Finding the Right Property

We all want to make money. The problem is most of us think the only way to do it is with a 9 to 5 job. This is not the case. For example, foreclosure investing can yield a very profitable income. The issue is finding the right investment property. You have to know where to look.

The bright side to the current housing crisis is that many homes are flooding the foreclosure market. These properties can be rented or flipped, and they can be purchased with little or no money down and at a fraction of their true worth.

Banks are not in the real estate business. They are in the business of lending money and earning from the interest. Non-performing loans look bad on their books, making it appear that their judgment is faulty. If investors are leery about a lender’s portfolio, they will invest elsewhere, costing the lender money. Clearing the bad loans off the books puts the lender in a better position with their investors, and provides a great investment opportunity for you.

Lenders will look at any offer that is made on a property, but they will usually reject offers that are much lower than the current market value of the home. You need to do your homework. First, determine how long a property has been in foreclosure or has been vacant. This will give you a good indication as to whether and how much the lender will negotiate when it comes to the property. While a property that has just come on the market may be difficult to obtain at a low bid, a property that has been on the market for a year or more can often be purchased at a steep discount.

One of the best places to start looking for the right investment property is on the government repossession lists at the U.S. Department of Housing and Urban Development (HUD). Some of these homes are offered for less than $10,000. The key to negotiating a deal with the HUD office is to be patient. You can offer as little as $500 for a property which has been listed as a foreclosure. Many of the properties for sale under $10,000 will actually sell for far less. The nice thing is most of these homes are valued at over $30,000.

The best way to make money on residential investment property is to resell the property either as a rent to own or land contract. Finding the right property for this type of transaction is not difficult. By contrast, finding the right buyer can be an issue. You will have to make judgment calls among buyers who either have a poor credit or have not been at their jobs long enough to establish a good credit rating. These types of buyers are the ones you will most likely be dealing with if you choose a lease to own option or a land contract for your residential investment property.

Once you vet a number of potential buyers, you can form a buyer’s list. This is a list of people who are looking to buy a specific type of property. Because you know what your buyers are looking for, you will be able to spot the right properties when you come across them, confident that you have a buyer for that property. It is a win-win situation for both you and your buyers.

You can sometimes create a deal with no money out of pocket when you have a buyers list. It is simply a matter of negotiation. After you negotiate the terms of the deal with the seller, your buyer tours the home. If the buyer is willing to purchase the investment property, he or she finances the purchase and you act as the middle man, collecting a percentage of the sale for finding the property and brokering the deal.

As you can see, there is investment income to be made by people who can see beyond their 9 to 5 jobs. All it takes is finding the right property.

Investing in Commercial Properties

You have many choices available to you when deciding what commercial real estate investment is right for you, ranging from large industrial parks to small vacation cottages for rent by the seashore. You can invest alone, be part of an investment club, set up a professional investment team composed of individuals, partnerships, or corporations. Commercial real estate opportunities and investment groups vary greatly, but it is worth learning about your options because the best real estate investments available now are commercial investments. It is really the only choice for those who understand real estate investing and want to make money without having to wait years for the residential market to turn around.

The residential real estate market has suffered greatly over the past two years. Housing prices are at an all time low throughout the United States. Property investors who were concentrating on the residential market have either stopped investing in real estate altogether or have switched to commercial investments. Commercial real estate is an entirely different field than residential real estate. If you are planning on investing in commercial properties, it is wise learn about this specific market and to become familiar with commercial real estate laws.

When deciding how to invest in commercial real estate, you should consider whether you have the knowledge and available capital to make investments on your own, or whether you should plan on seeking knowledgeable partners with healthy financial resources to invest with you, either through a partnership arrangement or as part of a commercial real estate group. You may wish to concentrate on one property, or you may wish to spread your money among different properties.

