The Truth About These 7 Real Estate Investing Myths

By Julie A Broad

Many people believe that the secret to successful real estate investing is to time the market - buying at the bottom of the cycle. Other people believe that you have to buy properties that cash flow - and that is the most important thing. While people that believe these things may not necessarily be wrong, they are buying into a real estate myth more than a reality.

If you want to make money in real estate, you have to separate the myth from fact. To help you, here are seven of the most common myths dissected:

Myth 1: You don’t need money to invest in real estate

Reality: You DO need money to invest in real estate, but it doesn’t have to be your money. At the end of the day, every real estate deal requires some cash. Even if you do a no money down deal that does not require a cent for a down payment you will still need cash for things like appraisals, inspections and lawyers.

And, almost every property needs a bit of love when you buy it. Even a simple coat of paint requires some cash. So, you don’t need your own money to buy property, but you WILL need money.

This does not mean someone without a penny to their name can’t buy property - but it does mean that person will have to do some networking to find a few sources of funding.

Myth 2: You need a corporation to buy property without risk

Reality: Every situation is different, so you should always get professional advice to determine what is best for you. In most cases, however, a corporation is not necessary at the start. In fact, if you wish to get conventional financing from a bank, you will not be able to buy property in a corporation without personally guaranteeing it. There are exceptions, but even business owners that buy it for their business (example, a Dr. buying a property for his business), will usually be required to personally guarantee the mortgage on their property.

Eventually incorporating may be beneficial for tax or liability reasons, but when you are just starting out, a corporation is just another hurdle that will slow you down to the point of stopping. When you are first starting out don’t worry about complicated and costly things like corporations, just find a good property and buy it. You can always restructure how you hold your properties later on.

Myth 3: Cashflow is the most important thing

Reality: Cashflow is important, but setting your real estate investing goals and then finding properties that help you achieve your goals is the most important thing.

Focusing purely on the numbers can result in buying problem properties that do not attract tenants easily, do not appreciate, and require a lot of work. You always have to consider what you want to achieve, what your exit strategy is and whether the property will deliver on your expectations.

It is more important to figure out what you want, and then find a property that works for you, then it is to find a property that makes plenty of positive cashflow every month.

Myth 4: Buy the Ugly House on a Good Street

Reality: Sometimes the seller of that ugly house thinks their house is worth more than it is just because the comparable properties around it are of higher value. You also might find yourself with a money pit.

If you have a good contractor, you have the money, and you know you can make the ugly house pretty then there often is tremendous opportunity in finding the ugliest house on a good street. But if you are buying the ugly house on the street, just expecting it to be worth more later because it is surrounded by good houses, remember it is still the ugly house.

And, ugly houses do not attract good tenants, even if they are in good locations. If you are not planning to fix it up, you will have a hard time getting and keeping good quality tenants in that property.

Myth 5: All real estate is a good investment

Reality: Over the long term, properties purchased in good locations will usually be good investments. We rarely hear long time investors say “I never should have bought that place” but we often hear them say “I never should have sold that place” or “I wish I had bought that when I had the chance”.

Over the years, real estate has gone up in value nearly everywhere. However, if you buy in an area that is in decline or dependent on one industry that is struggling (timber, fishing, etc,) you are taking the risk. It is possible for areas to decline and never improve.

You can make poor investment decisions in real estate just like you can with stocks. Not all real estate is a good investment, just like not every blue chip company stock is a good investment.

Myth 6: You need to time the market

Reality: Unless you have a crystal ball, you will never know what is going to happen in the market. The reality is that you just have to find a good deal. You don’t have to wait for the right time. In fact, waiting is the worst thing you can do in real estate. The sooner you buy, the better for your wealth growth. Just make sure you buy a good deal.

Your best bet is to focus on your objectives and find a good area with good prospects for the future, and buy there. If you hold onto it for 5 or more years, you will be able to weather any downward turns the market takes, and as long as someone else is paying down your mortgage and it costs you nothing, or very little, to hold each month, you don’t have to time the market.

Myth 7: Real Estate Investing is Easy

Real estate investing is simple, but it is not easy. It takes work. It takes effort to find good properties. Once you own the property, it becomes pretty easy over time.

For more insider strategies for getting started as a real estate investor, sign up for real estate expert Julie Broad’s free monthly newsletter at her website http://www.revnyou.com Get your free report for making money with real estate here.

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Real Estate Investing - 3 Important Factors to Consider Before Investing Your Money

By Mike Lautensack

One of the biggest concerns is to make sure you have a sound business concept that makes sense. Today, in this environment, the flipping or wholesaling of houses I believe is a very difficult concept.

