Real estate investment – Why own a real estate investment:
- To rent the real estate and produce positive cash flow.
- To resell the real estate for a profit.
There are lots of people out there giving late night TV shows and selling expensive courses that will guarantee to make you rich and famous. Some of their promoters are now in jail, some who aren’t, deserve to be. So here are some simple aids that won’t cost you a dime.
First of all, you make your money when you buy, not when you sell. So finding the motivated seller who is willing to offer you a good deal in exchange for a quick sale is the single most important factor to your real estate investment success.
Surprise, surprise, most owners of real estate want to sell it for full fair market value. In fact many owners are so proud of their real estate they want you to pay MORE than fair market value. Most real estate sellers don’t want to give you a 30% discount on fair market value. But this is what you need if you intend to fix up and resell the real estate for a profit.
Think it can’t be done? A real estate investor we know in Tampa closed on a pre-foreclosure house for $46,000 in February 2004, using 100% hard money financing. They sold it for $98,000 in April 2004 having spent about $2,000 on fix-up work.
Let’s be clear on this. If you can buy a house for $70,000 that would be worth $100,000 if it was fixed up, but it will cost $30,000 to fix it up, you’re paying market value, NOT getting a bargain. You need to buy this house for $45,000 or keep looking. Download our free spreadsheet to evaluate that real estate “bargain” in real terms.
You need to factor in things like the real cost of fixing it up, the closing costs when you buy, the closing costs when you sell, the cost of money while you are fixing it up from the day you buy it to the day you sell it, any pre-payment penalties on the money you have borrowed etc.
If you intend to keep and rent out the property then you can pay a little more. But don’t forget, even with current interest rates you have vacancy. property taxes, insurance, repairs and maintenance to pay for before you get to positive cash flow. Download our free real estate investment spreadsheet to evaluate that real estate “bargain” over the next ten years. Or calculate your potential profits directly on this web site. (Note: It may a take couple of minutes for page to load).
Don’t spend hundreds or thousands of dollars on some real estate “get rich quick” seminar or course pitched by some late night TV smoothie, check out our books on real estate investment.