Real Estate Investing for Beginners

Real Estate Investing Education

2008-11-11T16:51:00.000-08:00

It pays to get a real estate investing education. Many of us have learned at the school of hard knocks.

There are different ways to get an education in real estate investing. Reading books, seminars and finding a mentor that you trust are all ways of learning the ropes of investing in real estate.

I have found that a combination of all the above to be valuable in my continuing quest for the "secrets" of real estate success.

The truth is there are no secrets or magic bullets. Like any business endeavor real estate investing is hard work and it takes time, commitment and constant effort.

Make a concerted effort to always improve your level real estate investing knowledge through education and you will reap the rewards in the long term!

What is Real Estate Asset Protection?

2008-03-20T13:56:00.000-07:00

What is Asset Protection and more importantly why do you need to worry about it? Let's define asset protection as implementing a strategy to limit losses from being sued, keeping taxes as low as possible and making sure your heirs receive your estate when you die.

The goals of an asset protection program are privacy, control and protection from liability.
Privacy relates to ownership information of your assets. You want this information to be as private as possible. If you are sued and a judgment is entered against you, you want to maintain control over your assets. Protection from liability allows you to shield your assets from claims against you no matter how large.

Attorney's will look at a defendants assets to make a decision about taking a case or not. If you don't have any assets (in your name) they may decide there's nothing to win so why bother. The key is to own assets in a way that allows you to keep control and profit from them while at the same time keeping them untouchable by others.

Liability insurance is an important element in protecting your assets. Insurance is not asset protection in itself but it provides risk management. A competent insurance broker can help you to decide how much and what type of insurance is appropriate for you.

Owning real estate with the correct entity is important for both protection and tax implications. I have used both corporations and LLC asset protection entities as well as land trusts. The specific circumstances and goals for ownership of each property will dictate how to set up ownership. In some cases you may want to separate ownership from management thus limiting liability to the owner by having the management company interact with the public.

Over the years I have gathered the information that allows me to make decisions about what entity to use for my businesses. Armed with that knowledge I often times use the LegalZoom to set up my corporations and LLC's quickly and inexpensively.

Taxes are also a factor when deciding on how to hold properties. You should spend the money for guidance from an attorney and CPA to ensure you meet your real estate investment protection goals.

The effort you put into your real estate asset protection plan will give you peace of mind that in the event of a lawsuit you have minimized your exposure

Why Investing in Preforeclosures May be Safer than Foreclosures

2008-03-04T13:56:00.000-08:00

Pre-foreclosure Investing May be a Better choice than Investing in Foreclosures

The current state of the real estate market has everyone in a frenzy over how to invest in foreclosures. Opportunities to pick up a cheap property seem to be everywhere. A whole new generation of investors want to get involved in buying foreclosed homes. Time to slow down and take a look at investing in foreclosures and show you that preforeclosures may be the better way to go.

There are four different stages to the foreclosure process:(1)before the notice of default is filed-preforclosure(2)filing of the notice of default(3)Foreclosure sale(4)new owner which could include the bank-REO.

There are what I consider some distinct advantages to buying in the preforeclosure stage over the forclosure auction.

First and foremost is that in preforeclosure you know exactly what you are buying. You have worked with the distressed owners and have performed a thorough inspection of the property. You have completed your budget for repair costs and you know how much work is involved.

I hope you have the cash to purchase at the auction. They won't even let you bid until you show proof of the funds. In a pre-forclosure deal you line up financing and in certain circumstances the current lender will work with you.

Title insurance may be difficult to obtain on a foreclosure because the title companies are exposed to additional risk. For instance they can't be sure that the foreclosure process was followed according to the law. Often this is a risk they won't take.

As long as were talking insurance, you may find that you can't get property insurance if it turns out the property has had prior insurance claims filed. With preforeclosure you can find out if the home is insurable before you buy it.

At the auction you don't have any way to negotiate terms and the sale is final. In preforeclosure you have the ability to craft an agreement that meets everyones needs.

In a preforeclosure sale you can help the owners minimize further damage to their credit. That does not happen at the foreclosure auction.

When you buy an occupied property at auction you don't know what to expect from ex-owner. They could tear the house up, squat for months and cost you a significant amount of money that you hadn't planned on having to spend. In preforeclosure you have negotiated directly with the owner and have built their trust in you.

