So you have heard that seller financing is a great way to market your investment properties. It broadens your consumer base and puts a little extra cash into your pocket in the form of interest charges. But, there is only one problem. You already have an existing mortgage, and you cannot pay it off unless you receive the sale amount in one large chunk.
Before you totally exclude seller financing from your real estate investing strategy, you should know that there is a financing solution that will allow you to finance the property without paying off the existing mortgage in one go. It is called contract financing or wrapped financing, and it is an attractive financing solution that property investors can use to market their real estate investing properties. Wrapping also increases residual income by adding interest fees to your profit margin.
Simply put, wrapped financing occurs when an investor keeps the current mortgage that he has taken out but offers to finance the property for the buyer himself. An example of this would be an instance where an investor is holding a $50,000 mortgage at 7 percent interest and wishes to sell the property for $200,000. The seller would loan the buyer the full $200,000, minus any down payment, at a higher interest rate of 8 percent. The monthly payment for the $200,000 would then be split with part of the payment being directed toward the original loan and the rest going to the seller. The seller would also profit from the 1 percent interest hike on the mortgaged amount.
As you can imagine, there are many factors that you need to consider before adding wrapped financing to your real estate investing strategy. Mortgages with sliding interest rates might not be ideal for this type of financing. You will also need to make sure that the existing mortgage will allow wrapped financing. Many mortgages demand payment in full upon sale of the property and would not be suited for this type of seller financing.
It is also a great idea to use a third party collection agency to collect the loan payments and disperse payment to you and to the original mortgage holder. This not only protects the buyer’s interests but yours as well.
Loan wrapping is a great way to introduce seller financing to your real estate investing marketing plan, but it is not for everyone nor is it for every sale. Be sure to research each deal thoroughly and follow all legal requirements. Failure to do so might result in the existing loan becoming abruptly due. If this happens, it could affect your bottom line or negatively impact the real estate transfer.
The only condition is that you must know how to use these techniques properly. You must know the pros and cons of both techniques in order to understand when and how to use which of the techniques.
Lease Options: PROS
When you use lease option, it makes your real estate deal risk-free. Even if the things go against you, you own the right to change your mind and terminate the deal.
Lease options can be a great way to buy nicer properties. This is because if the property is in an awesome condition, most sellers prefer to do the lease option rather than giving a deed.
There are many lenders in the real estate market who consider lease option as a land contract or a contract for deed refinance. Thus, even if you are not on a deed, you get a chance to enjoy its benefits.
Lease options also provide you an opportunity to buy properties from the sellers who have lots of equity.
Lease Options: CONS
As I have already said when you go with lease options, you simply get a control over the property and not its ownership. This is in a way beneficial to you, but at the same time it has certain disadvantages as well.
If you are looking for something that could ensure you long-term gains, lease options are not for you.
Most sellers in the real estate market do not consider lease options as a closure on the property.
They usually see the transfer deed as a guarantee only.
Most sellers, especially those with lots of equity, prefer to do lease options rather than giving you the deed to their real estate property, but at the same time, they also want to close the deal as soon as possible so that they could get their equity out.
Subject TOS: PROS
When you use subject TOS, it gives you complete ownership of the property. You can even get the title in your own name.
Quite interestingly, one of the best things with the subject TOS is that sometimes you may get paid to get the deed.
Since using subject TOS, you get the ownership of the property and become the titleholder; it becomes very easy for you to refinance the property.
Once you get the deed, if you happen to hold the property for longer than 12 months, subject TOS give you the opportunity to enjoy some long-term gains.
Subject TOS: CONS
Unlike lease options, no change of mind is allowed in subject TOS, even if things go extremely wrong against you.
Using subject TOS can also cause a substantial rise in your real monthly costs. The reason is that subject TOS require you to keep two insurance policies in place – one for yourself, as you are the real owner, and another for the lender with the old owner on it.
The laws regarding the subject TOS widely vary from place to place. And, in some places, the laws do not favor going for subject TOS.
