Results tagged “real estate” from boozwatt.com

As a real estate investor, I’ve done it, seen it, or heard it all. The news is filled with doomsday predictions daily, and Real Estate investors are bailing left and right. The good news is, there is still money to be made in real estate, and with less and less real estate investors in the market, there’s even better deals to be had, and more money to be made than before. 

There are countless changes, upgrades, and updates that can be made to any given property. What separates successful, long term real estate investors from the rest is the ability to maximize their resources (time and money), and in turn, their profits. This has become more important due to the relatively thin profit margins available in today’s real estate market compared the margins available over much of the past decade. Thinner profit margins leave a much smaller margin of error. In order to assure a much greater chance of success on a flip property, it’s absolutely crucial to maximize every ounce of your available resources for your flip project. No matter their timeline or their bankroll, investors doing flips always have limited resources because time equals money due to mounting carrying costs, and the more money expended on renovation equals less available profit on the back end. Therefore, it is crucial for each real estate investor to understand how to maximize their profits from a flip project. So let’s get started. You’ve followed the formula here and the tips and suggestions here, and you’ve identified a potential flip property. Now on to the planning stage.

I recently wrote an article elsewhere on the site discussing investment strategy as it relates to finding potential rental properties. In that article I discussed the inverse relationship between rental properties and renovation / “flip” projects, and I received a lot of emails asking for elaboration on the subject. After clearing it with our company’s other lead partner, I’ve decided to answer the call for more elaboration, and describe in detail our company’s investment strategy. While you’ve already learned elsewhere on this site how our company evaluates “flip” properties and rental properties (see link above), this is how we put it all together. When I was starting out in real estate, one thing I looked everywhere for was real world success stories, and how individuals and investment companies got where they were. My thought was, if not necessary, there’s no reason to re-invent the wheel. The problem is, a majority of the time you can only find that type of information in books, and I didn’t feel like having to pay for it. Secondarily, I’ve always wondered, if you’re so good at real estate investing, why are you writing books instead? But I digress. Here is our strategy, free of charge, to the loyal readers of boozwatt.com:

Flipping properties isn’t the same business as it used to be. Even as short as two years ago, “lipstick” alterations (meaning cosmetic changes such as paint and etc.) would yield massive returns. There’s no question that the market has changed, however. Discussions about the changing real estate market are on every news channel, every real estate website, and even within these pages of boozwatt.com. Flipping properties has become more of an art form now. It requires not only the transformation of a formerly ugly property to something of uniformly appealing taste (appealing to uniform taste is harder than it sounds), but also an efficient maximization of renovation dollars. The reality of today’s real estate market means that the margins on flipping properties is smaller. A prudent investor must buy for a good price, spend efficiently on the renovation, and then list below the market price in order to sell quickly and avoid carrying costs, which can become devastating the longer a home goes unsold. 

Today’s foreclosure market is absolutely record setting. Recent results have shown that foreclosures have increased 93% compared to last year. NINETY THREE PERCENT!! That’s insane. This is good news for real estate investors for two reasons. 1) A majority of these properties used to be on the regular market before they went into foreclosure, soaking up buyer interest and padding the inventory numbers, thus the foreclosure process will remove them from the pool, and 2) more foreclosures equals more deals. The second part is the obvious one. More foreclosures equals more deals. Duh. But what isn’t so obvious is the impact. Not only are there more deals to be had, due to foreclosures, but there are less investors to take advantage of these deals. 

We all remember the heady days from late 2003-2005. It was a market where, despite the realities, just about anyone could get into the investing or purchasing of a new home without really making all the motions necessary to protect themselves from the "worst case scenario. But just like common rules of economics dictate, markets with high profitability soon will get flooded with competition. Unfortunately, millions of innocent families got swept up in the rush, either buying property that had low "teaser" rates, or just plain buying above market price, sometimes both. Lenders point fingers at their financial pools and investors, many pointed the finger at Wall Street, real estate brokers, underwriters, and homeowners alike.

Why The UK?

There are several reasons why we believe investing in property is, has been, and always will be as good a place for your money as there is out there! Firstly, the worldwide housing market is limited in supply and the population is ever-increasing at an exponential rate. This is true with most local markets as well as demand for housing continues to outstrip supply, pushing prices up and causing cities to expand. Simple supply and demand tells us that as demand grows faster than supply, prices must rise! Of course, investing in the right market and at the right time are integral to your success in property investment. Not all markets are rising, or have good rental returns; but if you are able to find the ones that are, you will do very well in the world of property investment!

Commercial real estate, private money loans also know as hard money and or bridge loans are becoming more prevalent as borrowers enjoy less red tape, quicker closings and more “common sense” underwriting than conventional financing provides. Typically though, borrowers still relay on this type of financing as an option when conventional sources are not available.

Aside from the implementation of your actual business strategy, there is nothing more important than being aware of, and utilizing, one of the greatest provisions of the Internal Revenue Code -- the 1031 exchange. The 1031 exchange, named, intuitively, after its provision in the Code itself, allows for the deferral of income tax on gains from property held for investment purposes by allowing those gains to be exchanged for similar (“like kind”) investment properties. I highlight “deferred” because it doesn’t allow an investor to avoid tax on the gains, but it allows tax on those gains to be deferred for as long as they are being held in a qualifying property. The great part about the 1031 exchange is that you can use it over and over again, as many times as you want. Therefore, you can defer taxes on your gains theoretically for your entire life. There’s also the potential, with some creative tax planning from your accountant, to never have to pay these deferred taxes, if you set it up in a way to pass it on to your children or even a charity (don’t quote me on this -- definitely check with your accountant on this one). Either way, the 1031 exchange is the single greatest gift the government has ever handed real estate investors. So, let’s see how it works:

Congratulations to Stewart Hsu, at stewarthsu.com, the winner of the October 17 article submission contest!! The article offers some very good advice on the beginning stages of real estate investing. His article, “How to Get Started Investing in Real Estate,” is featured in full below. Enjoy!

An extensive and well diversified portfolio of income generating real estate is a must for the well-rounded, successful real estate investor. While asset building itself comes from the profits garnered through various forms of flipping including investing in foreclosures, the inevitable end game for all real estate investors should be the funneling of those profits into an ever increasing holding of rental properties. For example, the strategy our company uses is a rather aggressive blend of asset generation through flipping various properties, and then a direct funneling of a set percentage of those funds into income generating rental properties. The percentage itself changes with the market.