Partnerships

I get asked all the time, should I find a partner to work with in my real estate investing business? I say yes, if you can find good partner. There are many ways you can partner up with someone. Regardless of which direction you go, find a partner that will complement your personality and drive. Let’s talk about some key points I feel are important in identifying the right business partner for you.

Personality: It will be important that you spend time getting to know your possible business partner before you rush into doing any work together. Spending time outside of the real estate business is important to see how one behaves. Make sure you like the person you are going to be working with. More importantly, do you like their attitude, drive, focus? Are they kind, patient, result-oriented? Do your due diligence.

Time Management: You don’t want a partner that does things only when they feel like it. Find someone who is good at managing their time and is efficient at completing their tasks quickly. Real estate is a time-sensitive business — no room for laziness.

Relationships vs. Money: I have always lived by the creed, “Chase the relationships, don’t chase the money.” Basically, don’t be greedy. It is too easy for people to be worried about how much money they want to make in this business. That will hurt your relationships. Therefore, find a partner who wants to build lasting relations instead of getting rich quick.

Different Business Entities: I encourage you to have your own separate business entities working together. Don’t put everything under one company because, if things don’t work out, it will be easier to dissolve the partnership.

            Working with a partner can be a great thing. It will take you some time to find the right one. A qualified partner can help you reach your real estate goals a lot quicker. If partnering with someone is what you have been thinking about doing then get out to real estate clubs because they are a fantastic place to network and find like-minded investors.

Three Ways Real Estate Can Generate Wealth

Real Estate investors can generate millions of dollars through their real estate investments, but how exactly does it all work? Learn more about how real estate can transform into wealth.

For many, real estate is simply buying a home to live in. Real estate investors use properties to generate wealth in a variety of ways. Real estate can generate wealth for investors in the following three ways: appreciation, cash flow, and equity. Though there are many investment styles to choose from, real estate investors use a combination of these three ways to generate wealth from their real estate investments.

Appreciation

Over time real estate increases in value. This process is called appreciation. Though there have been some notable exceptions to this rule (2007/2008), real estate increases in value year over year. For example, home values in the US have gone up 6.7% according to Zillow.com[1]. They expect them to rise another 3.2% in the next year. So, if you bought a home for $200,000 a year ago, it could now be worth $213,400. Appreciation generated over $10,000 of wealth, in just a year.

Cash Flow

Cash flow is the term investors use to describe the amount of profit a rental property generates after revenue from rent and any expenses are accounted for. It’s most often expressed by this simple equation:

Rent – (Expenses + Mortgage Payment) = Monthly Cash Flow

Before purchasing a property, investors ensure that the final “Monthly Cash Flow” number is positive. For many buy and hold investments, this number can be modest; however, when you consider that investors generally have a portfolio of units, it adds up quickly.

Equity

Many investors take advantage of conventional financing to secure rental properties. For example, the $200,000 home they purchase, they put $40,000 down, and then take out a 30-year mortgage on the remaining $160,000. The rent the tenant pays goes towards that monthly mortgage payment. So the investor leveraged $40,000 to eventually build $200,000 of equity. Creating equity in a property is one of the ways investors generate wealth.

Generating Wealth Through Real Estate Investing

There is no simple formula for generating wealth through real estate investing; however, all investors use some combination of appreciation, cash flow and equity to create their personal wealth. Investment style, personal goals and market conditions affect what portion of the investor’s wealth comes from each element, but all work together to achieve the investor’s financial goals.

 

[1] https://www.zillow.com/home-values/

How a Real Estate Closing Works

You’ve showed your client the property and he seems very interested in it, then he decides he’s going to buy it. Now you have reached closing, which is the final step in executing a real estate transaction. But you’ll have to go through a few processes before the transaction is actually over.

Several things happen during closing: the buyer and the lender deliver a check for the balance owed on the purchase price. Then the seller signs the deed over and gives it to the buyer. A recorder’s office, which will record the deed, will require the seller’s signature to be notarized. Commonly, the seller delivers possession to the buyer by giving them the keys to the property. Unless otherwise specified in the real estate contract, delivery of possession should be on the closing date, which is usually several weeks after the offer is formally accepted.

A title company, lawyer, notary, or the buyer will register the new deed with the local land registry office or recorder’s office. A declaration or statement by the buyer or seller regarding the purchase price may have to be filed with the government. Conveyancing taxes and recorder’s fees will typically have to be paid, which are part of the closing costs. The seller receives a check or bank transfer for the proceeds of the sale, minus the closing costs and mortgage payouts. Prepayments for real estate taxes and insurance may be taken from the funds allotted for closing costs, and fees charged by other parties are paid. Sometimes, closing in escrow, which is a neutral third party, may occur to prevent the two parties from getting ripped off.

At a closing, the basic idea is this: the buyer gives the seller their money and the seller gives the buyer the deed.

