Renting vs. Owning: Which is Best for You?

Renting vs. Owning- Which is Best for You-150x150Right now when the housing market is slowly recovering and interest rates are still near record lows, it might be the best time to consider becoming a home owner. Of course, depending on your financial situation, home ownership might not be the best choice for you. People have always debated whether it’s better to own a home or rent one, but the truth is that it mostly depends on each person or family’s budget, location, and future plans.

Owning a home can be as affordable as renting or even more affordable in some parts of the United States. The difference in price can be easily figured out by simply comparing mortgage prices to rental prices in your area. But even if renting seems cheaper, you will need to take into consideration all the advantages that home ownership has to offer.

Factors that Should Influence Your Decision

First of all, probably the most important factor that will influence your decision on whether to rent or buy a home is location. Prices fluctuate significantly depending on what area the home is located in. You might want to be closer to your job, which may make you look at homes in more expensive parts of the city or town. Prices for homes could be well out of your price range, so renting will be your only viable choice. Alternatively, you could move to a less expensive area, which will make your daily commute longer, but will give you the advantage of being able to afford buying a home.

Another factor that will have an impact on your decision is timing. You have witnessed the rise and fall of the real estate market during the past few years, and you have probably realized that buying a home has a lot to do with timing. Millions of people have lost their homes during the economic collapse because they became home owners before the housing market bubble burst. Interest rates also fluctuate, so buying when interest rates are low is a wise choice.

Last, but not least, one factor that should influence your decision is your financial situation. When analyzing your financial situation, you need to have a look at both your savings as well as your income and future earnings. This way you will determine if you are in a good position to become a homeowner, or if you should rent until you can make the necessary changes that will allow you to buy a home.

Pros of Owning a Home

Becoming a home owner is something that most people aspire to. Statistics show that home ownership in the United States is at nearly 70 percent, which means that it is a dream that can come true quite easily. Home ownership comes with great advantages that you won’t get if you rent. Here are some of them:

  • Equity. When paying your mortgage loan, you are increasing your degree of ownership with every monthly payment. By paying rent, you are pretty much losing that money, as opposed to ownership where you can actually borrow against your equity to finance other purchases or refinance your home.
  • Tax deductions. Your mortgage loan interest and property taxes are tax deductible, which will save you a significant amount of money each year. If you work from home, your home office and part of your utilities may be eligible for further tax deductions.
  • Make changes to your home. When you own a home, you can decorate it any way you want. You can paint the walls any color you choose, hang pictures on the walls, and even add rooms or other structures to it. When renting, you can only make small modifications, and you will most likely need the building owner’s permission.
  • Choose how to deal with repairs. Whether you can repair and maintain your home on your own, or hire a contractor, you can do as you wish, without being at the mercy of your landlord, as is the case with renting.

Pros of Renting a Home

Depending on many factors, renting could be a more viable option than owning a home. Here are some of the more important benefits of renting:

  • Low upfront cost. When renting, you are required to pay the first and last month’s rent, and probably a security deposit upfront. There are no large down payments, home inspection fees, and closing costs, like when buying a home. The difference between the upfront costs of renting and buying can be as high as several tens of thousands of dollars.
  • Easier to relocate. If you need to relocate for reasons such as a job change or divorce, you can easily pack up and move. Also, if your salary changes, you can easily move to a different area.
  • Increase your credit score. A low credit score can get in the way of becoming a home owner, so renting for a while not only allows you to have a roof over your head, but it will also help increase your credit score and get back on the path to home ownership.
  • No repairs and maintenance. If something in your rented home, like appliances or fixtures, stops working or breaks, you won’t have to replace it and pay for it. The landlord will take care of repairing and replacing things.

Both owning and renting have their advantages, but choosing one or the other will mostly depend on your budget and plans. Prices and interest rates fluctuate often and sometimes significantly, so buying a home at the opportune time will save you a lot of money and future headaches. Also, if you are not comfortable with the current housing market situation or your financial situation, then renting will most likely be the better choice.

Real Estate Dealers and Investors- What’s the Difference?

