Have you ever wanted to get started in Real Estate Investing?

 

 

     There are so many ways an aspiring investor can get started in Real Estate. Tucson is an excellent location to invest in. Property values in Tucson and the surrounding areas are comparatively less than other markets, which can promote cash flow. Tucson and the surrounding area is comprised of many cities. Some of the surrounding cities are: Picture Rocks, Three Points, Marana, Avra Valley, Oro Valley, Red Rock, Sahuarita, Green Valley, and Vail. Each city has it's own individual pros and cons for investment purposes.

 

     How much do you know about investing in Real Estate locally in Hampton Roads? Do you currently own rental property? Are you looking for a short term investment or a long term investment?

Do you know any active investors or any real estate professional to help you get started? Do you currently own a home that you are living in that has available equity? Do you have good or bad credit? These are basic questions that you should be asking yourself when you think of Real Estate as an investment.

 

There are four most common ways to invest in Real Estate. There are many variances and differences in each of these ways, but for the most part each is done the same.

 

Rental Property:

 

     Rental property is the foundation to every serious long term investor. Acquiring and building a diverse portfolio of rental property is paramount in order to achieve financial wealth and investment leverage. The key thing you must look for when purchasing a rental property is how much cash flow will it yield? What is the standard appreciation in that given area? What are rental rates verse what my mortgage is? Are there any owner paid utilities? What is the risk associated with the investment?

     Once you begin to purchase cash flow properties, you begin to build monthly cash flow. The more properties you own, the more monthly cash you will have, therefore, the more investing leverage you have to buy more properties and to use to invest in other areas such as Rehabs. In essence, this cash flow is Residual Income, money that will come to you each month for the rest of your life as long as you own the property. For Example: You own 5 properties each bringing $300.00/mo after all fees and mortgage. That's $1500.00 a month that you can use to reinvest back into your properties or to use to buy more cash flow properties. Just think, that's $6000.00 every four months you own the houses.

     On top of the monthly cash flow you will receive, your properties will continue to appreciate or go up in value constantly, depending on the current real estate market. Which the difference between market value and loan amount is equity, money that you have sitting in your house that you can leverage to purchase more cash flow properties.

     Thirdly, each year that you rent these properties, the tenants will be paying down the amount owed, increasing equity build-up as well. On top of that, each year rental rates will almost always raise, so each year you own the rental property, the investment will just get better and better.

 As you can see, rental property will be the backbone for your investment endeavors and will create long term wealth as well as residual income. The more rental property you own, the more cash flow you will have to purchase rentals on a consistent basis.

 

Rehab Projects:

 

     Rehabs are a lot more complex than rentals. You must be very good with number crunching and have some great contractors, or you'll have problems. Rehab investing can be very risky, and timing is everything. Rehabs are short term investments. The faster the better, the longer you hold on to these properties, the less profit you will make.

     You must have substantial capital in order to rehab properties efficiently. The first thing you must do when you find a fixer upper is know what the property is selling for verses what you can get for it completely renovated. This is your gross profit margin. For Example: A house is selling for $50,000 and has a market resale value rehabbed at $150,000. You have a $100K margin to figure in all the expenses involved.

     What kind of expenses are involved with Rehabs? To begin with, you must have a down payment and closing costs to purchase the property. In most cases, 20% down and 5% closing costs determined upon contract price. On a $50k house, that's $12,500. Next you must figure in rehab expenses after taking bids from multiple contractors and negotiating the price as low as possible. Let's say rehab expenses for this property is $40K, to completely renovate and sell this property in a timely fashion. Now you have $47,500 invested. Next you must figure in your selling expenses. which include commission fees and closing costs. Commission fees are around 6% of resale value, and closing costs are normally very inexpensive depending on sales price, day in month you close, etc....in most cases no more than 1% of sales price. In our case, that would be $10,500 for commission and closing costs  based upon a sales price of $150k. Total capital invested into the project is $62k. Amount owed on property is $40k, after putting the initial down payment of 20%. Add capital invested to loan balance to figure total investment. Subtract sales price of  $150k from total investment of $102 which is the net profit earned of $48K. Which should take no longer than 60 days to renovate and resale once owned, determined upon project size. Any longer than 60 days, you must start deducting net profit for holding costs.

