What to Look at When Thinking About Buying Your First Home!

Admit it. Everyone would like to be a landowner. Who wouldn’t want to own a piece of the earth, all to themselves, to do with as they please? Better still, a house. Even if you couldn’t see it, just knowing you had it would make you feel good. You could imagine what life would be like there. You could plan to retire there someday, or take the family to visit it, or leave it to your children, or keep it as an investment. Maybe you can’t afford it; property values are obscene. Maybe you thought it would always be a dream.

Until recently. With the popularity of eBay and other online land auctioneers and straight sellers, buying real estate has become something the most ordinary and resource limited person can do. You can now buy a deed to a quarter acre of land in the sunshine for under a thousand dollars. Whole houses can be had for under five thousand. You could spend a few thousand and buy yourself a 20 acre ranch! To a city dweller accustomed to cramped spaces, these offers are very tempting.

Even when the picture clearly states “not the actual property”, people plunder savings, empty out paypal, max out credit cards, take on debt, wire money into the void, all for the privilege of being fined, taxed, stranded underwater, or flat-out suckered. So much for your dream.

How can one buy land safely? Rule number one is actually look at the land you are buying, in person. Pictures always hide the truth. Rule number two, due diligence. That means check things like taxes, deeds, insurance, liens, structural integrity, zoning, road access, etc. before you buy it.

If you don’t, here are the ten most likely scenarios for that little piece of property you dropped a couple of thou on over the internet.

1) The Antiquated Subdivision:

Many of these date from the 1960′s, although some may date from the 1920′s and earlier. In essence, these are subdivisions that were proposed, surveyed, and platted on maps, complete with proposed streets (sometimes with street names). Often these were speculative in nature, banking on future growth that never came. Sometimes, they were intended to deceive out-of-state buyers right from the start, and are making a comeback now that the internet has provided new buyers unaware of the old scams. The most frequent locations that turn up online are around Southern New Mexico, Central Florida, California City, CA, Southern Arizona, among others.

In many cases, new regulations have been put into place to prevent development of these sites, in order to protect the environment, manage growth, or to discourage the purchase of unbuildable land. These regulations are often based on the size of the land you own, with a 2 acre minimum being a common number in New Mexico. This means that a typical 1/4 acre parcel, commonly traded online, far from any utilities whatsoever, has no chance of being granted a building permit. So while 1/4 an acre in New Mexico near the Mexican border in drug-smuggling territory might sound like a good deal for a thousand bucks, all your thousand bucks is buying is a square of dirt surrounded by other squares of dirt that will forever remain a square of dirt. To get there, you’ll need to take some dirt roads, and then just dirt.

2) The 5 Acres of Scrub:

Popular locations are Western Texas and Southern Colorado. Typically the offer advertises “ranchland” in vast, unpopulated, poverty-line living counties where buying a carton of milk really does require a 60 mile drive. These parcels have been chopped from larger chunks of nowhere, and seldom do roads exist, dirt or otherwise, to reach them. 5 acres is nothing in these areas; typical property owners own hundreds. Under 20 acres usually means you wouldn’t be allowed to build on it, even if you could reach it, which you most assuredly can’t. 5 acres of this scrub-and-rattlesnake filled land of hills and gullies frequently trade hands in the $4,000-$8,000 range, some suckers have shelled out up to $20K. A few have attempted to see the land they own the deed to, only to learn that a helicopter would be the only way, and no permits would be forthcoming even if you brought that helicopter with you.

3) The Crackhouse:

“Needs TLC” claim the ads, showing homes in long-declining and shell-shocked cities including Flint, Detroit, Buffalo, Pittsburgh, Youngstown, and Dayton. Very real property damage, from collapsed ceilings to burned out attics to rampant vandalism to filth is visible in many photos, when the seller actually includes them. Still, at only a few thousand, the idea of buying a house in a city, paying someone to fix it up, and renting it out for cash sounds very tempting. Buying one of these is perhaps the most dangerous investment of all. Not only are you buying a home that is well beyond salvage, many buildings are in fact condemned, and you’ll have to pay for demolition. Most are located in the most impoverished, dangerous, crime-filled areas of cities with rapidly declining populations; even if the house were brand-new, you’d never be able to rent it. If someone is injured by it while it’s vacant, you are liable. While it’s out of your sight, it is a tempting lure for vandals and squatters. A favorite with “property flippers”, they destabilize real property values in a neighborhood. Steer clear.

