Profiting in Real Estate
One report indicates that over 23% of total home sales in 2004 were bought as investment properties. This is not a surprise, since home prices have had a high percentage increase in recent years and the market has been experiencing high returns.
There are many ways to make money investing in real estate. Flipping a property means that you buy it, fix it up quickly, and resell it for a profit. Foreclosures are another way to get investment property, which is when a home owner defaults on a loan and the mortgage holder then puts it up for auction. With abandon property, its often unclear who holds the title to the property, so theres extensive title research and legal work that occurs with these properties. Paper investments, or non-property real estate investments, are when you invest in a mutual funds or bond that is directly related to the real estate market, but not actual property. These investments should be made with advice of a professional broker.
Manage Your Exposure
Managing the risk associated with investing in real estate is key to protecting yourself from loss. The most important aspect of risk management in real estate is to know the law. Its essential that you have a working knowledge of the real estate legal structure and requirements.
After youve researched property availability, cost, and buyer interest, youll need to hypothesize about what the future holds for your market. Will prices go up or down?
When considering your risk, keep the following points in mind:
1. Think about the local economy. Are there jobs available or are most companies in the area losing jobs? Are new homes being built more or less than over the past 5 years?
2. Make wise financing choices. When picking your funding source, think about how long you plan to keep the property. Adjustable Rate Mortgages (ARMs) are attractive because of their lower down payments and lower rates. You can pick the duration of the loan typically either 1,5, or 7 year ARMs and your rate will be adjusted to the prevailing rates after this period of time. If you plan to hold onto a property longer than the ARM, ARMs can cost you more because of the higher interest rates. It may be more prudent to opt for a fixed rate mortgage with the shortest length you can handle financially.
3. Pay a large down payment to reduce your risk. If you can put down 10%, youll have instant equity in the property, and most likely get a better interest rate.
4. Be creative with your mortgage payments. Make larger monthly payments then require, or make one extra payment a year youll reduce your principle.
Getting the Highest Return
To make the most money possible in real estate, the standard philosophy is to buy low, sell high. Most people try to do this, and many do not succeed because its hard to do. When trying to get the highest return possible, keep your costs down and do everything possible to draw in the highest bidders.
Once you own the property, do as much of the repair work yourself, as long as it is of a professional level. Shoddy work and inferior materials will cost more to correct later. With difficult projects, hire a trained professional from a small scale operation. Large contractors with several employees have to factor their large overhead into their prices.
When looking to maximize your profits, try to save money with your lender. Look around for cheaper loans with the less popular lenders. The large banks and financing companies usually have high fees and rates. Dont accept overpriced fees. For example, your lender is charging $75 to deliver a few papers a short distance, ask for it to be reduced.
By educating yourself on the legal and accounting aspects of real estate transactions, you can save yourself thousands of dollars. If you learn the basics of these two areas you will know when to ask for a professionals help.
When negotiating, be firm but flexible. Attempt to find a win-win situation where both you and the other party walk away from the table happy. Be clear on what you want, and what you can be flexible on. If the other party walks away angry and feeling cheated, they might try to sabotage your attempt to make a profit.
If you are selling your property, its important to also shop around and negotiate for the best prices on high priced items, real estate commissions, and closing costs.
Staging is setting the scene by making your property look its best. You will get the highest price for a property that has been properly prepared.
Actively market your property and youll get the largest pool of potential buyers possible. It is a benefit to the seller if there are several interested parties in your property.
Originally posted 2017-11-14 17:45:15.