Building Your Buyers List – Part 2

Step no. 1 Identify the market that you wish to start investing in. This is critical as this will be the market you will start looking for cash buyers in. A real estate market can be defined in a number of ways, such as:

  • City Limits
  • County Limits
  • Zip Codes – this is the most common
  • District – in the larger and more populated cities

Step no. 2 Find realtors to help with your market research and analysis to determine the following:

Step no. 3 Find cash buyers. Here is a list of both online and physical resources you can use:

  • Local real estate agents, such as Keller Williams, RE/MAX, Coldwell Banker and Berkshire Hathaway.
  • Title companies, such as Chicago Title and Old Republic Title.
  • craigslist.com
  • biggerpockets.com
  • Various paid websites that offer real estate software products that allow you to search county records and the Multiple Listing Service for recent purchases of real estate that were done with cash.
  • County records. This can be done online or in person.
  • Real Estate Investor Clubs. Make sure to search online for the local REI club in your area and attend the next meeting so you can speak with cash buyers there.
  • For finding contact information, search the following websites:

Step no. 4 – The Qualifying of Cash Buyers – here is a suggested list, both scripts and questions:

RECEIVING INBOUND CALLS FROM INVESTORS

“Thanks for calling. I apologize, but I put the ad out a little premature. I haven’t got the contract accepted yet, but if this is what you are interested in I’ll call you back once I lock it up. Before I let you go, I assume you’re an investor, correct? What kind of deals are you looking for?”

MAKING OUTBOUND CALLS TO INVESTORS

“Hi, my name is [name]. I found your information online and it says you’re buying houses. I’m a real estate investor too, and I wanted to see if you have anything for sale. I can sometimes get great deals through other investors. Do you have anything available?”

QUALIFYING CASH INVESTOR QUESTIONNAIRE

Where are you investing? (City, County, Zip Codes, etc…)

What type of properties are you buying?

What property characteristics do you look for? (Beds, baths, sq ft, etc…)

What types of repairs do you typically do on your properties?

What is your maximum purchase price?

How much profit do you need?

How many deals can you handle per month?

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/

Building Your Cash Buyers List – Part 1

Many first-time real estate investors start off wholesaling in order to gain the experience and get the exposure they need to become a fix and flipper or a buy and holder. If this is the case, then these first-time investors’ first step is to find cash buying investors or cash buyers to wholesale their properties to.

In this article, we will go over many ways to find cash buyers and discuss how to screen and qualify them.

Before we move forward, keep in mind that cash buyers can be either groups or companies, such as trusts, holding corps or LLCs, as well as individuals.

When wholesaling properties to cash buyers, you need to look at properties from two different perspectives:

  • Fix & Flips – These are properties that you are trying to get at the highest discount you can. For most investors this could be between 25-35% below market or even as low as 40-50%. It’s key to find out from your cash buyer what their rehab budget is, as well as the level of profit they are looking for. This is critical in coming up with your offer amount on the property. A fix and flipper is looking for a specific profit after they buy the property, do the rehab and resale it.
  • Buy & Hold (Rental Property Owners) – This is where you try to get the best discount you can. Usually if you can get an offer accepted at upwards to 20% below market then you have a good deal. You need to understand your cash buyer’s specific criteria on what types of rental properties they are looking for and in which market, the amount of cash flow they are looking for, and the capitalization rates they wish to get. Often, you can find the answers to these questions from the following sources:
    • Real Estate Brokerages
    • Property Management Companies
    • Other investors and those you network with by attending Real Estate Investor Clubs

This will help with your preparation prior to reaching out to cash buyers, and it will help you get specific and detailed knowledge of the following:

  • What type of properties are selling the most and the speed at which they are selling
  • The median price of property sales, as well as the average price per square foot that they are selling for

In Part 2 we will go over some simple steps to consider.

Zoning in on Zoning

Knowing what you can and can’t do with a piece of property is crucial; it can make or break many deals. I highly suggest you determine this before getting started in any real estate transaction. This can save you a lot of money, time, and energy. I am not kidding about the money part. So what is zoning, and why is it important?

Local governments create zoning ordinances to map out the physical boundaries of different zoning districts, which can occasionally be modified. To determine what your lot is currently zoned as, you will want to go to the municipal building. Zoning and some other ordinances can often be found online. However, do not, I repeat, do not rely solely on that as your only resource. Always go to the primary source to double check your information, especially if it’s a deal you intend to do yourself or invest in.

Now you are probably wondering, why the big fuss over zoning? Well, zoning determines what land uses are permitted in each district or classification. Some examples of classifications may include, but are not limited to residential, mixed residential, commercial, and conservation. Zoning ordinances also lay out all the juicy specifics, like lot size minimums and maximums, setbacks, and height restrictions. Please remember that land use and regulation laws vary from state to state. Therefore, you need to be familiar with the states you work with or at least know where to find the right information when needed.

