Bargain Properties ? How To Play This Game.
Fixer's and foreclosure properties have always been the "jewels" that RE investors look for in order to make big profits. However if you dont do your home work before hand you may lose not only your investment but your profit as well.
A step by step approach is best in order to make a solid decision before committing to the investment. Make a check list and use it. And dont forget to add these to your list.
Nothing on this list is really more important than anything else. Its just here to get you to think about what exactly you need to look for. While you may have an investment that excels in one area...it cant be problem heavy in another.
Doc's List:
WHY THE ASKING PRICE
Most investors focus on price first.
So the goal is to buy for cheaper than the current market value and sell within market value or above. So how come the seller is offering such a GREAT price. Is it to settle debt??? Is it due to divorce? Death in the family?
If not, there may be problems with the property that require major expense to correct. Structural problems such as a cracked foundation or outdated plumbing and electrical wiring. The last two are VERY common in older craftsman homes from the 30-50's. CONSIDER HOLDING COSTS
My personal opinion is that the holding costs are the number one profit killer. YOU HAVE TO BUDGET THEM IN. Commissions to agents, mortgage, closing costs taxes, all repairs...and dont forget the gas and electric.
A poor understanding of the current market value is another major deal killer. Remember market value is an educated guess at best. No one really knows until the appraisal is complete.
Price other property in the area. Come as close to the size/style/lot size you are looking at buying.
TERMS AND CONDITIONS CAN HELP YOU
What areas can you leverage besides price and location? Financing?
In some cases a full price purchase can allow you to leverage the terms to mean a lower interest rate or smaller down payment.
KNOW THE LOCAL MARKET
Good investors get in the habit of understanding the lay of the land. What is the local community like? Where are the closest fire/police/EMS services? How good are the local schools? Don't rule out these questions. Make sure to look in to the last houses sold in the area as well as any selling trends you can find.
As the man said...it is all about location.
Location is usually seen as the most critical component of finding a good deal next to price. In reality, this matters much more if youre looking in terms of finding a long-term residence than it does for a quick sale. It's more critical to focus on the potential profit margins than the area it's located in. If the ugly home by the dump is more profitable than the fashionable condo downtown, then it's a better deal, aesthetics aside.
FIXER UPPERS AND FORECLOSURES
A familiar area ripe for investment picking is distressed properties or fixer-uppers. Of course these are the houses that need repairs to some degree. And the investor's job is to discount the costs of these repairs enough so that the profit is still suitable.
With small repairs such as painting, minor landscape, and basic flooring, profits may be available but not really worth the risk. More significant profits are found with extremely distressed properties. Plumbing is corroded, the roof needs replacing, and the interior needs to be gutted and remodeled, but the seller is asking 50% of the market value and you can repair it for much less. Always factor in the amount of work that you are looking at once you have a rough idea of the cost of the expense, add on another 5% as a buffer.
GET IN A ZONE WITH ZONING
Zoning provides an opportunity to put the property to a higher or better use and is an area many investors ignore. Higher and better use means that the owner is getting the most out of the land. For example, if a lot is zoned for three units but contains a single lot, then it is not getting its highest and best use. Or if a lot is zoned commercial, yet there's a three unit residential building sitting on it, it is not getting its best and highest use, like a business or a store.
Think of it this way, what could make you more money...a single small house on the land you just invested in...Or a duplex on the same land? One tenet or two? Zoning is a gift or a curse depending on your plans with the property...makes sure you know before you buy it.
Classic zoning "no-no's" are garages converted to bedrooms. Non-permitted granny flats and detached garages. - 23221
A step by step approach is best in order to make a solid decision before committing to the investment. Make a check list and use it. And dont forget to add these to your list.
Nothing on this list is really more important than anything else. Its just here to get you to think about what exactly you need to look for. While you may have an investment that excels in one area...it cant be problem heavy in another.
Doc's List:
WHY THE ASKING PRICE
Most investors focus on price first.
So the goal is to buy for cheaper than the current market value and sell within market value or above. So how come the seller is offering such a GREAT price. Is it to settle debt??? Is it due to divorce? Death in the family?
If not, there may be problems with the property that require major expense to correct. Structural problems such as a cracked foundation or outdated plumbing and electrical wiring. The last two are VERY common in older craftsman homes from the 30-50's. CONSIDER HOLDING COSTS
My personal opinion is that the holding costs are the number one profit killer. YOU HAVE TO BUDGET THEM IN. Commissions to agents, mortgage, closing costs taxes, all repairs...and dont forget the gas and electric.
A poor understanding of the current market value is another major deal killer. Remember market value is an educated guess at best. No one really knows until the appraisal is complete.
Price other property in the area. Come as close to the size/style/lot size you are looking at buying.
TERMS AND CONDITIONS CAN HELP YOU
What areas can you leverage besides price and location? Financing?
In some cases a full price purchase can allow you to leverage the terms to mean a lower interest rate or smaller down payment.
KNOW THE LOCAL MARKET
Good investors get in the habit of understanding the lay of the land. What is the local community like? Where are the closest fire/police/EMS services? How good are the local schools? Don't rule out these questions. Make sure to look in to the last houses sold in the area as well as any selling trends you can find.
As the man said...it is all about location.
Location is usually seen as the most critical component of finding a good deal next to price. In reality, this matters much more if youre looking in terms of finding a long-term residence than it does for a quick sale. It's more critical to focus on the potential profit margins than the area it's located in. If the ugly home by the dump is more profitable than the fashionable condo downtown, then it's a better deal, aesthetics aside.
FIXER UPPERS AND FORECLOSURES
A familiar area ripe for investment picking is distressed properties or fixer-uppers. Of course these are the houses that need repairs to some degree. And the investor's job is to discount the costs of these repairs enough so that the profit is still suitable.
With small repairs such as painting, minor landscape, and basic flooring, profits may be available but not really worth the risk. More significant profits are found with extremely distressed properties. Plumbing is corroded, the roof needs replacing, and the interior needs to be gutted and remodeled, but the seller is asking 50% of the market value and you can repair it for much less. Always factor in the amount of work that you are looking at once you have a rough idea of the cost of the expense, add on another 5% as a buffer.
GET IN A ZONE WITH ZONING
Zoning provides an opportunity to put the property to a higher or better use and is an area many investors ignore. Higher and better use means that the owner is getting the most out of the land. For example, if a lot is zoned for three units but contains a single lot, then it is not getting its highest and best use. Or if a lot is zoned commercial, yet there's a three unit residential building sitting on it, it is not getting its best and highest use, like a business or a store.
Think of it this way, what could make you more money...a single small house on the land you just invested in...Or a duplex on the same land? One tenet or two? Zoning is a gift or a curse depending on your plans with the property...makes sure you know before you buy it.
Classic zoning "no-no's" are garages converted to bedrooms. Non-permitted granny flats and detached garages. - 23221
About the Author:
Doc Schmyz has worked with investors all over the US. His free website shares Real estate investing information for all over the US. Find real estate information by state
posted by X - Men @ 5:44 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home