10.19.07
Investment Properties
More and more people are exploring real estate investing as a way to generate extra income or fund retirement. If you are to become one of these people, here are some pointers on preparing to be an investor and choosing an investment property.
Build a strong investment team.
This should consist first of a licensed Realtor. I can put you in touch with my business partners and introduce you to a mortgage broker, appraiser, home inspector, attorney and contractors. These people will all become an important part of your investment team.
Remember, as much as you might want to fly solo, you will be able to manage more investment properties and increase your profits by teaming up with a professional who already knows the ins and outs of the transactions. The team-based approach minimizes the risk for novice investors but helps maximize the profit potential.
Focus on Foreclosures
When dealing with foreclosures, you might find yourself dealing with banks and REO departments directly. When dealing with them the most important thing is to have your financing in place and be able to act quickly to solve the bank’s problems. They like to own mortgages, not houses.
Search for Colorado Springs Foreclosure Properties.
Buy at deep discounts
A good goal is to receive a 20% return on your total investment. To determine how much you can invest, start with the price you think you can sell the property for after fixing it up (as your Realtor partner, I can provide a market pricing analysis to project value) and divide it by 1.2. For example, if you think you can sell a house for $250,000 after all the repairs and/or renovations, divide $250,000 by 1.2 and you will come up with around $208,000. Take the $208,000 and subtract what you might expect to pay in repairs, renovations, and agent commissions (to sell the house). This will give you a ballpark figure of what you can pay for the house to earn a 20% profit. For example, if you estimated all your costs and came up with $40,000, you could then afford to pay up to $168,000 for the house you plan to sell for $250,000.
Long Term Approach – Buying and holding
There are two types of investors. Those known as “flippers” and those know as “buy-and-holders”. When the market changes, as it has recently, flippers need to make a shift to the buy and hold strategy to ride out the slump. “Buy and Hold” investors buy real estate and lease it out for a steady cash flow. The tenants then pay down the mortgage principal while the property increases in value, and when the investor is ready to sell they can leave with the equity that’s built up over the years. An added benefit is that the property can also offer some nice tax write-offs.
No matter the approach you choose, with patience and perseverance, investing in Real Estate can be an exciting, profitable venture.
Technorati Tags: Colorado Springs Real Estate, Foreclosure, Homes For Sale
