The new economy brings with it a new set of rules for investing in real estate throughout Chicagoland. In the past real estate has been a proven method for building wealth, but the current rules for successful investing have changed.
Making big money in real estate is still a possibility, but investors must pay very close attention to the changes that this economy brings. Todays investors need to reexamine their criteria for buying, selling or renting property. They also need to be flexible, along with complete research, before they take advantage of some of the best foreclosure deals seen in years.
New Rule #1 Location, Location, Location
No, this may not be a new rule but many investors of the recent past forgot how important location is when purchasing investment property. The best locations make investors wealthy. A client of mine called and said he found a foreclosure located in a less than desirable area. He could purchase the property for $50,000 and rents were almost $1,000 per month. Positive cash-flow was over $400.00 per month. Yes, he made a nice positive cash-flow and the numbers looked good on paper, but the problem was location. Because of the location tenants were consantly moving in and out, vacancy rates were high and as a result rents could not be raised, he was always looking for new tenants and re-remodeling his homes. If you purchase property in a good location tenants tend to stay and rents can be raised year over year and very little remodeling is required.
New Rule #2 Buy, Fix and Sell Now
Sounds crazy? Let me explain. New construction in Chicagoland has come to a halt, homeowners are short selling their homes. Home remodeling has slowed down to a snails pace. As a result, homes entering the market are in need of some remodeling. I am not saying they are trashed but they require new carpet, updated kitchens, wallpaper removed etc… A few years ago buyers could find both new construction homes and existing resales in perfect condition. Today these are both difficult to locate. Because of this shift, investors who buy, fix, and sell property have a major advantage over the competition.
New Rule #3 Expert Advice
Ever call a real estate agent to ask advice about investing in property? Spoke with a lender about obtaining financing on a foreclosed home? Discussed title with a real estate attorney? A couple of years ago anyone with a pulse was an “expert” and could navigate through the smooth waters of real estate investing. Today, working with a schooled advisor is critical. Questions to ask each advisor: (1)How many properties to they personally own today? (2) How many years experience do they have working with investment property? (3) If they are a real estate agent, how many foreclosed homes have they sold in the past 12 months, then 24 months? If the answers are few you are dealing with a neophyte. Beware! Investors need expert advice.
New Rule #4 Government Money
Government money is sloshing around the real estate market. The way our government solves problems is to throw money at it; if you have the ability to solve these problems, the money will flow your way. State and Federal money is available to investors when buying and renting real estate. Who can use it. YOU. The government will back 50% of purchase price on many investment properties, they will subsidize rents - the uses are almost endless.