Real Estate Dealers and Investors- What’s the Difference-150x150Many real estate investors don’t mind whether they are considered an investor or a dealer. The difference between the two can have a big impact on how much money you make in this business. Real estate investors benefit from several tax advantages, while dealers do not. The biggest difference is that investors are taxed at the capital gains rate while the dealers’ profits are taxed like regular income, which can be significantly higher. It’s up to the Internal Revenue Service (IRS) to determine who is taxed with each rate.

What is a Real Estate Investor?

A real estate investor is someone whose main goal is to purchase a property from which he or she can generate a profit. The profit is made by selling or renting the property to other parties.

One of the options that a real estate investor has when purchasing a property is to finance it with a loan. Other real estate investors, ones who have a better financial situation, choose to purchase the property without getting a bank loan. The goal is to sell the property for a profit when the prices increase. If the property’s value increases over time, the real estate investor will be able to receive a large return on their investment.

Some real estate investors choose to rent a property that they have purchased, generating a profit through rental income. The real estate investor becomes a landlord, with the responsibility of providing proper living conditions for the tenants, and maintains the property. The investor must determine the cost of running a rental property, taking into account things like repairs, regular maintenance, taxes, insurance and mortgage. After determining all of these costs, he or she can determine the appropriate rent amount that the tenants will be charged.

What is a Real Estate Dealer?

Dealers, like real estate investors, buy and sell properties for a profit as fast as possible. While real estate investors make long-term investments in properties, dealers are in it for the quick profit, and try to resell their purchases as soon as they can.

The Internal Revenue Service doesn’t allow real estate dealers, who are basically short-term investors, to benefit from the same tax rate that real estate investors benefit. Real estate investors are charged a long term capital tax rate, which is much lower than the rate that real estate dealers get from the IRS.

Factors That Determine Investor vs. Dealer

The Internal Revenue Service doesn’t have a clear set of rules that you could use to determine whether you are considered a dealer or not. The IRS analyzes your business in order to determine your classification, using the following factors:

  • Ownership Duration. If you own several properties for less than 2 years, you will most likely be considered a real estate dealer. If you hold on to properties for more than 2 years, they will be considered investments, and you will be classified as a real estate investor.
  • Statement of Intent. If your intentions of buying and reselling are expressed, then you will be considered a real estate dealer.
  • The Level of Advertising. Significant advertising and strong efforts to sell will be regarded as a real estate dealer tactic.
  • Number of Sales. The more sales you have over time, the greater the chance that you will be regarded as a real estate dealer by the IRS.

There are no fixed criteria to determine if you are a real estate investor or a dealer. The difference in tax between the two is significant, but it is up to you to decide if being a real estate dealer is worth the extra money that you will have to pay to the Internal Revenue Service. Understanding the difference between a real estate dealer and an investor will be important for your ability to take advantage of the lower tax rate, and save you a considerable amount of money.

The Power of Networking in Real Estate Investment

The Power of Networking in Real Estate Investment- 150x150Question: When it comes to finding out about real estate investment deals quickly, do I just have to network with the right people or is this a “boys club” situation?

Answer: Networking is a powerful tool in virtually any profession, so networking will certainly be advantageous in anything involved with real estate.

It is true that two heads are better than one. One of Warren Buffet’s investment rules is that “if you are alone you will move fast, but if you are more than one you will go far”. Networking is very important in securing success in real estate business. Real estate business networks enable real estate investors to create new relationships and sustainable models for real estate growth.