The universe of investors out there that are looking to take your property over have diminished dramatically over the last few months. That doesn’t say that flipping or wholesaling a year or two ago didn’t make sense. It doesn’t mean it won’t make sense two years out. It probably will.

Buy and Hold

Right now with our environment, the buy and hold concept is what makes sense. To buy at the right price, too. You’re getting dramatically lower prices today than a couple of years ago.

Buy aggressively. Buy right and buy cheap. You should be able to hold properties relatively easy and they should produce positive cash flow in this environment. A couple of years ago that was very difficult to get a property to cash flow. In today’s environment it’s far easier than it was just a year or so ago.

Make sure that the concept of your business plan makes sense given the environment and what’s going on in the world. That’s one of the key elements to it.

Buy in Stable Neighborhoods

Also make sure you’re buying in what I call healthy, growing, stable neighborhoods. Make sure you have done a little bit of demographic analysis of the areas that you’re buying properties in. It’s so much better if the neighborhood you’re buying in is also moving in the right direction.

If you’re buying in a neighborhood that is declining, where drugs, crime, and those kinds of things are starting to take over, it is going to be very hard long term to make significant money. You’re going to have trouble convincing investors to invest with you if you’re buying in rough areas - what I call war zone areas.

I know particularly that in some of these war zone areas, as a property manager, it’s very hard to rent properties in these areas, too. If you do get them rented the turnover is very high, as is the cost of turnover.

The people renting there tend to like to take everything on their way out. That can even include the copper and the appliances, the toilets and sinks and what not.

Focus on Neighborhoods That Are Improving

I would stress that you try to focus on neighborhoods that are improving. They don’t have to be upper economic neighborhoods. They do need to certainly be stable or improving neighborhoods. If the population is growing in those neighborhoods, that’s even better.

That implies there is going to be demand for both buying homes in the future and to rent them. So if you can get in a neighborhood that’s growing in terms of economics and population, it is clearly a far better and more feasible plan to present to a private investor than buying in a war zone.

I deal with a lot of investors at buying war zones. I’m telling you that in my experience over the years it’s a tough way to make a living. I would much rather see you move up a notch or two in terms of the economic neighborhood you’re in.

Buy homes where you would be willing to live. If you’re not willing to drive down to see a property at night, then maybe that’s not the best of areas to be in.

I invite you to learn more about Marketing for Private Lenders and get FREE instant access to a 60 minute audio titled The Marketing Plan — Learn the Marketing Secrets of How to Get People Calling to Give You Money For Profitable Real Estate Deals! by going to http://www.realestatewealthtoday.com/PLS-Vol3-Signup.html.

Mike Lautensack is a full-time real estate entrepreneur in Philadelphia, PA and creator of the Private Lending Presentation Kit. This powerful done-for-you kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your real estate business. To learn more about this kit and receive your FREE Real Estate Wealth Newsletter go to Private Lender Presentation Kit.

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The Pitfalls, the Pain, and the Rewards of Flipping - Rehabbing Homes

By Daniel Kepka

So your looking to get into flipping or as it is known in the United States, rehabbing to some. We will call it flipping to keep things simple. I have over 9 years of experience flipping homes. From doing a lot of the work myself to hiring people to do it for me. So lets take a look at what flipping a home really is.

Flipping means many things to many people. I define it as buying a home for the sole purpose of making a quick profit, within 3-6 months. I hope this fits most peoples definition of it. I will solely focus on the part of flipping that includes renovating.

Now here is the golden rule. You make ALL your money when you buy the home not when you sell. What do I mean by this? Well, if you buy a home at a sufficient discount, if you bought wisely then all things being equal when you sell you are guaranteed to make a profit.

How does this affect you? Let’s use a scenario. You buy a home for $100,000. The homes in the area, same square footage, same general look and layout sell for $115,000. Now your home needs a lot of work and the ones selling for $115,000 are in pretty good shape. You think you can put in $5,000 and your Realtor fees are $5,000. So you will walk away with a cool $5000 in your pocket. Smart right?

Well now it takes you 4 months to fix. There was an unknown plumbing issue and on top of it all the market fluctuated like it does, and houses dropped 1% (doesn’t sound like much but it is). So lets add up about $3,000 in mortgage and taxes, another $1,000 in extra plumbing repairs, and let’s drop the price of the homes in the area by $1,000. So now if you sell your home for the average price you will make $0 dollars in profit not to mention your time invested. This is a terrible deal. So make your money when you buy a home.

