How to Invest in Real Estate without Much Money

How to Invest in Real Estate without Much Money- 150x150Investing in real estate costs money, but with a little resourcefulness and knowledge, you can buy real estate with little or even no money of your own. Having some quick cash to put down as a down payment is the ideal situation, but there are other options for real estate investors who don’t have much money. You have the traditional option of borrowing money, but we also tell you about some lesser known options that might work best for you. Here are your options when trying to invest without much money:

Options for Investing

1. Traditional Borrowing. Should you find yourself in the position of not having enough money to make a real estate investment, borrowing from a lender is always an option- just make sure that you will be able to pay the money back. Even though lenders have tightened their lending requirements, banks and credit unions are still able to lend you the money that you need for your investment if your credit score is good enough to qualify. You will most likely be asked to make a 10 percent or larger down payment, but there are still lenders that require less. Borrowing money from lenders is the safest and most well-known way of financing a real estate investment.

2. Seller Second. An often used form of financing, “seller second” can help you invest in a property by allowing the seller to provide a second mortgage. Normally, this second mortgage will be enough to cover most or even all of the down payment required. This type of financing allows you to buy an investment property without using much, if any, of your money, and the seller will get a large part of his equity. It is important to be sure that the mortgage loan that you qualify for allows a second mortgage to be added to it.

3. Seller Carry Back. This is a type of “creative financing” and it allows you to invest in a property with little or no money at all. Seller Carry Back is a form of financing in which the seller sells the property to the investor, but receives the money as monthly payments, for as long as 5 years after the sale. The seller must truly own their home, and not owe any money on mortgage loans.

4. Subject-To. This is another type of financing that can help the real estate investor if they don’t have enough funds. The name “subject-to” came from the phrase “subject to existing financing” which means that you are able to buy the home, but with the condition of the existing financing on the home will remain in the owner’s name, while the buyer will make the monthly mortgage payments. This type of financing gives you the advantage of not having to make a down payment because you will be able to refinance in six months and put the new loan in your name. Subject-to financing is only short-term because the seller is not going to be comfortable leaving the mortgage loan in his or her name for a long time.

5. Lease Option. Another popular way of investing in real estate with little money is by doing a lease option, which allows you to rent a home with the possibility of buying it down the road, before the lease term expires. During the period in which you are renting, which is typically two or three years, you will have plenty of time to get financing in order to purchase the home. The home owner will be unable to legally sell the property during the option period.

When investing in real estate without much money, it helps to be creative and resourceful. You shouldn’t let your lack of funds be an excuse to not invest in real estate. The solutions presented in this article show you that you can invest into this industry without having large amounts of money and liquid assets, but you have to make sure that you fully understand that these solutions might not always be a perfect fit for your situation.

Contractor Scams: How to Protect Yourself

Contractor Scams- How to Protect Yourself-150x150Because construction projects are a big business in the United States, it is no surprise that they have attracted all kinds of scammers and fraud artists. Every year, home remodeling fraud costs home owners all over the country thousands of dollars and a considerable amount of stress. The number of people who are being scammed daily is anyone’s guess, as many people don’t even report being scammed to the authorities. Whether you’re renovating your own home or you want to flip a house for an investment property, you could be a target for scamming.

Scammers are mostly preying on the elderly and singles, and simply disappear once they receive a deposit or do a poor job. The best and only defense against contractor scams is you. Before hiring a contractor, you should research them thoroughly and look at the company’s reputation, previous work, and feedback from other customers. If you want to start investing in property that requires a contractor’s help, know that it is often a long and involved process, so ask yourself before you get started if you want to invest in real estate. Here are some of the most important warning signs that should make you think twice before hiring someone:

Watch Out for These Warning Signs

1. Little or no identification. Contractors who are professional and care about their image have more than just their name on a van. Business cards and uniforms are a good sign that you are dealing with a professional, but these can easily be faked, so you will need to look further. Ask your contractor for his business address, business license and insurance certificates. Then run a check on all of them to make sure they are valid.

2. Soliciting. A common tactic of a scammer is to go door to door, telling home owners that they have some material left from a previous job and is willing to make some repairs on your house for cheap. They might also tell you that they have looked around and can suggest where your home needs repairs. Hiring one of these contractors will leave very little evidence to track them down if they turn out to be scammers.