Networking Opportunities

  • Property Community- This is an excellent resource that enables you to find and join various social groups where you can connect with and meet real estate investors to discuss property trends and other real industry related information on forums. You will also find property listings by types and regions. Property Community saves you money on advertising costs for listings and should increase the likelihood of a fast sale. Also, you can easily ask questions about real estate and receive answers freely throughout the forums. Another benefit lies in the ability to send private messages to group members if you need to discuss a more private matter, such as negotiating a real estate deal.
  • Meetup- This is one of the most popular forms of networking for both formal and informal groups. Meetup.com enables you to find out about any real estate meetings and networks close to where you live. You can also start your own meetup so that others can join. Some networks have over 1,000 members. Most meetups have networking events where you can meet great connections within the industry.
  •  Real Estate Webmasters- Real Estate Webmasters provides you with realtor forums where you can easily introduce yourself and then start chatting about investment prospects. Real Estate Webmasters has links for easily finding properties for sale as well as for finding buyers for your property. You can discuss your experiences with Google, Facebook, Yahoo and Bing and tips for how these can help others. By joining this forum, you will gain access to a wide network of investors and real estate experts. As an investor, you will learn more about link building techniques and other useful online practices. If you want to develop a new website for your property listings, you will be able to meet various real estate web designers with ample experience. There will be a wide variety of real estate and related professionals on the forums so you will be sure to make plenty of worthwhile connections.

Real Estate Investment Clubs

There are usually several different investment clubs in most moderately large to major cities. Some clubs are even formed at the national level and may have local chapters. For some, local clubs may be more beneficial because they will be more tailored to discussion and resources for your area. On the other hand, a real estate investment club at the national level may create more opportunities in different states that may not be easily accessed otherwise.

A real estate investment club enables you to create useful networks, gain investment expertise as well as tips about commercial and residential properties available for sale and purchase currently. These clubs will also help you familiarize with various rules and regulations related to real estate in your local area and nationally. You can ask and answer questions while connecting with like-minded real estate investors who share common goals.

Real Estate Conferences

Conferences are invaluable knowledge centers for real estate investors. By attending conferences, you will gain access to engaging discussions about the future of real estate business and acquire more of the expertise required to achieve success in the constantly changing real estate industry. There will be most likely be a variety of meetings and events going on simultaneously at the conference, giving you multiple chances to network, creating new friendships, business partners, and finding more real estate deals.

Many of your questions will be answered as many professionals from government departments concerned with land and property are typically present. Emphasis will be on current investment opportunities and  future trends in real estate.

The Power of Business Cards

A business card is one of the most powerful networking tools. A business card represents you and your company as a brand. It informs them about your niche within the industry, services you offer, your contact information, and leaves an impression on the person it is given to. Even if you don’t end up working with the person that received the card directly from you, they may pass along your card or your name to others that may end up working with you.

Many real estate investors have formed fruitful friendships by handing out their business cards. There are some cultures that consider receiving a business card a great honor. Designing high quality business cards can improve the image of your business and make a memorable impression.

Real Estate Get-Togethers

They might start as informal groups with a few real estate professionals that you know. Just look at a get together as an ordinary hang out with some buddies. You get to interact with fellow investors, share challenges, ask questions and help one another. These get-togethers may grow into larger groups or simply closer knit groups. You never know, from these you may develop some invaluable real estate investment partners. The group will keep each other updated on new developments in local investments and you’ll be the first to know inside information. This can also save you time and money on advertising if someone in your group leads you to a deal.

The informal nature of a real estate get together means that you don’t incur subscription costs or abide by rigorous rules. They are becoming more and more common because you get to do business with like-minded friends in a sociable manner.

There are so many opportunities for networking in the real estate industry. With all of this information, there’s no excuse for you to not join in! Reap the benefits of a strong and influential network of real estate professionals and see what incredible things happen just because of the people you know.

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.

8 Excellent Lead-Finding Strategies for Real Estate Investing to Adopt Right Now

8 Excellent Lead Finding Strategies- 150x150The most important part of investing in real estate is finding real leads, but you will also find that this is the hardest part. Converting a lead into a good deal is what will eventually lead to profit. Being new in the real estate industry may seem a little overwhelming, and you might be tempted to give up, but the good news is that there are plenty of ways in which you can generate leads. From word of mouth and cold calling to putting up signs and creating a website, there are plenty of ways in which you can find leads for real estate investing.

The main thing to keep in mind is that you should constantly be prospecting for new leads. Dedicating several hours per week to working on your lead generation tactics and finding new ones is very important. Let’s have a look at some of the ways in which you can find real estate investing leads.

