while others are likely popping into your head right now.

Option #2. The seller, this is a little known option that most people do not think of. Typically, this is best used when you are either doing 100% owner financing, or when you just need the seller to hold a 2nd mortgage for the down payment. While financing the down payment can have several options to secure it, a 2nd mortgage is the most popular. Typically, with the 2nd mortgage there is a slightly higher than standard interest rate in exchange for the seller graciously helping you purchase the property with no money out of your own pocket. Make sure you always make payments on time to the seller, you may need them as a reference later for your next transaction, the more happy sellers you have, the better your references will look to your next potential seller you work with.

Option #3. The property, this may seem a bit strange, however it is not unheard of for the buyers to work with a company to secure funds in exchange for something after the property is purchased. For example, a buyer makes an agreement with a lumber company to allow them to clear the trees from the property; in exchange, they receive money upfront that they are able to use for the down payment. The buyer has created a wonderful situation here, their land is being cleared, plus they have spent no out of pocket money for the property with little upfront risk to them. While this is a bit harder to work out it is very possible to do with a lot of creative thinking and good people skills.

Option #4. Promissory Notes, these are typically used when the seller is doing a 2nd mortgage for the purchase of the property, because you are promising to pay a certain amount, as well as a specified amount of interest at specific intervals. This even applies if the promissory note is written to have one large balloon payment or lump sum payment. While this is most common with the sellers, it is possible to also use with other investors. A good sound business plan, as well as through investigation into the property are likely to be necessary components of making this option work successfully.

Option #5. Investors are a great method of securing cash to purchase property without actually using your own money. Investors want you to have good common sense, the ability, and desire to succeed; it is easier to get investors to work with you if it is not your first piece of property, as they like to see that you are able to handle it, without risking their money. Investors tend to charge high rates of interest; however, they are more flexible in the payment terms than a typical mortgage will be.

Option #6. Equity Partners, this is something that is not well known of gathering funds. This is similar to investors, however most investors are silent, where equity partners own a portion of the purchased property, and have a say in how it is managed, and the prices charged if selling or renting. If you want to be the only person making the decisions in regards to the property, this is not going to be a good option for you. However, if you do not mind sharing the decision making power then there is some comfort that can be taken in strength in numbers. The more partners you have, the greater your buying power will be.

Option #7. Tenants, this may seem surprising that a tenant can help finance the purchase of property, however if you have someone ready to move in before the sale is finalized, then you should have at least the security deposit, as well as the last months rent. If you so choose to require the first month as well, this gives you additional funds. Can you see how this can provide you with a great source of income for the down payment? This can be very tricky to work out, as most sellers will not allow you to show the property until the sale has been completed. However, with an open-minded seller, this is entirely possible to work out, especially if you are in an area where good priced rentals are in high demand.

Option #8. Real Estate Brokers and Agents, this option should really seem strange to most people. However, most agents and brokers receive a large commission from the sale of property that they are handling. If you can get the broker or agent to take a promissory note for the down payment this is one of the options. However, another option is to see if the broker or agent will loan you the money for the down payment. Often an agent or broker will loan the money for the down payment if it means quickly closing a sale. For this to work, it is best to offer to repay an amount larger than what you are borrowing as well as interest. This is something that not all brokers and agents will be willing to agree to, however this is where a good rapport with brokers and agents and already having an established relationship will greatly help increase your chances of success. The broker who knows you already successfully own and manage other properties will be less likely to decline such an offer, compared to a broker who has never seen you before, and does not know what you are capable of doing.

Option #9. Home Equity Loans, is another option that you have. While this is possible for someone who owns their home, it is not possible if you do not own your home. You also need to have some equity in your property in able to be a home equity loan. If your home does not have, equity built up yet then this is virtually impossible to make work. Try to find the best interest rates possible when using this method and carefully shop around; if you are able to borrow enough, you could possibly purchase more than one property with this method. It depends on the selling price of the property, as well as the down payment requirements, as well as the amount of equity you have available.