When deciding on the type of commercial real estate you wish to invest in, think about your existing real estate knowledge. If you know anything about the trades or building, you may wish to develop property as new construction. If you are well versed in property management, you may want to start investing in commercial properties such as office condominiums or storefronts that require management skills. If you are inexperienced in the field, you may wish to partner with experienced investors who have the knowledge you lack.

If you have more money than time, you may want to take on a partner who, because he or she knows the ins and outs of the real estate business, can provide you with sound property investment advice. You can allow that experienced partner to find, vet, and purchase investment properties while you provide the capital. Another option for someone with money is to invest in several different limited real estate ventures where there money can be spread around in different properties. Regardless of the way you choose to partner with others, it is wise to reduce the details of your arrangement to writing with the help of an attorney.

If you do not know anything about real estate but still wish to make good, solid, commercial investments, you can choose a good real estate investment firm to help you decide what properties make the best investment sense for you.

Whether you are well versed in commercial real estate and are ready to build a strip mall on vacant land or have no idea what commercial real estate is, you can make money in this type of investment provided you take the time to plan your method of investment and leverage your knowledge by partnering with the right people.

Real Estate Investment Group

One of the best ways for a person to succeed in real estate investment is to become a part of a real estate investment group. If you have a keen sense of real estate and finance and know what would make a good real estate investment, but have no cash flow, then you are a good candidate for teaming up with others to invest in real estate. Your knowledge and someone else’s money can generate a profitable venture for both of you. If, on the other hand you have money but no real understanding of real estate investment, your money and someone else’s knowledge can help you both succeed.

Real estate investment groups can be informal investor clubs or they can work according to guidelines set out in partnership agreements, trust agreements, and joint venture agreements. If you decide to formalize your investing agreement with your group, you will want to consult an attorney to decide on the best framework for your group. For purposes of this article, we will focus only on the benefit of working with others to realize your investment goals.

Finding people who are willing to use their credit or finances to gain a foothold in the real estate investment world takes networking and research. Meeting and talking to people face to face will give you the opportunity to get to know them, their backgrounds, and their areas of expertise. Members for your group can be found using ads in local papers, flyers, or posts on the internet. This type of group benefits all its members through mutual sharing of information and experience.

The typical investor usually has one expert niche. Someone who buys only commercial investment property may know little or nothing about residential investment property. Perhaps a member of your group has spent his time doing nothing but buying and flipping property and knows nothing about renting a property. As each member shares his or her area of expertise, all the group’s members benefit. As you get to know the members of your group, you can select those members you want to do business with, choosing your partners based on their investment strengths.

This type of group can also work to your advantage should you come across an investment property outside your price range. When an investment opportunity arises that needs an infusion of capital you may either find a fellow investment group member who has the capital and an interest in the investment property, or, through the magic of networking, knows just the person to contact for that cash infusion. There may be two or three group members willing and able to make the deal happen.

The more investors there are on a project, the fewer out-of-pocket expenses each one must shoulder. You and your investment group will share both the profits and the risks of your ventures. In addition, you may find the odds slightly more in your favor with lenders when you approach them with a team of investors to purchase a large commercial property.

Partnering with others in real estate can offer you many advantages: the ability to obtain properties you once thought were not in your budget, the knowledge of other seasoned investors, and the financial backing of one or more of your members. By forming a real estate investment group in your area, you can enter a whole new world of real estate investing.

Investing with Partners in Commercial Real Estate

Investing with partners in commercial real estate is one of the best ways to make money in the real estate market without incurring all of the risk. The commercial real estate market offers thousands of options for investment, including rental investment, foreclosure investing, and commercial investment. Commercial real estate tends to be more expensive than residential investment property and financing is not as easy to obtain. Another reason people invest in the real estate market with partners is to reduce or eliminate the need for investment property financing.

Many professionals, such as doctors and attorneys, form limited partnerships when investing in real estate ventures. Whereas an individual investor might be limited with respect to affordable investment property, a commercial real estate venture or limited partnership enables several individuals to take part in a larger commercial real estate venture.