Unlike, lease options, the sellers who have lots of equity with their property, do not prefer subject TOS, or for that matter, giving a deed.
Overall, these techniques have opened new ways to earn more money in real estate business.
However, performing a successful short sale is not as simple as it looks. You must put your best negotiation skills at work so that you could persuade the bank to accept your offer. Awkward attempts to short sell will mean losing the real estate investing deal and your proposal will get rejected. In fact, there are two main components that determine your success in the short sale first, how prepared you are, and the second, how much control you have over the homeowner and the deal.
You must work out an effective game plan while you are submitting your offers. You need to be equipped with the necessary tools so that you could turn the NO of the bank into Yes. Consider the following factors in order to make your game plan strong and to ensure your success.
Judging The Profit Potentiality Of The Deal
You must be efficient enough to analyze and judge the profit potentiality of the short sale deal. Only then, will you be able to succeed in your real estate investing game plan. You must understand that not all deals are good short sale opportunities.
For example, homeowners facing foreclosure should not attempt at this deal. Before you decide to proceed, analyze the deal and review the property thoroughly. For example, how much will you need to spend for the repair of the short sale property; whether you will be able to find a potential customer for the same.
Performing The Short Sale For Mortgages
As soon as you have decided to short sale the mortgage, contact the mitigation department of the bank that handles properties in foreclosure. Try to convince the concerned authority that you want to buy the property so that you could help the homeowner with his foreclosure. Bid a relatively small amount saying that the real estate investing property is in very poor condition. Also, fax the sales contract for that amount, along with some very bad pictures of the property and an extensive list of repairs that you think is needed to bring the property up to a marketable condition. Now, wait for a few days.
It is very much likely that the bank will contact you to increase your bid to a much higher rate. Never ever accept the higher rate demanded by the bank rather increase the amount a little bit and make another offer, with more documents and pictures to support your offer. Keep trying to convince the bank that the real estate investing property is in very poor condition and you will be at a loss if you increase your offer more than what you have already offered. This way, after two or three rejections, your effort will be rewarded and the bank will accept your offer. Thus, performing a successful short sale for mortgage demands your patience and a firm strategy.
Then, performing a successful short sale does not just mean to submit an offer and wait for the bank to give you an answer. You must have a back up plan ready so that you know what should be your further course of action if you get a rejection. If you stick with the basics, it is not very difficult to turn a no deal into a moneymaking real estate investing deal.
Your goal in real estate investing should be to make the most profit in the least amount of time using as little of your money as possible. Buying fixer-uppers and renovating them for resale is an excellent way to increase your profits. But how do you avoid becoming a renovator and losing sight of your investment goals?
You must focus on becoming a project manager. Project management puts you in the position of making sure the renovation gets done instead of doing it yourself. Project management for fixer-uppers will include finding subcontractors, getting quotes and scheduling the work.
Know What You’re Getting Into
Your agreement with the seller should include access to the property so you can complete inspections and uncover any hidden problems. It’s best if your agreement allows you to re-negotiate the price or even nix the deal if major problems are discovered.
Be Flexible
When starting any fixer-upper renovation project, realize that the process may not go as smoothly as you expect. There will always be unplanned delays and unanticipated obstacles. Keep your schedule flexible, allow for some extra time, but work to minimize any delays that do occur.
Let the Professionals Work
It may seem like doing the work yourself will save money. This may be true if you’re working on your own home. But when you are renovating a fixer-upper for resale, everything you do must pass inspection and conform to local building codes. Are you sure enough about your skills to meet these requirements? You’re usually better off to start with a professional subcontractor rather than trying it yourself and then paying to have it done over.
Hire Qualified Contractors
When hiring the pros to do your renovation work, ask for references and check them out. Ask yourself if you can develop a good working relationship with the contractor. Don’t rely on a handshake for your business agreement. Draw up a document that spells out what’s expected from both parties.