Use Bandit Signs

Commonly known as “bandit signs” in the real estate world, yard signs that advertise your business are a very effective way of finding leads. Strategically placing bandit signs in certain areas that you are interested in will lead to more people calling you. However, when using bandit signs, here are some important things to keep in mind:

  • The law. Before you start using bandit signs, find out if the laws in the area allow this. Generally, more upscale neighborhoods won’t allow bandit signs. It is not recommended to break this rule, as this will lead to your signs being immediately removed, and you might also be fined.
  • The size. It is very important for your bandit signs to be readable by passing cars. Spend more money and get larger signs, because they will be easier to see by those who drive by, and you will have more room for your message.
  • The message. Your message should be short and to the point, making it easier and quicker to read. Originality never hurts; it is actually best not to use the same old “we buy” or “we sell” messages, but don’t go overboard, as this may confuse possible leads.
  • The placement. Placing signs near stop signs, traffic lights, and gas stations will benefit you more because these are places where people will stop and actually get a chance to read the sign as well as write down your phone number or website.

Use Newspaper and Online Classifieds

The ‘For Sale by Owner’ section is a good place to look in the local newspaper or on a website. By doing this, you can get in touch with people that have been trying to sell their home or property for a while unsuccessfully, which could result in you getting a very good deal. If a classified ad lists a phone number that is out of area, it usually means that the owner might have relocated for his job or personal reasons, and this puts you, as a buyer, at an advantage, because most of these people will want to get rid of their old home as soon as possible.

The ‘For Rent’ section of the newspaper or website will most likely be filled with landlords who want to get rid of their property or properties. This is one of the best places to look for leads, and where you will be most likely to get the best deals.

Use Business Cards and Flyers

You most likely already have business cards, but it’s a good idea to print some flyers as well. Give them out like candy to everyone you interact with, even to people who you meet at the grocery store. Giving out more than one business card is always a good idea, because you never know which one of the persons that you’re giving them to have a friend or family who might become a lead. Another way in which you may generate leads is by posting business cards and flyers in high traffic areas, such as supermarkets, libraries, or post offices.

Use the Internet

One of the best ways to get leads nowadays is through the Internet. Getting leads online is more cost-effective and time efficient than most old ways. Here are a few ways in which you can use the Internet to your advantage:

  • Build a website. Building a website is now easier than ever, and almost everyone can do it even without spending a dime. A website can help you reach your audience more easily, and allows them to clearly find out what you are offering. Possible leads can contact you much easier through a contact form or social media.
  • Use social media. Not only is social media one of the best ways to reach people today, but it is also mostly free. Use social media websites like Facebook, Twitter or LinkedIn in order to gain leads or develop relationships that may bring in outside leads.

Use Direct Mail or E-mail Campaigns

If you have some money that you are willing to invest into your business, a good choice is to start a direct mail or e-mail campaign. You will most likely have to invest in an address list or an e-mail list, but you can also get these for free if you are willing to do the work yourself. However, you must make sure that you buy these lists from a reputable seller, because usually, once you buy a list, your money is not refundable.

When looking for real estate investing leads you must keep in mind that every person you meet is a potential lead. If they turn out not to be selling or buying a property, then maybe they have a friend or family member who might be interested. Making a good impression on people and being creative is very important in the real estate industry, so you shouldn’t be afraid to try out new tactics.

This Analysis Helps to Determine Property Investment Potential

This Analysis Helps to Determine Property Investment Potential- 150x150Despite the recent economic crisis, investing in real estate is still a profitable business. But in order to make a profit, investors have to determine the value of the property or properties that they intend to buy and estimate how much money they will make from their investment.

New investors in real estate might find analyzing a property for investment potential challenging, due to all of the factors that this process involves. Despite the fact that all of these factors seem overwhelming, determining if a property is worth investing in is not that hard. Essentially it is all about the numbers, as analyzing a property involves looking at its income, expenses, and applying a multiplier to determine its value.