Investing with partners in commercial real estate can make possible the purchase of larger tracts of property, strip malls, industrial buildings, or even large apartment complexes. When choosing the right commercial investment, consider the location of the property as well as the use. There are many bargains available today, because in many areas values have reached rock bottom.

The terms of a joint venture formed to purchase commercial real estate should be reduced to writing by your attorney. Each partner in the venture is expected to put a certain percentage towards the purchase and management of property in the venture and each partner receives part of the profit.

The ideal way to invest in commercial real estate is to have several partners who can all add something to the venture. One partner may have more money while another may have more real estate knowledge. A third partner may be willing to manage the venture. Everyone should have a negotiated financial stake in the commercial real estate venture.

If you are considering investing with partners in commercial real estate, it goes without saying that you need to know both the talents and investment philosophy of your partners as well as their financial situations. You should know your potential partners well: be wary of anyone who promises easy money, especially if they ask you to provide most of the capital. There are some great commercial real estate investment deals on the market today, but there are also con artists who prey on those who want to make fast money without doing their homework. Real estate is usually a good investment, but it is important that an investor have good knowledge of the market.

Real estate tends to appreciate in value, and in some cases it appreciates very quickly. If you have money to invest and want a good return, consider teaming up with partners to purchase commercial investment property. Whether you decide to purchase a large area of land for future development or decide to purchase a strip mall for rental income, with knowledge of the real estate market you can expect a good return on your money.

Learn to Invest from the Pros

There are many real estate investment programs on the market that offer to teach you about the business of investing in real estate. How do you know which program to buy and which to ignore? You have to know what to look for in these programs.

First, determine what real estate investment niche you are going to specialize in. Are you interested in foreclosures? Flipping properties? Rental properties? These and other options can all yield a good profit. The successful real estate pros have each chosen a real estate niche in which they specialize. Learn from someone who has specialized in the same area you are interested in.

Next, find someone who is offering training programs in your area. Look for people who have made money investing in the local market in which you are planning to invest. It will do no good to try real estate investment techniques used by someone in Colorado when you live in Florida. You want to learn from someone who knows the laws governing your area. Finding a local investor who has succeeded in this business will allow you to learn what you need to learn in order for your business to become successful.

Third, beware the real estate “expert” who has made his money from selling seminars and books and not from actual real estate transactions. The only real estate transaction some of these authors have been involved in was the purchase of their homes.

You want to learn to invest from pros who can share specific examples of what worked for them, what mistakes they made, and what the potential pitfalls are. Top teachers are not afraid to hand out references and introduce you to former students who have done well with their system. Ask for a list of names. Speak with these other trainees. Find out what they like about the program and what they do not like. Listen to their real estate investment experiences.

Finally, look for a program that is a complete training package. In addition to the information provided in the books or CDs, is there a support team willing to walk you through the system? There are actually a few teachers who will make deals with you — legitimate deals where the two of you go together to examine an investment property and then go get the financing. This type of professional real estate investor is the one who is committed to helping you succeed.

The last thing you want is for someone to sell you a bunch of books and tapes and just walk away. You want to learn from pros who are willing to stand behind you.

Purchasing an Apartment Building

When purchasing an apartment building, consider the following:

1. Make sure that the building is in a stable area. Purchasing an apartment building in a blighted area where the price of real estate is decreasing is not prudent. You will want to buy an apartment building in an area where the home prices are stable or appreciating. Your commercial investment will cost more money, but you will be much more likely to have a good return on your apartment building if it is located in a favorable area.

2. Do a complete property inspection before you even think about closing on the property. You may have to pay for the inspection if the seller does not offer it, but it is worth the expense. You do not want to purchase investment property that is falling apart or needs extensive repairs. An inspection is a wise idea when investing in any real estate structure, but is especially important when purchasing a commercial property such as an apartment building.