Create a Work Schedule
To renovate your fixer-upper most efficiently, you’ll need to put together a work schedule for the subcontractors. Keep in mind that some jobs need to be done before others. Remember, subcontractors don’t always show up at the time or date you’ve scheduled. Make sure you allow for this so that one late worker doesn’t wreck the entire project.
Don’t enter into a renovation project without a budget and a set of priorities. Hire qualified subcontractors and let them do their job. Make sure the work proceeds according to schedule, but expect the unexpected. Efficient project management of your fixer-upper renovation will pay off in extra profits when you get ready to sell.
Yes, it is true; many people are making a very comfortable living through real estate investing. But while the majority of people have a great investing experience, there are those that get taken in by scam artists and end up purchasing a property that has been misrepresented. To save yourself the expense and hassle of making this mistake, you should look for obvious signs and know when to back out of a deal no matter how good it may seem.
The first and most obvious sign that an offer is too good to be true is that it just seems too good to be true. If you are approached with a deal that seems a little too generous, there is a good chance that you are going to get burned. Be sure to examine the offer thoroughly and find out why the owner of the property would sell it so cheaply. In some cases, there will be a plausible reason why the homeowner wants rid of the property. Maybe he is on the verge of bankruptcy or there is an illness in the family which makes in necessary to move quickly. In the absence of any logical reasoning, though, there are likely hidden problems with the property, problems that you do not want to make your own.
There are many overhead costs associated with real estate investing. These costs normally fall into the categories of repairs and advertising, but there are some costs that can follow you for a lifetime. These costs should be completely avoided and come in the form of financial liabilities and fines levied toward the owner of contaminated properties or properties that represent a health hazard. Even after you sell such a property, you can still be held liable for any ground water contamination or illness associated with the property. For this reason, never buy a property if there are health concerns of any kind involved.
Debts can become attached to a property and follow that property from owner to owner. If you purchase a property for real estate investing purposes that has several liens on it, you could lose all of your profit paying off someone else’s bills. To avoid this, never purchase a property if you cannot have the title searched or if there seems to be some amount of obscurity about legal issues surrounding the property.
The key to building residual income in any real estate investing venture is to know which deals to make and which ones to leave alone. Be sure to do plenty of research on any investment property before you purchase it. If something seems odd at any point during the transaction, back out of it. There are plenty of investment opportunities out there that are worth your time and money. Do not throw all of your hard work away on questionable properties.
Probate is the legal process by which the estate of any deceased person is validated and executed. It can be a long and costly process for the sellers. Probate validates the Will, if one exists. It pays off existing creditors and distributes the assets to heirs and beneficiaries. The reason probate real estate bargains exist is that they are a part of the estate of a deceased individual. There is no legal hassle involved in buying such property. When you acquire property that is a part of an estate, you help the beneficiaries to settle the estate via a sale of assets. All the property, furniture, stocks, bonds, real estate, cars, etc have to go through probate.
Not all beneficiaries are interested in keeping and maintaining everything they inherited. The estate might also involve people who live in another city or even another state. They may not wish to relocate just to look after or inhabit property left to them. Sometimes, a house may be willed to more than one person. In this case, the property must be sold in order to ensure that everybody gets their fair share. Most beneficiaries who decide to sell would rather sell for less money immediately, than wait for much better prices. The attorney fees keep eating away at the final gains. So, you are likely to encounter very highly motivated sellers who would appreciate your help in getting on with their lives.
Trying to make a profit in foreclosures can be quite difficult. The foreclosure business has become quite popular recently. You probably end up chasing the same foreclosures and REOs that all your competitors are after. In many areas, it is very difficult to handle the procedures, even if you are interested, because of saturation. With a probate, there is no publicity or listing and hence, very few people would actually know where to find these properties. With probates, the person who knows the market is liable to profit up to 30-50% discounts.