Like stated earlier, zoning is a very important variable when doing any real estate transaction. Please familiarize yourself with zoning before you end up paying to do it later. Either way, you will have to know it. Now, take this and get out there and apply it.

Let’s Start Our Power Team – Part 1

Ah, the mysterious POWER TEAM! Why on earth are we so attached to this idea? Believing you must have a power team is something that can hold you back. Since you don’t have a clue what a power team is, who should be on it, or how to draft your team members, you may be perplexed and stuck. Maybe you will stall and do nothing because, after all, your power team isn’t yet assembled. Well, just stop it now before you get started down this path.

Your power team, like your business plan, and even your goals, is something that is going to naturally evolve over time. It is not something you have to fully create before you begin.

You should start at the very beginning, a very good place to start. When we read, we begin with A, B, C. When we invest, we begin with a real estate agent. Finding the right agent might take some doing, but that individual is the key to your success.

Real estate agents do not receive training in investing. They essentially learn how to use the Multiple Listing Service (MLS) contract and how to not get sued. It is your job to find the rare gem of an agent who understands and likes working with investors. Oftentimes, a good place to start is with Keller Williams or REMAX. Those particular offices usually provide at least a little investment training to their agents. However, I have often found a great agent at an office with only one location. This search is part of your great scavenger hunt! Here’s what I want you to do.

Find a real estate office in the general area where you want to invest. Though any agent can show you any property, agents tend to know the neighborhoods surrounding their office the best. The phone will likely be answered by an administrator.

The conversation is going to go something like this: “Hello, It’s a wonderful day here at Keller Williams. This is Angie. How can I help you?” (Yes, they say something like that.)

“Hello Angie (use her name). This is Gena. I’m a real estate investor. I’d like to speak to one of your agents who works with investors.” This will stop Angie from sending you to the agent covering the floor that day or to the next one on her list. You are already in control. You know who you need to speak to, and you have said so. Sometimes Angie knows just what to do, other times she doesn’t have a clue. In the latter case, ask to speak to the managing broker.

With simple guided conversations, you can find a great realtor for your business.

How to Get Started in Real Estate

So you’ve decided you want to be a real estate investor — now what!?! The dynamic and fast-paced world of real estate investing can be daunting for any first-time investor. Follow this step-by-step guide to get your bearings and successfully launch your career in real estate investing.

#1 Define Your Goals

Many would describe the world of real estate investing as “limitless.” Despite the nearly endless potential for success, defining your goals is an important step. Determine what YOU want from your career as a real estate investor. Do you want to supplement your current full-time job and save for retirement? Do you want to eventually have monthly cash flow so you can quit your full-time job? By understanding your goals, you will be able to determine the direction of your real estate investing career.

#2 Find Your Niche and Investment Style

After you define your goals, it’s time to pick the investment style that will best help you achieve them. The common ways to invest are:

  • Buy and Hold: When an investor purchases a rental property, typically with a traditional 30-year mortgage, and uses the proceeds from tenant rent to pay the mortgage and create equity.
  • Fix and Flip: A short-term investment strategy where an investor purchases a property in need of repairs, completes the repairs and then sells the property for a profit. Because the property is in poor condition, a fix and flip deal is primarily a cash deal.
  • Wholesaling: An excellent strategy for a beginner investor, wholesaling is finding real estate deals and then selling the deals to investors who have capital on hand. They then take a commission.

If you don’t have a ton of capital on hand, a fix and flip might not be for you. Research all the investment styles and choose the one that makes the most sense for your goals and budget.

#3 Invest in Your Knowledge

Once you have defined your goals, secured your capital, and determined your investment style, the next step is to determine the best way to achieve your goals. While the Internet is an excellent resource, having the support of a mentor or teacher is invaluable. As a real estate investor, you will need to learn the tools to support your goals. You will need systems to hire the right people, as well as resources to find your ideal investment properties. Finding a teacher or mentor will help you avoid time-consuming and potentially costly mistakes.

Getting Started in Real Estate Investing

If you take your time and define your goals, you can embark on a successful career in real estate investing! Don’t bite off more than you can chew. Take your time and you will reap the rewards.

Fast Track to Your First Million

Are you looking to get started with real estate investing? If so, here are a couple of pointers on your first steps to making the big bucks. In order to make millions, you need to start thinking and planning for millions.

The first thing you need to do is get organized. Create some good habits now to better prepare for the hefty paycheck. When getting organized, you are going to want to get a business or entity, phone number, email address, business card, and work space. Establish a schedule and pencil in when you are going to have your weekly company meeting, even if it’s just with yourself. Create a model of what you are doing so it will be easily duplicated when your company expands.

