Where Should I Invest In Real Estate

by David Cowley

Do a search on the internet for real estate investing and you will find hundreds of ways to get rich quick through real estate investing.  And it’s true, if you are selling books, DVDs or real estate seminars you can become wealthy in a short period of time.  If you are investing in real estate it is just not going to happen without the proper up front research.

Investing in real estate is one of the few ways for the average person to gain wealth.  Can you become rich overnight?  Not very likely.  Real estate investing should be considered a long term strategy that can gain you tremendous amount of wealth over time but you must do your homework first.  The majority of people that are getting into the real estate investing market are simply purchasing a home in an area that they are familiar with and then wonder why they are not rich after a couple of years.

Do a search on the internet for real estate investing and you will find hundreds of ways to get rich quick through real estate investing.  And it’s true, if you are selling books, DVDs or real estate seminars you can become wealthy in a short period of time.  If you are investing in real estate it is just not going to happen without the proper up front research.

There are three main points you must consider before purchasing your first property and they are location, location, location.  This is a rather simplistic view of real estate investing but it has never been more true than today.  Thousands of people are getting into the real estate market, and yet many of the foreclosures in the market today are from non owner occupied homes.  This means that people that have purchased a vacation home or purchased a second home for investment purposes have gotten into financial trouble.  This Usually happens because they did not purchase that asset in the correct location at the correct time.  So the question is, how do you find the correct location to invest?

Any locations can be the correct location to invest in real estate as long as the timing is right.  There are four cycles of real estate investing and the cycles can run from 7 to 40 years depending the the intelligence of the local government.  These cycles are Buyers Stage 1, Buyers Stage 2, Sellers Stage 1 and Sellers Stage 2.

Buyers Stage 1 – strategy buy and hold.

1.  Oversupply of properties on the market. 2.  Prices and rents are falling. 3.  You will see a spike in the properties time on the market. 4.  Unemployment is at its highest. 5.  New construction is overpriced and sales are stagnant. 6.  Construction jobs are at an all time low. 7.  Foreclosures are at its highest rate. 8.  Investment properties are not being purchased or being purchased at a slow rate.

Buyers stage 1 is a declining market and you will need to shop around for a good investment because you do not know how low the market will go.  If the local government is not taking action at this point then the market turnaround will be delayed and more care will be needed taken.  Always purchase a new property with a lot of equity and a good cash flow to help minimize your risk.

Buyers Stage 2 – strategy buy and hold – also known as the Millionaire Maker.

1.  No new construction. 2.  Demand for housing is increasing sharply. 3.  Properties time on market is decreasing. 4.  Rents and Prices for property are at its lowest. 5.  Foreclosures are starting to decrease. 6.  Job growth is increasing. 7.  Rehabbers are purchasing an increasing number of properties. 8.  Fewer properties are getting on the market. 9.  Demand for properties is increasing because buyers are able to qualify at the low prices.

Buyers stage 2 only happens after the local government is starting to attract new business into the area.  For every one new job brought into the area three new jobs are created.  These newly created jobs are the butchers, bakers and candlestick makers.  In other words the support jobs that are needed to service the new people in the area.  I believe that the most important thing to watch for in this market is the job growth rate.  New people coming into the area will require housing which will drive up the price.  Your local economic adviser counsel is a good place to look.

Sellers Stage 1 – strategy buy and sell quickly.

1.  Demand for property is increasing. 2.  The time on market for properties in decreasing. 3.  Property taxes are on the rise. 4.  Unemployment in decreasing.

Sellers stage 1 is a very risky time to be investing in property because you do not know how long before the sellers stage 2 will occur.  Be sure you know the signs of the next phase so you can get out of the market at the best time.

Sellers Stage 2 – strategy sell, sell, sell.

1.  Supply of properties has sharply increased. 2.  Time on market is increasing. 3.  Construction of new homes is increasing. 4.  New job growth is slowing. 5.  New real estate investors are jumping in. 6.  First time home buyers are increasing.