When buying foreclosures you are very often dealing with people who do not really want to sell the property. The homeowner doesnt trust you and he feels that you are taking advantage of his misfortune. Foreclosures involve getting the homeowners out, which is not very pleasant. People who offer the properties in foreclosure could also be bankrupt at the same time and would prefer staying in their house, rent-free and delay the procedure. They also have others knocking on their doors and calling them at all hours and realtors promising them full equity and full price.
So they see themselves with many options and may not want to talk to you. The homeowner is losing the roof over his head and in some cases, can get quite nasty. In probate, the people do want to sell and the house is very often not their primary residence. So, you end up dealing with people who are not only motivated to sell, but also not highly stressed about it.
When someone passes away, their heirs are left with a very large responsibility in the form of real estate that many don’t like dealing with. If you can offer a reasonable price, a quick sale and a simple solution, they will be more than willing to sell to you. Trying to dispose off a property far away from where they live becomes very difficult for them. In most cases, they don’t want to hold on to the property and don’t want to figure out the logistics either. This is especially true if there are bills to be paid against the estate of the deceased.
Many people who are over 65 years old defer their property tax liability. When they pass away, these deferred taxes become due. The heirs inherit this tax liability and in many cases, like to turn the property into cash at the quickest possible time, to pay these taxes and other costs like Liens or Attorney’s Fees.
Bird-dogging, more commonly referred to as flipping, is the practice of buying run down real estate properties, below the real value and making improvements and renovations to resell at a higher rate to earn profit. Wholesaling, which is also a type of flip, is the practice of reselling the asset to other investors at a low price, without making any repairs. The second investor then re-sells the property at the market value, after renovating it.
The person who takes advantage of a good real estate opportunity and invests in it, with the intention of repairing it and reselling it to make profit, is called a bird-dog.
The basic rule of bird-dogging is that the flipper must be able to recover the original and incurred costs of the property, to sell it at a higher rate. A bird-dog usually takes advantage of cases, where a person may be forced to sell the property at a low cost due to reasons like inability to make repairs or pay the mortgage.
Over the years, significant changes have taken place in the real estate market. A bird-dog, who knows the tricks of the trade, will deal and invest in only those properties which will yield a decent profit, after paying the assignment fee and recurring costs. Very often, the person who has undertaken the repairs of the house may hand over the task to someone else, which may not be able to serve the purpose. Consequently, the profit is drained from the deal.
If you want to be successful at the business of bird-dogging, you have to invest like in any other business. To identify a good real estate opportunity and benefit from a good deal, you need to be good at speculating market conditions and estimating the costs and profit of the real estate property. You need to evaluate deals accurately. Make sure that you handover the repairs only to a genuine and experienced contractor, as this will help in reducing the risk of another flip and a waste of your time.
Using a TREC contract is always beneficial, as the person responsible for repairing and renovating the property may need to borrow from a bank. A bank usually needs to see a legal real estate contract for verification purposes. You need to know how to bag a good bargain. You need to stay in constant touch with services and people that provide you with up-to-date knowledge of the current state of affairs of the business. Compare the prices with other real estate properties in the neighborhood that have been sold and accordingly negotiate and quote your price. Ensure that the deal is genuine and will yield a considerable share of profit to everyone involved. Invest only in those deals that will be worth the effort.
For those who do not have the capital to start a new business or rent for a place to operate a business, dealing in real estates is the perfect choice. Bird-dogging is an easy way of making money in the real estate market, with minimum risks involved.
7 posts found
moreonrealestate writes, Dec 10, 2007: (7 posts)
(Topic: Financing, Law and Taxes / A Glance At Wrapped Financing)
So you have heard that seller financing is a great way to market your investment properties. It broadens your consumer base and puts a little extra cash into your pocket in the form of interest charges. But, there is only one problem. You already have an existing mortgage, and you cannot pay it off unless you receive the sale amount in one large chunk.
Before you totally exclude seller financing from your real estate investing strategy, you should know that there is a financing solution that will allow you to finance the property without paying off the existing mortgage in one go. It is called contract financing or wrapped financing, and it is an attractive financing solution that property investors can use to market their real estate investing properties. Wrapping also increases residual income by adding interest fees to your profit margin.
