Monthly Archives: January 2017
When I was a child, every Saturday morning was the same: Wake up early, pile into the minivan with my mom and three siblings and start looking for . . . garage sales! Yes. I was raised by a “garage sale mom.”
Because we didn’t have a lot of money, we bought nearly all of our clothes, furniture, toys and pretty much everything else from someone who no longer wanted those items. And, let me tell you — my mom was the master at those sales. She knew how to find the coolest gadgets, toys, games and appliances for pennies on the dollar. She could negotiate a 50-cent t-shirt down to 10 cents, and regularly did. She would even buy far more than we needed, just so she could resell those items at her own garage sales and make a profit to fund our family vacations.
Today, I do far less garage-sale shopping than my mom, but the lessons I learned from her haven’t changed. I still want to find a great deal. Today, however, instead of 50-cent t-shirts, I spend much of my time hunting down great real estate deals, because I’m a real estate investor.
Whether I plan to flip that house, hold the property as a rental or go for something entirely different: Everything begins with a great deal. Here are four simple tips you too can use to find better deals on your own real estate, whether you’re looking for an investment, a property for your business or simply a home for your family.
1. Consider buying a bank-foreclosed property.
When someone fails to pay a mortgage payment for an extended period of time, the lender will ultimately repossess the home and remove the occupants. Once the home is empty, the lender generally lists the house for sale on the market, using a local real estate to list it.
While the foreclosure, in itself, is of course sad (no one rejoices when someone loses a home), once the deed has been done, these properties can be some of the best deals you’ll find in real estate. Banks want to be in the business of lending money, not managing property, so they are often quick to offer large discounts just to get the deal off their books. Translation: You can get a great deal on foreclosed properties, if you know how to buy foreclosures right.
Because the foreclosure process can take several years, these properties are often in need of some serious repair or updating. So, further discounts may be given to compensate — for buyers willing to brave a rehab.
Talk to a local real estate agent about the foreclosures in your area, and start checking some out. You might be surprised at the deals you can get.
2. Be the first . . . or the last.
In real estate, often the old adage holds true: The early bird gets the worm.
Oftentimes, it’s not the highest offer for a property that gets accepted, it’s simply the first. Therefore, if you are looking for a great deal, be quick about it! Get a pre-approval from a bank so you can jump at any property right away, and have your real estate agent set you up with automatic email alerts notifying you of any new property that hits the market.
Then, don’t delay — check it out quickly, and make an offer the same day if possible.
Conversely, another way to find great deals is to look for properties that have been on the market for a long time. Those owners are often far more willing to sell for a discount, because they are tired of holding on to that property. Many times, they will have been making two mortgage payments for months (or years) and will entertain almost any offer.
Related: The 7 Tips Entrepreneurs Need to Know Before Investing in Real Estate
3. Approach absentee owners privately.
In a hot real estate market, like the one most of the United States is experiencing today, great deals can be hard to find because of the large number of people looking for a home. In some areas, a single house for sale might get a dozen or more offers in the first several days.
Therefore, one of the best tactics real estate investors use today is to look outside your multiple listing service and instead contact owners directly, asking them to consider selling. At any given time, a good percentage of the population will entertain that option, so why not reach out before they list the home with a real estate agent?
One of the best kinds of people to target is absentee owners, which simply means someone who owns a property but doesn’t live there. They might be landlords (who hate their tenants) or owners who inherited their houses and are simply unsure what to do with them. You can find these deals in a number of ways, such as:
driving around, looking for houses that look vacant, and using online public records to track down the owner
buying a public record list using an aggregate-list site like ListSource.com
calling mom-and-pop landlords who are listing properties “for rent” on Craigslist. Let them know you aren’t interested in renting, but you would like to talk to them about buying.
4. Look at a lot of deals.
Finally, understand that finding good deals is largely a “numbers game.” You often have to kiss a lot of frogs to find the prince!