4 Tips for Time Management

In this era, people tend to be busy with multiple things every single day. It may be work, studies, family, social life, workouts, projects and more – all these things fill our schedule every single day. We tend to give ourselves a big pile of work and find ourselves unsure of how to get it all done on time. It is indeed hard to manage time, especially if you’re a person with a lot of responsibilities. Here are four tips to help you better manage your time and get things done.

First, determine your schedule in a certain timeframe (it may be within the day, next three days, this week, this summer, and more) and identify the things you need to accomplish. It’s better if you list them in your phone or write them down so you don’t forget something. You can also use your list to check off tasks/appointments you accomplish. After making a list, divide each item into different categories – schedule, urgency, and more. These will help keep you on track.

Second, learn to say “No.” I know for a fact that it’s good to say “Yes” to task assignments, opportunities, promotions and more, but if this will jeopardize your time management and give you too many things to do, then it’s okay to say “No” sometimes. You, of all people, know yourself. You know your capacities and limitations. Don’t force yourself to do something you can’t at the moment.

Third, avoid distractions. As humans, we are easily distracted for many reasons. If you set a time to do something, focus on it. Most of the time, you get something done faster if you give it your total attention. And, you make less mistakes. Be committed to the list you set for yourself. Be persistent to finish the task at hand. Avoid backlogs and save time.

Last and most important by far, enjoy and love what you’re doing. If you don’t enjoy what you’re doing, you will just feel lazy and end up unfulfilled. Engage yourself in the schedule and the tasks you set. Be consistent.

These are only a few of the many tips you can follow to better manage your time. Whatever you decide to do to succeed in time management, remember to keep it balanced. There’s a time for everything – work, studies, family, spiritual growth, social life, yourself, and more.

Four Real Estate Myths

  1. Set your home price higher than what you expect to get.

This may work at a car dealership, but real estate is a totally different animal. In real estate, if the buyer doesn’t see your home as a deal or a bargain, you don’t make it to the top of their “must see” list and are often forgotten about. If your home is presented or listed as a bargain, then the buyer is going to put it at the top of their “must see” list, even if, over all, it was a little less desirable. When a property looks like a good deal, buyers feel rushed to get their offer in quicker due to the possibility that several other offers are being submitted.

  1. You can get a better deal as a buyer if you don’t use a real estate agent.

If the house is listed with a real estate agent, the total commission is already built into the sales price. Even if you as the buyer don’t use an agent yourself, the seller will still pay the entire commission to the listing agent.

  1. All of the properties listed on the Multiple Listing Services (MLS) are listed online.

This is not always the case. Usually the agent or homeowner has to actually go in and manually post the property online. Realtor.com has claimed that they have everything the MLS does. Yes, they do have a lot of great properties shown from the MLS; however, it is not the full MLS. It is considered limited access.

  1. Open houses sell properties.

Buyers who visit an open house hardly ever purchase that home specifically. Open houses are really used to benefit the real estate agent, as they are a great opportunity for them to find other buyers.

First Flip Checklist

So, This is Your First Flip? Where is Your Checklist?

Let’s talk about flipping. More specifically, let’s talk about what your checklist of items should include. Following the right process when buying a property will save you money and time after you have purchased the home. My list of the most important items that need to be addressed before and during the purchase of a property is below. Of course, there will be some flexibility to this — you decide where that will come in.

  1. Financing: Get your financing lined up. Find out what lender you will use and what their requirements will be for you to borrow funds from them. Also, find out their terms and repayment schedule so you can work that into your numbers.
  2. Insurance Agents: Talk to your insurance agent and find out what kind of coverage you will need while the renovation is taking place and how much it will cost.
  3. Contractors: Get some quotes on the rehab. Look for contractors that are licensed, bonded and insured. You don’t want to cut corners just to save a few bucks. Fix things right the first time around.
  4. Investor Friendly Agents: Make sure your agent has your best interest in mind throughout the entire process of purchasing the property. Never let your agent lead you astray. Make sure your agent is providing all the information you need to close the deal correctly.
  5. Interior Designer: Find one whose design aesthetics you like and one you can afford. A good designer will help you sell your properties quickly. They will work closely with your contractors to get things done right.

Before you start your search for the perfect property, find a financing lender, insurance agent, contractor, and interior designer with fees and requirements that fit your budget. Once you have your power team players in place, use your realtor to find the right deal. During your due diligence period, once you have a property under contract, you can have your contractor and interior designer walk through the property and give you bids. Contact your insurance agent and make sure the insurance will be in place and is affordable. Do all of this before your due diligence period ends, that way if something is not working you can cancel the deal.

There are some other minor things that need to be done during this process, but the items I’ve gone over are very important. Your list should look similar to mine. Remember to take things slow. Don’t rush into a deal, and never get into a flip if it feels like too much to handle. I suggest that first time flippers start off with a light or medium rehab. If you make a checklist before you start, you should have covered all of your bases to make money on your investment.

What is a Real Estate Absorption Rate and How Does It Apply to You?

In real estate, absorption rate is basically the length of time it takes to sell a house that is listed on the market. The rate is mostly based off of the number of months it takes before the home is sold. Absorption rate is a concept that helps people in the real estate world determine prices and sales activities.

