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Real Estate Investment; Six Figures

Updated on March 11, 2013

Grand Real Estate Can Be Yours

Think Like an Investor

There are many ways to achieve wealth, or at least supplement one's income, such as Blogging, investing in stocks and bonds, and selling ebooks. No investment method, however, has the potential to deliver the high dollar windfall that Real Estate does. Investing in Real Estate is a very exciting venture. To be successful in flipping, buying and holding, foreclosures, and so on, it is always to your advantage if you genuinely like fixing up homes and enjoy the challenge of the projects you take on. Other than that, this is a relatively easy way to make money. Many people who do not have much education learn how to invest in Real Estate, in fact this is one of the ways that lower income people can actually pull themselves out of poverty. This fact has been achieved by numerous savvy individuals from the lower income level of society, who have understood that having a job is not the way out, investing earned money is. I personally have met people like this who live very well and are able to afford college educations for their children. The first thing to do if you are interested in accumulating wealth is to think like an investor. In other words when looking at properties think with your head, not your heart.


First, it is extremely important that you are able to ascertain what the property you are interested in is worth. That is the only way to know whether you are getting a good or a bad deal. Sadly, many people do not know what they are getting into, and discover that they can not sell their property for the price that they paid for it. This is exactly what happened in the last big Real Estate boom. One way of knowing what you are getting into is to look at comps (properties that are similar and therefore you can compare to the property you want) to understand the value of a particular property. Don't make the mistake of just finding properties that are easy to qualify for, or that don't require a lot of money down. This is where I believe a lot of novice investors get hurt. The key to accumulate wealth in Real Estate is to buy in highly appreciating areas and holding onto them while they go up in value.

This is an article about accumulating wealth through Real Estate, meaning do not expect your first home to be your dream mansion. Your first home is an investment piece to leverage you into the dream house later on. Your mind should be on the characteristics of a home with potential growth, not a home near the golf course.

Characteristics of home with potential:

  1. A trendy, yuppie area
  2. 2-3 bedrooms
  3. Fireplace
  4. Large closets, walk in are ideal
  5. Roomy attic that may be used foe expansion
  6. A fenced yard
  7. 2 car garage
  8. Convenient for jobs
  9. Place of washer/dryer
  10. Hardwood floors

Signs that the area is goin downhill:

The yards are not being kept up.

Businesses are going under.

When you see that properties re maintained or fixed up.

You see cars up on blocks in the yards

fences are deteriorating


Signs that a Neighborhood is improving

Old homes hare being fixed up

New businesses are being started

The city is being renovated

New homes are being built

Property sales are up

Appraisers- be careful

Be careful when basing your decision to buy or not on an appraisal. Appraisers tend to be determining what values have been in the past, not what they are going to be worth in the future.

What to look for when just starting out is the worst house in a block, or the home on the street that needs the most fixing up. Just be sure that the issues are only cosmetic, such as it desperately needs a new paint job and the lawn is over grown, or the house was broken into and looks run down. In this scenario, whether you flip or buy and hold, you will gain appreciation value. Never buy the nicest house because you will pay premium for it, and the chance for appreciation is not very high. This brings me to the time I saw a house that was enormous. It was 5,000 square feet, and located in Long Beach near a University. Most of te places in the area were running about $200,000 to $240,000. It was located on a cul-de-sac, and took up three lots, an absolutely gorgeous place, consisting of 8 bedrooms, a huge basement, and 4 garages. If it had been anywhere else it could probably have brought $1,000,000, but in that particular area they were trying to sell it for $250,000 and couldn't find anyone to buy it. If someone had wanted a really nice home it was a great deal, but you could never get your price when you decided to sell it, because the home was overbuilt for the neighborhood. This is a bad investment.

Victorian Homes

REOs

REOs are the most popular form of bargain opportunities in real estate investment. You stand to buy a property for 5-50% off the market value. They are considered a much safer and easier way to buy real property than purchasing directly from the seller right before a foreclosure auction.

Buying REO means that you are getting the property straight from the lender. You will get a clear title and sometimes even insurance. In some cases you will get a home that has been totally overhauled.

Lenders don't like REOs because they don't pay interest, and lenders are in the business of gaining interest. When a lender has money tied up that isn't producing a profit, it registers as a liability, or a "negative" in their bookkeeping. REOs don't look good on the books of a lending company and is a sign of its failure. REOs take time and therefore money away from the lender's business, which is making money on loans.


Real Estate Bargains

In considering what makes a piece of property a bargain and another property not, many real estate investors have discovered that there are seven critical areas that should be considered considering new real estate bargains.

What should one take into consideration that may lead to high profits?

These are the most vital issues in determining if a piece of property is worth considering.

  1. Price- A property that is significantly below market value.
  2. Terms- The down payment,interest rate, terms, or other conditions of financing are below market.Creative financing can make or break the deal.
  3. Rental and resale market- The property is mistakenly positioned in either of these markets.
  4. Location- The location is actually better than the seller realizes. Location is truly one of the most important issues when selling a piece of property. Some investors learn this the hard way. One can have a beautiful home in a shady area that gets broken into when left unattended, and draws a lot of interested visitors who love the home but don't feel safe enough to buy.
  5. Condition- It's a "distressed" property that you can fix up. These are often the most fun and the easiest properties to make a profit on.
  6. Zoning- The zoning provides an opportunity to put the property to a highest and best use. In appraisal the terms, "highest and best use" are used when you find a small old home on a huge lot in a cosmopolitan area. We have all seen examples of this. Its a goldmine in the city. A developer buys the property and subdivides the land into two 30 unit condos. That is an example of getting the highest and best use real estate. The zoning allows multiple units, but there is only one home on the lot.
  7. Occupancy. It's vacant and there's no problem, or it's occupied, you can't get the tenant out, ant this is a big problem. Something to think about.


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