Option #10. Life Insurance Polices, this is something that most people have lying around and if you shopped well your policies have been accruing cash value that you can borrow against. Typically, the fees and interest associated with this type of loan is very minimal especially compared to other options. It is important to have a large amount of insurance as well as having been making the payments steadily and faithfully for years for this to be a viable option that can be successful. You also want to be careful that you do not tap out the insurance policies, after all this money is in case the unthinkable happens. You still do not want your family to be without just to purchase property. Try to balance both needs so that you are still growing your investment portfolio, as well as making sure your insurance needs are still fulfilled.

Option #11. Equities in Other Real or Personal Properties is something that few people really think of. You might own a boat, a car, empty property, stocks, bonds; anything that has cash value can be used as equity against the new property to secure the financing. Most people have more equity in personal property than they really realize. If you borrow against this equity, it is basically found money that is not coming out of your pocket, and is still enabling you to grow your investment portfolio.

Option #12. Existing loans on the property is another viable option that is often possible. What this means is that you assume or take over the loan that currently exists on the property. This means that typically you can do a 2nd mortgage for the sellers’ portion of the property that they need. This is something that most people never stop to think of. However, more and more this is an option for people to explore, it may enable you to get the property at a much-reduced interest rate depending upon the original rate of the loan.

Option #13. Pledged Asset Mortgages are another option. What this means is that you pledge an asset to help secure the mortgage for the property. Most banks require a CD to be sued in asset mortgages. For a personal home, the CD typically only has to be 10%, for investment properties it typically has to be 20%. Once a certain period of time has lapsed with payments made on a timely basis and the terms of the mortgage are being fully met, the hold on the secured property is typically released so the owner of the pledged property is free to do with it as they wish. The property that is pledged does not have to be owned by you, if you have a relative or friend who is willing to pledge their property this will work as well.

Option #14. Lease Options, are a viable option for those who do not have a lot of money or assets to use for their down payment. This entails the seller agreeing to lease you the property for a specific period of time, at the end of this period you have the option to purchase the property. Any rent payments that you have paid, a percentage of this is typically applied towards the down payment amount that has been pre-determined in the lease purchase agreement. This typically allows a buyer the time to see how well a property will do, as well as pay very little upfront, for the property out of their own pocket for the deposit, as well as last months rent that most sellers would require. This is a great option that can be combined with other financing options to increase your purchasing power, which if carefully used will allow your investment portfolio to grow quickly.

Option #15. Government Programs, various different loans are backed by the government that is free money lying around. Some are grants; others are loans that must be repaid. The terms and conditions as well as applying procedures and rules vary depending on the exact program. There are also down payment assistance programs designed specifically to help people purchase homes with money given to them for the down payment. Check around carefully for the best program for your needs, and make sure you stick closely to deadlines for applying.

We have covered 15 options for securing funds for property. Some you already were aware of, some are probably new to you. Do you see now how it is possible to become an investor with little money out of your own pocket? Remember keep calling, keep talking and keep viewing properties. Do not settle for something just to own a piece of property, always stick to your wishes and standards, and make sure it is affordable and a good financial decision.

As you can see this installment is very useful to those purchasing property for investment as well as those looking to purchase property for their own personal residence. Our next installment will cover a lot of information about the lease purchase option.

How to Succeed at Real Estate - Installment 13

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.

Our last installment covered various techniques and methods of financing the purchase of property. This installment is going to cover a lot of information pertaining to this option such as the benefits, how to use with a sublease, as well as some of the items that need to be included in the contract for a lease purchase.

Remember a lease purchase is the purchase of property where you rent property through a lease, which includes a guaranteed option to buy at the end of a set period of time. Typically, a portion of your rent payments will be credited towards the down payment, so that if you decide to purchase the house, you have already paid the majority if not all of the down payment.