The next question you probably have is how do I find preforclosures to invest in? There are a few different sources for leads on properties but the one that have found to be useful is RealtyTrac. I hope this post has opened your eyes to a different way of looking at foreclosure investing.

Until Next time

Potential Pitfalls When Buying Homes for Sale in Foreclosure Auctions

2008-03-03T13:30:00.000-08:00

You should be aware of these issues when Buying Homes for Sale in Foreclosure

Investing in foreclosures is the hot topic in todays real estate market. In fact there is a ton of hype about getting rich quick investing in foreclosures. Don't believe it, you aren't going to be an overnight millionaire. Their are certainly opportunities for investors but you need to be well informed. I want to talk about some of the problems that you may have to deal with when buying homes or other real estate at the foreclosure auction.

When attending an auction to bid on a property you are required to have cash or a cashiers check with you. You will be asked to show the person in charge of the auction in order prove your bidding limit. No cash , no bidding - simple as that. There are numerous ways to come up with the money and we will touch on that in another article. Suffice it to say that bidding at auctions takes a significant amount of cash up front.

When you buy at an auction in most cases you probably won't have the opportunity to inspect the house. Owners of homes that are being sold at auction are under a tremendous amount of stress. They have the banks hounding them, investors trying to contact them all while worrying about where they are going to live. It's highly unlikely that they are going to give you the grand tour. So if you prevail in the auction process you don't really know what you have purchased. I have seen houses that look ok from the outside but when you get in, it turns out the owners were cooking meth in the bathtub. Buyers beware, you could buy yourself the biggest nightmare ever.

Know whats on the title report. There could be tax liens, first or second mortgages and other items affecting the property that would either make the purchase lees than profitable or a downright money losing proposition. Know what you are bidding on. If you don't know how to research the title then contact a title company and see what products they offer to meet your needs. A few dollars spent up front could save you from making a very expensive mistake.

You need to have a plan in place detailing what you are going to do with the property before bidding on it. What's your exit strategy? Will you fix and flip or hold as long term rental. Are you ready to be a property manager? If not, then you will need to find one. Maybe you are buying it for your personal residence. Once you win the bid at the auction you may have a tenant living in it (the prior owner). This might require you to go through an eviction process to get them out. The point here is to have your plan of action figured out up front. The more organized you are the smoother this will go. There will be problems so spend time to prepare yourself.

If the property appears to be good deal, there will be competition bidding against you. Figure out the most you can pay and show up with that amount. Often times people get auction fever and end up paying too much. Don't get wrapped up in the excitement, this is business!

Thanks for coming to the Real Estate Investing for Beginners blog.

Until Next Time

Still More Thoughts About real Estate Investing for Beginners

2008-02-28T15:56:00.000-08:00

Thoughts About Real Estate Investing for Beginners - Part 3

You have probably noticed from previous posts that there are a myriad of ways to get involved in real estate. Different methods require different skill sets. As a beginner you need to identify what method best suits your skill set as well as your particular interests.

In this post I'm going to continue to highlight some more methods that a real estate investor might use.

Let's get started. Tax lien certificates are instruments that are sold by county property tax authorities. Not every state sells tax tax lien certificates. As investments vehicles certificates are solid, secured by real estate and backed by the government. When property owners fail to pay their property taxes, the county places a lien on the property and sells a certificate to an investor. If the taxes are not paid by the property owner after a certain amount of time then the holder of the tax lien certificate receives the property. If the taxpayer pays the taxes then the certificate holder receives the money paid including an amount for interest.

Tax deeds also involve delinquent property taxes. In this case, after a certain amount of time that the taxes are late, the county will auction off the property to the highest bidder.

Flipping real estate involves purchasing a property at a price substantially under market and immediately selling to someone else for a profit. There are several different ways to accomplish the desired outcome - profit! You can flip a contract - in other words get the deal under contract and then flip it to someone else for a profit. Or you can flip the property itself to someone else.

Rehabbing is popular the "handy" crowd. It's a good way to get started and you can create substantial equity through your own sweat. You can also approach it in a more business like manner especially if you happen to be a contractor. Contractors have the benefit of know how and the manpower available to take on a project.

