Sign up for our email updates here!

From the Archives: A Guide to Real Estate Investing in Georgia (Part 2)

Dec 1, 2017 by

*** This article was first published in the Georgia Real Estate Investors Association Handbook in 2001. Some specific details (i.e. prices and tax information) are out of date, and should be viewed with that in mind. If you are interested in learning more about the concepts covered in this article, please visit www.gareia.com, or contact us at info@gareia.com or at 770-451-8800. ***

(Continued from November’s blog post “From the Archives: A Guide to Real Estate Investing in Georgia (Part 1))

Purchase Strategies

The primary goal of this program is to control an asset worth a large amount of money while using little or none of your own money. You hope that, eventually, that asset will go up in value, and in the meantime, you are paying it off using other people’s money again (rental income). That being said, you find that time is on your side in almost every real estate situation. Eventually, the property will be worth more than it is today. The one exception to that theory is a property in a bad location. Almost every problem that arises in a real estate investment can be improved – but a bad location is out of your hands. Experienced investors recommend that you NEVER buy a property in a bad location.

Creative financing revolves around the creation and use of “paper,” which is really nothing more than a formal IOU or a “Note.” You can “create” thousands of dollars by simply agreeing to pay at a later time, either in installments or in a lump sum, or a combination of the two. The most common note is a conventional thirty year mortgage, where you agree to pay back money in monthly installments of principal plus interest over 360 months. There is no magical requirement that a note have any interest or even any payments, for that matter. Successful investors believe in the GOLDEN RULE, when it comes to real estate negotiations. If you will do unto others as you would have them do unto you, you will find that you are more successful over the long-haul. In addition, people will want to do business with you.

It is critical to discover the underlying reason that the seller needs to sell. If you can meet those needs creatively, then the opportunity exists for you to have a WIN/WIN transaction. If that opportunity does not exist, or if the seller is not willing to give you the chance to help, then it may be time to move on to the next house for sale. Remember, the seller has only one house to sell – you have literally tens of thousands to buy.

The major areas of flexibility the seller can control are price, repayment terms, interest rate, amount of cash needed at closing, and date of closing.

It is important to try to limit the amount of hard cash going into every transaction, because once you have run out of money, you must forego any future opportunities, no matter how good.

The ideal scenario is one in which the lender will allow you to assume the mortgage, and the owner will sell you the house and carry back a second mortgage for their equity. You must determine how much their equity is worth to you.

If you plan only to buy a house, fix it up, then sell it for a profit, and you have the cash to get started, then you are well advised to use your cash. When you sell, you will be able to get all your cash out, plus your profit, and you can go on to your next deal.

Renovation Techniques for Optimal Profit

Your goal in any real estate investment is to own the least expensive home in the most expensive neighborhood you can afford. If that is the case, then the principle of progression says that the more expensive homes will appreciate at a relatively faster rate than your house, and they will pull your house along with them, giving you optimal appreciation.

Likewise, don’t put so much money in the house that you can never recoup your investment. Be very careful to estimate your improvements accurately in advance, and don’t fall prey to the desire to add on and add on. You can run up a rehab bill dramatically if you don’t watch every penny.

You also need to decide before you start your renovation whether you plan to hold for rental or you want to sell quickly for profit. Because most renters think of their residency as relatively short term, they are willing to accept less in terms of improvements than a buyer will. There is no need to make a rental property fabulous – it simply needs to be reasonably attractive and competitive with the tenants’ alternatives.

On the other hand, if you plan to renovate and resell, you’ll have to add some real pizazz. Visit all the homes that are currently for sale in the area, and see what your competition is like. There is no need for you to vastly exceed what the competition is offering, and you’ll never get the money back if you do. Costs add up quickly, and buyers today expect things to be in good condition. So make sure that you first budget for fully repairing essential items before you spend all of your improvement money on the pizazz. Don’t forget that all buyers will likely hire a professional inspector to go over your offering with a fine-toothed comb. That means you already should have done so!

Resale Strategies for Investors

There are several considerations that must be taken into account if you decide to sell your property quickly.

If you hold the property for less than one year, the profit you make will be considered a short term capital gain, and you will have to pay a large portion of your profit as taxes. Current short term capital gains tax rates are identical to earned income rates, so you will likely be in the 28% bracket or higher.

 

If, on the other hand, you can hold the property for more than 18 months, the profit qualifies for long term capital gains treatment. Currently, ling term capital gains (LTCGs) are taxed at a maximum 20% rate.