3. Asking for money up front. Another type of contractor scam is to ask the home owner for up to 50 percent of the project price up front to buy supplies. Then, once you have paid the money, they either pack up and go, or do a poor job knowing that you won’t fire them, since you have already invested money in the project. A good way of protecting yourself from this scam is by never prepaying more than 10 percent of the project total.

4. Contract lacking all the details. When first talking to a contractor, they might agree to everything that you are asking for, but not include it in the written contract. Some contractors will tell you everything you want to hear just to get the job, but you must not just take their word for it, and ask to have all the details in writing on the contract.

5. Unforeseen problems. Blaming structural issues or damage, the contractor might inform you after the contract was signed that the price for the project will be much higher than what was agreed upon. The extra fees may be legitimate, but some contractors will look for jobs like this, where they can increase the price after the construction project has started. Hiring a professional home inspector before starting a major project is a great way of protecting yourself from both legitimate issues that may arise and scams. If you are investing in property, this should be done before you purchase the home so you don’t buy a home with extensive and expensive structural issues and damage unknowingly.

Any of these warning signs should influence you to think twice before hiring that contractor. The best way in which you can protect yourself from scams and fraud is by hiring only reputable contractors that can be thoroughly checked. A trustworthy professional contractor will not pressure you into signing anything, and work with you to determine exactly how much the remodeling project will cost. If you need a contractor for an investment property, be sure that the property has potential to make enough money after the contracted work is completed.

Avoid Making These Big Mistakes as a Short Sale Investor

Avoid Making these Big Mistakes as a Short Sale Investor- 150x150Investing in short sale properties can be a great way of making a profit in a fairly short amount of time. With the housing market slowly recovering after the big hit that it took during the recent recession, there are still plenty of homeowners who are underwater on their mortgage loan, and their best option is a short sale. Hundreds of thousands of homes are on short sale lists, giving real estate investors a great opportunity to make a significant amount of money.

Unfortunately, many of these short sale and foreclosed properties come with issues, which can cause expensive problems for some real estate investors, especially for the ones who are just starting. Damage that is undisclosed by the seller or undetected during the home inspection can end up costing you tens of thousands of dollars, putting an end to your career as a real estate investor before it even started. In this article, you can read about the biggest mistakes that a short sale investor can make.

Top 5 Biggest Mistakes

Mistake #1 – Being in a Hurry to Make Some Quick Cash

Theoretically, investing in short sales is a pretty fast way of making money, but it is an investment, after all and, like most investments, it requires patience and preparation. Rushing into an investment and expecting to quickly make some cash can lead you into making some serious and costly mistakes. As a short sale investor, you should hope for the best, but be prepared for the worst, meaning that you do your homework beforehand and are able to efficiently take care of any problems that may come up.

Mistake #2 – Not Keeping Your Options Open

Not every short sale will go through, so, even if you think you have found the perfect deal, keep your options open, as a better deal could be just around the corner. With such a large inventory of foreclosed and distressed homes, focusing all of your energy and money on a single property is not the most profitable move.

Mistake #3 – Not Following Short Sale Deadlines

The short sale process follows some pretty strict deadlines, so not being able to follow them can result in you losing that deal. Make sure that you have everything ready in time, from paperwork to scheduling the home inspection. Starting all of the necessary proceedings early, such as the loan pre-approval or home inspections, makes it easier for you to follow short sale deadlines and deal with delays.

Mistake #4 – Not Doing a Home Inspection

The few hundred dollars that you have to spend on a professional home inspection are not worth the thousands that you will have to spend later if the house has serious damage. Simply because the outside of the house looks good doesn’t mean that it is in a good shape. Unseen problems like roof or foundation damage can be very costly to repair, and possibly leave you with no profit at all. Pay close attention to all of the details and get a comprehensive insurance policy from the home inspector.

Mistake #5 – Paying too Much

Short sale investing is normally a sure way of buying a home cheaper, but that’s not always the case. A mistake, like overpaying when investing in real estate, can put you out of business or end up being just a waste of your time, in the best case scenario. Do your homework before investing your money and find out how much similar properties have sold for in the area in the past few months.