One of the ways to watch for new construction of new homes is to check with the local building permits department.  You will be able to pick up some good deal from the new first time real estate investors that jump in during the sellers stage 2 market.  Always do your home work prior to investing in real estate.

About the Author

David Cowley has created numerous articles on real estate investing.  He has also created a Web Site dedicated to real estate investing. Visit http://www.rgvre-team.com

How to Make Your First Rental Income Property Sale

Once you make the decision to sell rental income property, you cross the largest obstacle between you and closing your first income property deal: The desire to sell more than residential real estate is foremost.

In this article, I’ll show you four things you must now do that will help you seize every opportunity, perhaps avoid missed opportunities, and maybe bypass months (perhaps years) of trial and error before you close and subsequently collect your first rental property sales commission. It’s not exhaustive, but guaranteed to get you started on the right foot.

1. Learn some basic terms and formulas. After numerous years of assisting countless residential real estate agents in a large real estate brokerage frantic for rental property advice, I strongly recommend that you understand just two real-estate-investing-related terms (and/or formulas) in the beginning. Comprehension of other terms and formulas can wait and follow later.

  • APOD – An APOD is a report that shows the income, expense, and cash flow of an investment property for the future first year of the property’s operation. It’s an assumption because it’s based upon current property data subject to change; still, it does offer a valuable indication of how a property will perform after one year of ownership. APOD is an acronym for Annual Property Operating Data (in case you’re wondering).
  • Cap Rate – Understanding how cap rate (or capitalization rate) is calculated is likewise paramount to working with rental income property. You will not mingle in real estate investing circles very long without hearing about or seeing a cap rate. I’ll forego the textbook definition and cut to the chase: here’s the calculation (memorize it):   Net Operating Income (NOI) divided by Sale Price = Cap Rate

2. Determine what typical cap rates are in you local market. Conduct your own comparative market study.

Start with your local MLS. What cap rates are income-producing properties listed and/or sold? Cap rates are commonly included in rental property listings so it shouldn’t be difficult. If cap rates are not shown then make the calculation yourself (you only need the property’s net operating income and sale price). If the NOI isn’t shown then derive one by computing the gross income and deducting about 45% for vacancy allowance and operating expenses. If the gross income isn’t shown, then call the listing agent or scrub it and move on to the next property.

Local real estate appraisers are another excellent resource. Call around until you find someone who appraises income property and is willing to share with you. Then ask them what cap rates are for multifamily and commercial properties in your area. While you’re at it, be sure to subscribe to their newsletter if they provide one.

If you know an agent that specializes in multifamily and commercial properties, likewise discuss it with them. Depending on how well you know them, they can give you a plethora of good information about the cap rates for your area.

3. Invest in real estate software. Yes, I know that it sounds like a shameless plug for my real estate investment software, but not so. Honest. Having sold income property for nearly twenty years, I can attest that quality cash flow presentations got me listings, sales, and real estate investor customers time and again. Truly, you would be wise to invest in real estate software (some software) that enables you to create real estate analysis and marketing presentations. Consider it as a way to develop your income property skills further, and as a tool to build your business.

4. Let others know you are working with rental property. Call your residential customers and alert your colleagues. You might be surprised how quickly you gain traction toward your first rental income property sale after mastering steps 1-3.

Here’s to your success.

How to Prepare for Real Estate Investing

This article presents six things real estate investors should do to prepare themselves for a successful real estate investing endeavor. From attitude to real estate investment software, each of the six suggestions, if practiced, will better prepare you for the challenges associated with real estate investing that lay ahead.

1. Develop the correct attitude. Foremost, bear in mind that real estate investing is a business, and that you are about to become the CEO of that business. You are not a home buyer. So look beyond curb appeal, exciting amenities, and desirable floor plans unless they contribute to the income and focus on the numbers. Real estate investment property is a matter of the head, not the heart. “Only women are beautiful,” an investor once told me. “What are the numbers?” Lay emotions aside, and prepare to make your investment decisions based on the property’s cash flow and rate of return.