While it may seem as though only the buyer is benefited by this type of transaction that is false. For a buyer there are fewer benefits than for a seller. However, the benefits for the buyer are usually greater financially. Benefits to the buyer include low risk with high financial leverage, if the buyer changes their mind about the purchase they are free to walk away, the seller is required to sell the property to the buyer, the buy is given control and possession of the property when the agreement is entered, there is typically very few initial expenses and costs with securing property this way.

Benefits to the seller include, most buyers in this type of agreement are willing to pay more for the property, therefore increasing the profit they make from the sell. The money that is received is tax-deferred until the option is exercised or it expires. If the rent is not paid on time the purchase option expires immediately, as well as the seller received the equity buildup over the option period. The tenant is more likely to take care of the property since they have a feeling of ownership, as well as the seller has the ability to regain possession if the buyer defaults in the lease purchase agreement.

As you can see, the seller has a few more benefits that are helpful to them, especially in securing the debt. The lease purchase option is still very useful to the buyer as well, but remember the best scenario is a win-win situation for everyone. There are several ways to use a lease purchase option to secure property.

The first method is by using the property as a personal residence, this is the option that most people are familiar with. Another option is to lease the property and either use it as a rental, or if the property is in need of repair then fix it up to sell it and pay off your entire debt, therefore turning a profit on the property. The last and final option is taking the property and subleasing it to someone else, where you become the seller, and the person you are selling to a buyer. This is often referred to as a sandwich lease.
It is very important to remember when entering into contract of any form; there must be a written documentation and recording of the agreement to protect both the buyer and the seller. Some important details that need to be addressed include, whether you have the right to sublease the property. Even if you plan to live there, you never know if things may change in the future, which would make subleasing the property a viable option for you. The right to assign is another important part to include. This means that if you choose not to exercise your right to the purchase, you are allowed to assign someone else the right to buy the property, whether through a gift, or by selling the option. Finally, you want to include if possible a right to extend. This means that the terms and conditions under which the purchase option can be extended to a later point are clearly identified and spelled out in writing in the original contract.

The contract needs to include many different parts, depending upon the needs of the buyer and seller will determine if you need to include all of the following sections into the lease purchase option contract. I am going to give a list of the items that should be included so that you can decide for yourself which are important and must be included and which are irrelevant to your particular situation. Remember, if the item can possibly cause a conflict later it needs to be included and clearly spelled out to avoid court battles and misunderstanding at a later point in time.

Section 1. Date in which the contract is entered into. This is not optional, and must be included. Names are also included in the first sections. If the words “and/or assigned” are included then it typically grants the right to assign the contract to someone else. Names needs to include the name of the seller, preferably legal name, as well as the names for any and all parties who are legally responsible for the property.

Section 2. The term must be clearly spelled out, with the beginning date, as well as the ending date specified exactly. This section should also clearly spell out how long the term is in years and months so that no questions can be raised later.

Section 3. The amount paid monthly for the rent should be in this section. Also included in this section should be the address where payments should be mailed, as well as the late penalties that will be assessed if the payments are not received in time.

Section 4. While most people would not think of including things like the utilities, taxes and insurance in a contract for a lease purchase it is highly important to spell out exactly who is responsible for what. Remember the more that is clearly spelled out, the fewer chances for conflict that can create headaches later down the line.

Section 5. You need to make sure the contract spells out specifically the intended use for the property. If you are undecided make sure the contract allows you to both use it for personal use, as well as leave your options open to be able to rent or even sublease the property to someone else.

Section 6. This section refers to the rights that we discussed earlier. You need to try to include the right to assign as well as the right to sublease the property so that your options are as open as possible so you can make the best financial decision in regards to the property.

Section 7. Possession is something that must be clearly spelled out. What this will represent is the exact date in which you are legally entitled to begin using the property, as well as become responsible for making the agreed upon rent payments for the property. Until the possession date comes, you do not have the legal right to be present on the property without the owners’ specific permission.