The Process of Analyzing a Property

Properties that have good investment potential are the ones which generate positive cash flow and match the investor’s return expectations. Here’s what you should look at before investing in a property:

  • Calculate a property’s price based on how many units it has if you are investing in an apartment building, or base the price on its square footage when investing in a commercial property. This, of course, won’t be enough to determine if a property has investment potential, but it will certainly put things into perspective.
  • Find out the property’s gross rent multiplier by dividing its price by the annual gross rents that it generates. After you find a property’s GRM, you can compare it to other similar properties in the area. However, properties have different expenses that won’t be reflected in the GRM, so calculating the property’s gross rent multiplier will be only one factor that is involved in analyzing a property’s potential for investment.
  • Calculating a property’s net operating income (NOI) is another way in which you can find if the property is worth investing in. The NOI is calculated by subtracting a property’s operating expenses, such as management and accounting fees, maintenance, insurance, utilities and more, from the income generated by rent. The loan payments are not included when calculating the property’s NOI, but you will need to add a management fee and a vacancy factor in some cases.
  • The cap rate is the most used way by investors to determine if a property is worth its asking price. The capitalization rate is calculated by dividing the property’s net operating income by its price. You should then compare the cap rate to cap rates for the area that the property is located in to help decide if the property is worth investing in. Generally, the cap rate should be between 7 and 12 percent.
  • Another factor that can help you determine if the property is worth the investment is the cash-on-cash return. Cash-on-cash return is calculated by dividing the property’s annual cash flow by the cash that you will invest to acquire the property. Then compare your required return with the property’s cash-on-cash return. If the cash-on-cash return is greater than your required return, then the property may be worth investing in. Otherwise, the property will most likely turn out to be a bad investment.

Analyzing a property for investment potential is much easier than actually finding a property worth investing in. Determining if a property is worth the investment is very important. This will make the difference between you being a good real estate investor and a bad one. This analysis will also influence your profit and for how long you will be able to stay in business. How good an investment is and if it is worth investing in ultimately depends on you, your financial situation and your budget.

10 ‘Make it or Break it’ Real Estate Issues for You in 2013

Top 10 Real Estate Industry Issues in 2013- 150x150Since the housing bubble burst in 2008, most people don’t trust the real estate industry anymore. The housing market is slowly recovering, and statistics show that most Americans would buy a home in the next few years, even if they expect the prices to go up in the near future.

Prices on homes have already started to climb, with a steady increase in almost each month of 2012. National home prices have increased by over 6 percent in October last year. In California, one of the states that were the most affected by the housing market crash, more than 50 percent of the homes listed for sale received multiple offers from eager buyers. The same trend was followed by Florida and Arizona last year.

Being an industry that has just started to recover, the real estate industry still faces a lot of issues in the years to come. Here are the top 10 issues that you should be aware of:

Top 10 Industry Issues

1. An Increase in Home Prices. With builders not being able to keep up with the demand for new houses, prices for older houses will continue to increase. The construction of new homes is almost three times lower than it should be to keep up with the population increase and the recent job growth. The inventory of homes for sale is at the lowest since 2006, and economists predict a 5 percent increase in home prices for 2013.

2. An Increase in Rent Prices. The job growth will push most people, who moved in with their parents or with friends back when the economic problems started, to start looking for apartments and houses to rent. This will create a lot of demand for rentals, which will cause rent prices to increase by up to 9 percent in 2013.

3. Less Good Deals on Foreclosed Homes. Sales of foreclosed homes represented only 11 percent of all home sales in 2012, down from 28 percent in 2011, and are expected to be even lower in 2013. This happened because banks have sold many distressed home loans to companies who agreed on new terms with the borrowers, instead of foreclosing.

4. An Increase in Short Sales. Instead of dealing with an expensive and time consuming foreclosure, banks prefer that the borrowers sell their home for less than what the mortgage is worth. In many cases borrowers are not required to pay the difference, which will generate more short sales, while the number of foreclosures will diminish.

5. An Increase in First Time Home Buyers. It is predicted that the growth in demand for homes in 2013 will be caused mostly by first time home buyers.