Simply put, wrapped financing occurs when an investor keeps the current mortgage that he has taken out but offers to finance the property for the buyer himself. An example of this would be an instance where an investor is holding a $50,000 mortgage at 7 percent interest and wishes to sell the property for $200,000. The seller would loan the buyer the full $200,000, minus any down payment, at a higher interest rate of 8 percent. The monthly payment for the $200,000 would then be split with part of the payment being directed toward the original loan and the rest going to the seller. The seller would also profit from the 1 percent interest hike on the mortgaged amount.
As you can imagine, there are many factors that you need to consider before adding wrapped financing to your real estate investing strategy. Mortgages with sliding interest rates might not be ideal for this type of financing. You will also need to make sure that the existing mortgage will allow wrapped financing. Many mortgages demand payment in full upon sale of the property and would not be suited for this type of seller financing.
It is also a great idea to use a third party collection agency to collect the loan payments and disperse payment to you and to the original mortgage holder. This not only protects the buyer’s interests but yours as well.
Loan wrapping is a great way to introduce seller financing to your real estate investing marketing plan, but it is not for everyone nor is it for every sale. Be sure to research each deal thoroughly and follow all legal requirements. Failure to do so might result in the existing loan becoming abruptly due. If this happens, it could affect your bottom line or negatively impact the real estate transfer.
Article Source: http://moreonrealestate.com
moreonrealestate writes, Dec 10, 2007: (7 posts)
(Topic: Selling Talk / Lease Options And Subject TOS: Moneymaking Tools In Real Estate)
The only condition is that you must know how to use these techniques properly. You must know the pros and cons of both techniques in order to understand when and how to use which of the techniques.
Lease Options: PROS When you use lease option, it makes your real estate deal risk-free. Even if the things go against you, you own the right to change your mind and terminate the deal.
Lease options can be a great way to buy nicer properties. This is because if the property is in an awesome condition, most sellers prefer to do the lease option rather than giving a deed.
There are many lenders in the real estate market who consider lease option as a land contract or a contract for deed refinance. Thus, even if you are not on a deed, you get a chance to enjoy its benefits. Lease options also provide you an opportunity to buy properties from the sellers who have lots of equity.
Lease Options: CONS As I have already said when you go with lease options, you simply get a control over the property and not its ownership. This is in a way beneficial to you, but at the same time it has certain disadvantages as well. If you are looking for something that could ensure you long-term gains, lease options are not for you. Most sellers in the real estate market do not consider lease options as a closure on the property.
They usually see the transfer deed as a guarantee only. Most sellers, especially those with lots of equity, prefer to do lease options rather than giving you the deed to their real estate property, but at the same time, they also want to close the deal as soon as possible so that they could get their equity out.
Subject TOS: PROS When you use subject TOS, it gives you complete ownership of the property. You can even get the title in your own name. Quite interestingly, one of the best things with the subject TOS is that sometimes you may get paid to get the deed.
Since using subject TOS, you get the ownership of the property and become the titleholder; it becomes very easy for you to refinance the property. Once you get the deed, if you happen to hold the property for longer than 12 months, subject TOS give you the opportunity to enjoy some long-term gains.
Subject TOS: CONS Unlike lease options, no change of mind is allowed in subject TOS, even if things go extremely wrong against you. Using subject TOS can also cause a substantial rise in your real monthly costs. The reason is that subject TOS require you to keep two insurance policies in place – one for yourself, as you are the real owner, and another for the lender with the old owner on it.
The laws regarding the subject TOS widely vary from place to place. And, in some places, the laws do not favor going for subject TOS. Unlike, lease options, the sellers who have lots of equity with their property, do not prefer subject TOS, or for that matter, giving a deed.
Overall, these techniques have opened new ways to earn more money in real estate business.