Flipping is about numbers. No emotions at all. Make a spreadsheet. Follow the budget. I cannot stress this enough. Follow the budget. A lot of shows on TV say this. But what they do not say is that you have to make your budget realistic. Yeah you might have a $20,000 dollar budget on a $400,000 dollar home. Again might sound like a lot. When you add in carry costs, repairs, labor, your time and unknown costs. It is a small amount. But on the flip side if your home you bought was $40,000 then $20,000 is a huge budget. Please remember to be realistic with your budget and then stick to it as if your life was on the line, which it might be.

How will you make your budget? Use free estimates when you first start. Get in a lot of people to estimate the work. Find some good flooring/tile/cabinet/paint/lumber/etc stores and get prices. How much are 35 2×4 studs? How much is 400 square feet of quality Berber carpet? This will come easier and easier as you get into it. When you get good, you will walk into a home and make a very accurate estimate in minutes.

Now labor. Do you do the work yourself? Well it matters on 2 things. Are you handy? And do you have the budget for laborers/contractors? If your handy I would recommend doing the easier jobs yourself. This saves a lot of money and costs you little time. What jobs? Putting on socket covers, painting, things like that. If you are not handy then you have to budget labor. It will make things harder but it will force you to find the best deals in your area.

So know the nuts and bolts. Where do I start? Get pre-approved by the bank. Know your limit and only use 90% max of it. Leave some cushion for a LOC (Line of Credit). You will need this money, trust me.

Next get a GREAT Realtor. The key word is great. I know you want to save the commissions but trust me again, they are a valuable ally in this business. First, they will find you homes, drive you around and the really good ones will even break down the numbers for you. And you don’t pay them a cent. When you sell they will advertise for you, do Open Houses and in general sell the home way faster then you ever could yourself. I have tried to sell homes on my own in the past and it is not worth it. The wasted time, headache and in the end less money for the same home. But I cannot stress this enough, they have to be on top of their game. No part-time Realtors or ones that don’t do much, or have not clue about investing. They need to be great at their profession. How will you find them? Have them buy you a coffee and interview many. Ask a lot of questions about flipping, are they Full-time, etc. This will take time and might be one of the hardest things to do. But if you do it right and take your time, the Realtor you choose will pay of dividends for you.

What should my Realtor look for? Well, there is a simple rule. Find the cheapest home in the most expensive neighborhood. Also make sure there is something wrong with it that you can fix. A house no one wants is a gem waiting to be picked up and make beautiful again. Also make sure the seller is motivated. You will know this by how long the house is on the market and how they negotiate with you. Some even tell you. Do your own due-diligence and talk to the neighbors on either side. Get some info from them. Then if the all is right, send out an offer.

Next, once your Realtor has found you the home. Remember you made your money already, cause you made it when you bought the home. Make your budget. I assume when you bought you bought a home that was not over your head. What I mean by that is the foundation does not need to be replaced or the entire roof removed. Do work in your scope. You would be shocked by how a little paint, some new carpet and some staging (will get into that in another article) can make a home look like new. Again, and again keep to your budget. Do not forget monthly utilities, mortgage, taxes, labor, materials, Realtor fees, and a 5-10% cushion for any unexpected issues.

Finally, time line. Do not hold your houses longer then 6 months. Unless your doing a major flip where your adding a second story or something. I say this cause the market could change dramatically in more then 6 months, many times earlier then that. And not always in your favor. Most flips should be in and out, like a ninja. You get into the area, clean up the house, make your profit and leave. Budget time realistically. In the beginning if you think painting the interior will take 6 hours, triple that number. That is probably more realistic. Again once you get good you will know exactly. But again get in, 3-6 months later get out. I mean sold and money is in your back on month 6.

In my next few articles I will talk about staging and holding properties. Yes once you have a small nest egg you will start renting, I know, shocking. See you next time people of the web.

Daniel Kepka, after 9 years of flipping homes joined his wife Marlene Alcon as a Realtor in the Calgary, Alberta, Canada area. After many mistakes and downfalls he has learned more about Real Estate then most people learn in a lifetime. His love of all things Real Estate fuel his urge to learn.

Drop by http://www.showmeproperty.net and search for Calgary homes, MLS listings, check mortgage qualification and so on!

Daniel Kepka

Discover Real Estate Ltd.