Another common peril is when the seller offers to hire a contractor to fix it up for you. He’ll put in new windows, slap up some sliding, and send you the pictures along with a substantial bill. Inside, it’s still a gutted wreck. Never buy a house you can’t drive to in a day; anything could be happening there, and you’ll never know about it.

4) Swamps and Cliffs:

The yuks comedians got in the 1960′s about someone buying swampland in Florida, with property underwater and teeming with alligators wasn’t just a goofy bit someone dreamed up; it was based on places lake the infamous River Ranch Estates near (and indistinguishable from) the Everglades, stuff you’d imagine the guys in Glengarry Glen Ross pitching to New Yorkers. Or, people were duped into buying subdivided lots in Shelter Cove, CA, a remote mountaintop perch far from the freeways and many basic services, where lots were plotted directly into cliffsides, far too steep to build on. Some plots no longer even exist, having crumbled into the Pacific Ocean from erosion. After laying dormant for four decades, those very same properties trade on eBay now, luring the same suckers who buy land sight unseen as they did in the 60′s. So many have been taken in that when they arrive in the swamps of River Ranch to check out their property, they are limited to a campground/trailer park “near” the property to stay. There is no access to the land they bought for $200-$2000 a quarter-acre; they’ll never see it.

5) The Inner City Lot

Similar to the crackhouse, on the surface it seems like a smart deal. A city lot, in a famous city, with city sewers, electricity, gas, and cable all at your future doorstep. Freeways nearby; public transportation. All for the ridiculously low-seeming price of $2000 or so for a lot. Here’s how it goes sour; these lots, picked up for next to zero by the sellers, are located in some of the most spectacularly depressed parts of the most spectacularly failing cities. Among them are the roughest parts of Detroit and Flint Michigan, the greater Gary Indiana area, and trusty old Buffalo, cities where entire blocks of abandoned houses and vacant lots go on for miles. There is no market for vacant property whatsoever; these cities have a staggering housing surplus, due to their dwindling populations. In such environments, vacant lots are magnets for illegal dumping, like refrigerators, sofas, stolen and junked cars, chemicals, bodies. The city, hurting for cash, will gladly charge you serious dough to remove it, or fine you for neglecting it. Not only is nobody, including you, going to want to set foot on the property, let alone build on it, you’ll have city taxes to pay and fines to dread.

6) Recreational Use

What would be nicer than to know you have a little plot in a place “near” Grouse Creek, Utah? Just a modest 1/4 acre; it costs only $800 or so. Even if it turns out to be junk, it’s cheap enough not to care, right? That would be one way of looking at it, although flushing $800 down the toilet would net you the same benefit. Zoned for recreational use only, which means you can’t build anything on it, you’re buying a hunk of dirt. Some might take solace from knowing they own a hunk of dirt somewhere (very far from any town, as usual), but you need to understand what recreational means; it means that dirt-bikers are tearing across that hunk of dirt at will, as they do in that part of Utah, and you can’t really stop them because you’re not allowed to build anything. It’d be cheaper just to do what everyone there does and ride that dirt for free. Carved from enormous acreage into useless 1/4 acre squares with no road access or way to find the place without GPS, no utilities (you won’t need them), nor any practical use, nor will there ever be any, you might as well have bought a deed to property on the moon. And framed it.

7) Quit Claim Deeds

So you went ahead and bought that land anyway, even when I said you shouldn’t buy land sight unseen. And you got a deed that says “Quit Claim” on it. Sounds good too, like the owner has quit his claim and now it’s yours. It’s not good; Quit Claim means the seller is quitting all responsibility regarding the land, thereby transferring them to you. This may be because there’s something wrong with the property, liens against it, ownership is contested, or the seller only owns a partial share of the property. In such a case, all his headaches are now yours. A Warranty Deed assures the buyer that the owner vouches that the property is lien-free, full ownership rights have been transferred. You can insure a Warranty Deed, you can’t a Quit Claim Deed. Niether assure you about the suitability of the land, its utility, accessibility, or buildability. But at least if you get a Warranty Deed, it’s all yours.