Article Source: http://moreonrealestate.com
moreonrealestate writes, Dec 10, 2007: (7 posts)
(Topic: Other Stuff! / Short Sale: How To Deal With A No-Equity Deal)
However, performing a successful short sale is not as simple as it looks. You must put your best negotiation skills at work so that you could persuade the bank to accept your offer. Awkward attempts to short sell will mean losing the real estate investing deal and your proposal will get rejected. In fact, there are two main components that determine your success in the short sale first, how prepared you are, and the second, how much control you have over the homeowner and the deal.
You must work out an effective game plan while you are submitting your offers. You need to be equipped with the necessary tools so that you could turn the NO of the bank into Yes. Consider the following factors in order to make your game plan strong and to ensure your success.
Judging The Profit Potentiality Of The Deal You must be efficient enough to analyze and judge the profit potentiality of the short sale deal. Only then, will you be able to succeed in your real estate investing game plan. You must understand that not all deals are good short sale opportunities.
For example, homeowners facing foreclosure should not attempt at this deal. Before you decide to proceed, analyze the deal and review the property thoroughly. For example, how much will you need to spend for the repair of the short sale property; whether you will be able to find a potential customer for the same.
Performing The Short Sale For Mortgages As soon as you have decided to short sale the mortgage, contact the mitigation department of the bank that handles properties in foreclosure. Try to convince the concerned authority that you want to buy the property so that you could help the homeowner with his foreclosure. Bid a relatively small amount saying that the real estate investing property is in very poor condition. Also, fax the sales contract for that amount, along with some very bad pictures of the property and an extensive list of repairs that you think is needed to bring the property up to a marketable condition. Now, wait for a few days.
It is very much likely that the bank will contact you to increase your bid to a much higher rate. Never ever accept the higher rate demanded by the bank rather increase the amount a little bit and make another offer, with more documents and pictures to support your offer. Keep trying to convince the bank that the real estate investing property is in very poor condition and you will be at a loss if you increase your offer more than what you have already offered. This way, after two or three rejections, your effort will be rewarded and the bank will accept your offer. Thus, performing a successful short sale for mortgage demands your patience and a firm strategy.
Then, performing a successful short sale does not just mean to submit an offer and wait for the bank to give you an answer. You must have a back up plan ready so that you know what should be your further course of action if you get a rejection. If you stick with the basics, it is not very difficult to turn a no deal into a moneymaking real estate investing deal.
Article Source: http://moreonrealestate.com
moreonrealestate writes, Dec 10, 2007: (7 posts)
(Topic: Rehabbing through Construction / Fixer-Uppers: Project Management 101)
Your goal in real estate investing should be to make the most profit in the least amount of time using as little of your money as possible. Buying fixer-uppers and renovating them for resale is an excellent way to increase your profits. But how do you avoid becoming a renovator and losing sight of your investment goals?
You must focus on becoming a project manager. Project management puts you in the position of making sure the renovation gets done instead of doing it yourself. Project management for fixer-uppers will include finding subcontractors, getting quotes and scheduling the work.
Know What You’re Getting Into
Your agreement with the seller should include access to the property so you can complete inspections and uncover any hidden problems. It’s best if your agreement allows you to re-negotiate the price or even nix the deal if major problems are discovered.
Be Flexible
When starting any fixer-upper renovation project, realize that the process may not go as smoothly as you expect. There will always be unplanned delays and unanticipated obstacles. Keep your schedule flexible, allow for some extra time, but work to minimize any delays that do occur.
Let the Professionals Work
It may seem like doing the work yourself will save money. This may be true if you’re working on your own home. But when you are renovating a fixer-upper for resale, everything you do must pass inspection and conform to local building codes. Are you sure enough about your skills to meet these requirements? You’re usually better off to start with a professional subcontractor rather than trying it yourself and then paying to have it done over.
Hire Qualified Contractors
When hiring the pros to do your renovation work, ask for references and check them out. Ask yourself if you can develop a good working relationship with the contractor. Don’t rely on a handshake for your business agreement. Draw up a document that spells out what’s expected from both parties.