Let’s take a large, urban area for an example. In the past six months, there were 20,000 homes sold. Six months is the common baseline when it comes to home sales. The number of homes sold will now be divided by 6. The result will be 3,333. This number will then be used as a divisor to the number of homes listed on the market. If the number of homes listed for sale is 15,000, the outcome will now be 4.5. Therefore, there will be 4.5-month supply of homes for sale on the market.

It is easy mathematics but that does not make it less important. In order to anticipate home prices and market activities, the absorption rate history of a certain market will be necessary. Absorption rate is vital to real estate agents because agents regularly need to determine the value of the properties they are selling. It is also helpful for buyers to understand the state of demand and supply for properties that agents will be presenting to them. All in all, absorption rates aid in decision-making when it comes to buying a property.

Most potential property buyers are wise and do extensive research before going face-to-face with real estate agents. If you are a seller who cares less about the absorption rate of your market, you’re making a big mistake. To become a top producing realtor, you must be well-equipped with knowledge about absorption rates and market activities. Awareness of the absorption rate of a specific market will help your success.

How to Take Better Pictures of Your House for Sale

The Internet has become a very useful tool in the today’s society. It has become a necessity for most of us because it has a variety of uses. Even sales and marketing is made easy with the Internet. Nowadays, people and establishments use the Internet to advertise the products and/or services they offer. One good example of this is real estate.

Yes, people come looking for houses, apartments, villas, or other properties online, too. So, if you’re planning to sell a property, expand your marketing horizon and attract buyers by having realistic and attractive photos of your house online. How are you going to do that? Well, if you are under the assistance of a real estate agent then you need to make sure they can provide a good photographer for you. If they can’t, get one yourself. But, if you’re selling your home without an agent and you’re on a budget, you can opt to take the pictures yourself. Here are some things to consider.

Before taking pictures, prepare and organize everything you need, like a good quality camera. Smartphones may work but, if you can, it might be good to invest in a digital camera. Nevertheless, either of the two will work. You’ll also want to have a tripod for taking sharp photos, and, of course, prepare your house by cleaning, removing unnecessary stuff, and redecorating the interior if needed.

When taking pictures, it’s better to have a tripod because the composition of your shots is important. Only frame what you want your viewers to pay close attention to. A good photo should lead the viewer’s eyes around the entire space. Good arrangement of elements in the photo – space, furnishings, colors, frame, lighting, positioning, angle — play a role in making your home inviting to buyers. Also, consider how high your camera is off the ground. Shoot from a lower angle, as this should create the illusion of a path that walks the viewer into the room. Take note that it’s better to use natural light streaming in from the windows. Avoid using your camera’s flash. Also, know the best time of day to capture perfect, natural light for both your interior and exterior shots. For outdoor photos, dusk might be a great time to catch the last bits of daylight to yield dramatic and soft shots. Plus, always pay attention to distortion that often happens when taking photos. Some lenses may cause this to occur.

After you photograph, choose your best photos and touch them up a bit. There are photo editing tools available on the Internet, or you may ask somebody skilled to do it for you. Adjust the lighting, if needed, crop, remove noise in the photo, correct colors and more. Remember that you should produce great and inviting photos. But, don’t make your house look like something it’s not; be realistic and truthful. Finally, think of an attractive description to go with your photographs.

Reality TV vs. Real Life Fix and Flips

I really love golf. I used to watch it on TV all the time. Then I decided to take it up. Wow, what a wakeup call. It is a lot harder than it looks, and I need to practice all the time. Why do I tell you this? Well, reality fix and flip shows are a lot like golf. It looks easy and fun on TV but in real life it is serious work! The popularity of these shows has brought a lot of newbies to the business that get frustrated quickly because things do not go as planned. The shows mislead people into thinking it is so easy. Although this business can be lucrative, you need to understand how things work. Let’s go over what I feel are the missing links for people getting started in this business.

  • It’s all about the numbers: The TV shows only show the basic numbers on a deal and make their profits look so big. What they fail to tell you is how much investors must pay back to their hard moneylenders. This cost is known as holding cost, which also includes insurance on the property while it’s being fixed up. So, the bottom line might be shown on TV as $60k in profit, but it might actually be $30k. That is still a good profit but maybe not to everyone.
  • It takes time: Trust me, finding deals takes time and a lot of searching. You don’t get every deal you make offers on. The shows make it look easy to find a deal, look at it, and get an offer accepted. Well, in real life, you will probably get 1 out of every 25 offers you make.
  • It’s scripted: Most importantly remember you are watching a show and it is scripted. The way they find the house, do the bidding, complete the rehab — it’s all for your enjoyment. Real life will have twist and turns that are more outrageous than what you see on TV.

If you are serious about getting into real estate investing, go to a local real estate club to talk to investors and visit with a local realtor who works with investors. Educate yourself on the industry and the processes. Prepare yourself for this business. If done right it can give you great results and even change your life.