3. Get a survey and a title commitment. The survey will show the property lines and make sure no other buildings are encroaching on your commercial property. The title insurance will reflect the current owner, and will give you information regarding any liens, encumbrances, unpaid taxes, covenants, or restrictions. Covenants and restrictions are often placed on multi-family properties, and can include everything from “no hanging clothes on the balcony” to “no antennas on the roof.” If you have little or no experience in reading a title commitment or survey, hire an attorney with experience in multi family commercial real estate investing. Again, it is worth the expense.

4. Make sure you see the leases. Look over the leases to become familiar with their terms and consider interviewing the tenants to see if they are happy with their living conditions, if there are any problems, and if they plan on continuing to live in the apartment building.

5. Figure out who is going to maintain and manage the property. Maintenance includes shoveling snow, salting the driveway, cutting the grass, and making basic repairs in the building. Managing the apartment building can include advertising for tenants, checking credit histories, and showing the property to prospective tenants. You can do these jobs yourself, if you are handy, you can hire someone to assist you, or you can offer one of your tenants a discount in rent by agreeing to take on this job.

6. Understand Landlord-Tenant Law in Your Area. Remember that your tenants will look to you if anything goes wrong in the building. You will be required to make sure that your tenants have hot water and heat or else you may be in violation of several municipal, state and federal laws. You also have to know the lease laws when purchasing an apartment building for a commercial real estate investment. Lease laws vary from state to state as far as the responsibilities of both tenant and landlord, but federal laws prohibit any form of discrimination based on a variety of conditions. You must be familiar with these laws before even thinking of leasing property or purchasing an apartment building.

If you are handy and can do basic home maintenance, and better yet – if you plan on living in the building where you can keep track of what is going on, buying an apartment building can be a good way to get started in commercial real estate investing.

Choosing the Right Real Estate Investment

It can be hard to know which distressed investment property to choose when you are first starting out in real estate. You know the money is there to be earned, but sometimes it is hard to determine if the money is worth the risk. The answer is yes. You can make a great income if you choose the real estate investment that is right for you.

The first thing a property investor should consider when looking at a distressed property is its market value. Market value is not the same thing as appraisal value. The market value is determined by what a buyer is willing to pay on the open market. This price could be thousands of dollars less than the appraised value. To determine the market value, speak with an experienced real estate agent. You will want to find an agent who is familiar with the area and with the type of investment property you are considering. Your agent can furnish you with “comps,” a list of what comparable properties in the area have been actually been selling for over the past six months, not what they have been listed for. Be sure to get comps for the last six months in order to determine today’s value. This will give you a good idea of what you may be able to sell the distressed property for in the near term.

Another thing to consider when choosing the right real estate investment is how long properties in the area are on the market before they sell. You do not want to purchase a property which will be on the market longer than three or four months. Unless you are using the property as a rental unit, the quick sale is what you are after. Never buy in an area where sales are taking six months or longer. This usually is a good indication of a declining market and falling property values. You want to find a prosperous neighborhood with an active job market and new construction in the area. A high rate of employment and new homes or buildings going up indicates growth. A distressed investment property in these areas can be a real treasure.

Choosing the right real estate investment also means knowing what is in demand. You can do this by simply running an ad in the local paper offering homes for sale. When people call, ask them what types of homes they are looking for. You can tell the potential buyer you have something you would like to show them, or you can take their name and number for later contact. This does two things. It tells you the types of property people in the area are looking for and it gives you a list of potential buyers. You can then find properties these buyers may want to purchase. This can insure a quick sale on just about any property you look at if you have gathered enough names.

Finding an investment property wanted by the buyers on your list means you are choosing the right real estate investments.

Setting up Your Investment Team

Real estate investing is not a one man show. There are many people who work behind the scenes to get a deal to go through. You can ensure a better track record and greater success by giving careful consideration to setting up your investment team.