Real estate short sale investing is a good way of making a profit for a knowledgeable investor, who takes the time to research not only the whole real estate investing process, but also the properties that he or she is investing in. It is hard to recover from mistakes in this business, so make sure that you don’t end up having to look for another job or even worse, broke, because you haven’t paid attention to all of the details that short sale investing involves.

Investing in Distressed Property and Foreclosures? Here’s Advice from the Experts

Distressed Property and Foreclosures- Expert Advice in Investing-150x150Foreclosed and distressed properties are a good real estate investment because their price is usually significantly below market value. When the owner of such a property defaults on their mortgage payments, the property goes into foreclosure and the bank or debt collector starts the selling process in order to collect the mortgage payment.

One third of all the homes sold between 2008 and 2011 were foreclosed and distressed. These properties are listed for prices 40-60% off their initial market value, and are a good deal for real estate investors. However, the possibility of making a profit with these properties will attract a lot of investors, so you will most likely have to win a bidding war before you can purchase a distressed or foreclosed property. Another issue that you may encounter is that foreclosed and distressed properties will usually need to be repaired before they are resold. Here are the top 10 tips for investing in distressed and foreclosed properties.

Top 10 Tips

1. Get pre-qualified for a loan. Unless you have enough cash to buy a property, you will need to take out a loan. Lenders will only consider serious offers, and you might not be able to bid on a property if you are not pre-qualified for a loan. However, if the home is too damaged, lenders might refuse to give you the loan, which means that you will have to take out another loan for repairs, or invest some of your own cash.

2. Research the area. Buying a nice home in a bad neighborhood is not a great idea. If the surrounding properties are in bad shape, they will most likely drive down the value of your investment. On the other hand, buying a damaged home in an upscale neighborhood will bring up the value of your investment. Renovating the home will also increase its value.

3. Have a professional home inspection. Foreclosed and distressed homes are sold “as-is”, making a professional home inspection a very important part of buying a property. Once the sale contract is signed, you will be responsible for any damage that the home might have. Besides giving you a clear picture of what shape the home is in, the professional inspection will also give you an estimate of how much it will cost you to renovate.

4. Be ready to make some repairs. Many times, when previous owners are evicted, they do intentional damage to the property. After the housing market crashed a few years ago, many people left their homes in a deplorable state, while others even stole kitchen appliances or light fixtures. Another thing that can happen to a home if the previous owners have been evicted is that it can become an easy target for vandalism.

5. Advertise. In order to find good deals on properties that are facing foreclosure, you need to advertise to their owners. A good idea would be to use bandit signs in areas with a high foreclosure rate. Another thing you can do is post classified ads in local newspapers, or on local websites. This way, you will find desperate sellers, and not be restricted to bidding on properties that your competition will also be bidding on.

6. Buy from people who are forced to sell. Buying from a seller who is only thinking of selling won’t guarantee a good deal. But buying from someone who is forced to sell because they are facing foreclosure or have other issues will most likely get you a good price.

7. Be careful when making estimates. Especially if you plan on remodeling or renovating a home before reselling it, be very careful when estimating how much money you will have to invest in the repairs and improvements. A small mistake when estimating these costs can become very expensive for you, and you might end up with a home that is hard to sell.

8. Contact lenders directly. Not every foreclosed or distressed property will be listed publicly, and some may be outdated. By contacting lenders directly and finding out if there are any foreclosed homes in the area, you could even find properties that are not yet listed, which gives you the advantage of being the first one to negotiate their price.

9. Make serious offers. While lenders and owners are in a position where they want to sell the distressed property as quickly as possible, making an offer that is too low won’t work. The home’s price will most likely be based on other sales for similar properties in the same area, so researching other sales should give you a good idea of how much you should offer.

10. Know the law. Many states have laws regarding foreclosure, made to help the home owner. In some states it takes up to 12 months for the foreclosure process to end, so make sure you know the laws before you make a purchase and find that you have to wait months before actually getting possession of the property.

When investing in foreclosed and distressed properties it is important to act fast, know what you want and, most importantly, have knowledge of the foreclosure process. Arming yourself with these top 10 tips will increase your chances of making a good investment, whether you are just starting out or you are a seasoned investor.