Calgary, Alberta

http://www.showmeproperty.net

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Real Estate Investing - 8 Common Mistakes to Avoid

By Kevin Cole

Every new investor dreams of starting a real estate investment company, making lots of money and living the “good life.” What most fail to realize is that if you do not know what you are doing, investing in real estate can be extremely complicated and costly. If you take it slow and learn to do it right, investing in real estate can be very profitable. In this article, I will explain 8 common mistakes a new investor usually commits and how you how to avoid them.

Mistake #1 - Failure to Invest in Education

Before you start spending your money, you need to take time and learn the basics of real estate investing. This doesn’t necessarily mean you need to spend thousands of dollars on seminars, or “guru” related courses; it simply means you should spend time researching the different investment strategies to understand what you need to do to be successful. You can get a good understanding of real estate investing basics by reading several books or visiting a few good REI websites and reviewing some of the free articles. Remember, the more information you learn, the more money you will earn.

Mistake #2 - Failure to Start a Business

Many people start out investing on a small scale using their own name, cash and credit. What they don’t realize is that any mistake can cost you everything you worked so hard to build. Before you start investing, do your research and create a business entity that best fits your needs. In most cases, an LLC or a Corporation will be the most appropriate entity to use for your business. By creating a business entity, you will be protecting your personal assets if something goes wrong down the road.

Mistake #3 - Failure to Obtain Insurance

Insurance is something that most people will never need, but for those who do, it is money worth spending. Almost all Fire Policies (Homeowners Insurance) contain one or more exclusions relating to “Business Pursuits of an Insured” which means you may not be covered if a loss occurs. Depending on what type of property you own and what you intend to do with that property will determine what type of insurance you will need. If you plan to purchase a single family home for a rental, you will need to obtain a Landlord Policy. If you intend to buy and sell “Flip” properties, a Commercial General Liability Policy might be the way to go as many will cover contract liability. As a best practice, make sure you speak to a knowledgeable Insurance Agent when deciding what type of insurance you will need.

Mistake #4 - Failure to Strategize & Plan

Real Estate Investing is like any other business, so why would you fail to treat it like one? If you want to be successful, you need to develop a clear plan of action on how you are going to succeed. Before you start investing, decide what strategy(s) works best for you. Don’t worry if it takes you some time to determine the right strategy, but when you do figure it out, make sure you stick with it.

Mistake #5 - Failure to Create and Maintain a Budget

One of the first things you will need to do is figure out how much money you have to spend. Don’t try to buy an apartment complex if you only have enough money for a condo. Once you figure out how much money you have to spend, focus your time and energy in developing a plan that fits your needs. If you over budget, you might limit yourself on your growth potential. If you under budget, you most likely will get yourself into trouble, which will result in a large amount of debt.

Mistake #6 - Failure to Correctly Estimate the Cost of Repairs

So many people buy houses thinking a new coat of paint, some carpet and tile is all they need to flip their new house for a profit. This mistake will not only cost you time, but it can cost you the entire deal. When you are looking to purchase a property, invest in a local contractor to review the property to provide you with a list of repairs that will be needed and the cost to complete each repair. This step will save you time and thousands of dollars on the back end.

Mistake #7 - Failure to Create a Team

Everyone has heard the saying, “You’re only as good as the weakest link.” If you plan to invest in real estate and you do not have a strong team around you, YOU will be the weakest link. It is very important to surround yourself with a strong team of individuals and continue to maintain a great working relationship with these people. Your team should consist of the following individuals: a Real Estate Agent, a Mortgage Broker/Lender, a Hard Money Lender, an Insurance Agent, an Appraiser, an Inspector, a Contractor, a Title Company or a Closing Attorney. It will take a lot of time and effort to develop your team, but when you’re finished, your success with show.

Mistake #8 - Failure to Take Action

After you educate yourself, start a business, obtain insurance, identify a strategy or plan, create a budget and create your team, there is nothing left but to put it all to work and take action. It might be scary at first, you might make little mistakes; however, if you don’t take action, you will never make money and be successful.

Investing in real estate can be difficult and if you go at it wrong, it can be extremely costly. On the other hand, investing in real estate can be very rewarding, professionally and economically. Don’t be afraid to seek help with a professional. In fact, most of these mistakes can be avoided if you know what you are doing. The more information and research you acquire, the fewer mistakes you will make.

Kevin Cole is a Real Estate Investor in California and is a Partner of BC Property Acquisitions, LLC, a premier Real Estate Acquisition & Investment Company specializing in the buying, renting and selling of Residential and Commercial Properties. You can reach Kevin at http://www.BCPROP.com

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