What is Your Real Estate Investment Objective?

Real estate investment requires a more diverse strategy than merely purchasing a home. In fact, if a real estate investor hopes to make money at real estate investing, they must settle on an investment objective. In other words, they must decide what type of investment property they plan to pursue, how much risk they are willing to take, and what they hope to gain from the real estate investment, and by when.

Here are three options to give you the idea.

1. Buy and Hold – In this case the investor would have the benefit of three (perhaps four) income streams at once: Cash flow when applicable, amortization (your equity increases as you pay down the loan), appreciation in the value of the property over time, and tax incentive (the ability to deduct certain expenses from normal income). This could be any property from a single-family home to a commercial office building. The idea is that the investor intends to hold the property as a rental. The downside, of course, is the longer investment duration.

2. Buy, Rehab, and Sell – This is a more risky investment strategy because the investor must locate a cheap, run-down property, and then hope that preliminary remodel cost estimates leave enough room for a nice profit after a sale, assuming, of course, that the property will be sold. Again, the type of real estate is not the issue. What’s in view here is a “fixer-upper” that can be flipped almost immediately without having to rent it out. When done correctly and Jupiter aligns with Mars, the advantage is the shorter investment duration.

3. Buy and Sell – This is merely a process where the investor ties up a property in escrow with the full intention of selling it either before or immediately following closing. New construction is a good example. The investor purchases a property during the construction phase, and then perhaps months later as the construction nears an end, the investor markets it at a profit. The benefit here is being able to make a small investment with little effort.

How to Handle Tenants Who Demand Lower Rents

Many tenants are approaching their landlord and threatening to vacate the rental property unless the landlord lowers the rent. Fair enough. Tenants after all, cannot be blamed for using this volatile economy as an opportunity to try and lower their costs.

Given, however, the adverse effect it would have on the real estate investor’s investment—such as cash flow, present and future value of the property, and the investor’s ability to borrow against the property—to merely cave-in to tenant demands and lower the rents would not be a prudent real estate investing decision. The smarter approach for income property owners would be to do some research in order to determine if the tenant is really in as strong a bargaining position as they think.

1) See what sort of properties and offers are actually out there. Tenants commonly make assumptions about what they can get elsewhere without really understanding the details. What they deem to be a better deal elsewhere may in fact be a misconception. Always stay current with your market so you can overcome tenant objections as they arise without harming your investment.

2) Understand the motivation behind tenant unrest. What are your competitors offering that has caught the eye of your tenant? In this case, ask them. But here again be preemptive. Perform a couple of comparisons on competing properties to understand what sorts of terms and discounts or incentives are being offered so you aren’t caught flatfooted and can work it out with your tenant reasonably.

3) Work out the numbers. Be aware of what it will cost you if your tenant vacates, the time it is likely to take to find a new tenant, what it could cost to get the unit rent-ready, the incentives you may need to provide to be competitive in the market, the difference between the rent you are getting now and this potential new rent, and all other costs you might incur to re-rent the unit such as agents fees and marketing expenditures.

4) Recognize why a tenant might not want to move. In addition to the other negotiating strategies, bear in mind that tenants are generally aware that moving is expensive, and like most us, don’t relish the idea unless it really is necessary or the savings outweigh the true costs of the move.

5) Establish an acceptable negotiation range. Use your market research to determine what would give you a great, fair, and poor result. This way you can come to the negotiating table prepared, informed, and confident when a tenant demands lower rent.

Preparation and information is the key to making good real estate investing decisions and crucial to a more favorable outcome with tenants seeking a rent reduction.

Calculating the Value of Foreclosures

Any real estate investor who wants to purchase foreclosures should bear in mind that banks don’t necessarily list their REO (real estate owned) property at discounted prices, and in fact, could be asking too much.

It’s important, therefore, that the real estate investor make his own calculation of value to be sure the foreclosed property meets with his or her own real estate investing objective.

Here are three things investors can do to evaluate the worth of a foreclosure property in order to avoid missing out on a good deal, and at the same time avoid from over paying for a property.