Don’t Fall for These Homes: Deal Breakers You Need to Know

Don’t Fall for These Homes- Deal Breakers You Need to Know- 150x150When looking for a home, it’s easy to fall in love with certain aspects of a house and totally disregard others. Whether it’s the neighborhood that the house is located in, the neighbors, or the curb appeal, you should take a step back and start looking at the whole picture. The issues that you might have missed will almost definitely give you big headaches in the future, and  if possible, they might be expensive to fix.

A house that may seem like it’s in great shape could be hiding some major damage and/or structure issues that will cost you an arm and a leg, while a house that doesn’t make such a great first impression could be easily and cheaply fixed to your liking, saving you big money in the long run. Here are some of the most important deal breakers that you should be aware of.

Important Deal Breakers

1. The location. Your new house will probably be your home for a long time, so its location should be one of the most important factors that will influence your home buying decision. Houses that are in close proximity to interstates, busy intersections, or train tracks might not be such a good choice if you don’t want to deal with a lot of noise and traffic. Also, one of the main considerations when buying a house is the neighborhood that it is in. An out of shape house located in a nice neighborhood could have a greater value than a good looking house located in a bad neighborhood.

2. The foundation. Foundation damage is not only one of the most expensive issues that the house can have, but it can also cause other damage to your home unsuspectingly. The house’s plumbing and walls can be affected by a cracked foundation, meaning that the repair bill will be in the tens of thousands of dollars. Even if the foundation was fixed, make sure that the work is covered by a warranty, preferably a lifetime warranty.

3. The roof. Changing, and even repairing, the roof of a house is a very expensive operation. Pay close attention to what shape the roof is in and, if the seller doesn’t agree to pay for its repair, it would probably be better to keep looking. Of course, this all relates to the cost of the house. The house may be listed for cheaper than other similar houses because its roof needs replacing. The biggest problem when buying a house with a damaged roof is that, when the first heavy rain comes, you might find yourself having to repair more than just the roof.

4. The plumbing and wiring. Two other parts of a house that can be very expensive to repair or replace are the electrical wiring and the plumbing. Re-wiring and re-plumbing a house involves opening up walls, digging, and usually quite a bit of time. Faulty electrical wiring can cause fires and bad plumbing can cause floods, so they are both problems that need dealing with before they put your life in danger.

5. Schools. If you have children, or plan on having them in the future, your home’s proximity to schools will be important. More important than that, though, is what school district your house is in. The quality of education, as well as the distance, both matter when you have kids. If the school is too far from your house, you will have to spend significant time driving your kids to and from school, or they will have to spend a lot of time on the bus.

6. Termites or pests. Probably unseen when you first visit the house, termite and pest problems can also be a deal breaker. Hiring someone who can thoroughly search the house for any of these problems is a great idea. Even if the seller has gotten rid of termites, they can still come back if prevention methods were not used, so make sure you inquire about what methods that prevent the reappearance of termites were used and when.

When buying a house, try to look at the big picture. The location is very important, as you will probably live there for many years to come, but you shouldn’t ignore the house’s existing damage just because you think you have found exactly what you were looking for. Even small damage to the roof or foundation can become a big and expensive problem in the future, so finding them before you buy the house is of utmost importance. A few hundred dollars spent on a professional home inspection can save you a fortune in the future.

10 Steps from the Pros for Purchasing Investment Property

10 Steps from the Pros for Purchasing Investment Property- 150x150Many first time real estate investors don’t know where to start, and end up making costly mistakes. Investing in real estate, like investing in most industries, is a lot easier if you have a clear understanding of the process and what steps you need to take in order to succeed. Purchasing investment property is different from buying a home for yourself, so you will have to put the needs of the future tenants or home buyers before your needs.

10 Steps for Success

When it comes to purchasing a property, it’s always good to have a plan. Now that you are investing in a property, you want to make sure that you will make a nice profit, so having a plan becomes even more important. Here are 10 steps that you should follow in order to become a successful real estate investor:

1. Set goals. Determine why you are investing, how much money you want to make, and write this down. Whether you are saving for retirement, your children’s college funds, or you just want to make money, setting goals will help you stay on track. Having a clear set of goals will prevent you from making impulsive decisions that can turn a seemingly good investment into a nightmare. Discussing the investment with your family is also a good idea, as these investment choices will affect them as well.