Once you are organized, you need to get going on marketing your company. Go to clubs and send out flyers and other marketing materials. Also, don’t forget to introduce yourself as a real estate investor. Get out and talk with people. Let them know who you are and what you do.

Now that you are organized and are marketing yourself, I want you to get your power team built up. Create a list of resources of different people or companies that could be useful in real estate investing. This list may include investors, agents, contractors, title companies, real estate attorneys, etc.

Don’t forget to surround yourself with like-minded people. Find people in real estate that are killing it and talk to them. Pick their brain. Repeat some of their best practices. Do ride-alongs with them or go get lunch.

Once you have implemented these first steps, you will be on your way to getting some deals going. At this point, it’s all about getting those offers submitted.

How To Acquire a Certificate of Occupancy for Tenant Improvements in a Commercial Building

This article is designed to help you through the permitting and construction processes associated with a tenant improvement (TI) project. Tenant improvements are defined as structural or nonstructural interior alterations to an existing commercial or industrial space. This includes electrical, mechanical and plumbing permits, a change in the permitted use or an increase in the permitted number of occupants.

To apply for a tenant improvement permit, you need to stop at the building counter in the public service building in your city and provide them with a complete submittal package. A complete submittal package consists of the following:

  1. A completed Tenant Improvement Worksheet.
  2. Four copies of a Plot/Site Plan showing the general layout of the existing building site, the location of the tenant improvement, the address, and the handicapped path of travel from parking to the accessible entrance(s).
  3. Four copies of construction plans and details, including but not limited to the floor plan, exiting plan, reflected ceiling plan, framing details, lighting plan, electrical/plumbing/mechanical plans and other applicable plans as listed in the Tenant Improvement Worksheet.
  4. Two sets of Title 24 energy compliance documents, when changes are proposed to the mechanical system, lighting or building envelope.
  5. A completed Hazardous Materials Questionnaire.

During the permitting process you will be asked to pay two separate fees: a plan check fee and permit fee. You are required to pay the plan check fee before they take your application for plan check. As for the permit fee, you must pay it at the time of permit issuance. Both fees are determined by the type of construction, the type of occupancy, the square footage and the extent of the tenant improvement.

After the development services technicians (DST) verify that the application package is complete, and you have paid the plan check fee, they will forward a set of plans/documents to each of the four departments/divisions: Building, Planning, Engineering and Fire. Approval from all four departments/divisions is required prior to permit issuance.

After you obtain all the required approvals and pay the permit fee, a DST will issue you a building permit. Now you can start construction. At certain stages during construction, you must schedule an inspection. The following list represents the sequence of required inspections for a typical tenant improvement:

  1. Underground plumbing and electrical
  2. Foundation
  3. Interior wall framing and rough electric
  4. T-bar ceiling and rough trades (electrical, plumbing & mechanical)
  5. Drywall nailing
  6. Electrical service
  7. Final Inspection

After all required inspections are approved and any required approvals from other divisions and/or departments are obtained, the building inspector will notify the utility company to release the electric meter and a Certificate of Occupancy will be issued. The issuance of a Certificate of Occupancy authorizes you to occupy and use the facility based on the permitted use shown on the Certificate of Occupancy.

Five Tips for First Time Home Buyers

Buying your first home can be an overwhelming experience. These 5 tips will help you stay on track during the emotional experience of buying your first home.

#1 Know Your Budget

Most real estate websites allow you to search by price. Know your budget and stick to it. Don’t be tempted to look at homes above your budget in hopes of “negotiating the price down.” By sticking to your budget, you will be able to enjoy your home long-term without it being a financial burden.

#2 Work with an Experienced Real Estate Agent

Try to get a referral from a trusted friend or family member. Your real estate agent is a very important part of your home buying process. In a hot market, a good real estate agent can be the difference between finding the right home as soon as it’s on the market and being the last to know.

#3 Know What is Your Non-Negotiable

Do you NEED something move-in ready, or are you ok with a bit of a project? Is space the most important thing to you or will you sacrifice that guest room for your preferred location? Know what items you are willing to compromise on and what you aren’t.

#4 Look at a lot of Different Houses in Your Price Range

Even though buying a home can feel like an emotional decision, it is also a financial one. By looking at a lot of homes in your price range, you can get a feel for what your budget will afford you. If you can’t find a single 4-bedroom home in your area within your price range, you may need to expand your search or save up.

#5 Anticipate Closing Costs

Part of tip #1, knowing your budget, is also knowing what to expect from closing costs. In most markets, the buyer is responsible for all costs associated with closing. From inspections to lawyer fees, there can be up to 3% of the purchase price in costs accrued. Knowing what cash you need to have on hand for closing is an important part of the budgeting process.

Buying your first home is an exciting time. Use these five tips to keep your home search on track and on budget.