Create a Work Schedule
To renovate your fixer-upper most efficiently, you’ll need to put together a work schedule for the subcontractors. Keep in mind that some jobs need to be done before others. Remember, subcontractors don’t always show up at the time or date you’ve scheduled. Make sure you allow for this so that one late worker doesn’t wreck the entire project.
Don’t enter into a renovation project without a budget and a set of priorities. Hire qualified subcontractors and let them do their job. Make sure the work proceeds according to schedule, but expect the unexpected. Efficient project management of your fixer-upper renovation will pay off in extra profits when you get ready to sell.
Article Source: http://moreonrealestate.com
moreonrealestate writes, Dec 10, 2007: (7 posts)
(Topic: Wholesaling / When to Back Out of a Real Estate Investing Deal)
Yes, it is true; many people are making a very comfortable living through real estate investing. But while the majority of people have a great investing experience, there are those that get taken in by scam artists and end up purchasing a property that has been misrepresented. To save yourself the expense and hassle of making this mistake, you should look for obvious signs and know when to back out of a deal no matter how good it may seem.
The first and most obvious sign that an offer is too good to be true is that it just seems too good to be true. If you are approached with a deal that seems a little too generous, there is a good chance that you are going to get burned. Be sure to examine the offer thoroughly and find out why the owner of the property would sell it so cheaply. In some cases, there will be a plausible reason why the homeowner wants rid of the property. Maybe he is on the verge of bankruptcy or there is an illness in the family which makes in necessary to move quickly. In the absence of any logical reasoning, though, there are likely hidden problems with the property, problems that you do not want to make your own.
There are many overhead costs associated with real estate investing. These costs normally fall into the categories of repairs and advertising, but there are some costs that can follow you for a lifetime. These costs should be completely avoided and come in the form of financial liabilities and fines levied toward the owner of contaminated properties or properties that represent a health hazard. Even after you sell such a property, you can still be held liable for any ground water contamination or illness associated with the property. For this reason, never buy a property if there are health concerns of any kind involved.
Debts can become attached to a property and follow that property from owner to owner. If you purchase a property for real estate investing purposes that has several liens on it, you could lose all of your profit paying off someone else’s bills. To avoid this, never purchase a property if you cannot have the title searched or if there seems to be some amount of obscurity about legal issues surrounding the property.
The key to building residual income in any real estate investing venture is to know which deals to make and which ones to leave alone. Be sure to do plenty of research on any investment property before you purchase it. If something seems odd at any point during the transaction, back out of it. There are plenty of investment opportunities out there that are worth your time and money. Do not throw all of your hard work away on questionable properties.
Article Source: http://moreonrealestate.com
moreonrealestate writes, Dec 10, 2007: (7 posts)
(Topic: Foreclosures and Pre-Foreclosures / Probate Real Estate vs Foreclosures)
Probate is the legal process by which the estate of any deceased person is validated and executed. It can be a long and costly process for the sellers. Probate validates the Will, if one exists. It pays off existing creditors and distributes the assets to heirs and beneficiaries. The reason probate real estate bargains exist is that they are a part of the estate of a deceased individual. There is no legal hassle involved in buying such property. When you acquire property that is a part of an estate, you help the beneficiaries to settle the estate via a sale of assets. All the property, furniture, stocks, bonds, real estate, cars, etc have to go through probate.
Not all beneficiaries are interested in keeping and maintaining everything they inherited. The estate might also involve people who live in another city or even another state. They may not wish to relocate just to look after or inhabit property left to them. Sometimes, a house may be willed to more than one person. In this case, the property must be sold in order to ensure that everybody gets their fair share. Most beneficiaries who decide to sell would rather sell for less money immediately, than wait for much better prices. The attorney fees keep eating away at the final gains. So, you are likely to encounter very highly motivated sellers who would appreciate your help in getting on with their lives.