2. Review your finances and budget. Thorough review of your bank account is required in order to succeed in real estate. Consult a financial advisor to find out exactly how your financial situation will be affected by your property investment, the costs, and profit. Always overestimate repair costs, so you won’t have any unpleasant and expensive surprises in the future.

3. Hire a good real estate agent. Even after doing significant research, you will hardly be an expert in real estate investment, so hiring a professional will benefit you greatly. Real estate agents who focus on investment property should have all of the market information and contacts that you need to find good deals, even before they are listed on the market.

4. Research the market. You might know everything about the housing market in your area, but that doesn’t mean you will find a good deal there. Extending your search to other areas of the state or even the country can result in finding some great bargains. Your real estate agent can be of great help with this, and put you in contact with his colleagues all over the country.

5. Research the rental market. If you are investing in a rental property, start looking at what other homes are being rented for. Again, your real estate agent can provide this information, but you can also find out rental prices in certain areas from places like Craigslist, or classified ads in local newspapers.

6. Get pre-approved for a loan. Having the money ready when shopping for good deals puts you at a great advantage, so try to not make any offers until you know that you will be able to borrow the money. Being pre-approved for a loan will make your offers more credible and increase the chance that you will succeed in buying the property.

7. Have some cash readily available. Having some money that you can access quickly will also save you a lot of headaches. That money can be used to make a quick down payment, which will secure the deal, or to pay the interest, tax, and insurance.

8. Hire a professional inspector. Having a professional inspection can give you peace of mind when investing in a property. The few hundred dollars that you will spend on the inspection could possibly save you thousands in the future. Issues like roof or foundation damage are hard to see by someone who isn’t a qualified inspector, and can become very costly if left unrepaired. Of course, before buying a damaged property, you should factor in the repair cost, and then decide how much you are willing to pay.

9. Negotiate the price. After you have found a property that you are willing to invest in, it is time to make an offer and negotiate the price. Having a few other options is recommended, as it will prevent you from overpaying. After the negotiation is done and you have reached an agreement with the seller, you will have to put down a 1 percent earnest deposit, and then you will typically have a couple of weeks to purchase the property.

10. Completion of the sale. Before the completion of the sale, you will have to do an inspection of the property, in order to make sure that all appliances and fixtures that were agreed on are still there. Then the only thing left to do is to collect the set of keys and start working on a plan to make your new investment profitable.

Going through these 10 steps will save you time, money and the headaches associated with buying a property. Once you think that you have a firm grasp on how investment in real estate works, it’s time to find other properties and reach your financial goals.

Why Should You Invest in Real Estate Property?

Why Should You Invest in Real Estate Property-150x150When the recession hit and the housing market started to decline, a lot of investors abandoned the real estate world and started investing in other industries. While relatively slow for the time being, the real estate industry has started to recover and attract old and new investors.

When investing in real estate, if you cannot pay for the property with cash, it is very important to have access to a lender that will accommodate your needs and budget. Knowing people in the real estate industry, such as agents, appraisers, and even home improvement companies can give you the upper hand over other investors. Also, researching the property that you are about to invest in is an important aspect of being a successful real estate investor.

Advantages of Investing in Real Estate Property

Depending on the housing market and many other variables, investing in real estate can be a very profitable business. Here are some of the advantages that you will have:

1. Profit. Finding a home priced low enough and realizing its potential can result in some big profits. Buying a home that is in foreclosure, close to being foreclosed on, or in need of repairs or improvement, is a great opportunity for making a profit. You can buy this home for much lower than market value, repair or improve it, and then sell it for a higher price, netting you a nice profit. Also, renting one or multiple homes that you have purchased will result in ongoing income.

2. Lower taxes. Buying a home will allow you to deduct many expenses, such as the mortgage interest, property taxes, insurance, repairs, and even profit that you make from selling the property.

3. Using leverage. Purchasing a home and increasing its equity without spending your own money is an important part of being successful in real estate investing. High equity will help you save on the mortgage while making profit.

4. Appreciation. Your property can increase in value over time depending on factors such as supply and demand or inflation. Small improvements or repairs can also influence the selling price of your investment significantly.