1) Estimate Repair Costs – Bear in mind that repair estimates computed by the banks may not be complete. For example, whereas they may add the cost of replacing a broken HVAC unit or appliance, they may not add the cost of new paint, carpet, or updating an outdated kitchen. You want to be sure what it will cost to repair a property so you can sell it for top dollar.

2) Do a Comparative Market Analysis – Be sure you know the sale prices other similar real estate in the area sold. Include recent sales (perhaps within the past six months), generally within the same neighborhood, with the same number of beds, baths and square footage, and in a similar condition. If created with meaningful numbers, this will give you an idea of what you can expect to sell your foreclosure.

3) Tailor Your Profit – You don’t want to take the risks without making an adequate profit and rate of return. Whether you plan to sell the property quickly for a profit or keep it as a rental property, remember that the foreclosure has little value to you unless you profit.

Complete all three steps for each foreclosure you preview and don’t hesitate to use your documentation to negotiate a deal with the banks. The banks could yield to reason and accept an offer less than what they expected and more consistent your real estate investing objective.

Commercial Real Estate Investing

Commercial real estate investing has different fundaments as compared to the other methods of real estate investing. This type of investment in the real estate markets has very high potential returns. These investments are higher in cost than most of the residential projects and carry an equally higher risk.

The risk in such type of investments depends on the proposed plan for the development of the commercial property. Commercial real estate investing is a good vehicle that the investors can explore. There are a lot of options to choose from in the commercial real estate market. A good knowledge of the field will be helpful in being successful in any of the avenues present in this domain of real estates.

Some of the investors are wary of investing in the commercial properties on account of the risks involved in them, even if the expected returns are high. Other factors such as dealing with the tenants also are the cause of worry for such investors. The multi tenant properties, retail shops, and office suites are considered as the highest risk properties of commercial real estate, especially with frivolous lawsuits.

Commercial real estate investing requires careful consideration and more focus on the various aspects. For this to happen, all the necessary documentation work has to be properly scrutinized. Factors such as the leases, their modifications and extension periods if present, notes, mortgages, the occupancy certificate, title policy, the contracts of the equipments, tax situation of the property, and such other related things, have to be properly verified by accountants and lawyers.

Surveyors working independently have to he hired for gauging the condition of property. The services of a good lawyer are to be taken to help in the procedures related to the lease structure, the deeds, insurance policies, tax returns, rent rolls, litigation history of the utility bills and the business licenses.

The problems associated with the property and the tenants have also to be looked into. Taking adequate precautions, studying the available information of the property and then utilizing it for getting advantage is always the method recommended while approaching a commercial property deal.

Commercial real estate investing is a different nut to crack than the traditional residential markets of real estates. A lot of thorough research is involved in this area of real estate investing is recommended before taking a leap into it.

The interests of the investors in such projects are also varied. The projects can be started for the strip malls, outright malls of shopping, industrial and business complexes, high rise condos and the sky scrapers. The returns on the investments in the commercial properties are high, regardless of the interests of the project types of the investors.

Unfortunately enough, the beginners in this field find the road of commercial property investing very difficult. These projects require massive contributions for funding the pursuits of investments. Forming groups of investors is a good option while investing, as this helps in sharing the risk amongst the members of the investing group. It has to be always remembered that such projects are fruitful in the long run.

Charles W. Moore, a U.S. Army Veteran began Real Estate Investing in 2001. He’s a Successful Investor, and Author of, “Million Dollar Rent To Own Real Estate Secrets Exposed.” Get his Free Report on Rent To Own Real Estate Investing at:http://www.Rent2OwnExposed.com – Learn Real Estate Investing, Stocks Markets and Internet Marketing, visit: http://www.REIeBooks.com

Article Source: ArticleSpan

How to Minimize or Eliminate Tenant Late Payments

The last thing real estate investors want to deal with when they own rental property is a tenant that fails to pay their rent on time. Unfortunately, real estate investing is not always sheer bliss: there are cases where investors will have to confront and resolve issues created by tenants who exercise bad habits.

