Month: November 2019

The Best of Investing in Real Estate

Posted on by Dennis
Investor Fequently Asked Questions

The Best of Investing in Real Estate

What is the goal of investing in Real Estate? To make money. How much money? The obvious answer would be, “as much as possible.” But how much is enough? Let me tell you something. No job or income comes without its problems, worries, and issues you have to deal with. And the obvious, it takes money to make money.

When people think of real estate investing, their minds wonder over two areas, flipping property and renting property. Which brings in the most amount of money, and which is easier? The answer to that question depends on a lot of different factors. First we will take a look at the money factor involved.

When it comes to flipping, which is buying a foreclosed property, fixing it up, then reselling it for a profit, where do you begin? The Internet is flooded with all kinds of advise including self proclaimed experts on the subject of flipping. Some so called experts have half hour or one hour TV commercials telling people how easy flipping is. But is it really that easy? If it was that easy, everyone would be doing it. And what would stop the thousands of Real Estate Agents who get advanced notice of every foreclosed home from buying the best and reselling them for a profit? Those self proclaimed flipping prophets are not telling the whole truth. Their advertising focuses on elaborate homes that are clearly under valued. They try to make it appear banks are stuck with those properties, have no idea what property values are, and price properties as low as they can just to get rid of them. That could not be further from the truth. Banks order Broker Price Opinions on every property it sells. Licensed Real Estate agents in the local market send banks information on similar properties including recent sales and active properties offered for sale. The report includes prices, location, size of the properties, and other information the bank needs to make an informed decision. The condition of the property is considered, and the market price is set. Banks use computers going into great detail. They know how much it will cost to complete the necessary repairs, and how much it will cost to resell the property, including closing fees, commissions, and of curse, taxes. The bank considers a meager profit margin, then prices the property accordingly. So how much money can you make flipping property?

How much you make is based on a few factors. Your first consideration has to be – collect all the information the bank obtained to make its decision. Gather all the market data the bank was smart enough to obtain before setting its price. The other factor of course is the repair and remodeling costs. How much work and time you put into the repairs helps to reach the maximum profit level.

I’ve worked with dozens of investors. I choose not to work with a number of them. I will not work with investors who cut corners in the name of profit. I’ve seen people attempt to sell moldy flips without properly treating the mold. Lawsuits stemming from those moldy flips raised liability insurance rates over 300%. Instead of pulling licenses from those agents and investors and dealing with them individually, powers in charge decided to have insurance companies pay out. And as we know, the rest of us have to pay higher insurance rates. The rest of us have to pay through the nose for a few bad apples to stay in business because the people in charge think their moldy flips help grow the economy. Nothing could be further from the truth. Put those maggots out of business and this country is filled with legitimate investors to fill their void.

Don’t cut corners on remodeling. Know what the average buyer wants, and remodel accordingly. Don’t rely on personal likes and dislikes, but proven remodeling and new home concepts that have worked. Do your research. Tour a few new construction homes for sale to see what a luxury home really is, then work some of those aspects into your project.

When looking for an investment to flip make sure you have the basics in place. Location is always number one. Size and layout is another consideration. The kitchen and master bedroom are important considerations. So is the garage, basement, including the foundation. Of course there are other factors involved. Rely on your Real Estate Agent who has viewed and sold hundreds of properties. They know what buyers want, and what buyers prefer to avoid.

Renting is another avenue of investing. You have to know how to crunch a few numbers to be a success. Find out what rents are in the area for the size of the rental you are considering buying. You have to budget for the mortgage, taxes, maintenance, and other factors. And you have to purchase an investment property at a price you can profit on down the road. That may require a bit of fixing up and remodeling. You also have to deal with people. You have to know how to screen potential renters, fill out forms, and a good back ground in taxes and budgeting. Like I said, no investment is going to be easy. You will need a good network including a Real Estate Agent, Lender, inspector, general contractor, maintenance personal, and a good accountant. Put the right team together and with the proper planning, you will see a regular income flowing in.

Of course I can’t cover all the aspects and details of investing in one article. Each investment is unique. We have to look at your situation, skills, cash flow, and of course the property you are considering. That is where the work begins. Give me a call and we can sit down and discuss your goals.

Selling High and Buying Low

Posted on by Dennis
Crossroads Real Estate Marketing

Selling High and Buying Low

How do you sell your house in the best market with the highest price, then buy a house at the lowest market price? That is very difficult to do in the same seasonal market. Especially if you are moving up. The housing market is the housing market. Prices are set by supply and demand. And markets can change overnight.

For years I’ve been watching and studying the local housing market. During a sellers market, I encourage my clients to sell. During a buyers market, I encourage my clients to buy. That sounds simple, it is simple, and it works.

Wisconsin has seasonal markets. That does not mean all markets are equal. Some markets are more stable than others. Some markets are rather volatile. You have to know which local markets quickly change and when they change. One client was able to sell a house at top dollar at the peak of the selling market, and a few months later was able to shop for a home in one of the best buyers markets in years. That was due to normal seasonal changes and one of the earliest and worst winters ever seen. 2019 was a rather strange market as a whole with some expected and unexpected changes. In this particular case, the buyer received about $20,000 more for the house he sold then he could have sold for if he waited 6 months. In the buyers market he is looking in, prices have dropped an average of $10,000 to $20,000 in the location and price range he is searching in.

Not everyone has the ability to sell during the best selling markets, then wait a few months to buy when prices show a seasonal drop. That may require owning a second home to move into, or to rent for a time. We would have to look at the options as a case by case basis. On the other side of the coin, buyers may be able to buy at the lowest market prices, pay two mortgages for a few months, then sell their old home at the best market price. That of course takes money and planning. And a few calculations to see if the wait is worth it. Some risks are always present. No one can guarantee higher or lower market prices a few months down the road.

Selling high and buying low is no guarantee. Based on historic sales, we will see seasonal trends that effect housing prices that could swing as high as 10%. On a $200,000 house, that could mean a $20,000 gain on the sale of a house in the best market. It could also mean a $20,000 savings when buying in the best market. When you are looking at a $40,000 total savings, you may wish to take a look at your options in regards to timing. No one can guarantee any change in regards to home prices in any percentage, but there are ways we can look at historic data to make an informed decision. In every housing market, information is power. You owe it to yourself to gather and examine that information to make an informed decision.

Although delayed home buying and selling is not for everyone, we can take a look at your particular situation to determine the best market to make your move a reality. It all depends on if you are moving up, or moving down, in which market, and of course the location and style of your existing home. A lot of factors are involved. No two cases are the same. But in a market where timing is everything, the right season can save you thousands.