Most people these days are a little cautious when it comes to investing in real estate, andÂ with good reason. Many wanna-be investors got stuck holding the hot potato so to speak in 2007. Well here is how to avoid that. There are a few different types of real estate investments, the ones I have the most experience with are properties to rent (rentalÂ pools)Â and properties to flip.
The flip game is complicated but when done right it can be very lucrative.Â The first thing you have to find when looking for a flip is the financing which can be done through a bank, hard money lender, friends, cash or your IRA (that's right I said your IRA). You can use money from your IRA without actually taking the money out so you don't get penalized and you can feel free to call me and I will be glad to help you with that. Anyway once you know where you are going to get the funds then you can start with the search for the property. This process can take a long time so as you start looking at properties you need to also start pricing things. Are you going to do the work your self? If you are I hope that you are handy or very determined to learn as it's not as easy as it seems. To get an idea of how much things cost you can walk the aisles of your local Home Depot or Lowes to see how much each item costs (Think doors, windows, tile.....). To find a house there are several methods, you can use a Realtor to send you investment properties or you can search on your own. The ideal property is one that is in a good or decent neighborhood with mixed sales of properties sold at regular market value and properties that were handyman specials sold at a discount. The ones you want are the properties that are handyman specials but you need the other move-in ready sales as those are going to be the ones that will help your property appraise at a higher value once it has been fixed. You will then take into consideration how much you want to offer and to determine that you need to have an idea of how much it's going to cost you to fix the property and also what your quiet costs are (the costs to sell and hold the property i.e. the interest payments on the loan). Once you have that value you will add your profit which is usually a predetermined number or percentage. You will then estimate the selling price of the property and subtract your number to come up with the offer amount. Once you get the property (hopefully you get the property)Â you will perform the necessary repairs to bring the property up to par with those otherÂ move-in readyÂ sales. Once yourÂ home is ready, you have to get a Realtor that knows how to properly market a property. Take a look at one of my listings and you will see that the photos are professional, the properties have virtual video tours and the descriptions talk about the neighborhood as well as the property itself. If priced right and marketed correctly your property should sell in 90 days or less.
The other type of real estate investment thatÂ I am most familiar with is the rental investment. With rental investments you are not speculating that the price will go up in the future. What you want is anÂ ROI (Return On Investment) of about 10%. So if you buy a condo for $50,000 and you rent it for $900 per month, your association fee is $300 per monthÂ and your taxes are $100 per month ($1200 per year) then you will be left with about $6,000 per year as profit. You would then take another $1000 for miscellaneous expenses, vacancies.... and you are left with $5,000 per year or about 10% return on investment. This means that after 10 years your property would have paid for it's self and anything else would be all profit. This is a much safer type of investment and still very profitable as I dont know any banks that will pay you 10% interest on your money these days. So remember if yourÂ cash in the bank, RothÂ IRA, traditional IRA or 401KÂ is not performing as it should give me a call or visit my website and I can help you invest it. This is not meant to be an allinclusive guide to investing in real estate, just a few tips to give you a general idea.
Eric Chavarria P.A.
Future Home Realty IncWWW.PrestigeFloridaHomes.Com