     Always remember that you must figure into your budget, Capital Gains tax will apply on profit made of 15%. Always consult your tax adviser for a more in depth overview. This will apply to all investment properties acquired and sold if you have not physically lived in the property two out of the last five years. In that case however, no capital gains tax would apply.

 

Flipping Property:

 

    The meaning of flipping property is to acquire a property and flip it to someone else, sometimes without ever owning it. You normally don't make large amounts of money on a standard flip. You must be very networked, especially with investors. Your job is to find under valued property and essentially flip it to a buyer or an investor. You must always have a buyer on the sideline to buy this property or you can get stuck with it. Which will usually mean to a loss, since there isn't really much of a profit margin to begin with. The best and most efficient way to invest in this nature is to work with several full time investors such as rehabbers or landlords that are consistently purchasing investment property and scout out great deals to sell to them at a slightly higher price to make a profit. Normally you will only make a couple of thousand dollars, but the more under value the property is, the better your profit. You must keep in mind that most investors that work full time are very market savvy and won't pay a dime more than what market value is, and even that is a challenge in itself. The best thing to do, is sell it slightly below market value if there is room, that way it's a win-win and you will more likely strike a deal. Most of the time flipping is done by being able to assign the contract to someone else. However, you must get the seller's consent in order to do this, which isn't always easy. There are many variations to flipping property, but for the most part, this is how it's done.

 

Foreclosures:

 

     Foreclosures are the most risky investment. They can also yield the highest return. Foreclosures can be acquired in three different ways. The first way is when the notice of auction is put into the newspaper in the legal section or when an investor receives a lead from a generated list of upcoming foreclosures. The investor will attempt to make contact with the owners to ask if they would be interested in selling their property at a below market value in order to help them avoid foreclosure and bad credit. The more equity the owner has in the house the better, but the best way to approach these disgruntled owners is with a win-win situation.

     The second way to approach foreclosures is at the courthouse steps on auction day. You must make sure that you have done due diligence with this property and possibly have viewed the interior in order to know what your buying. Many times you will buy a foreclosure and it is infested with termites or has any number of unknowns wrong that may take away from your profit margin. Always know what market values in the area are going for and what you can flip or rehab it for when completed.

     Lastly, if the property is not purchased at the auction, it becomes Real Estate Owned, Or REO. An REO is a bank owned property. Normally they are fixer uppers and great for rehabbers. Hud and VA also have REO property that is listed. Normally these properties are sold below market due to condition and can be great investments, however, there is a lot of red tape in order to purchase these properties. With the Hud properties, you must bid for them, and the first two weeks of being listed is generally a owner occupant bid only time. Meaning, investors get second dibs of the properties after the owner occupants.

     Foreclosure investing is very complex and can be handled many different ways. It can almost become a full time job if done thoroughly and efficient. You must have substantial capital with foreclosures, because many times you must purchase these properties in cash due to the amount of time it will take to qualify and close a loan to purchase.

 

     These are the four most common ways to invest. If done correctly, you will build wealth and financial independence with no limits. It's a fact that 96% of all millionaires in this country credit real estate for creating some amount of their net wealth. That's an amazing percentage! All these methods point back at the foundation of your portfolio. You must own rental property in order to leverage the money you will need in order to Rehab or purchase forclosures. The equity you will build in your rentals along with your monthly cash flow will help you continue investing.

 

 

Landlording

Sec.8 tenant in NC. M/T/M LL Looking to sell home

We are looking to sell our home currently a Section 8. living M/T/M how much of a notice is needed? Any special documentation needed to have Tenant to be cooperative during the selling of home. Thank you for any input will be helpful.

Insurance deductible question

Last July, my neighbor's tenant's car caught on fire in their driveway. The heat from that fire melted the vinyl siding of my rental property (the houses are very close together).

I received a settlement from my insurance company, who told me they would pursue the neighbor's insurance provider to reclaim the funds that were paid to me and my $2500 deductible, and that "it would take awhile".

Now, 10 months later, they are saying that they can't (or won't) attempt to contact the neighbor's insurer because there's nothing in the fire department's report to prove the fire was caused by "negligence".