Trying to make a profit in foreclosures can be quite difficult. The foreclosure business has become quite popular recently. You probably end up chasing the same foreclosures and REOs that all your competitors are after. In many areas, it is very difficult to handle the procedures, even if you are interested, because of saturation. With a probate, there is no publicity or listing and hence, very few people would actually know where to find these properties. With probates, the person who knows the market is liable to profit up to 30-50% discounts.
When buying foreclosures you are very often dealing with people who do not really want to sell the property. The homeowner doesnt trust you and he feels that you are taking advantage of his misfortune. Foreclosures involve getting the homeowners out, which is not very pleasant. People who offer the properties in foreclosure could also be bankrupt at the same time and would prefer staying in their house, rent-free and delay the procedure. They also have others knocking on their doors and calling them at all hours and realtors promising them full equity and full price.
So they see themselves with many options and may not want to talk to you. The homeowner is losing the roof over his head and in some cases, can get quite nasty. In probate, the people do want to sell and the house is very often not their primary residence. So, you end up dealing with people who are not only motivated to sell, but also not highly stressed about it.
When someone passes away, their heirs are left with a very large responsibility in the form of real estate that many don’t like dealing with. If you can offer a reasonable price, a quick sale and a simple solution, they will be more than willing to sell to you. Trying to dispose off a property far away from where they live becomes very difficult for them. In most cases, they don’t want to hold on to the property and don’t want to figure out the logistics either. This is especially true if there are bills to be paid against the estate of the deceased.
Many people who are over 65 years old defer their property tax liability. When they pass away, these deferred taxes become due. The heirs inherit this tax liability and in many cases, like to turn the property into cash at the quickest possible time, to pay these taxes and other costs like Liens or Attorney’s Fees.
Article Source: http://moreonrealestate.com
moreonrealestate writes, Dec 10, 2007: (7 posts)
(Topic: Beginners or Bird Dog / The Basics of Bird-Dogging)
Bird-dogging, more commonly referred to as flipping, is the practice of buying run down real estate properties, below the real value and making improvements and renovations to resell at a higher rate to earn profit. Wholesaling, which is also a type of flip, is the practice of reselling the asset to other investors at a low price, without making any repairs. The second investor then re-sells the property at the market value, after renovating it.
The person who takes advantage of a good real estate opportunity and invests in it, with the intention of repairing it and reselling it to make profit, is called a bird-dog.
The basic rule of bird-dogging is that the flipper must be able to recover the original and incurred costs of the property, to sell it at a higher rate. A bird-dog usually takes advantage of cases, where a person may be forced to sell the property at a low cost due to reasons like inability to make repairs or pay the mortgage.
Over the years, significant changes have taken place in the real estate market. A bird-dog, who knows the tricks of the trade, will deal and invest in only those properties which will yield a decent profit, after paying the assignment fee and recurring costs. Very often, the person who has undertaken the repairs of the house may hand over the task to someone else, which may not be able to serve the purpose. Consequently, the profit is drained from the deal.
If you want to be successful at the business of bird-dogging, you have to invest like in any other business. To identify a good real estate opportunity and benefit from a good deal, you need to be good at speculating market conditions and estimating the costs and profit of the real estate property. You need to evaluate deals accurately. Make sure that you handover the repairs only to a genuine and experienced contractor, as this will help in reducing the risk of another flip and a waste of your time.
Using a TREC contract is always beneficial, as the person responsible for repairing and renovating the property may need to borrow from a bank. A bank usually needs to see a legal real estate contract for verification purposes. You need to know how to bag a good bargain. You need to stay in constant touch with services and people that provide you with up-to-date knowledge of the current state of affairs of the business. Compare the prices with other real estate properties in the neighborhood that have been sold and accordingly negotiate and quote your price. Ensure that the deal is genuine and will yield a considerable share of profit to everyone involved. Invest only in those deals that will be worth the effort.
For those who do not have the capital to start a new business or rent for a place to operate a business, dealing in real estates is the perfect choice. Bird-dogging is an easy way of making money in the real estate market, with minimum risks involved.
Article Source: http://moreonrealestate.com