Real Estate vs. Other Investments

Real estate seems to be the best choice when considering investing your money. The world economy is slowly recovering, but its fluctuations have a big effect on other possible investments, such as gold or stocks. Owning a home has some clear advantages that were enumerated above, besides being a good investment. Besides those advantages, home prices and current mortgage interest rates are very low right now and probably won’t go lower, but will start to increase soon. Other advantages to owning a home instead of other investments are:

  • Having more control over your investment. A home gives you more control than, for example, stocks. With stocks, you depend on big corporations and executives, who don’t make decisions based on your financial situation. If you have a home or apartment that is not being rented, you can always lower the rent, or create other incentives to attract renters.
  • More options. Whether you need some fast cash or passive income, there is a real estate investment that can accommodate you. With stocks or gold, for example, you don’t have many options besides buying or selling.
  • A tangible asset. A home can be rented, sold, or you can live in it. You own the property or the land, and this can give you a lot of peace of mind. Being defrauded in real estate is much harder than in stocks, because you can visually inspect the property or talk to the tenants face to face.

Every investment has pros and cons, but it seems that real estate is the one that offers you the most control, stability and options. But, like all investments, investing in real estate highly depends on your knowledge and financial situation.




Tips from the Pros: Become a Successful Real Estate Investor

Tips from the Pros- Become a Successful Real Estate Investor- 150x150Investing in real estate can be very rewarding, but it can also prove to be very challenging and demanding. Patience and knowledge are very important parts of being a successful investor in this industry. When it comes to investing, everyone has different goals and aspirations, but there is one thing that all investors have in common: they invest in order to make money. Here is a list of the top 10 tips that will help you become a successful real estate investor.

Tips from the Pros

1. Do your homework. There are many important aspects to investing that you need to have a good grasp of before starting, including having a good understanding of your local real estate market as well as the negotiation process, how buying and selling properties works, and what type of financing to use. By doing your homework, you will have the advantage of knowing how to find the best deals, realizing when someone is trying to scam you, and how best to approach the process. Investing in yourself is the first and most important step in becoming successful in this industry.

2. Make realistic offers. The recent economic crisis made the housing market crash, which resulted in a lot of properties being foreclosed on or becoming distressed. Prices on these properties are very low, which makes this an ideal situation for real estate investors to make substantial profits. Unfortunately, this has created a lot of competition, which means you can’t make low-ball offers. Still, be careful not to make offers that are too high; you have to find the right balance when making an offer. Banks and owners with distressed homes are in a hurry to get rid of these properties, but that doesn’t mean that any offer will be accepted.

3. Have financing ready. Say you find the perfect deal, the owner accepts your offer, but you didn’t start looking for financing in time. Not being pre-approved for financing will most likely result in you losing that deal, unless you have enough cash to pay for the property. The owner will probably be in a hurry to sell so, by the time you find a lender, they will accept someone else’s offer, and you will lose the deal as well as the time you put into finding it. Finding a good lender and developing a relationship with him will save you the trouble of losing great deals because you weren’t quick enough.

4 Overestimate your costs. Many investors lose money or barely break even because they haven’t correctly estimated the amount of money that they have to use for home repair and improvements. When making estimations, it’s recommended that you overestimate the cost of the repairs and underestimate the cost of the property after repairs. Some homes can be in really bad shape when you buy them, especially if they are foreclosed homes, which makes it even harder for you to clearly estimate renovation costs. The previous owners may have intentionally damaged the house or apartment because they were being evicted, even stealing home appliances or lighting fixtures.

5. Focus on the local real estate. When people talk about the real estate market, they usually refer to the national market. Fortunately, the prices on the national market don’t necessarily reflect local real estate prices. The best thing you can do is find the area that you want to invest in, and then try to only focus on specific sections of this area that seem like they would be the best to invest in.

6. Avoid speculation. The surest way to make money in the real estate industry is by investing for value. Buy property based on its current and future value, instead of buying property hoping that the price will increase in the future. Speculation is a lot like gambling, and can put you out of business and leave you indebted before you even realize what happened.

7. Invest in areas that you know. Especially if you are a new real estate investor, concentrating on areas close to your home is a great idea. Knowing the area will help you observe the trends in sales and rentals much easier, and act faster when a property comes on the market.