Does anyone know anything about this type of insurance claim? Maybe they can't determine how the fire started but isn't the owner of the vehicle (or property) responsible?

Is there anything I can do besides eat the $2500?

Thanks (this is NJ, BTW)


Settlement Payment In Full

what is the correct language to put on a check given the limited amount of space on the memo line?

is it payment is full
settled
full settlement payment

LPA should offer a stamp for this.

I had a SD small claims case and the judge questioned whether I had the legal form of this statement on the check.

I won the case but not without worrying about it.

Help please - selling house

I have a situation where the tenant is trying to stay 6 more days after the agreed upon move out date of 5/31. We are trying to sell the house, but she has turned very uncooperative. I can't list or show the house because she might sabotage the showing. 6-days may sound petty, but she is now threatening with lawyers. Here's the situation:

1. Called her in March 2019 to tell her we are selling the house after her lease in June 30, 2019.
2. She panicked and found a new place within the week. She gave me a 30-day notice to move-out on 4/30, which I accepted.
3. I made arrangements with realtor to put house on the market 5/1.
4. Tenant's new place fell through mid April. I agreed to extend her stay until 5/30 to find a new place. I put off selling the house.
5. Seller now is asking to move out 6/6 because that's when she can move in. I asked to see if she signed a lease in case she is just trying to stall, which she can't provide and got really defensive. I'm afraid giving her 6 days will turn to 10 days, then another 10 days. I never received a reference call from "other landlord".

What can I do to make sure that she is out by 5/31? (Annual lease has been terminated with 30-day move-out notice.)

Can I charge her 2x or 3x the daily rate for each day after 5/31? ($1,600/month)

I really just want to be done with this situation, but don't want to be taken advantage of. Thank you for your help.

Rental Criteria

Wanted to know the proper procedure in changing your rental application part way through advertising. My thought is to: 1)remove the advertising and wait "some amount of days" 2) contact everyone I spoke to and notify of new criteria 3) re-list add(how many days should I wait?) Is there a law pertaining to this?

Need to end Month to Month

My tenant came to me on May 1 and told me they would be out by the end of the month. They have NOT paid rent on the assumption that their security deposit is rent. I have done my job and have an excellent new renter ready to sign a lease.

Now current tenant is now back peddling and I verbally told her that we expect them to be out by the end of the month. What type of documentation do I need to back this up. Will a letter saying that their tenancy is up at the end of the month enough to cover it? I don't want to start an eviction at this point but is that the correct thing to do here?

NJ - Landlord Get Out of Lease

Hello Everyone,
Have a tenant who passed a background check, references etc.
Gave me security deposit (it has been deposited) and signed the lease (I have not signed the lease yet or given the tenant a copy). The first month's rent has not been paid yet and I have not given the keys to the tenant.

Over the past few days, the tenant has begun showing some signs that she will be a problem tenant. Very odd to say the least, and I will not go into details. That being said: Since I have not signed the lease or given the keys to the tenant, nor has the first months rent been given to me, can I give her back the security and simply say the deal is off (paraphgrasing but you get the idea). Or if someone can recommend a better way of handling please let me know.

Thanks

No Written 30 day notice

The tenants decided to move without giving a written 30 day notice. On May 2nd I get a call telling me they found mold/mildew under their mattress that was sitting directly on the floor. They expect me to replace their mattress. Their housekeeping is way below a normal person's cleanliness. Always food on the floor, Kitchen sink drain always plugged with food, Stove top and counters with food left out.
Anyone know what I should do about their claims of Mold/Mildew? Can I be held responsible for their filthy choices to live that way ?

Swimming Pool Waiver

Does LPA have a waiver available? I found the addendum but its a bit vague. Im looking for something that acknowledges the tenant using the pool at their own risk.

Credit/Employment check

I recently became a landlord and have a few interesting thoughts and would like to see how people handle them?

1) The Credit report doesn't show whether previous *rental* payments specifically were paid and on time, and that matters way more to me than whether they made credit card payments on time.

2) Young tenants have little to nothing in their credit reports

3) Employment verification services are very expensive

Would love your thoughts, thank you!!