8) Owner Financing/Taxes/Mortgages

No credit check! That’s the first come on to owner financing, usually mentioned in the title or at the top of the description, and it’s a bad idea unless you’re rich enough not to care. Payments are high; $300-$500 a month for 3 years. Sure, they offer good terms sometimes, sometimes as low as 8%, some offer zero percent financing. But since they’ve picked their own price (even at auction; that’s what reserve prices are for); they can claim any amount is interest, the stat is meaningless. What good is zero percent interest when your payments total $14,000 for a square of nothing an appraiser would put at $1,000 or less? The bottom line is, you’re making what is essentially a car payment on something that is a great deal less usable than a car. Miss a few payments, and it’s gone; you don’t get to touch the deed until it’s paid off. Even if the land is usable in theory, it’s usually at an inflated price.

Another money trap is property tax. Those vacant lots in Detroit command around $150 a year in taxes; invest in a few of those and you could be paying thousands in property taxes on things like useless, dangerous, toxic land. That causes things like missed payments, forfeitures, and credit woes.

Never count on mortgaging undeveloped land; banks don’t fall for any of that bogus land stuff. They don’t like lending on property that has zero cashflow, they won’t lend on dilapidated boarded up houses and weedy vacant lots, they won’t finance your pair of ranchettes near Deming or your Appalachian woods or your dirt at the bottom of the Pacific. So if you do get in a tax pinch, or rack up fines, don’t expect the bank to bail you out. They probably wouldn’t take the land if you gave it to them.

9) Where’s a Sucker When You Need Him?

If you’ve already bought some of these properties, or are even more tempted now despite everything, you may be thinking in the back of your head, “I’ll just dump them off on another sucker; there’s one born every minute…” Hats off to you if you can make it happen, because the small time lot, parcel, and acreage buyer is at the losing end of what is essentially a Ponzi scheme. Jow Blow buys 200 acres; carves them into 20 acre parcels and sells them to people who carve them into 5 acre pacels, which eventually get chopped up into 1/4 acre lots. By the time you shell out $800 for that 1/4 acre, you’re paying the maximum that 1/4 acre is ever going to get. Even at the bulk economy rate, only the top of the pyramid makes any real money. Now that the market in Grouse Creek is saturated, some of those 1/4 acre lots have started selling at $200 apiece, a loss of 75% on your investment, and no, they’ll never be “hot” again, because they’ve been divided as far as the law permits. Many properties like these are sold by infomercial real estate guru types at seminars they charge hundreds of dollars a head to attend. Stay away from those guys, too.

10) The Usual Perils.

The internet is rife with rip-offs, scam artists, and fraudsters. eBay is notorious for its multitude. While the majority of eBay sellers will handle your transaction honestly and responsibly, there is that omnipresent risk of getting burned. As usual, the most vulnerable are the elderly, and those with poor credit scores. Even the honest ones will include the all encompassing disclaimer “sold as-is, where-is” and often admit that they’ve never seen the property either. And as always, remember: you can’t get something for nothing, you can only get nothing for something.

There’s something romantic about knowing you own a piece of land somewhere, even if you’ve never seen it with your own eyes. If it’s in a rugged place like Texas or Colorado, even more romantic. That’s what the sellers play on most, just like Al Pacino in Glengarry Glen Ross when he went in for the kill. You want to believe you have that retreat somewhere, that piece of the earth nobody can take from you, a place of spiritual freedom in your mind. You’ll buy a piece of paper that represents that dream, and the seller will pocket your cash.

If you’re not a romantic type, then maybe you’re a hustler with stars in your eyes, thinking about turning $500 into a Donald Trump-like empire of real estate, trading casinos like they were poker chips, online. Consider every dollar you sink into a surefire land deal on the internet gone; if you manage to recoup half of your investment at some point, you did pretty well. Unless you’re at the top of the pyramid.

This romantic smallfry was sorely tempted by the beautiful, cheap land I imagined these places to be. I looked them over for a very long time. And then I did my research.