8. Understand that you will make mistakes. Everyone makes mistakes, even the top players in the real estate industry. The only difference is that they have recovered and learned from those mistakes. Don’t look at mistakes as setbacks, but steps in the real estate investment learning process. Of course, this whole learning process will be a lot easier if you also learn from other people’s mistakes and try to avoid making them.

9. Develop relationships. Relationships are extremely important to the real estate industry. Whether you like it or not, you need to develop your people skills and make as many relationships as possible with people in the same business. Having good contacts with lenders, construction companies, and real estate agents will make your life a lot easier. LinkedIn and Twitter are great tools to help you with this.

10. Start small. Starting small means that you will have less risk involved and it will help you better understand what you need to do in order to become a successful real estate investor. Many investors fail in the beginning because they think that they know enough already when they are starting out. Starting small allows you to apply what you have learned and see if you have what it takes.

Like many others have done, you can achieve financial success by investing in real estate, but it all depends on your goals, knowledge, and work ethic. Following these top 10 tips will help you get on the right path to becoming a successful real estate investor.

Learn About Lease Purchase Investing Now, or Hate Yourself Later

Learn About Lease Purchase Now- 150x150The lease purchase is an alternative way to buy a home, and is especially helpful if the buyer is unable to finance a home immediately, but would like to have the option of buying the home in the future. As an investor, you are not facing more risk by investing in lease purchasing than you would by investing in traditional real estate, and you will most likely be able to close more deals than other real estate investors.

Lease Purchase and How it Works

Buying a home through lease purchase is a home rental lease that gives you the option of purchasing the property at a future date, during the term of the lease. You are required to pay a deposit upfront, and sign a rental lease contract for 1 to 3 years. During this period of time you will have the option of buying the home, which cannot be sold by the owner to another party.

During the rental period, should you decide to buy the home, the initial deposit and part of the amount that you paid as rent will count towards the down payment. If you decide not to buy the home, the initial deposit and the rent that you paid over the years will be kept by the owner.

Lease purchasing can be beneficial to all of the parties involved. It may not be a good choice for everyone, but here is how a lease purchase can benefit the seller, the buyer, and the investor:

  • The seller has a few distinct advantages by giving buyers the option of lease purchasing. The home will be listed for sale and for rent, which will attract more potential buyers. You will most likely receive your asking price for your home because of the delayed sale and more variables that can be negotiated. Knowing that they might buy your property in the near future, your tenant will take better care of your home, and may even make improvements. Last, but not least, the deposit that the buyer will make can help you avoid foreclosure, catch up on your payments, and increase your credit score.
  • Buyers who use lease purchasing have the advantage of not throwing money away by paying rent like in a traditional renting situation. Part of the money that goes towards paying the monthly rent will be used as down payment if you decide to purchase the home. Also, lease purchasing is a great option for home buyers with less than perfect credit, but has significant funds available.
  • Investors are able to control a home in order to generate profit from renting it out to a 3rd party. As an investor, you won’t need a large amount of money to make a lease purchase, as opposed to traditional real estate investing.

Lease Purchase Investing

A lease purchase investor has a few options when investing in a home, such as living in the house or apartment, renting it out for a positive cash flow, or reselling it immediately. In a slow housing market and economy, when a lot of sellers have to sell their homes before going into foreclosure, a lease purchase investor can easily make a profit.

Once a contract is signed, the investor is required to pay a deposit that will later be added to the down payment, if they decide to buy the home. The rent is set, and the investor is given the option of purchasing the home before the lease contract expires. The home’s selling price is set and it will not change for the duration of the contract.

In order to make a profit, the real estate investor can rent the home to another party for more, or flip it for a quick profit. Normally, lease purchasing is advantageous for both the seller and the investor. While the buyer makes a profit, the home owner will manage to pay their mortgage with the rent money that they receive from the investor, or even sell their home for a good price.

Challenges That an Investor May Face

Sometimes the deal doesn’t work out as expected, or the housing market takes a turn for the worse, in which case the investment won’t be profitable anymore. The good news is that, by using lease purchasing instead of a traditional real estate investment, the necessary capital won’t be that large, so you won’t be losing tens of thousands of dollars.

Depending on the state of the housing market, a lease purchase can be a profitable investment.  Lease purchase investing can be profitable for investors and play an important role for tenants in the journey to becoming a home owner, but, like any real estate investment, it features plenty of risk, and should not be done without having proper knowledge of the process.