Section 8. The next section needs to include the security consideration that is being given. This means the amount of money that is being offered to the seller to take the lease option, this money typically is applied towards the purchase price of the property when the option to buy is utilized. This is also called option consideration as well. Either way it needs to be included in the contract.

Section 9. There needs to be a section devoted to default, this includes what constitutes a default, as well as what can remedy the default, and the time frame in which the remedy must be exercised before the default progresses and the buyer loses the property, or the buying option.

Section 10. You need a whole section that is clearly devoted to the option itself. This needs to spell out exactly when the purchase option becomes available, as well as the price, and how much of the rent is applied towards the purchase if it is exercised.

Section 11. Another important aspect is the examination of title. This means that at a specified time after you elect to exercise the purchase option you have the right to examine the title to the property, as well as review the title insurance policy that should be currently effect to make sure the title can be purchased free and clear.

Section 12. You need a section included in the contract that gives the exact date in which the purchase option expires. This is the last date possible to exercise the purchase option before the owners no longer are legally bound to sell it to you at the previously agreed upon price.

Section 13. Signatures, everyone who is involved legally in the sale and lease of the property must sign the contract otherwise, the contract is not enforceable. This is not optional in any way, it is an absolute requirement.

Now that we have covered the major portions of the contract, please note this is not all-inclusive, and should never replace the advice from an attorney who is retained to look out for your best interests. Remember we discussed an attorney previously; they should be consulted before signing any contracts to make sure there is adequate protection afforded to you. Next installment we will cover making an offer for the piece of property you select to make an offer for.

How to Succeed at Real Estate - Installment 14

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.

We have now covered various ways of getting the money to start investing, as well as explained in depth what needs to be included at a minimum in the lease purchase option contract. We are now going to move along to the making an offer for the piece of property of your choosing.

Making an offer means that if the seller accepts your offer, you will be purchasing the property for the amount you offer to the seller. This amount can be well below the asking price; however, the seller is not required to accept your offer. It is always a good idea to have worked on building a rapport with a seller before making an offer. This way you can better tailor the offer around the needs of the seller and your needs. This will help you achieve a much higher rate of seller acceptances.

It is important to make offers in a professional, diplomatic, and mature manner. Calling someone to say “Yo I wanna buy yo house fo $80,000” is a completely unacceptable way of making an offer. You should close your internet browser window and walk away now if you do not see a problem with that type of offer to purchase a piece of property. If however you are aware that the offer was inappropriate, then you can proceed to learn how to make an acceptable offer.

Before you can make an offer, you need to realize that if the seller does not accept your offer that does not mean it is over, they may make a counteroffer. You need to know your financial limitations so that you know when you need to walk away from the property and move on. You need to know your financial limits before making an offer to save everyone time and effort as the negotiations go back and forth for a while.

While making a verbal offer is acceptable to an individual seller, it is best to do things in writing for a more professional image, as well as the ability to keep detailed records of which properties you made offers on in case you want to review the previous offers you have made at a later point in time. Your written offer should be given to the Real Estate Agent or Broker if one is working on the property or directly to the owner if they are selling the property themselves.

Your offer should include the price you are willing to pay for the property, as well as any financing information or the request for any seller assisted financing. This way everything is in writing and clearly able to be reviewed later. It is acceptable to make several offers to a seller in one multiple offer, for example if you have a means of obtaining the funds for a cash offer then you could consider doing the following. Make a 3 offer all in 1, with offer 1 for example being a cash offer of $80,000 for the property, and offer 2 being $10,000 down with the seller holding a 2nd mortgage and total price of $82,000, with offer 3 being a lease purchase option with the purchase price being $90,000 and an initial payment to the sellers of $2,000 with a monthly rent of $800. As you can see the terms in each offer are radically different, however they give the sellers many options and more of a chance at them accepting one. You want to make sure it is clear that each offer stands alone; they cannot take the price from offer 3 and combine that with the down payment offered in offer 2, and so on.

