Monthly Archives: June 2016
When you have extra money, you think of ways to invest it so as to earn more money. If it is a huge sum, an idea of buying second home may always pop up in your mind. Buying real estate can help you earn large amount of profit on the basic investment. Real estate investment is a fabulous business and you can do it along with your existing job or business. But, this doesn’t mean that it is a very simple business which just involves buying a property and selling or renting it. It’s a wise investment and definitely, you need to invest your time and brain in this business to make it successful. So, what are you waiting for, go through these real estate investing tips mentioned below before you start off.
Tips for Investing in Real Estate
- Scrutinize the property before buying. This is one of the most important tips. Check with the nearby localities about your site. Examine your site properly, do not be negligent about doing this. You can also hire a professional inspector for this.
- In any business, research has prime importance. A comparative study will prove beneficial, before doing any deal. You need to do a research to know about the average property value, around your property. This will help you in deciding the value of your property if you have to sell it.
- Similarly, check the rent of properties in this area if you are planning to rent your property. This is the best way to measure the market value of your property. The sale price of your property is almost equal to that of the nearby properties and even the rent will be almost equivalent.
- The rate will only increase or decrease depending upon the amenities and condition of your property. This research is necessary even if you are renting your property because, if you decide a higher amount of rent as compared to other properties with similar features, then it will be difficult to find customers.
- Also, a person who can afford highest price, will think of buying instead of renting, so reasonable rent price is important.
- There are various fields in the investment business. Get specialized in any one field, this will help you to gain deeper knowledge and have updates of those investment properties. For example, you can focus on fixer- uppers, foreclosures, low down payment properties, starter homes, small apartment buildings, condominiums, etc.
- You need to be thoroughly aware about the current tax laws, real estate loan options, loan payments, cash flow statements, etc. Also, you need to study the tax properly and calculate your advantage.
- An essential factor is tax, as it makes a huge difference between negative and positive cash flow. Newcomers can take help from tax advisers. You can also take advice from a real estate attorney for legal matters relating to your property.
- If you are renting your property then you must have the necessary information about tenants. Know where they work, their hometown, contact numbers, etc. Collect the security deposit as well. Also, respond to all their complaints; solving them on time will help you keep up good relationship with them.
- Negative cash flow will lead to frustration. If a property is reducing your cash everyday then it may lead to a lot of stress followed by financial problems. So, note out any issues that may affect your cash flow negatively and make you to sell the property even before you earn enough benefits out of it.
- Remember that you have to first secure your investment and then earn profits out of it. Opt for the best insurance coverage for your investment. For this also, research the available options and the benefits of each over the other.
- Learn the art of real estate negotiation. You have to be a good negotiator to do this business. Highlighting the plus points of your property, in a way that customers forget the minus points is much important. Your convincing abilities will be helpful while deciding the price.
Starting a real estate investment business is a great option of investing your surplus money. It all depends on your knowledge and confidence to make this business, a success. Study about real estate field thoroughly and be a successful investor.
Purchasing real estate of any kind requires you to weigh up a multitude of factors before deciding to go ahead with it. This decision making process becomes even more complicated when you are looking to buy rural land. Many of the same variables are in play, such as what you want to get out the property and its potential for future growth; but they have to be looked at in a different context. Here are a few of the most important things to keep in mind when considering whether to buy real estate in a rural setting.
Is This Intended as an Investment or a Permanent Homestead?
Know why you are buying the land. In many cases the distinction between whether you wish to own the property long term, or intend to on-sell it in the near future, can determine if it will be a good purchase for you. Even within the realm of investing, keep in mind what sort of timeframe you are looking at.
This is important for the simple reason that what makes a sound rural investment is often markedly different from what will make for a good lifestyle block. For example, a 10 acre section with cattle and a house that is long overdue for repairs may be a solid investment. There are assets included in the property, which given time and care could yield a tidy profit in the future. The same property would be less ideal for a family wishing to move out into the country and entirely unsuitable for an elderly couple looking to retire. Again, know what you want from your rural real estate purchase.
Is the Property Under or Over Valued?
This is something you would consider at all levels of the real estate process, but for rural properties it takes on a whole new level of importance. The reason for this is that both the floor and ceiling, so to speak, on the potential valuation of rural real estate is usually much more varied then for urban properties.
If you can find a piece of potential farmland that is currently not being used to its full potential, it could make for an excellent investment provided you have the capital to develop it. On the flip side, a farm that is running extremely smoothly may have little room for growth, unless you are able to purchase the surrounding real estate as well and expand outwards. Look at rural real estate not for what it is, but for what it could become.
Is There Potential for Development?
The logical flow on of this point is a consideration of whether your desired piece of rural real estate is equipped to support your vision. Maybe the soil is partially barren? Maybe the type of grass is incompatible with livestock you wish to bring in? Is the property accessible enough to efficiently carry out repairs? With so many added variables, you really need to do your research on all aspects of the property if you are considering purchasing rural land. Fortunately, there are real estate firms out there who will be happy to help you with this process.