The first person you should choose for your investment team is a licensed real estate agent. You will want someone who is familiar with the neighborhood and with the types of investment properties available. A good real estate agent can let you know which way the market is moving. He or she will be the first to know when a potential investment property appears on the market. This same person can bring potential buyers to your open houses and introduce you to others who may want to view your properties. Traditionally, the professional real estate agent works for the seller. However, you can hire an agent to work for you as buyer if you offer to pay commissions. The choice is yours. Either way, a real estate agent will be one of the most important members of your investment team.

A second valuable member of your investment team should be a licensed contractor or inspector. This is the person who will be able to determine what repairs to the investment property are necessary to get it ready for sale. He or she can also save you time and money by inspecting a potential investment prior to purchase. While you may not be able to spot potential problems in a property, the contractor or inspector will use his or her training and experience to alert you to those problems. For example, your contractor or inspector can tell you if there has been significant water damage or if termite or other infestations exist. This team member can save you from investing in a property that could end up costing you money.

It is always a good idea to have another investor on the team, preferably someone whose knowledge compliments yours. For example, this investor may know commercial investment property whereas you have only been dealing with residential investment property. If this person has substantial monetary resources, he or she may be able to help back a potentially large investment when you are unable to carry the entire financial load. Joint ventures are made all the time in real estate. Having another investor on the team means you can take advantage of another point of view and may also be able to make deals you may otherwise have to refuse.

Finally, you may want to consider adding a lender to your team. The lender can offer you options in financing and can keep you informed about interest rates. You may also be privy to information about properties which have been foreclosed upon by the lender’s organization. Most importantly, many times the personal relationship you have with your lender allows you to get loan approval which might otherwise not go through.

Never think of real estate investment as a one man show. There are too many other people with specialized knowledge who can make all the difference in your choice of investments and what sort of profit you realize on your investments. These are the people you want to have on your side when setting up your investment team, working behind the scenes to put those good deals together.

Small Commercial Real Estate Investing

When you think about buying investment properties, you may automatically think that this type of investment is for those who have enough money to dabble in large real estate investments, such as the purchase of large complexes, shopping centers and buildings. This is not the case. Investment in small commercial real estate projects has become a premier way to make money in the real estate market, especially now that the residential investment property market has bottomed out.

“Small” in the context of commercial investment can refer either to the capital required or to the size of the project. It usually means both. Smaller properties often cost much less than larger projects. Small commercial investments can range from purchasing and refurbishing an old building to turn it into a restaurant to purchasing and managing a store front property.

Prior to investing in any property, it is important that you become familiar with the market in general and with the locale of the investment property you wish to buy. When choosing your first investment, resist the temptation of lower prices you may find in blighted areas. Location is always the primary consideration when investing in real estate, so it is important to choose a good location in which to invest. A good location means that there will be a demand for whatever project you develop when it comes time for you to open your doors to the public or to sell. For example, if you plan to construct a strip shopping center, it is vital that your property have easy access and either proximity to public transport or ample parking.

One excellent beginner’s project is building a small office development. Office developments rent office space to professionals and others who need office space, similar to the way strip malls rent storefronts to sales businesses. A small office development can be rehabbed from an old building or built on vacant property. If you choose to develop an office development on vacant property, be sure to do a market study to make sure that there is a need for this type of development within the area.

Another development idea is to turn an old house into office space using “white elephant” retail property. White elephant retail property can be found all over the country. You’ve seen it: it’s that restaurant or bar that keeps changing hands. The key to transforming a white elephant retail property is to study the location to determine the viability of the business sector you plan to serve and avoiding replicating the business failures that have gone before. It is usually a given that you will have to scrap the current business use of the property and make it into something totally different. Office space is always in demand and can be a good option for making a success of a white elephant property.

It is a good idea to partner with other real estate investors who can give you property investment advice stemming from their past experience. If you decide to invest with partners, you obviously will not need as much capital to invest. You will have to split any profits or revenue with your partners, but you also incur less risk. Investing with partners can be a good way to get started in small commercial real estate investing, especially if you are new to this type of venture.