Some sellers may be tempted by an offer, however still be unable to accept the exact terms that you have offered. At this point, they can make a counteroffer. A counteroffer is the exact reason why you need to know financially what you can afford financially so that you do not have to sit on an offer too long and allow it to expire before making a decision. However, especially if you are wanting the property for investment then the price is more important than if you are choosing to live in the property.

Make sure if a seller declines your offer that you remain professional, after all you never know when you will try to purchase property from either them, or someone they know in the future. You never want to leave a situation with a bad or vulgar manner. That can leave a bad impression that will cause you problems in the future. This is never advisable.

The next installment will cover the contract that you will need to have prepared if the seller has accepted your offer or you have accepted the counteroffer that the seller has presented to you. Remember keep calling sellers, keep viewing property, and keep taking notes of the properties you call about and go view.

How to Succeed at Real Estate - Installment 15

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.

This installment is important to the real estate investor as well as the individual who is looking to purchase property for their own residence. Once again as in the lease option contract installment, this is only a guideline and should never replace the advice of a licensed attorney who is retained to represent your interests. Especially when dealing as expensive as a house and the financial implications that result in the purchase of something so expensive.

A contract is something that all parties sign, and agree to abide by, if a party of the contract breaks the terms they default and is enforceable in court should it ever resort to something so drastic. You want all terms of the sale included in the contract, remember if the agreement is not in the contract in writing, then it is not enforceable, and will not likely be upheld should a disagreement occur. You should NEVER purchase a piece of property without a contract, even if you are paying cash for the property.

Section 1. The first and most critical thing that must be included in the contract is the buyer and sellers information. This should include legal names, address of both the buyer and seller. If the property is owned by a company, then the company name should be listed, if owned by individuals then the names of the individuals should be listed.

Section 2. Moving along the next section should be a description of the property. This should include the county and state where the property is located. As well as a legal description of the location, and the physical location (postal address) for the property.

Section 3. Purchase price is going to include several sections. The first section is the amount of the earnest deposit; this is the money that is given to the seller along with the contract to the seller to show that you are in fact serious about purchasing the property. Sometimes a promissory note can be used in lieu of cash or check for the earnest deposit. The next part is Sum Due after Acceptance of Contract, this is not always required, and most investors will negotiate to purchase a property without paying anything additional here. Next is Proceeds of New Note and Mortgage from Any Lender Other Than Seller, this means any mortgages that will be secured, for the property. Next is Existing Mortgage on the Property, this is the amount that is expected to still be due after the purchase of the property, if you are not assuming the previous mortgage this should be zero, if you are assuming the loan, this would be the payoff of the mortgage. Following we add in Balance Due Seller by Promissory Note, this is any promissory notes that the seller has agreed to hold to assist in the purchase of their property, this includes any 2nd mortgages that they agree to hold. Finally we now add in Additional Sum at Closing, this is not always used, some sellers require money at closing, while others do not each deal is different and will determine if this is necessary or not. Finally, the last part of this section is Total Purchase Price, in which we add up all of the other parts of this section. Total Purchase Price will be the complete total of money that will be paid for the property. This includes all notes, mortgages, and money paid upfront for the property.

Section 4. Apportionment of Purchase Price and Deed, this section typically is broken down into four sections, land, buildings, improvements, and personal property. The reason to break it down is that different tax laws and deductibles are available for the different aspects, as well as depreciation is handled differently. This may not be as important for an individual doing a purchase for their own personal use; however, for an investor this can save thousands of dollars in taxes.

Section 5. Buyer’s Expenses should be listed in this section. Obviously you want this to list as few things as possible, since you are having to purchase the property you are already spending a large amount of money overall. The more you can get the seller to pay the better off you are.

Section 6. Seller’s Expenses should list anything and everything that the seller will be covering in connection with the sale. Some of the different items that must be paid for by someone include, Transfer Taxes, Title Commitment for Title Insurance, Survey, Attorney Fees, Appraisal Fee, Real Estate Commission, Title Abstract, Title Opinion Letter, FHA/VA Mortgage Discount, Photographs, Satisfaction of Mortgage and Recording Fee, Lead Paint Inspection, Home Inspection, Repairs or Replacements of the Structure, Any Other Inspections Required By Law. While not all sellers will cover everything, the majority of the items listed are typically covered by the seller. Attorneys’ fees are typically covered by the party who the attorney represented.