Generally, real estate agents work for real estate brokers, who act as intermediaries between buyers and sellers of real estate. Real estate, that includes land and all permanent fixtures on the land, can be classified as residential or commercial. The classification depends on whether or not the property generates income. Commercial properties are income generating properties, while residential ones are meant for occupation by the owner as his primary residence. In order to become a real estate agent, a person needs to be at least 18 years of age and should have graduated from high school. Moreover, he needs to complete 75-80 hours of course work and obtain a license. He can act as buyer’s or seller’s agent.
Agents Dealing in Residential Properties
The price of real estate is affected by both local and economic factors. When the market is booming, an agent can make oodles of money. A seller’s agent makes money through commissions, which are determined as a percentage of the sales price. So when the prices appreciate, the seller’s agent stands to gain in the form of huge commissions. Since the current market is not a sellers market, it would behoove us to take a look at the payment structure for a buyer’s agent.
A buyer’s agent is entrusted with the task of scouting for suitable properties, either residential or commercial, and getting a good deal for the buyer. A good deal would mean a low purchase price. The current market is a buyers market, since property prices are at an all time low. A buyer’s agent is generally paid a percentage of the purchase price or listed price as commission. Sometimes in addition to receiving a percentage of the purchase price, he is also entitled to a percentage of the difference between the listed price and the purchase price. In addition to this, he is paid an hourly fee and promotional expenses. It’s evident that a seller’s agent earns much more than a buyer’s agent, since the latter will stand to lose in the event of the buyer getting a good deal.
Agents Dealing in Commercial Properties
These agents earn commission on the sale and purchase of land and commercial real estate. The commissions, for both residential and commercial real estate, are negotiated in a similar manner. In case of rental apartments, the agent is paid a rental commission by the real estate company responsible for renting out homes and apartments.
Broker Price Opinion (BPO)
Agents can also earn money by offering their opinion on the worth of the property to lending institutions. A fixed fee is paid for it.
Other Ways of Earning
Some states allow agents to appraise properties. In this case, they earn an appraisal fee. Experienced professionals can also earn by conducting seminars and training sessions.
When times are good, average salaries can be as high as $65,270. In fact, a really good agent can earn more than $100,000 a year. However, the median pay for these professionals in 2012 was $41,990 only.
Basis on Which They Make Money
In case of residential properties, an oversupply has resulted in pulling down the prices of homes. Many people are preferring renting to owning, since they are unable to afford the mortgage payments. In this situation, commercial real estate agents can earn commissions by bringing together landlords and tenants. It is a good time for business owners to invest in commercial properties, since they can acquire property at a really cheaper price. However, buying a commercial property is much more complicated than investing in a residential property. This is because, unlike residential deals, commercial ones do not require mandatory disclosures. Hence, a commercial real estate agent’s services are indispensable. Thus, a commercial type agent can hope to earn much more than an agent specializing in residential properties. However, the deals are generally complicated and time-consuming and involve huge sums of money. Consequently, a commercial type agent is paid more, but at less frequent intervals.
I decided that a second post entitled “Selling Real Estate” would be helpful for those with homes for sale and would be the perfect encore to “Buying Real Estate”. Once again heres the advice that I can offer after a decade of buying, owning, investing in, managing, leasing, and selling real estate.
1.Find an experienced, honest, straight shooting, full time real estate agent. Again, this is not a shameless plug! I sincerely believe that smart, successful people surround themselves with smart, experienced, experts that can help guide them to a well thought out decision. A serious listing agent will know the comps, will have been inside similar homes in your neighborhood and will have sold homes in the neighborhood recently. Have the agent show you comps of similar homes that have SOLD in the past 6 months and within a reasonable proximity to your home. Ask the agent what the average sale time is in your city and then ask what price you should list at for your home to sell in the average amount of time in your market. I personally allow clients to “test the waters” at a slightly above market listing price provided we are clear on what I believe the accurate listing price should be and provided the seller is willing to make price changes if feedback or showings (lack of) indicate the need to do so. Good real estate agents will communicate that the two most important criteria that buyers look for are price and condition. Sellers should do everything in their power to make sure the home shows well and is priced fairly.
2.Internet and Social Media I decided to make internet and social media have its own section to emphasize the importance of what Im about to write. If your listing agent does not have a website, a blog (with daily or weekly contributions), and accounts with Facebook, Linked In, Twitter and Google + you probably have the wrong agent. Recent studies show that somewhere between 80% and 95% of home buyers are searching for homes on the internet. If your agent isnt a major internet presence in your city then you are not maximizing your advertising and marketing and you probably have the wrong agent.
3.Comps Valid comps are homes that have sold in a given area, in the past 6 12 months, with similar square footage, beds, baths, and finishes as your home. Things that dont matter at all are 1) what you paid for the home 2) what you owe on the home 3) what your neighbor paid in 2007 or 4) the amount of money you lost by not selling at the peak of the market. Be realistic, look at the data and listen to your agents advice. Upgrades or renovations made after purchasing a home merit consideration when determining the value of the home but sellers should recognize that they will only recoup a percentage of the entire cost of the renovations, not all of the money spent.