2. Develop an investment goal with meaningful objectives. Have a plan with stated goals that best frames your investment strategy. What do you want to achieve? By when do you want to achieve it? How much cash are you willing to invest comfortably, and what rate of return are you hoping to generate? <!– /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-parent:””; margin:0in; margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:”Times New Roman”; mso-fareast-font-family:”Times New Roman”;} @page Section1 {size:8.5in 11.0in; margin:1.0in 1.25in 1.0in 1.25in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.Section1 {page:Section1;} –> A stated investment goal with meaningful objectives is one of the most important elements of successful real estate investing. Have it prepared and worked out in your mind before you start purchasing.

3. Research the real estate market. Understand as much as possible about the conditions of the real estate market when you plan to invest. Learn property values, rents, and occupancy rates. You can turn to a qualified real estate professional to run a comparable market study for you, or have the county tax assessor help you. You must always be prepared to recognize whether an investment opportunity is fairly priced or not; whether it offers a potential to make real money or not.

4. Learn the terms and returns and how to compute them. Get familiar with real estate investing terms such as APOD and Proforma, and rates of return such as cap rate and cash-on-cash. Learn the formulas and calculations. There are sites online that provide free information, so prepare to do some home work and gather as much data on the terms and returns as you can . It will keep you from looking like a deer staring into the headlights of a car when hear them discussed.

5. Invest in real estate investment software. Having the ability to create your own rental property analysis gives you more control about how the cash flow numbers are presented and a better understanding about a property’s profitability. So prepare to purchase quality real estate investment software. The benefit it will provide you is well worth the meager investment.

6. Create a relationship with a specialized real estate professional. The emphasis here is to work with a real estate agent that knows the local real estate market and understands rental property. It won’t advance your investment objectives to spend time with an agent unless that person understands the nuances of real estate investing and is adequately prepared to help you make wise investment decisions. If you’re planning to get assistance from a real estate professional, prepare to seek out a real estate investment specialist.

How to Sell More Rental Property

Winning over an investor is more than style and panache. Real estate investors are less impressed with the agent’s Armani and Mercedes then they are with the agent’s ability to discuss and service real estate investment property.

To make the kind of lasing impression on real estate investors resulting in a long-term relationship, it must be evident that the agent genuinely cares about how the investor spends his or her money and therefore can be trusted to assist them in making a sound investment decision.

Here’s how to do it.

Foremost, be trustworthy. Treat your customer’s money as if it was your own. Beauty is certainly in the eye of the beholder and you certainly can’t impose your taste upon your customer, but don’t hard sell a property (or its potential) just to make a sale.

Next, be informed. Know what your market values are and be prepared to share that information with your customer. In your opinion, if a property is over priced, say so. The same is true when you consider a property to be a good investment. Just back it up with credible data.

Next, be honest. Tell your investor whether you deem a property as a grade A (proudly show it off) or a D (show no one and never collect the rent after dark) type of property. Discuss realistic (not hope-so) vacancy rates. Give an informative opinion of what you believe the odds of lowering those rates really are, and whether rent increases are likely. Be truthful about the property’s location, condition, profitability, and potential.

Finally, be reliable. Never attempt to sell an investor investment real estate based solely on someone else’s data. Run the numbers yourself and create your own presentations. This is easy with good real estate investment software, and too beneficial not to make the meager investment. Real estate investors will trust you more when they can rely on you to substantiate the data you present to them.

The Essential Guide To Successful Real Estate Investment

by Justin Brown

Real estate investment may not seem attractive to everyone, although for many, it can be very lucrative. There are however, essential steps to take to ensure that your real estate investment is successful and financially worthwhile.