5 Questions To Ask Before You Buy Investment Property

Deciding to buy investment property is one of the best decisions you will ever make for your future. However, it isn’t something you can decide to do one day and then rush out and do the next. There is a process that you have to learn and lots of information to digest. If you think you have done that already and you are now prepared to go out and make your first purchase, here are five questions to ask that will help you to prepare.

What type of investment property are you interested in? Are you interested in a duplex, multi-unit complex, or perhaps just a single family home? Are you interested in commercial real estate? What about undeveloped land? How you answer this question will determine other things that you do later, such as how you go about financing your investment. It is also best to focus on a particular type of property so you don’t go on wild goose chases and so your team knows what they need to clue you in on.

What area am I interested in? Are you going to invest in the city where you live? If not, what part of the country do you want to invest in? The Internet is the best resource for determining what area of the country you would like to put your time and resources into. Ken McElroy, author of “The ABCs of Real Estate Investing,” calls this Level I research. Later, when you have determined a part of the country and a city in which to look, you will need to decide what neighborhood interests you. You will find that during McElroy’s Level II and Level III research.

Do you have a financing strategy? The type of property you are looking for (as well as your own assets) will determine how you can make your purchase. If it is a small property such as a house, you may want to pay for it outright. However, even if you don’t have the money to pay for it, if it is a piece of property that has made money in the past, the bank will probably give you the finacing you need. They know that they will make money on the deal regardless of what happens to your investment. If you are looking at a large property that you can’t afford outright, you will probably be able to find other investors to partner with you.

Is my team in place? You can’t do this successfully without a team. That is simply because of the large amount of work involved, and so many different types of expertise needed, that you simply can’t do it all. There is not enough time for you to become proficient enough with real estate law and accounting, plus broker your own deals and manage your own properties. You have to delegate. That is why McElroy recommends you start with an attorney, an accountant, a broker and a property manager. After that, you may also need appraisers, tax consultants, a surveyor, a structural engineer, an architect, an estate planner and more.

How much do you have to spend on repairs? This is essential. Knowing this will help you determine what areas to look around in because some areas may be full of old buildings or some newer buildings may actually be in need of a lot of upgrades. You will want to what you are getting into and whether you can handle it.

This isn’t a a complete list of questions. Once you embark on your real estate investing adventure, you will find a never-ending list that you will need to address. But these will get you going on the road to asking yourself the right kinds of questions. Sometimes asking the right questions is more important than the answers themselves.

The Truth About Using Credit: Why Avoiding It Will Cost You Money

There is a popular saying that “love makes the world go around, but money greases the wheels”, the subtle truth behind this saying is that short of love, money is the most emotional subject of our lives. Perhaps the only emotion more compelling than the desire to have the new car, gadget, etc. is the crippling sense of fear that comes from not being able to pay the next months round of bills. All to often this is the cycle that leads to crushing debt, there is no denying the power of debt, but that power does not have have to control you, when you understand how it works, what to do and what not to do, it can become your greatest asset.

To begin with let’s take an autopsy of the the most prevalent abuses of this great power. Bear in mind that while some of these mistakes may seem commonplace or even cliched they have all been made by intelligent people, more important are the ones that are not as well known or worse still get recommended as being “the right thing to do”. Also note that credit is a two sided coin and for every victim who does not understand there is a master who does.

No Credit
This is the first response of fear of the power of credit, usually in response to the misfortunes of a parent or perhaps even a generation. While this approach may seem on the surface like the right course of action or at least an acceptable compromise, nothing could be further from truth. The truth is that we live in a world of credit, a world built by credit, maintained by credit, and too often destroyed by credit. The real illusion is thinking there are acceptable alternatives, there are not. Savings are always eroded by inflation, an indirect effect of credit at work, and living paycheck to paycheck is essentially praying for disaster. This illustrates the ultimate problem with trying to avoid credit, it is building a financial “house” with no foundation.

Bad Credit
Bad credit, when it appears, is always a symptom of the real disease. Inability maintain payments on expensive toys, inability to make payments on monthly essentials, or ignoring the calls of a collection agency. Like a fine wine left on the shelf for till it becomes vinegar, getting credit then putting it off turns it sour rather than improving it.