4.Showings An absolute, immutable law for my team is to try to never say no when a client suggests a time to view a property. Being available when the client prefers is one of the keys to our success in my mind. The same holds true for the home seller as well. Try to never refuse a REASONABLE showing request if its at all possible. Reasonable showings to me take place between the hours of 9am and 7pm and give at least the minimum amount of notice that is required when setting up the appointment. Obvious exceptions are made if the home owners have young children or unusual work hours but allowing as many home showings as possible drastically increases the likelihood of sale. The automated showing systems many of us use can be set up to notify owners or tenants via email and phone 24 hours in advance of any showing.
5.See Things From The Buyers Perspective Nobody is easier to work with than a home seller who is simultaneously a home buyer. Almost every home seller was a home buyer at one point and it makes sense to consider the Buyers perspective when selling a home. Remember what mattered to you when you were deciding between a few different homes. Also consider the available inventory (your competition), the seasonality of the real estate market, the lending environment, and the economic environment. Seeing things from the buyers perspective helps a seller to be reasonable, realistic and fair.
6.Offers If you are not getting showings and offers within the first few weeks after listing your home for sale you are probably priced too high for the current market and should reduce the price. Remember that listing a property for sale invites criticism and comparison and although your home is perfect in your eyes a potential home buyer may have different taste and may be considering large scale changes to your home. Be prepared for low ball offers from people trying to “steal” properties and dont be offended. Be thankful for every offer your listing agent receives and make a counteroffer that makes sense to you. Refusing to counter is counterproductive and does not make any logical sense. Balance the emotion of the sale with logic and data. Feel confident that you are making the right decision for you or dont sign the contract. REMEMBER that all offer terms matter NOT just the price carefully consider the lender, mortgage down payment, good faith deposit, seller assist, settlement date, buyer strength, appraisal contingency, and home sale contingency. When you do accept an offer remember than buyers almost ALWAYS ask for credits or repairs after inspections even if they have to take the home in “as-is” condition. Review the inspection report carefully, be fair and at worst split the costs of all REASONABLE repairs with the buyer.
Leasing a commercial real estate can be a confusing issue for most entrepreneurs and small business owners. The professional real estate agents often add to this confusion by being diplomatic for their own vested interests.
Commercial real estate investments involve a lot of money, and an imprudent move can result in a huge loss for the owner. Nowadays, most of the new commercial real estate businesses are started by leasing office space, as it provides a cheaper alternative to purchasing a new space. Here are some tips on how to lease commercial real estate.
Develop a Proper Network
Having a proper network of experienced real estate brokers, solicitors, contractors and investors is necessary to find the best deal. It is always good to check out references and arrange meetings with such qualified people, in order to find and execute profitable deals.
One can also take the help of local professionals, who in turn can provide useful leads and contacts. It is advisable to read local newspapers and the city newsletters, to understand the various aspects of the real estate market. The knowledge of the current real estate statistics are helpful for the owners to come up with a profitable and feasible lease rent.
Find a Reliable Tenant
It is always important to look out for tenants who have a good reputation in business. In case some damage occurs to the property, the owner has to get it fixed, and he/she may have to pay out quite a bit to ensure that it remains in good condition. Tenants that pay late, break contracts, or mishandle the property, can become very problematic at times. Therefore it is advisable for the owner to be a part of the business, and get involved with his clients and the building. The investment and the profits borne would collapse, if the owner becomes casual about it.
Negotiate for a Profitable Deal
The owner should always keep in mind that the fees money, including the brokerage commission, and the fees charged by accountants, attorneys and engineers, are all negotiable. He should never hesitate to ask for a lower price, as most of the service providers reduce their fees in order to guarantee ongoing future business.
As large amounts of money are involved in commercial real estate transactions, the deals can be easily negotiated. The basic concept of a successful negotiation is the knowledge and empathy of each party, with regard to the major issues faced by the other. A balanced perspective is often helpful for a deal, which is good for both the landlord as well as the tenant.
Study the Assignment Clauses in the Lease Agreement
With the increase in number of fraud cases in real estate deals, the owner should be careful while reading the terms and conditions of the lease agreement. Any doubts should be immediately cleared out with the real estate agent and the tenant.
Annual Increase in the Rent
There is normally a change in the rent of a property, as a fixed rent over longer-term leases are rare. Some landlords opt for an annual increase in the rent, which is based on the percentage increase in the Consumer Price Index (CPI). In some commercial property leases, the increase in the property rent is capped at a fixed percentage annually (say 2% or 3%).
It is good to give oneself some time for the research, in order to avoid a bad investment. There is of course no sure shot way to make a wise investment, but the awareness of market conditions and one’s own finances, can definiately help the owner to come up with a profitable lease for his commercial real estate.