There are many challenges that you’ll encounter along the way and also a lot that you’ll need to learn. It is how you react to these challenges that are important, which will teach you a lot in the long run, and provide you with invaluable experience.

Your real estate investment plan will of course be determined by your financial goals. You may wish to invest for the long-term; for your retirement, or to make money quickly. Either of these approaches will require thought and proper planning.

If your aims is to make money quickly, consider searching for bargain houses and then offering them to other investors, or by finding houses that require work and refurbishing and then selling on.

Many argue that the house boom is gone, and that price gains are not as great as previously. This maybe so, but it is your skill to identify opportunities and invest in bargains that will still make you a success in the real estate investment market. According to reports, house sales have been declining recently, so it is even more important than ever that should you wish to maintain a successful career in real estate, you remain determined but wise in your investments. This factor is probably more prominent in investments for quick resell, as the potential profit margin may not be a great deal. However, if it fits in with your strategy, consider investing in property to rent. This could provide a continual steady income until market prices enable you to make a healthy profit from selling, or you could of course continue renting. This will obviously depend on your requirement for capital to invest in other property.

Set yourself goals along the way that are realistic. Realize your potential and strive to reach these goals. Although you will probably make mistakes, to be a success in real estate investment, you need to learn from them and move forward to make better, more educated decisions in the future. Some mistakes may put you off completely, but perseverance is a must in order to succeed, after all, as Winston Churchill once said:

“Success is the ability to go from failure to failure without losing your enthusiasm.”

Remember this quote and remain determined and focused on your goals and the strategies to achieve them. Stick within your budget and be cautious when viewing property. Do not assume anything or take anything at face value. If you are unsure, have an expert check it out for you before you decide whether to invest.

Editors Note: Never make a real estate investment without running the numbers. Always be sure that your real estate agent has, or you have, the proper real estate investing software to do a qualified real estate analysis, including a thorough cash flow analysis. If you are uncertain about rental property software solutions, go to => http://www.proapod.com.

How to Convert Homeowners into Real Estate Investors

If you’re a real estate agent with a phone and good real estate investment software then you have the tools you need to convert a property owner into a rental property owner. It will require some long hours on the phone along with true grit, but it is possible if you want it bad enough.

Here’s how you do it.

  1. Research the money market – call several lenders in your area and ask them what rates they’re offering to refinance a home along with rates to purchase income property. You will probably discover that rates are extremely favorable.
  2. Research the income property market – make note of what properties are currently available for sale. Use your real estate investment software to prepare cash flow analysis presentations on each one and highlight those of particular interest.
  3. Call your homeowner customers one-by-one – let them know what you’ve uncovered and suggest that they consider pulling some money out of their home to make an investment in rental income property. Be gracious to take no for an answer, but at the same time be prepared to make a lasting impression when the iron is hot. Offer to send them an APOD and Proforma you created on the income properties currently for sale.

Is it too simplistic? Not really…remember what you learned about cold calling—that it takes an average of one hundred calls to close one transaction. And in this case, that one transaction, being able to sell one income property, can result in a hefty commission. So don’t get discouraged, keep your eye on the prize because it’s worth it.

You might even be surprised by the opportunities you’re presented by a simple phone call. A colleague of mine, for example, ended up listing several hundred units as the result of a cold call to a FSBO concerning a small plot of vacant land. I have had similar experiences. When you make that call, you just don’t know what the needs of that person on the other side of the phone is.

Okay, but we mustn’t gloss over the importance of being able to make clear and concise real estate analysis presentations. You do need good real estate investment software to make your presentations; otherwise, you’ll appear to the customer simply as a hungry agent looking for a deal. Bear in mind that customers respond to knowledgeable information.

The bottom line is that you must convey information. In this economy everyone is looking for a floatation device; no one wants to loose his or her money. When you’re adequately prepared to show a reasonable thinker how to take advantage of this market, rather than to be victimized by it, you will create a win-win scenario that both your customer and you will enjoy.