For me, I look at deals in terms of a funnel. At its top, numerous leads come in, but at the bottom, only a few come out. Therefore, if I want more deals at the bottom, I need to improve each aspect of my funnel, including the quality and number of leads at the top. For example, my funnel might look like the following:
Raw leads from my real estate agent — 200
The location is somewhere I would buy — 100
A quick analysis shows promise — 20
A deeper analysis still shows promise – 10
Deals I’ve made an offer on — 8
Offers I’ve made that have been accepted – 1
Notice that, in the above funnel, my agent sent me 200 possible properties, but at the end, I ended up making offers on only eight and only one offer was accepted. If I wanted to buy two properties, I know I’d need to look back on my funnel and find a way to increase my numbers. Because, again, it’s just a numbers game.
Whether you are looking to buy an investment property, purchase a home for yourself or buy real estate for another reason, remember: You make your money when you buy. If you want to have immediate equity in your property, which can help you build wealth in the future, or save you in case of an economic turndown, you must find great real estate deals.
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Crowdfunding is rapidly gaining popularity as the must-have investment option. In 2015, real estate crowdfunding was expected to grow into a $2.5 billion industry. According to David Drake, founder and chairman of The Soho Loft Media Group, real estate investors have started to value crowdfunding as an avenue that helps stabilize and diversify investments. As the real estate crowdfunding industry continues to grow, investors are more apt to embrace real estate crowdfunding instead of traditional investment options because of the higher rate of returns, ease of access, and limited liability.
If the stats weren’t enough, here are seven definitive reasons why you should start investing through real estate crowdfunding.
Offers more control
It’s natural to want control over your investments and real estate crowdfunding does exactly that. Unlike real estate investment trusts (REITs), investing through real estate crowdfunding gives you the power to control which real estate properties you invest in. With real estate crowdfunding, investors are presented with all relevant information about the property prior to investing. They are even encouraged to monitor the progress of each project over the term of the investment.
Promotes asset diversification
If you want a diversified portfolio, then real estate crowdfunding is right for you. Previously, investors would make a large investment in a single project, leaving them susceptible to a higher risk. With real estate crowdfunding, investors can now contribute smaller sums of money into multiple projects, thus diversifying their risk.
Lower investment buy-in
There are many potential investors who don’t have ready access to large amounts of capital for investments. Traditionally, investing in real estate was an opportunity reserved for the wealthy. “Investing in commercial property is generally very capital intensive,” said Heather Schwarz Lopes, chief strategy officer of Early Shares. “Now investors can start at a lower price level,” said Lopes. Today, real estate crowdfunding provides more opportunities for those who have $5,000 (the minimum for many crowdfunding sites) that they would like to invest.
Latest path to passive income
The best type of investment is one that requires minimum effort to earn funds. Real estate crowdfunding has a significant advantage over the direct approach of investing. Direct investing requires that the investor be directly involved in the day-to-day operations of a project. With real estate crowdfunding, an investor simply invests in a project and enjoys the benefits of passive income, which includes monthly interest payments.
Access to more properties
Traditional investing practices don’t allow investors any kind of access to the projects they invest in. Real estate crowdfunding gives the investor access and updates to diverse, profitable properties. With the growing popularity of online real estate crowdfunding platforms, new screened and unscreened properties are added on a daily basis.
Traditional investing requires additional funds for investments and has no protection with respect to the financial liability of the investor. Through traditional investing, investors are required to pay the direct costs and any liabilities incurred as a result of the investment. With real estate crowdfunding, the financial liability of the investor is limited only to the extent of their investment.
Higher rate of return
In traditional real estate investing, there are many players handling multiple aspects of the deal. With real estate crowdfunding, investors directly invest in a property. This reduces the associated fees, allowing for additional profits that go directly to the investor.
The rise of real estate crowdfunding has paved the way for a new and more accessible form of investing. More “Average Joes” are getting into the game and investing without having hundreds of thousands of dollars in their bank accounts. With investing minimums as low as $5,000, a higher rate of return, and more diversity in properties available than ever before, there’s no reason not to invest. If you’re still a laggard and investing through traditional avenues, get with the times.