Five Basic Tips for Investing in Real Estate

Five Basic Tips for Investing in Real Estate

There are a lot of things to learn in Real Estate before you start investing. In fact, investing in Real Estate is much more complicated than the stocks investing. That is why Real Estate has become the common investing area for many people and thus have become more popular over the years. One needs to have financial and legal knowledge before investing in the Real Estate.

So, here we are providing you five basic tips which helps you to familiarize yourself with the basic concept of Real Estate.

1. Location:

Location Matters which is an old age saying perfectly suits when we think of the investing in Real Estate. The first thing you should make sure while investing in a property or proceeding forward is whether it is located in a good place or not.

If it is the best location, it can be the worst house there, but that doesn’t matter as you can just fix the issues or resell it to someone who wants a house in the best location. This is called as the Fixing and Flipping formulae by the professional Real Estate investors.

2. Wholesale properties:

Being wise is also very much important while investing. You need to follow the Warren Buffet formulae from the stock market investing which says “You need to be greedy, while everyone else is feeling fearful.” You need to look out for the wholesale properties that are being offered at great discounts and thus avoid paying full prices.

Using this technique, you can buy the property at low price and keep the selling price twice the buying price which helps you in maximizing your investment return.

3. Connect with local investors:

Hanging out with the local investors and talking with them about the local Real Estate market will help you in knowing the things better. Ask them to show their properties and take in every single bit of information they give you.

4. Reading helps a lot:

There is a tremendous amount of information available online these days. You can also gain information that you may need regarding the Property field and investing as well. Buy and read books that give you practical knowledge about buying, flipping, renting and selling the properties.

5. Find a good Realtor:

This is the best part. When you are all set and finally ready to invest in some property, then a Realtor is the person who helps you with it. And a good Realtor who understands the concept of investing returns and also have sold a number of properties can be the best choice.

Property investment can offer fabulous returns, but there are also people who are bankrupted after investing in Real Estate. It is all in your hands, so be sure and know everything involved before you invest.

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Memphis Buy And Hold is┬áspecializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com

Buying Investment Property – Rules to Follow

buying-investment-property-rules-to-follow

It really important to have some guidelines to follow when you are starting your career in real estate investing. If you follow the rules, you can never really lose. On the other hand, with experience you may be able to bend the rules and still make good deals.

Investing Rule #1 – Not All Deals Are On MLS

Most small unit residential property gets listed on your local multiple listing service (MLS) website, but not all. This is extremely important in the more competitive markets because the more people who see a deal means the more competition for you. As a new investor, you may not have the ability to compete against the big players, so you may want to focus on alternative methods of finding deals:

Auctions – Just like MLS, auctions have good real estate deals and bad deals. The number of potential buyers at an auction is much lower but everyone there is an investor. Additionally you will need to have enough cash available to pay.

FSBO – Some owners list their properties without the help of a real estate salesperson and these go on a ‘for sale by owner’ website. Often these websites are full of overpriced real estate listings, but occasionally you can find a gem truly worth adding to your investment portfolio.

Word of Mouth – “I heard John over there on Rose St. is looking to sell his property soon.” Any time you can get make an offer before a property hits the market is a win. If they accept, you can possibly pay far less than market value.

Driving for Dollars – You know that property at the end of the street that is always overgrown and needs some maintenance? It may be worth your time to go knock on their door and find out what’s going on. When you have free time you can drive through neighborhoods you’re interested in and possibly find deals.

Investing Rule #2 – Asking Price is Not Related to Market Price

Browse through listings for just a few minutes and you will find a property that’s twenty thousand dollars more than others. You can also find properties asking for far less than what they could get.

Unlike typical homeowners, investors are generally a very rational group of people who really understand real estate. They may be asking for top dollar but they probably know the lowest number they will accept. Do not be afraid to offer what you think it’s worth. It’s rare, but investment properties can and do sell for half of their asking price.

Investing Rule #3 – Due Diligence and Inspections are Mandatory

You don’t want to close on a house just to find foundation problems or termites so do the inspections up front. If you do find something, you can usually negotiate a more favorable agreement.

Also, don’t forget about a proper title search. Ensure the title company is going back 50+ years or to the last instance of government ownership. Why? Well, imagine you get a phone call one day finding out a great grandparent died with no will leaving the equity to their 7 children and now some of those children have since passed away. You find out there are 15 potential claims against the property! This is a true example, so it can happen!