10 Mistakes Others Make When Flipping Houses, But You Won’t!

10 Mistakes Other Make When Flipping Houses- 150x150House flipping is the process of buying a house under market value, renovating it if it’s needed, and then selling it at market value for a profit. Flipping a house is a good way to make money in the real estate industry, but it’s not as easy as it looks. TV shows on home improvement channels make it look a lot easier than it is, but the truth is that you will face a lot of competition in this business, especially nowadays.

Finding a house that is priced at least 30 percent under market value is hard, and once you do, you need to move fast. Having access to cash or financing, and being ready to start the home’s rehabilitation right away will make a big difference in house flipping. Acting too late will result in losing good deals and, even worse, money. Here are the top 10 mistakes that you should avoid when house flipping.

Mistakes to Avoid

1. Underestimating the cost. Over spending is probably the biggest mistake you can make when trying to flip a house. It’s better to overestimate the cost before buying the house, than to realize that you have to pay more than you budgeted for to renovate it after you have already bought it. The value of the house will always be relative to similar houses in the area, no matter how much money you invest in its rehabilitation. Asking significantly more than similar houses go for in the neighborhood is unrealistic, and will result in not being able to sell the house.

2. Paying too much. If you pay too much for a house, you will most likely make only a small profit or even no profit at all. When buying a house with the intention of flipping it, you should always make sure that the price is low enough to allow for rehabilitation costs. Theoretically, you should already have a profit when you buy the house. The rehabilitation will be just a nice little bonus.

3. Not having a budget. Over spending on a home’s rehabilitation can also be the result of poor money management. Having a budget will allow you to better estimate how much you will spend on each area of the house. Be careful when establishing a budget, because there will always be unexpected expenses, like hidden damage, that will make the renovation cost more than you anticipated. Don’t buy the most expensive appliances or fixtures. Have a look at the other similar houses in the area to get an idea about what you will be competing against when you put the house on the market.

4. Unreasonable time frame  With flipping houses, you have to be quick, but also realize that the whole process of buying and rehabilitating a house will not happen overnight, like some house flipping shows on TV will have you believe. Having a plumber or electrician ready to start working right away helps a lot, but they can only give you an estimate of how much the job will take only after seeing the house.

5. Allowing buyers to see the house before it’s on the market. You might be eager to start attracting customers as soon as possible, but putting up the “For Sale” sign before the rehabilitation is done will not make a good first impression on potential buyers. Showing a house that still needs work to buyers will not be in your advantage, so it is better to finish the rehab, even though it’s going to be a while longer until you can put the house on the market.

6. Not doing things yourself. Hiring someone to do things like cleaning the trash or taking old appliances to the dump will cut into your profits, and it’s something that you can do yourself. You can even do small repair tasks like changing light bulbs, or even fixtures.

7. Doing all the work yourself. Doing some of the work yourself is not only recommended, but it will also cut costs. But tackling big jobs, like fixing the roof or the plumbing, can quickly prove to be much harder than you initially thought it would be, so it is better to leave this type of work to professionals.

8. Not salvaging bath, kitchen and lighting fixtures. You don’t necessarily have to replace dirty or stained fixtures, such as sinks, faucets, toilets, or bathtubs. Of course, replacing them is sometimes easier than scrubbing for a few hours, but it is also more expensive. Salvaging things that only need to be cleaned is a lot more profitable than just throwing them away and buying new ones.

9. Ignoring the exterior. Being the first thing that buyers will see, the home’s curb appeal is very important to creating a good impression. Home buyers are looking for the entire package, a house that looks appealing inside and out. Having an unattractive exterior may keep buyers from wanting to see the interior.

10. Over-remodeling or under-remodeling. Don’t invest money in the most expensive appliances or fixtures that you can find. This is a sure way of killing your margins. On the other hand, cutting corners will turn the buyers away. Your best bet is to use common sense when rehabbing a house in order to flip it quickly and effectively.

Using these 10 tips when flipping houses will improve your chances of selling it faster and for a better price. Don’t get caught up in the same mistakes others have made. Doing research will get you one step ahead of the competition and on your way to becoming a successful house flipper.