Okay, because late rent is one of the most common tenant problems landlords face, let’s examine several steps that you can do to minimize or eliminate it.

1) Create a lease or rental agreement that clearly spells out in detail what the late fees are. For example, include a late fee if the tenant fails to pay his rent by the prescribed time: perhaps $25.00 by the fifth of the month and an additional $5.00 per day starting on the sixth day of the month until the rent is received.

2) Start communicating with your tenant by the seventh or eight-day, and inform them that you have not received their rent and warn them that unless they resolve the issue and make their payment you will be forced to take action. In this case, what action you can take and by when depends on what state you are in. So read up on your states landlord tenant laws.

3) If the tenant fails to respond and still fails to make their rent payment, send a pay or quit notice by certified mail or by the procedures outlined in your states landlord tenant law along with a letter stating all of the negative effects an eviction will have on them and their future.

4) If that fails to jar the tenant, and he does not pay the rent by the last day of the pay or quit notice, file for eviction as soon as possible. If this is your first eviction, you might want to hire an experienced attorney to assist you.

Late payment is never something a real estate investor wants to deal with, and having to evict tenants is typically not savory to most landlords, even if they are deadbeats. But it is needful for you to always follow through with your late rent fees otherwise the message you send a tenant is that it’s ok to be late with the rent. And you don’t want that.

Along these lines, here are some other recommendations. Do not accept a partial rent payment because this can have a negative effect on an eviction. Always avoid trying to get rid of your tenant by intimidation, threats, changing locks, turning off utilities, or physical removal because this is illegal without a final eviction judgment. During the eviction process, stay away from the tenant.

Here’s to your real estate investing success.

Make Sure You Are Doing Due Diligence

Unless you are work in or have some affiliation with a business oriented working environment, the concept of due diligence is probably irrelevant. But if you are associated and involved in the world of business, finance, or real estate, then due diligence is a concept that is very familiar to you and its presence is heavily incorporated.

So what does being a diligent investor entail? Well, diligence is synonymous with being meticulous, conscientious, and thorough. This combination may sound like the pre-requisite for having obsessive compulsive disorder (OCD), but realistically making sure that everything is in order and that all of your bases are covered during a real estate transaction is a positive thing. Making sure you know as many details about the property before the purchase is negotiated is really the best defense if an investor wants to make the best deal possible.

Doing research and finding as much information about a property of interest is of the utmost importance. Before even considering making an offer, investors need to physically visit the property, get comparable rates for other homes that have sold in the area, and do extensive research on the property. Knowing the exactly how much money you are willing to invest and the ultimate price you are willing to negotiate is an essential aspect of the deal. It is important to have a fixed purchase price that you are willing to adhere to. Knowing what you want and what you are willing to pay for it demonstrates a level of strength and integrity.

Due diligence clarifies and questionable areas of concern. Before becoming involved in any deal or signing any formal contract agreement, an investor has to evaluate several important areas. Information regarding the bank and lender responsible for the loan, financing currently in place, and the title holder are essential. Also, it is imperative that an investor is aware of any financial situations that are attached to the property, such as liens or taxes.

Doing due diligence is basically covering your ass-ets. Taking the necessary precautions and making sure that all necessary actions are executed to their full potential is at the forefront of any potential deal or agreement. Before making an offer on any home or property, no matter how sweet you think the deal is, an investor needs to gather as much information as he/she can. This just means basically just doing your homework. Make sure the who, what, when, where, and why questions are adequately addressed and answered prior to making an offer. Knowing exactly what you are getting yourself into can only be beneficial and could save you from a ton of headaches and unforeseen problems in the future.

Jeff Adams is a full time investor who has done over 350 deals and is a leading expert in the buying and selling of real estate. For more information visit http://www.FreeForeclosureCourse.com or sign up for a free seven day e-course at http://www.RealEstateWebProfits.com.

Article Source: ArticleSpan