Doom and gloom is everywhere. Foreclosures are at record highs, builders are swimming in inventory, the mortgage market is in a shambles and there seems to be no end in sight. Buyers are afraid to buy because the market might go lower. Sellers are in a panic because there seems to be no hope of selling before the next millennium. Through it all the media is having a field day with all of the negative news.

There is no doubt that this is a difficult market for sellers. If it’s bad for sellers doesn’t that make it good for buyers? While there are many challenges for both sides due to the unsettled credit markets, deals can still be done. What has really happened is that people haven’t adjusted to the new reality. It seems that everyone is waiting for the market to return to the way it was, but waiting may prove to be an exercise in futility. What we experienced for several years was a speculative blow-off in an overheated market. The gains that were occurring were unsustainable, it was a classic case of “irrational exuberance.”

How Do We Make Money In This Market?

So how do we make money? The short answer is that we need to return to value investing. Gone are the days of buy high and sell higher, the music has definitely stopped in that game. A value investor will make his money when he buys, he doesn’t acquire property in the expectation that the price is going to appreciate. Making your money when you buy simply means that you buy a property that has a lot of potential equity. To do this you need to locate a motivated seller, someone trying to dispose of a distressed property will usually be highly motivated in this market.

When the markets are soaring into the stratosphere the only thing that sellers are motivated to do is get a ridiculously high price for any piece of garbage. Now that the pendulum has swung in the other direction they are feeling the heat. If it’s hard to sell a house in good condition imagine how difficult selling a fixer must be. The good news for the investor is that he can be the hero while earning a nice profit. You need to make the purchase at a price that will allow you to make the necessary repairs and still sell the completed project at a price low enough to attract buyers.

The Rehabber’s Advantage

The advantage that a rehabber has is that he has a very good idea of how much money he is going to make when he buys a property. If there is any appreciation at all it is just gravy. Of course that assumes that he has done his homework correctly. That homework includes properly evaluating the house to determine the scope of work required, carefully estimating the cost of renovations, determining what the sale price will be and allowing for unexpected problems. Easy, right?

If it was easy everyone would do it and we’d all be gazillionaires. The “flip and grow rich” TV shows make it seem so simple. The fact is that many novice rehabbers get into to trouble because they pay too much, underestimate time and repairs, expect to sell for more than is possible and do not take the time to learn how to do things the right way. There are no short cuts in this business. You need to pay your dues and learn from your mistakes and do it better the next time.

How To Get Started

You should begin by learning your market, look at dozens of houses to get a feel for things. Join one or more real estate investment clubs in order to network with other investors. Seek out people who have already done what you are looking to do and learn from them. There is no magic bullet and you can’t learn everything that you need to know by taking some guru’s over-priced course. However you can learn by doing and improving you techniques as you go along.

Rehabbing is a great way to make money under the current market conditions. If you buy it right it doesn’t matter if the market stays flat. You can also feel good about the fact that you help a distressed seller get rid of his problem. You make a lot of friends among the neighbors when you turn an ugly duckling into a swan. You are not just helping yourself, you are helping the whole neighborhood.

Money is better than poverty, if only for financial reasons. – Woody Allen

If you're new here, you may want to subscribe to our RSS feed or sign up for our real estate social network. Thanks for visiting!

Tags: buyers, flip property, real estate, real estate investing, rehab, repair property, sellers

You would be amazed how many people have come to me over the years with an insurance issue affecting their home. Whether it was a case of coverage being denied due to a lapse in the policy or insufficient coverage to replace valuable antiques and other items destroyed by fire—it is alarming how many people have not properly addressed their insurance needs. Whether you are buying a new home and need insurance—or you are reviewing an existing policy that is up for renewal—here are some tips to make sure you will be protected!

BEFORE YOU START LOOKING FOR A HOME

• Check your credit rating: Having good credit may assist you in obtaining a more favorable rate on your insurance. Apply online for a copy of your credit report from Equifax, TransUnion or Experian and immediately report any mistakes.
• Review your home insurance claims-filing history: You can obtain a record of prior home insurance claims that you have filed by obtaining a CLUE report from ChoicePoint or an A-PLUS report from Insurance Services Office (ISO). You can expect a lower insurance premium if you have not made prior claims or have an insignificant history of prior claims. If you have not filed a claim within the past five years, then you won’t have a loss history report.

WHEN LOOKING AT NEW HOMES OF INTEREST

The characteristics of your home, such as where it is located and how it is constructed, will directly affect your premium. Here are some other factors that will also come into play:

• Construction materials of the home: If you are planning on living near the ocean or in an active hurricane region, you may want to purchase a brick home that is more resistant to extreme elements. For properties located in areas that are prone to earthquakes, floods and severe storms, it is recommended to buy newer homes built in compliance with current codes or older homes that have been bolted to their foundations.
• Age of the house: Older homes that contain plaster walls, wooden floors and ceiling molding can be costly to repair. These unique features can raise the cost of your insurance. Older homes that have been remodeled or updated to comply with current building codes are typically less expensive to insure than older homes which are out of date.
• Safety devices: Significant discounts in insurance may be available to homes that are equipped with smoke detectors, burglar alarms, fire alarms and dead-bolt locks.
• Condition of the roof: Insurers are attracted to properties that have a newer roof in good repair. This will be a money-saver on your premium.