 

There are only three reasons why any property won’t sell. Most problems in selling are a variation on one (or more) of the following:

  • It’s not ready to be shown.
  • It’s not being marketed properly.
  • It is priced too high.

One of the best resources for persons interested in owning and managing rental and investment properties is the Georgia Real Estate Investors Association, Inc. We are a non-profit educational organization that serves our members with programs on various real estate topics. For more information about our meetings, call 770-451-8800.

_______________________________________________

This article first appeared in the Georgia Real Estate Investors Association Handbook in 2001. Some specific details (i.e. prices and tax information) are out of date, and should be viewed with that in mind. If you are interested in learning more about the concepts covered in this article, please visit www.gareia.com, or contact us at info@gareia.com or at 770-451-8800.

___________________________________________________

Published by Georgia Real Estate Investors Association

Copyright 1998 by First American Management Corporation, All Rights Reserved

read more

Related Posts

Tags

Share This

From the Archives: A Guide to Real Estate Investing in Georgia (Part 1)

Nov 14, 2017 by

*** This article was first published in the Georgia Real Estate Investors Association Handbook in 2001. Some specific details (i.e. prices and tax information) are out of date, and should be viewed with that in mind. If you are interested in learning more about the concepts covered in this article, please visit www.gareia.com, or contact us at info@gareia.com or at 770-451-8800. ***

From the Archives: A Guide to Real Estate Investing in Georgia (Part 1)

Focusing on the Right Real Estate

There are many different types of real estate, and profits can be made in most of them. You may wish to focus exclusively on residential real estate for the purpose of making money, and there are several reasons:

  • People have to have place to live. There is always a relatively good resale market for detached single family homes, and you can’t say that about other kinds of real estate.
  • Detached single family homes attract a better quality of tenant than apartments or rental condos.
  • There is a huge (inexhaustible) supply of people needing to sell their single family homes in the Atlanta area. Just look in the classified ads.

And some of those sellers can afford to be flexible in their price o their terms in order to accomplish their goal of selling. That’s where an opportunity for investors may come into the picture.

In general, you are looking for a ten to twenty year old three bedroom house in an improving lower middle class neighborhood where most of the people who live there are owners. Many experienced investors suggest a price range of $50,000 to $75,000. There are certainly exceptions, but this is a good place to start.

The key to success in real estate investing is this: YOU’VE GOT TO SEE A LOT OF HOUSES AND MAKE A LOT OF OFFERS.

If you are not seeing a lot of houses, you will quickly lose touch with the real estate market, and you won’t know a good deal when one turns up. And if you are not making a lot of offers, it is unlikely that you will happen to make an offer on on the perfect combination of factors in your favor, namely the house with good upside potential combined with a seller who is willing to be flexible on price or terms.

Sources for ‘Don’t Wanter’ Properties

You are looking for don’t wanter SELLERS, not don’t wanter PROPERTIES. Let’s define a “don’t wanter seller as somebody who, for whatever reason, is willing to sell his house for substantially less than it is worth.

Remember, “worth” is a relative term. A house that is worth $55,000 to one person might be worth only $35,000 to someone else who wants to sell immediately. Fortunately, there are many reasons why people are willing to sell their home for substantially less than the house is seemingly worth in the open marketplace.

Among the most often cited reasons for selling below market is personal problems in the family. Marital problems can cause an otherwise happy household to become a place of misery, with both sides simple wanting to be finished with the relationship at any cost. It’s not your job to reconcile the marriage. It is your job to find out if the owner(s) can be flexible in their price or terms to the degree that you can find an opportunity to help them out of their problem.

Other reasons a seller might be willing to be flexible in price or terms include death, sickness, job loss, financial disaster, job relocation, military reassignment, career change, marriage, or any of a thousand personal reasons. It is critical to note that the cast majority of factors that might lead a seller to want to be flexible in either price or terms have NOTHING to do with the house. In most cases, it’s a PERSONAL problem, not a real estate problem.

Look for ‘Don’t Wanters’ Consistently in the Following Areas:

  • MLS (active and expired listings)
  • Tax records of absentee landlords
  • FSBO [for sale by owner] classified
  • Lease with option classified
  • Real estate agents
  • Farming a specific neighborhood
  • Foreclosure notices
  • Vacant houses
  • Banks/HUD/VA/RTC Suctions/Gov’t Auctions
  • Tax Sales/FIFA notices

(Check back in December for Part 2 of this article!)

_______________________________________________

One of the best resources for persons interested in owning and managing rental and investment properties is the Georgia Real Estate Investors Association, Inc. We are a non-profit educational organization that serves our members with programs on various real estate topics. For more information about our meetings, call 770-451-8800.