Section 7. Attorney Modification means that both parties have the right to have an attorney review the contract before the parties are bound by it. However, such items as purchasing price, closing date, and possession date are not open to attorney review.

Section 8. Prorated Items, this will include any trust account, as well as tax payments that are due. The total of for a tax bill for a year for example will be divided by 12, if the seller sells the property in March, then the seller is responsible for 3 months worth of the tax bill. The buyer is responsible for the other 9 months of the tax bill. Any amounts that are held in an escrow account for items such as taxes and insurance are transferred to the buyer.

Section 9. Title and Title Insurance are covered here. Most attorneys agree that a period of 30 days to provide a Title Commitment or proof of Title Insurance is acceptable. If you know what title company you want to use, you would also record that information here. If this is undetermined at the time the contract is written, you can put “To Be Determined.”

Section 10. Next section is devoted to the survey and information obtained during the survey. Most attorneys also agree that 30 days for a survey is plenty of time. Surveys are important so that the buyers are well aware of exactly where their property lines are, as well as making any encroachment issues known upfront.

Section 11. Examination of Title and Time of Closing follow after the section for the survey. This will determine the exact date and time in which the closing will occur. During the closing, the title will be provided so that it can be examined as well. The location of the closing is also included so that all details are recorded. Typically, this occurs at the office of the buyer’s attorney, if the buyer is not using an attorney then the title company is the next best option for the closing location.

Section 12. Something that is very important is the Default by Buyer section. This section limits the responsibility of the buyer to only forfeiting the money paid as the Earnest Deposit when this contract was originally presented. Regardless of whether the earnest deposit was cash, check, or even a promissory note. This limits the liability of the buyer in case something occurs in the future before the purchase is completed that makes the sale unable to be completed.

Section 13. Moving along we have the Performance/Default/Release of Earnest Deposit section of the contract. This section simply states who specifically will retain the earnest deposit until the sale is completed, as well as what if any type of account it will be held in. It also states when the earnest money will be disbursed, and what will happen to the money if the buyer defaults, as well as if the seller defaults. This is a very important section since it involves money that is given before the property is in the possession of the buyer.

Section 14. Attorney Fees and Costs is another section that is important, not so much for an immediate need, but more of a protection measure. This states that in the event the parties must go to court for some reason due to the contract, or the sale of the property the party who wins the suit will be entitled to recover from the losing party the attorney fees as well as court costs and any other costs of enforcing the contract.

Section 15. Until the buyer gains possession of the property, you need a section in the contract that states that the seller is responsible for the property. This section is called the Risk of Loss or Damage. This will enable you to have a course of action in the event that there is damage done to the property from vandals, natural disaster, or other methods.

Section 16. We now come to another important section, Condition of the Property. This will cover the condition that the property is in, and the condition that the property is expected to be in when the buyer takes possession. Typically, this also warrants that there are no defects in the property, if this is included as well and defects are found the buyer can sue the seller.

Section 17. Well and Septic Test, this is to certify that the property has water and sewer connects and that the system is in good working order, regardless of whether it is septic and well or through a local water company that handles both issues.

Section 18. Flood Zone, this section states that the property is not in a flood zone. If the seller is unsure, they need to find this out for sure, before selling. A buyer who is not told property is in a flood zone before the purchase can sue the seller for any damages that occur due to flood, as well as breach of contract.

Section 19. Occupancy, this is typically only important if the property is currently rented out, or someone else lives on the property that will be remaining. If there are tenants, their legal names must be included for all occupants. If there is, no tenants and no one living on the property that will remain after closing you can either omit this section, or just put “Not Applicable.”