Misused Credit
How many credit card commercials expound the virtues of frequent flier miles, fancy dinners, clothes, even new cars and big houses as the rewards for having good credit. Unfortunately, they are little more than a golden cage. At first it feels nice to have something decent for a change, then it feels even better to have something really nice. In time it feels deserved, but these things must be earned, not with hard work but intelligence. When intelligence is lacking the hard work always follows close behind. When hard work is no longer enough to pay the bills and the golden house of cards collapses.

Personal Credit
All the preceding mistakes really flow from ignorance of one key step. With one step all the worst pitfalls of credit can be sidestepped or greatly minimized and the virtues can be enjoyed at least as fully if not more so. The key to controlling credit is to control it impersonally, through a corporation, LLC, or other legal entity. Again there is a relevant saying that “a corporation is like a person, but with no soul to be damned and no body to be imprisoned”. While it is obviously not advisable to form a corporation merely to avoid paying taxes or other bills, it does mitigate the risk of financing a large amounts. Furthermore it allows full advantage of the benefits of good credit, some of which may be less familiar.

Differed Payment
The cornerstone of good financial management is to manage cashflow in and out on a recurring basis, rather than bulk items. When good credit has been established and maintained large purchases or investments can be measured out over a longer period of time rather than paid for out of pocket. While paying out of pocket may have the appeal of finality, it misses many of the tax advantages that come with extended financing, to say nothing of the obvious problem that any large purchase must be broken down into small payments. When a large investment is made in cash the payments are still made but they are made in advance, where they are by far the most costly. Every dollar put into savings toward some large purchase is annually robbed of some portion of it’s buying power, a loss further compounded by the it’s inability to earn any income while in savings. The real power of credit is it’s ability to move money, usually in great sums, backwards in time, greatly magnifying it’s earning ability.

Established Reputation
This is the very essence of the Fair Isaac school of thought, in regards to credit ratings. The idea that a lender can safely extend credit to a party with whom it has had no prior dealings, again the great advantage this affords is one of time saved by not having to establish a brand new credit history with each new lender. It’s no wonder this reputation is so broadly used by everyone from employers, to landlords and even as a basis for screening college applicants. Perhaps it’s most important aspect is in business to business relations. A small company can gain tremendous credibility by by having a well earned credit score, and in a competitive market this is too important an advantage to overlook.

Buying Assets
The pinnacle of the philosophy of proper credit management is to use credit to invest in assets that will earn income or appreciate far in excess of any interest paid on the money borrowed to purchase them. Perhaps the easiest example of this would be Real Estate, however this does not apply as a wholesale rule to all Rea; Estate purchases. Generally it applies to income producing properties, either held indefinitely and refinanced, or sold for a profit. The same rules can be applied to the purchase of a business, provided it runs essentially on it’s own with little or no owner management. The power this philosophy affords those who can master it is the ultimate freedom, not merely a freedom from debt, but a freedom to use debt to whatever ends they choose.

How to Invest in Real Estate With Private Money

I am not a real estate investing guru by any means. In fact, I only have 3 rental properties. The first one I bought with no money down. I used hard money to make the purchase and then traditional loans to refinance and pay back the hard money lender. The fees were very high so I would not recommend using hard money unless you are fixing up and reselling in a short period of time. The second and third properties I purchased together with just 10% down versus the traditional 20% or more required for investment property.

For my next property, I was determined to avoid using banks at all. I wanted to find a deal with either owner financing or private funding. Private funding is when an individual loans the investor the money to purchase the property. The investor/borrower then makes payments to the private lender just as they would to a bank in a traditional situation. Normally, you won’t get the 15 yr or 30 yr terms you get with a bank, but you can get from 1 to 5 yrs and then refinance. You will also have to pay higher interest rates; such as 8-12% for first mortgage positions. If you want private money in a junior or second mortgage position, you will likely have to go as high as 15% due the greater risk involved for the lender.

Below, are my recommendations on buying a property using private money.

1. Find a wholesaler. These are the men and women that have the “I Buy Homes” ads, signs and sometimes commercials. These investors specialize in picking up properties at a discount. They usually don’t want to be landlords. They like to get in and get out and make a quick buck. They purchase these properties for less than 70% of fair market value (FMV). They then turn around and sell to an investor for a small spread.