_______________________________________________

This article first appeared in the Georgia Real Estate Investors Association Handbook in 2001. Some specific details (i.e. prices and tax information) are out of date, and should be viewed with that in mind. If you are interested in learning more about the concepts covered in this article, please visit www.gareia.com, or contact us at info@gareia.com or at 770-451-8800.

___________________________________________________

Published by Georgia Real Estate Investors Association

Copyright 1998 by First American Management Corporation, All Rights Reserved

read more

Related Posts

Tags

Share This

The Hidden Market: The Wave of the Future

Jun 1, 2017 by

by Tony Youngs

Tony_Youngs

The Hidden market consists of all those distressed properties you have seen in neighborhoods where there is no pride of ownership. You know, the ones with high grass, peeling paint, overgrown bushes, etc.. Usually they are in nice neighborhoods. They can be vacant or occupied, but none of them have for sale signs, no ads in the paper, not on the internet or MLS and because of this, nobody knows these homes can be bought. Maybe you pass by them every day and never even give them a second look. There are also hidden markets that are not obvious, I will teach you how to discover those opportunities also.

 

In the year 2017, you may want to change your perception of these hidden gems. You see, as we came out of the great foreclosure crisis, and values started to return, so did the demand. Hedge funds were buying everything they could get. Canadians were coming into the market, and investors were coming out of the woodwork. Suddenly it seemed there was not much inventory. Listed properties were getting multiple offers and there is too much competition at the foreclosure auctions. Great deals are few and far between. There is always somebody that will pay a higher price than you.

 

The Hidden Market is the answer. There are hundreds of distressed off market properties that you can get at bargain prices because there is hardly any competition. .  In the hidden market, you will find properties that are in default, but the foreclosure process has not been started. You will find properties where an owner has died but the heirs don’t have the desire or the funds to fix it up. You will also find distressed free and clear properties, bankruptcy properties and plenty of homes with equity.

 

That is exactly what I will be teaching about at GaREIA this month!  You will be taught the “secret” of getting these offers accepted.

You simply must find a way to find properties that not many people know about.  There are three options for profit in real estate that anyone can do to be successful;, whether you have money or not.

Option One:  if you have no money, no partners, and no proof of funds, this option would be for you. You get really good at finding good deals for other investors. There is no risk on your part, but you must be willing to do the legwork. This can be very lucrative as there are many cash investors that would take what you find.

Option Two:  This is for you if you have money or have access to money. This option is where you are good at finding distressed hidden market properties, but you actually close on them and take title. Then you clean it up, do a few of the repairs but leave plenty of work  for the investor you are going to sell to. The reason option two is lucrative, is because you don’t have to do a major rehab job, but you are selling the property to a cash investor instead of a retail buyer who is trying to get a loan.

Option Three: This option is where you fix it up all the way and list it on the MLS. It takes more time but you make much more profit if you do it correctly. This also requires you to have money, or have access to money i,e., IRA, cash partner, or hard money. Sometimes you can sell it to a cash buyer who wants a long term rental.

I personally do all three options but I recommend you pick one that fits your resources and then focus on it. You will need to get really good at finding good deals and the hidden market is where you will find them. As more and more investors come into the marketplace, you must learn about, the “Hidden Market”.  Make plans to attend the June 12th General Meeting at GaREIA for information that use will be able to implement right away.  More info

You need a system and the discipline to follow it.  A system of finding unlisted properties when you buy and using the MLS when you sell.  That is how you make profit today. Over the last 10 years, I have mastered the hidden market. All you need is desire.

Tony Youngs is the author and creator of the Hidden Market system and a real estate investor for 28 years. He will be the Keynote Speaker at the GaREIA General Meeting on June 12th, 2017,  present an all day seminar on July 14th, and present a 3 Day Boot Camp September 9-11.

 

 

read more

Related Posts

Tags

Share This

U.S. Construction Spending Hits 10-Year High

Jan 4, 2017 by

construction-worker

The U.S. Census Bureau of the Department of Commerce announced this month that construction spending during November 2016 was estimated at a seasonally adjusted annual rate of $1.18 trillion, 0.9% higher than October’s estimate and 4.1% higher than November 2015.  Residential construction was at a seasonally adjusted annual rate of $462.9 billion in November, 1% higher than October’s estimate.  Nonresidential construction was at a seasonally adjusted annual rate of $429.9 billion in November, 0.9% above October’s estimate of $426.2 billion.

construction-spending

Click here to read the full release

read more

Related Posts

Tags

Share This