Hey Rick
I'm a first time visitor and I was checking out your blogs on investing in south Florida web-site
I am new to real estate investing, i live in california and have been knocking on doors to try and pick up some properties with some equity in them what do you recommend when you say invest with your brain not your wallet..
what I'm trying to ask, as you mention in what makes a bad deal good to look out for HOA fees, rental rates ,taxes and ur monthly mortgage payment..obviously rent rates,hoa fees and mortgage to measure positive or negative cash flow...right
what could you suggest i look out for..
thank you ,
JH - (name changed for anonymity)
First of all JH, thanks for visiting the blog!
I love to hear that you're knocking on doors, but you may be wasting energy. I would like to discuss where you are getting your leads before I give further advice but we can discuss that privately via email.
Gang, the reason I say this is that you DO NOT want to be buying lists of pre foreclosure properties from any type of firm,business or website offering the service. What is bound to happen is you will be one of possibly a hundred investors knocking on the door, calling or sending letters. UNLESS you have a VERY distinct way of differentiating yourself, it will be a waste of time and money. Get with an agent who specializes in Investment Real Estate and get the right leads the right way. If you need help finding the right agent, email me and I will set you up with the best person or people in the city you are in. That being said, let's move on.
When I say to invest with your brain and not your wallet I am in essence referring to two things:
1. Do not get greedy with your projected returns
(You can refer to the post directly below this to expand on the principle I am about to explain.)
Please do not set your return goals to high just to pad your WALLET. Think more (with your BRAIN) and realize that any positive return is a success in Real Estate Investment, get in and get out! If your neighbors are renting for $1500 a month and making $200 positive cash flow, rent yours out for $1400, take your $100 positive and MOVE ON TO THE NEXT!! The point of renting the home is to have the mortgage paid for, you are going to make the BIG MONEY on the sale 3-7 years down the road, not on the extra $100 per month. PLUS you will obviously be the first to rent seeing that you now offer the best price for available product. Make sense? Good.
On the flipping side of Real Estate Investment use the same concept. If you project a sales price of $500,000 because that's the average rate in the neighborhood, advertise at a steal, give 10% off, sell in a week and MOVE ON TO THE NEXT!! GET IN AND GET OUT!! Less hold time equals more money in the long run, what seems and may feel like a loss now are gains on time and money that you WILL BE attached to shall you try to get top dollar for your flip.
2. Do not get cocky with the amount of money you have to invest
Just because you may have money to invest in Real Estate does not make you a smart investor. Don't go for the first thing you see, do your homework and invest with your BRAIN....simple yet sometimes....scratch that, many times overlooked.
What makes a bad deal good in terms of HOA, mortgage payments, rental rates, tax, etc:
No matter how much work a property needs, if after that work is complete your numbers still work out, its a good deal! If you think its a bad deal, express that to the seller and beat them down until the deal is good!
If you are visiting this site I am sure you know that you want your rent to be more then all of your fees, but please please please be sure to calculate EVERYTHING when figuring your net numbers. Vacancy allowance, Annual repairs, City and State Tax. We all love surprises just not in Real Estate!!
What should I look out for:
- hidden fees from associations
- maintenance for problems that the seller can fix now
- assessments that the seller forgot (yea right) to mention
- tenants that don't pay
- unforeseeable home repairs (they will happen)
Thanks for the questions, I hope this helped. If not send more!!
-Rick
rick@rickrapp.com
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