Section 20. Mortgage or Third-Party Financing, this section simply means that you are released from the obligation to purchase the property if you are unable to secure a mortgage and financing on terms that are reasonable and that the buyer can afford. If you cancel the contract due to this reason you will be due back any deposit money paid thus far.

Section 21. Seller Financing, this section covers all details of the sellers note, as well as number of days to cure any default, the interest rate, amount of the seller financing and any other details pertaining to the sellers financing. Also, need to include the options to assign the seller financing so if you so choose to sell the property later on, someone else can assume the mortgages.

Section 22. Termite Inspection is a major issue. Often termite damage is not readily visible to the average person. The seller is responsible for a termite inspection, and if damage is found responsible for repairs up to 3% of the selling price. If the seller opts not to repair the damage, the buyer is entitled to a 3% discount off the selling price according to the terms of the contract. If the repairs will exceed 3%, the buyer has the option to either cancel the contract, or just simply deduct the 3% from the purchase price.

Section 23. The Zoning section states according to the zoning laws of the county and state where the property is located what the zoning requirements are. Multi-family units are not allowed on properties that are zoned for single-family residences, so this is very important to make sure the zoning is correct for the structure on the property.

Section 24. Legal Use, this section refers to the fact that there are building code violations or any other violations on the property.

Section 25. Local Ordinances, depending upon the area where the property is located there may be certificates showing compliance with the ordinances. If this is the case for the area where the property is located, the sellers are responsible for these costs.

Section 26. Next section is Time for Acceptance, this states that amount of time that the contract and offer to purchase the house are good for until the seller must make a decision to either accept or deny the offer and contract.

Section 27. RESPA Compliance, you need an attorney or title company to make sure your transaction following all Real Estate Settlement Procedures Act of 1974 guidelines. This section will cover those guidelines.

Section 28. Additional Terms and Conditions are all included here. If it was not mentioned in a different part of the contract, it probably belongs here.

Section 29. Notices, this section details exactly how the buyer and seller will communicate with each other. Typically, most contracts state that notices must be done in writing, with certified mail, return receipt so there is no question of it the notice was received.

Section 20. Finally, you need a section for the signatures. This includes the signatures of all sellers as well as all buyers. Make no mistake this section while listed last, is not an option, but a requirement. Without signatures the entire document is void and not enforceable I any courts and leaves everyone unprotected.

Whew, we are finally done covering the main parts of a sales contract. Seems like a lot of work. By now, I am sure you are searching for the attorney to work with if you have not already gotten an attorney lined up to use. While an attorney is not a requirement, they do help make sure your protected and will look after your best interests as well as your money. Next installment will cover the closing of property. The final step in the purchase of property.

How to Succeed at Real Estate - Installment 16

Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.

We have covered a lot of material in this series. From the way to find flexible sellers, what exactly, a flexible seller is, how to determine market value of a piece of property, even lease purchase options, and what should be included in a sales contract. This is a lot of information to be presented. Just keep calling sellers and taking notes. Maybe the time to purchase is not now, but keep learning and it will all pay off. You will find that dream piece of property that will teach you a lot. I also recommend watching a show on TLC called “Flip That House” this can also teach you some details about what kind of house can be repaired, as well as what type of budget you are looking at.

Our last topic in this series will be the closing. After all once closing is done, you take possession of the property to either move in, or else the property is ready to be rented, or even renovated and sold. There are several key people that need to be present at the closing, as well as several key documents that need to be present to complete the process. The closing should typically take place either at the attorneys’ office of the buyer, or at the office of the Title Company who is handling the title.

Four major pieces of paperwork need to be present at the closing. The first is the Loan Commitment/Agreement, which covers the terms, and conditions that are typically associated with the mortgage that will be attached to the property. If you are paying cash for the property, this can be excluded. Second is the Sales Contract, if you recall we covered the sales contract in depth in the last installment so you should be familiar with what the sales contract is, and what should be included in the contract at a minimum. Third is the Title Insurance Commitment, this is a report prepared by either a title company or the attorney of the seller that will discloses any liens on the property, as well as anything that may need to be cleared up in order for the buyers to obtain a clear title to the property. Finally the last document needs to be included is the Closing Statement, this document outlines all costs and fees associated with the purchase, included in the sales price, and outlines exactly who is responsible for which portion of the costs.