6. Bigger Home Building Costs. Even if new constructions are at a low level right now, construction materials are at high prices. The labor costs are also high because many construction workers left the industry when the crash occurred. The demand for new homes will lead to even higher costs for new construction in 2013.

7. Property Management Increase. Foreclosed homes that have been sold to investors in the past are now entrusted to professional property management organizations to maintain and rent. The number of foreclosed homes that will be sold to investors will increase in 2013, and so will the number of property management companies needed to manage them.

8. An Increase in Mortgage Interest Rates. Current mortgage rates have been at an all-time low lately, so predictions indicate that they will only go up in 2013. However, the interest rates will only slightly increase, to an average of 4 percent.

9. Credit Requirements. In order to get approved for a mortgage loan, your credit score must be in the 760s right now, but this might change in 2013. As more and more people will buy homes, lender competition will make credit requirements much more lenient.

10. A Two-Tiered Industry. Because banks don’t give out many construction loans, the home builders will be divided into two types: large home builders with access to funds, who can handle big projects, and small to medium home builders, who depend on loans and can’t handle big projects. This will create less competition and bigger prices.

The real estate industry has suffered greatly in the last 5 years, but it’s showing signs of recovery. While the worst has passed, there are still plenty of issues that need to be resolved, but that will happen slowly over the next few years.

Can the Real Estate Industry Ever Be as Good as it was Before 2008?

Is 2013 the Year for the Real Estate Industry Comeback- 150x150The economy still has a long way until full recovery after the burst of the housing bubble. The real estate industry has seen some tough times in the last few years, and has only recently started to recover. Economists say that 2013 will be the year when the real estate industry will finally get back on the right path and see some noticeable growth. Economists also mentioned that the real estate industry comeback will be the main factor that will generate the economic growth in 2013.

Recent Changes in the Real Estate Industry

In the last months of 2012, the housing market started to become a sellers’ market, with home inventories low and higher home prices. Banks that have lots of distressed homes are holding on to them, planning on selling them when prices increase even more. Unfortunately, the most important thing that the real estate industry needs in order to stimulate the economy is inventory.

Another factor that influenced the real estate industry lately is the job market growth. Unemployment is still high around the United States, but the job market is definitely recovering. The lack of inventory is also affecting people who need to move in order to be closer to their job, but analysts hope that this surge of jobs will eventually help residential real estate recover and start growing more rapidly.

With interest rates at historic lows right now, and are expected to remain low in 2013 unless the job market sees dramatic improvement. While lenders are starting to ease up on qualification requirements, many home buyers still find it difficult to get approved for a mortgage loan.

Real Estate Outlook in 2013

The recent changes in the real estate industry point towards modest, but steady, growth. Home sales and prices are growing, and home builders are starting to recover in order to meet the new homes demand. All things considered, 2013 might just be the year for the real estate industry comeback. Let’s take a look at the factors that will influence real estate most in 2013:

  • The multi-family market has been experiencing a great recovery in the past months, and this trend is expected to follow in 2013. Low interest rates and more lenient restrictions have made apartments attractive for buyers, while the limited home inventory has attracted more investors in this market.
  • The single-family housing market has transformed from a buyers’ market into a sellers’ market and will most likely continue to remain this way in 2013. Without single-family home inventories, the real estate industry won’t be able to stimulate the recovering economy to its full potential.
  • The office space market started to recover, as well, and it’s predicted that it will grow even more in 2013. Unfortunately, the job market isn’t growing fast enough to cause a big increase in the office space market, but will regain more stability in 2013.
  • The industrial real estate market might see an increase in leasing, but a decrease in sales in 2013. Depending on the area, there are places where the industrial real estate market will grow, but also places where it will stagnate or even deteriorate, as it is closely tied to employment.

Whether 2013 will be the year when the real industry makes a comeback or not, one thing is for sure: the industry is recovering. The recovery might not come overnight, but, as long as industries that are closely related to real estate make a comeback, so will the real estate industry.