2. Get a property from the wholesaler that needs little work. Make sure you are at 70% of FMV or less. In the contract, make sure you use a “weasel clause” stating the deal is subject to you getting financing or subject to partner approval. The partner is this case is your private lender. This way, if you can’t find financing, you can get out of the contract.

3. Once you have a property under contract, begin to assemble your “property information package”. This packet will consist of a cover page with a photo of the property and your contact information. The next page will be a 1 page Executive Summary detailing your goals, they types of properties you are interested and ideally, some examples of deals or experience you have that will help you do these deals. There are a ton of templates on the internet. Just search “executive summary template”. The 3rd page will be photos and features of the property. List the bedrooms, bathrooms and other selling points. The 4th page should be the county assessor’s page. Just go to your county website and enter the address. You will then be able to print out the assessor’s page with the square footage, yr. built, bedrooms, bathrooms, etc… All information you will need when you get insurance…but let’s save that for later. The 5th page will be the Tax record page, showing the estimated taxes you will pay. Page 6 will be a printout from RealEstateABC.com. Just enter the property address and you will get a report showing the estimated value of the property along with a map of the location. Page 7 will come from Zillow.com. Enter the address and you will get another appraisal estimate along with comparable sales data. If possible, highlight comps that flatter your property and include photos. When you go out to take photos of the property, make sure you take photos of similar homes on the street. You can include these photos along with the zillow page and get some basic appraisal information.

4. Talk to everyone you know: Friends, family, co-workers. Go to real estate investing groups and speak to other investors. Someone should know someone that wants to make 8-12% on their money rather than the 2% they are getting at the bank.

5. When you find someone interested, take them to lunch and show them your packet. If it’s a good deal, the numbers should speak for themselves, but you may need to “sell” it a little. If you find a fellow investor, they should not need a lot of convincing.

6. Agree on the loan amount, the interest rate, the length of the loan and whether you are paying principal and interest or interest only payments.

7. Contact a Title Insurance company and give them the information. The seller/wholesaler will have sent a copy of the contract already most likely once you let them know where to send it. The closing attorney (usually the Title Insurance company works with one) can draw up the Promissory Note and the Mortgage paperwork. While you don’t have to, it’s a good idea to request a “lender’s policy” on the Title Insurance in addition to your policy. In the event the lender has to take over the property, he or she then has the title insurance. Banks require this and it really puts the lender at ease.

8. Contact an Insurance company for your fire/hazard policy. The loss payee will be your lender’s information. This way, if the place burns down or the Earth swallows it up, the lender gets paid off first. Again, this really puts the lender at ease and more comfortable with the deal. When you mention the Loss Payee status and the Lender’s Policy on Title Insurance, you will seem very knowledgeable and professional.

9. Lender will approve all documents and then Closing Date is set.

10. Go to closing and sign the paperwork. The lender need not be at closing, but make sure the money is there ahead of time.

Congratulations! You are a real estate investor and you’ve used private funding!

Naturally, there are entire books and seminars on this subject. Make sure to do your own due diligence. If you are not sure, ask a professional. Attorneys, other real estate investors, etc…

Happy Investing!

John Noce is a Real Estate Investor in Asheville, NC. As a member of the Carolina Real Estate Investors Association, John has served as club librarian, club secretary and most recently Webmaster and Internet Marketer for Club Activities. John is frequently a guest speaker at the club’s focus groups, main meetings and has presented a 1/2 day seminar on Internet Marketing for Real Estate Investors. John Noce has written several e-books and has created the “Hotjohnnie Property Analyzer”. As an Excel format, investors can enter in property data and verify if the numbers will work. If not, the analyzer calculates what offer to make.

The 6 D’s To Finding Hot Real Estate Deals

You’d probably be surprised to know that even these days of instant communication and the ability for properties to be advertised on the internet to audiences of millions of people, there still exists lots of hot real estate deals on the market.

Let me share with you the ways that I personally and many experts I know, have profited greatly by finding hot real estate deals. By hot I mean real estate that is being sold well under market value.

Its all about the 6 D’s:

1. Divorce

2. Death

3. Dummies

4. Developers

5. Deadlines

6. DBank

and together these 6 Ds fall under the 1 D class – DESPERATE! Desperate vendors need to offload their real estate quickly so they will sell their real estate for well under market value.