  YOU HAVE DECIDED ON A HOME

  Now that you have selected the home you want to purchase, you need to maximize the value of your premium by considering the following:

  • Select the highest deductible you can afford: A higher deductible will yield a lower premium. Over the long-term, you will save money and maintain insurance for when it’s absolutely necessary.
  • Inquire about discounts: Ask your insurer about discounts for smoke detectors, fire extinguishers, burglar and fire alarms, multiple policies with the same company, electrical systems upgrade and sprinkler systems.
  • Obtain enough insurance: It is absolutely necessary to have enough coverage to completely rebuild your home in the event it is destroyed, replace all personal contents within your home and insulate you from liability in case someone is injured on your property.

  Most importantly, keep your insurance current. Always, let your insurer know about alterations, additions and improvements to your home as these may affect your premium and coverage.

Tags: buyers, buying-home, home, home purchase, homeowners insurance, insurance

“There are too many foreclosures in my area.”
“The market is dead”
“New home construction is making it impossible to compete with.”

When I hear any of the above statements, my response is, “Whatever.”

If everyone believed the media hype about global warming, everyone might move to higher ground. The media continues to report that the Toyota Camry is among the most stolen vehicles. Does that hype lead to no one wanting to buy Camry’s? Hardly. That model is among the best sellers nationwide.

Negative real estate hype…Don’t believe it all. It’s as simple as that.

Does that mean there is no truth to it all? No. The media really isn’t lying. They merely aren’t being terribly specific. It’s popular. The media could come out and say, “Real estate is thriving in certain areas of the country.” But real estate is doing poorly in more areas than areas doing well. It’s a generalization with a popular topic right now. In other words…Its hype.

The market is dead in certain places but not everywhere. It is tough to compete with a new home builder, who is offering no money down, free upgrades, warranties on everything and no closing costs if the house you are rehabbing is across the street from it. I don’t like to buy houses if there is new construction within a few miles of the house I am looking at. Foreclosures are at record highs in many parts of the Country but they aren’t killing every market.

“Whatever! Just be smart!”

Let’s take a look at a metropolitan area that is not doing very well… Detroit. Even in Texas, I keep hearing about how awful real estate is in the state of Michigan.

Michigan? I thought we were talking about Detroit? We were talking about Detroit but Detroit is in Michigan, so it must be bad everywhere in the state, right?

I doubt it. Well look at all the foreclosures in Michigan, people say. Okay, let’s look at all the foreclosures in Michigan… Where are the majority of them located? Wayne County. And which city within Wayne County has the highest number of foreclosures? Detroit. What’s my point? Don’t believe the media hype.
A good deal in Detroit is a good deal in Detroit.

Let’s take a look at a real estate investor in Detroit. They come home, sit down to watch the news on CNN and the lead story is about how the property values in the state of Michigan are nose diving. The investor smirks at the news, takes a sip from a can of beer and flips the channel. All without a second of worry about the property he is currently rehabbing in Detroit. Why? Because that investor was smart and didn’t buy into the media hype.

A smart investor will research the area and immediate area around the house they are looking to buy. If there are 15 other houses for sale on the same street and most have been on the market for over 100 days, a smart investor will not try to convince themselves that their house will sell faster than the others. Now what if there are no houses for sale on that block and only a handful in a quarter mile radius? Look closer. What if there have been several sales in that area within the past six months that all sold with a reasonable price per square foot? Look closer. How much will the house cost to buy right now, in its current condition? How much should it sell for after being fixed up, based on the recent comparables? Don’t look at the deal in terms of dollars though. Look at the percentage in the deal. A deal should have a minimum of 30% equity and if there are a lot of repairs needed, the amount of equity needed should increase as well. “But the house is worth $200,000 fixed up and I can get it for $150,000. That’s $50,000 in equity”! Umm, no it’s not. That’s only 25% equity. You have to pay closing costs when you buy it AND when you sell it. You will likely need a Realtor and that will be at least 5%. Then it will cost money to fix it up. It’s going to cost money for utilities and holding costs as well. That $50,000 gets eaten up pretty quick. Ok, ok, ok….. I am getting off the subject a little.

The point I am trying to make is an investor, with a property in an area the rest of the country believes to be dead, smirks all the way to the bank. Why? They are smart and don’t listen to the media hype.

• So be smart. Don’t try to compete with a builder. Buy a house where builders aren’t.
• Be smart. Instead of blaming foreclosures for killing a market, why not try to BUY one of those foreclosures and cash in?
• Be smart. If a market really isn’t doing well, find the parts that are doing well. The day people literally stop buying and selling houses, is the day you can honestly say, “The market is dead.”

As I said, a deal is a deal, no matter where it is.
Smart investors don’t listen to the hype.

Tags: buyers, fixer, foreclosure, Foreclosures, housing, housing market, real estate investing

Last year was an out and out bummer if you wanted to find yourself a real estate bargain.

As Dian Hymer says, writing for Boston.com,the bargainless real estate market of a year ago was due in large measure to the fact that inventories of homes for sale reached record low levels.

But what a difference 12 looooong months can make. Buyers today, says Hymer, “have the luxury of choice.”

Still, Hymer’s posting reminds us that there are certain things we can do to make the real estate buying experience that much more enjoyable, and more important, that much more of a bargain.

For one thing, Hymer says, “In order to find a good deal, you need to be able to identify a fairly priced property when you see it.”   Okay, you ask, “How do I do that?” Easy, says Hymer in this primer on how to find a real estate bargain: You MUST learn everything you can about home values in the area you are looking in.

One other keen way to sort of create your own real estate bargain, she says, is “to research the listings that have been on the market a while without any offers.”

Makes sense,doesn’t it!

Tags: bargain, buyers, deal, estate, market, real, sale