Top Ten Real Estate Investing Undisclosed Tips

TIP #1

No money down real estate usually isn't.

There will usually be some money required to put a transaction together and make it profitable. It may be closing costs, repairs or upgrading, or just some cash to hold the property, whatever. But somewhere, some money will be needed on every real estate transaction.

You may be able to finance every dollar you need, but it can come back to haunt you in the long run in the form of mortgage payments you cannot afford to make.

Follow savvy real estate principles and do your homework on the financials, including the total cost of that 'no money down' transaction.

TIP #2

Your rehab project may suffer delays and lost profits due to simple things like a rise in gasoline prices, which adds to the cost of materials delivered by truck to your local lumberyard or home improvement store. A few cents per gallon at the gas pump can be enough to erase your potential profits while you work to rehab and "flip" a property.

Take care to calculate into your rehab cost a 'fudge factor' to include funds for such 'emergencies'. A good rule of thumb is to multiply your estimated rehab costs by .2 (20%) and add that to the estimated cost when you are analyzing a potential project.

If this small addition kills the deal for you, it is probably best to move on to another deal.

TIP #3

If you fear Realtors will view you as competition, enlist their help. You can easily have Realtors all over your area working to help you find more and better real estate deals.

As they get a commission for each sale, they are eager to find you deals. Be sure and be ready to take those they bring you as you want to work with them in the future too!

TIP #4

Any way you can reduce expenses raises net income. By installing a new $4,000 furnace that saves $800/year on heating costs you turn a $4,000 investment into a $10,000 higher sales price.

To reduce costs and increase profits on your rental real estate you can also add insulation to reduce the heating costs. Or, if you're paying $80/month for lawn care one of the tenants might do it for $40. You could buy cheaper insurance.

Look for ways you can reduce your expenses and raise your net income on your rental real estate.

Traditional real estate investments call for certain qualities, such as a good credit record, a sound financial position, an appreciable income, bundles of dollars for a down payment, and savvy lenders by your side.

TIP #5

Increasing the net profit on any real estate investing deal is the surest way to get the highest price when you decide to sell. Be sure to implement any changes several months prior to placing the real estate on the market in order to show the effect of the change in the balance sheet.

Learning to do the math on rental real estate really does matter.

TIP #6

Trust is vitally important in real estate as the seller must trust the buyer regarding the equity payment terms. One of the most traditional ways is to give the seller a substantial amount of cash as a down payment.

However, there are other methods of providing the seller payment for their equity that do not include cash and often offer the seller more value in the transaction. These methods include exchanging higher price for better terms, trading value for value and even paying for whatever it is the seller wants to do with their profits.

Always look for alternative ways to pay the seller more than they are asking!

TIP #7

Mortgage note investors can earn substantial yields when the real estate market is challenged by steadily rising interest rates.

Those with prior experience as real estate investors can utilize their knowledge of property to choose sound, secure, credit-worthy investments. When the building that serves as collateral on the note has true value, the associated debt carries less risk.

Those investors who are accustomed to doing rehab on a property usually have an eye for what constitutes solid and problem-free construction and can provide a reasonably accurate estimate on any repair costs.

Utilize a team approach to maximize your profits as you learn more and contribute to your own bottom line.

TIP #8

When investing in real estate mortgages there are different rates of return, yields, timetables to maturity, and degrees of risk versus potential reward, as with any debt instrument. To learn more about investing in mortgage notes, contact a broker who specializes in them. They can explain how it works and how it may serve you as a practical alternative to rehab projects. Investing in real estate mortgages help you stay invested in real estate during both bull and bear markets.

TIP #9

Many real estate investors have incomes that are erratic and difficult to document. There are many legitimate reasons for this, but traditional banks generally do not care. Very few lending institutions will provide real estate loans without complete income verification.

An alternative used by some non-traditional lending sources is to use the "Stated Income" approach, which utilizes statements directly from the borrower as to how much money they make. These loans are great for real estate investors because they are simpler to get when you find someone that will do them, however, you must still be certain that the real estate deal will make the expected return or you can get in trouble quickly.

Look for a lender who uses the Stated Income approach and does not require income verification for real estate transactions that really work.

TIP #10

Never fall into the trap of thinking that you will get rich quick in real estate. Getting rich overnight will not happen regardless of what some of the so called "experts" tell you. Real Estate Investing takes some time, effort and knowledge to do it with minimum financial risk.

Remember that YOU can do it, too! You can join the millions of investors who create sizable incomes through real estate, you simply must understand that it is not an overnight process and stick with it!

Above all, don't be afraid to get into real estate. Thousands of every day people succeed admirably in this industry every year.

Gather the information you need, then get started making money.

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