Desperate Vendor #1 – Divorced

Its a sad fact that many people are getting divorced these days, and through divorces, most couples will need to sell their real estate in order to split the assets between the divorcing couple. Most people who are divorcing want to sell their property quickly, and so will normally sell below market value in order for them to get a quick sale.

Desperate Vendor #2 – Death

When people pass away, they often leave their properties to a group of people – like their children. When this happens, many groups will want to sell the property as this is the easiest way to divide the asset up. Most groups will want to sell their real estate quickly and will settle for under market value.

Desperate Vendor #3 – Dummies

Im still astounded by the fact that there are still many people out there that do not know what their real estate is worth when they sell. Many vendors dont see the potential in their property and so ask for less because they think their property doesn’t look as good as the others in the street or that it needs a lot of work. If you understand the ways to add value to a property for not a lot of money, you can see properties with a different perspective. Because you are a savvy investor and understand the market in the area, you know that the property is worth more. So its possible to pick up a property sold by a dummy for below market value.

Desperate Vendor #4 – Developers

Now this vendor category might surprise you as you may be thinking, why would a developer be desperate to sell and why would they sell under market value. Well there are many different kinds of developers out there and not all of them are as experienced as the next. Some developers dont know how to budget in all the required costs of developing a property. Other developers might not be able to get the best kind of finance and so their banks are starting to push them for repayments which they cant afford unless they sell some of the units within a property. Some developers just need to get some sales down so that they can advertise that a certain percentage of their development has been sold. All these cases spell a desperate vendor who needs to sell a property quickly and you benefit by purchasing it under market value.

Desperate Vendor #5 – Deadlines

These are vendors that need to sell because of an impending deadline. It might be that the vendor is moving overseas because of a job they have accepted, or that the vendor has already committed to purchase another property and they need to sell their existing one to finance the new purchase. In these cases, you will find a desperate vendor who is generally quite flexible on their selling price and thus you can pick up a hot deal under market value.

Desperate Vendor #6 – D’Bank

D’Bank (the bank) becomes a desperate vendor when a mortgagee defaults on their mortgage payment and the bank forecloses on the mortgagee. In order to recoup some of their money back on the loan and to save on the cost of maintaining a property, the bank puts up the property for auction. In the majority of cases, these properties are sold well below market value. This is known as seized property or foreclosures. Its well known that you can purchase foreclosed or seized properties for up to 90% off market value.

How to Find Desperate Vendors And Hot Real Estate Deals

The big question is, how do you find these desperate vendors and thus score these hot deals. Here are some ways:

1. Scour all the places that list real estate properties for sale. Look for words in their ads like urgent, desperate, heavily reduced, well below valuation, vendor moving overseas, vendor has already bought, vendor looking for quick sale, deceased estate. Chances are these are desperate vendors who will be willing to be quite flexible on their price.

2. Keep up with the ads in an area that you are focusing on if you notice properties that have been listed for a few months, then you should be able to find a vendor who is tired and a bit more open to your offers.

3. Make good friends with real estate agents and let them know that you are a professional property investor. The agents often know about deals before they are advertised and if they know you are ready to pounce on a good deal, they will want to beat other agents;

4. Work with real estate agents that are investors themselves and keep in touch with them. If they know that you are serious and will act quickly they will keep you informed about any good deals that are coming;

5. You can drive by properties that look a bit run down and not well taken care of. Either knock on the door or use council records to locate the owner. Give them a call and make an offer. Youll be surprised at how many vendors would be open to a serious authentic offer by a willing buyer.

6. Subscribe to the many real estate listing sites on the internet. Most of them allow you to customise what you are looking for – search on keywords like urgent, desperate, vendor has already bought, deceased estate & have all of these emailed to you regularly;

7. Subscribe to foreclosed and seized property listing services that can send you the latest foreclosed property and when the auction will take place.

All in all, you should follow the famous property investing tycoon, Dolf De Roos 100:10:3:1 Rule:

* Look at 100

* Put offers in on 10

* Have 3 accepted

* Buy 1

Be persistent in your hunting of hot real estate deals, as persistences always pays.