Investing Rule #4 – Run The Numbers

“Well, that kitchen may only cost $10,000 instead of the $12,000 I originally thought. Now the numbers work.”

If it’s not a good deal then walk away. Do not adjust the numbers to make them work. People get attached to their own ideas so they may lie to themselves to make it work.

When you run the numbers, don’t forget to include everything. Besides common monthly expenses don’t forget to include hidden expenses:

  • Vacancy – 5-10% of rents for vacancy depending on your area. Your property will have vacancies so don’t forget to include them.
  • Capital Improvements – Major things will require replacement such as heating systems, the roof, etc… Add 3-5% of rents for these future expenses
  • Property Management – You don’t want to personally manage the investment forever. Don’t forget to include 8-12% of rent for your property management
  • Reserves – It is extremely important to have a cash reserve just in-case. Add another 3% or more for cash savings
  • General Maintenance – Add 3-6% for day-to-day repairs such as the leaky faucet, new door knobs, lights, etc…

Investing Rule #4a – 2% Rule

It’s really good to look at deals rationally, so there are a couple rules to help quickly analyze a property. The first is the 2% rule. Simply put, if the monthly rent is 2% of the sale price, or higher, it’s a good investment. If you are paying $200,000 for the property then you should aim to receive $4,000 or more per month.

This is probably one of the hardest rules to follow. It can be very hard to find a deal that meats the criteria.

Investing Rule #4b – the 50% Rule

Assume that 50% of your rent will go to expenses before you even count the mortgage. This rule really feeds into the 2% rule. If half of the rent is immediately gone, you are left with only 1%. Then take the mortgage out of that and you are left with very little.

This number is to help you quickly analyze properties without having to sit down and do a spreadsheet on every property. Also, it’s a good way to check for accuracy. If you find your expenses are only 15%, perhaps you forgot something.

Investing Rule #5 – All Rules Can be Bent

“Everything is Negotiable” goes the saying in real estate, and this is true for rules as well. For every ‘rule’ out there related to investing there is someone breaking that rule and making a fortune.

You may find that the 50% rule doesn’t apply in your area which means the 2% rule can be lowered. Other people may find their best deals on MLS and others may live in such a competitive market that all properties sell above their asking.

Why Have Rules for Investing in Real Estate?

People tend to overlook things or get emotionally attached to a potential project. By having a checklist and set of rules to follow, it is much easier to stay focused and disciplined. These rules are a set of guidelines that will help you earn money. You can bend them and make money, but if you always follow the guidelines, you are far more likely to win than to lose.


Memphis Buy And Hold is┬áspecializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com

What Is Property Management in Real Estate

Property-ManagementWhen you are looking to get into real estate investing, you will want to spend some time learning about property management. Most people will focus on getting a property and finding a good deal. These are important parts of the investing process, but managing your property is the second half of the investing process. So what is property management? It’s the part that helps you get the money out of your investment.

All property has to be managed by someone. You can manage some property by yourself or you can have a property management company do part of it for you. There is even the third option that is a mixture of you and the property management company working together to take care of all the parts of your investment.

The main reason that you need a help is leverage. The more properties that you buy over time, the more time you’ll spend managing the operation of your properties. An investment company can save you a lot of time by taking care of many portions of normal maintenance and management. When there is someone else taking care of your investment, you have more time to go look for more investments.

The main reason that many people do not use help for their properties is because they want to do it themselves or do not think that the money spent on a management company is worth the cost.

Managing a property yourself allows you to save the most money and be the most directly involved the your investment. Many people enjoy being in control of their finances more directly. Sometimes you will have problems that you need to overcome with bad tenants though.

The cost of an investment company is normally a percentage of the monthly rent. This type of compensation helps motivate the property management company to keep your units full and rented out. If they do not have the property rented out, then neither of you will make any money.

A good property management company will be able to help you take care of more investment properties without having to spend as much time taking care of each unit. This leverage is what helps many top investors to grow a portfolio of real estate investments from just a few to several hundred.

So what is property management to you? You can choose to make someone part of your real estate investing team or you can choose to do it on your own. Whichever way you choose, you will need to take care of your investments.

If you want to grow your real estate investments further than just one or two, then you need to spend time learning more about what is property management and how it can help you.

aboutdcDerrick is a Memphis native specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com