Category: Investing

Funding A Real Estate Project

So you found the perfect investment property. It’s in a great area, near great schools, and even shopping. You’ve done your thorough research and know the area will be great for a rental property. So how do you fund your new venture? Many new real estate investors don’t have the credit necessary to finance a new purchase. So what is the proper way or ways to go about closing the deal . First of all before you go down this road, you want to make sure that there is equity tied up in the property at the time of purchase. This is a great way to secure your loan without taking any undue risks. Some quick calculations should tell you how much cash you can put pull out of the deal at the time of closing.

This will help you bridge the gap between the time of closing and the deposit put down by your first renter. So now what do you do? Well there are many options that you can utilize for a short term loan. The least expensive but sometimes stressful way is to borrow from your family. Let them know that you have an investment opportunity in the works, and because of the equity tied up in the property their investment is secure. You could also help if you could give them a definite date when the entire amount will be paid off. Then it would be as simple as getting a loan against the equity right after closing to pay them back as soon as possible. If you don’t have relatives or friends with such means there are other options.

funding

One is credit cards. I know this sounds crazy, but you can literally apply for 10 credit cards at one time and use the cash advances to fund the down payment of the property. Then as soon as you are able to pull the equity out, you pay them off very quickly, and look into merging them into one account so that you do not have too many credit cards on your credit profile. Another method is high interest short term loans provided by many reputable vendors. The interest rate is super high, but you are only utilizing this matter for a short period of time. This will give you more flexibility to just make payments for two or three months until everything is settled and then you can pay it off all at one time. This method will also be a gold star on your credit report as you’re borrowing money and paying it off very fast. No doubt these methods may seem risky and extreme, but with the proper research and homework you can utilize them for short term financing and put your new investment right in your portfolio.

Always Be Building

Huge part of real estate is building. Whether you are building on a lot, adding new stories to an office, or just simply building that dream home that you always wanted. The best way to enhance any piece of real estate is to build on it and expand. It gives it an overall enhancement and utilization, and appears attractive to more and more potential buyers. As far as home purchases go, with families growing and income rising, homeowners are always looking to expand on their current property to fortify their lives. Commercial developers are looking to increase the size of the lot to bring new renters for their commercial space.

home building

So when is the best time to build. The short answer I will give here is; always. Never put off building until tomorrow what you can start today. Many people argue that high interest rates or cost of materials make building difficult, and they should wait for some future date. But that could not be further from the truth. I will say it again the time to build is always now. Why is that? Well the value of the home increases the minute you drive in your first nail. And home appreciation becomes cumulative almost like compounding interest. So if you hold off building to some future date, you will be wasting assets and equity they can be gathered right from the start. Yes with building costs being high, the benefit of the expanded property may not be as much, but it is better than doing it in the future. If you look at property prices from the past, you’ll see that they always rise faster than the rate of inflation.

That means that even building that new deck would never be a waste of time. As far as commercial properties go, you can pre-lease or pre-sell commercial space right after the initial blueprints are printed. That means you can take a deposit, and have the lease signed before the windows are even put on the walls. This also gives bankers an incentive to lend more money as they know that the payments will be secured by lease payments.

With commercial properties as well, they also benefit from price appreciation. So they get it from two different sides; rental income and equity positions. So if you’re looking at lumber prices or the cost of contractors and think that we would be better to hold off on building or expanding on your dream home or business; do not wait. The time is always now. All forms of expansion are basically money in the bank.

5 Things to Ask Before You Buy a Fixer-Upper

Not too long ago, house flipping became a craze that by all appearances was the perfect way for a person with some extra cash and a designer’s eye to make a lot of money.

During that time, you could easily buy a home very cheaply, make a few repairs, put in new flooring and a coat of paint on the walls and then get a fat check for your trouble. These days, the market has rebounded some, and the number of flippers has increased.

It is still possible to make good money flipping houses for profit if you proceed carefully. To help you determine whether you are ready to start flipping houses for profit, here are 5 things to ask before you buy a fixer-upper.

Do I have Enough of the Right Knowledge

To really be successful you must know how to pick the right properties to invest in.  This means knowing everything possible about the location, price trends and future additions that may be popping up the neighborhood where you are considering a home.

Do I Have Enough of the Right Skills

With the decline of hot property deals in today’s market, a lot of the money made in flipping is through sweat equity.

So, if you’re good with a hammer, can install a laminate floor, or fit a room with drywall, you may be able to turn a decent profit on a flip. If your plan is to pay someone else to do all the work, at the very least you can count on a much smaller profit margin.

Do I Have Enough Money?

Real estate is expensive. And while the rewards can be worth the initial investment, if you don’t have the financing or ready capital to ensure you will be able to complete the project, you may end up spending a lot of money, and putting in a lot of work, only to end up with an unfinished house and an empty bank account.

Do I have Enough Time?

Flipping houses is a very time-consuming process.  Even before the actual renovation starts, it may take months of searching listings and attending auctions before you find the right property to take on.  Here is what to look for in a property, take your time and get it right.

Once you’ve closed escrow, you’ll need to invest time in the actual renovation.  Whether this involves doing the work yourself, or overseeing the professional contractors who will be handling the hard stuff, expect to be on site regularly to ensure everything gets done correctly and on time.

Do I Really Have the Patience for All of This?

After taking everything else into consideration, you have to ask yourself the hard question.  Do you really have what it takes?  If the answer is no, that’s OK. It doesn’t make you less of a person.  It just means that there is something else out there that will benefit from your knowledge and skills more.

Like everything else in life, not every avenue is right for every person.  If flipping houses for profit is right for you, fantastic!  For the right person, it can be an exciting and rewarding way to make money.