Once an offer to purchase property has been accepted, there are several things that you need to do. I am going to outline the items so that you have a bit of a time frame to work with. Each situation is slightly different, so there is no need to call a national crisis if a task runs over by a few days, as long as things are completed accurately, and the proper way you should be fine.

Immediately after offer is accepted you should begin working on the financing. If you are going to be assuming the mortgage, then you apply to assume the mortgage with the original lender, if you will be obtaining new financing you should begin applying with several different lenders, if you have a lending company you prefer to work with, make sure you contact them. With lenders the lower the interest rate and fees the better off you are. Shop around carefully for the best results and prices. If you are going to be paying cash for the property or need the assistance of partners or need to secure a home equity loan to get the funds then now is also the time to start those so that you will have the funds you need in plenty of time. Also now is the time to start drafting the Sales Contract, once a draft has been prepared it needs to be distributed to all parties of the sale so that any adjustments that need to be can be done in plenty of time. Lawyers usually do not review documents the same day they receive them, so you will need several days for your lawyer to review and get back to you.

Approximately one week before closing, you need to start working on details for the insurance, title, taxes, and renters if it is going to be a rental unit, as well as utilities. First start with insurance, you need to order a policy and get this set into motion. Next, you need to review the Title Insurance Commitment to ensure that the title is clear, and there are no problems in obtaining a clear title. You also need to obtain and review the Closing Statement so that you know exactly what the expected costs are to be, you do not want any surprises at the closing itself. At this time, you also need to notify the utility companies of the change in ownership of the property. You may need to pay deposits for the utilities and schedule the date when the bills will change to your responsibility. Most utility companies will allow you to schedule this in advance so that the change takes place on the specified date. If the property is currently a rental and there are tenants living there, you need to draft a letter informing them of the ownership change. This is not mailed yet; you just draft and ensure it is accurate and complete. You will not actually mail this until after the closing. If the property is empty, and in good repair and no work is needed you can start working on the newspaper ads that you will be running, most newspapers require at least a few days advance notice to run ads, this gives time to schedule the ads to run at the perfect time compared to closing.

The day before closing there are still tasks to do, you need to very carefully inspect the property to ensure that there is no damage or anything else that you need to know about before the closing. Check everything even if a home inspection was previously done; make sure you are completely satisfied with the purchase before it is finalized. Finally you need to obtain a certified check for the funds that will be due at the closing itself. You need to check with the seller, real estate agent or broker to confirm who the check needs to be payable to. Often the check is to be made to the closing agent’s escrow account, but best to double check before a mistake is made.

Whew, now that all of that work is done you are almost there, it is almost time to do your personal victory dance as you complete your first transaction. At the closing, you have several things that need to be completed. This includes signing all paperwork necessary, delivering the certified check for the closing funds, obtaining the keys to the property, obtaining any warranties and maintenance as well as service contracts that are transferable, also if the property is currently rented, an original copy of all lease agreements should be obtained.
Congrats, sit back and drink a cup of coffee you have now successfully finished your first closing and started your career as a real estate investor. Now that you have your property, it is time to start working on the management aspects of it. If you are going to live there, well it is time to move in and throw a housewarming party. Good luck with future business transactions in your new investment career.

The next few installments of this guide will begin to cover the nitty gritty business of actually managing the property for profit. Since we have just covered closing in this installment, it only seems natural to follow with Installment #17 discussing some methods that can be used for the buyer to get cash back at the closing. While you bask in the enjoyment of having your first property do not let it take all of your time, after all to build an empire it takes more than one piece of property, continue making calls and viewing properties as time goes on.