Developers take raw land and add value through various means. Some developers take a project from conception through to completion. This could be a single house or whole housing development. Others take the raw land, rezone and/or obtain approvals and then sell the project to builders. Still others actually install the infrastructure and sell to builders. As you can see there are a lot of ways to add value to raw land.

There are so many ways to get involved in real estate that surely one or more methods will meet your specific needs. You're really only limited by your imagination when comes to real estate investing.

Educate yourself, find a niche and a mentor and get out there and find a deal. Have an open mind and think of creative ways to solve problems. It takes work but where there's a will there's a way!

Until Next Time

More Thought about Real Estate Investing for Beginners

2008-02-24T16:48:00.000-08:00

Thoughts about Real Estate Investing For Beginners - Part 2

Ok so in the last post on Real Estate Investing for Beginners I covered foreclosures, pre-foreclosures, short sales and REO's. Now I'm going to get into some additional real estate investing methods that are used. I know I said it before - but I want to say it again, as real estate investors our primary goal is to be problem solvers.

Moving along, let's talk about some more techniques that you can add to your toolkit along with the ones from prior posts. Today the theme will be how to start investing in real estate with little or none of your own capital. You're probably thinking how in the heck can I invest without money? Believe me, it's possible. I know because I've done it!

One way to get involved in Real Estate with no money of your own is to identify or "bird dog" good deals. There are investors out there that have the money but don't have the time or expertise to dig up good deals. If you can find a real estate money maker there will be people more than willing to pay you for finding it for them. Join some real estate investing forums and see what people are talking about and what they are looking for. Then go find it!

Investing in real estate notes or mortgages provides another vehicle for starting out. Holders of private real estate notes are sometimes willing to discount the note in order to raise quick cash. The more motivated, the bigger the discount. If you happen to have the cash this is a good way to earn above average returns. If you don't have the cash you can pass the deal to a real estate investor for a "finders fee". Go ahead and Google "investing in notes" to find forums specifically on the subject.

Keeping with the theme of little or no capital investment, obtaining an option to buy a property is a powerful tool that limits your financial risk. By the you can do options with no money out of your pocket and I'll tell more about that in a future post. An option is a contract that gives you the right to purchase real estate at some time in the future for an agreed upon price. Note it gives you the right but not the obligation. Typically you will pay an option fee up front for the right. Your risk will be limited to the amount of the option fee. Should you decide not to purchase the real estate you can simply walk away and you loss is the amount of the option fee paid in advance.

Lease options are similar to options but with the addition of a lease. Lease options are two separate and distinct contracts. One contract for the lease and a separate one for the option.
The lease contract simply means you are entering into an agreement to occupy the property in some form or another. For instance, on a single family home you would probably be living in the home. The option gives you the the right to buy the home in the future.

I'm just scratching the surface of investing in real estate with overviews of just some of the more popular methods but stick with me, I'll get to the details in depth in future posts. Thanks for visiting Real Estate Investing for Beginners and feel free to ask questions.

Thoughts About Real Estate Investing For Beginners

2008-02-20T20:52:00.000-08:00

Some initial thought about Real Estate Investing for Beginners

Real Estate Investing has undoubtedly created many of the largest fortunes ever amassed for the worlds wealthiest people. Wealth creation using Real Estate Investing as the vehicle has no equal.

Now I know there is an awful lot of hype surrounding the business of real estate investing. Investing in real estate is not a get rich quick scheme. You can attain fabulous wealth, but it won't happen overnight! As a beginner , you may be overwhelmed with information overload not knowing where to start. My goal with Real Estate Investing for Beginners is to help you sort through all the hype. To help you identify a method, set some goals and create a road map for your future real estate investing. Not everyone will have the same road map. There are literally dozens methods, techniques and business plans within the exciting world of real estate investing. Your goal as a beginner should be to identify the method that best suits your needs, circumstances and skill sets. As they say "there's more than one way to skin a cat".
So it is with real estate investing, there's more than one way to invest.

I want to start with an overview of some of the methods or techniques that a real estate investor might use. Before I get into the methods, let me say that our job as real estate investors is to solve problems. The circumstances of the deal will dictate the method. I won't go into detail about the methods in this post. I simply want to get you thinking about them and how each method might be utilized. The list won't be exhaustive at this point, but we will continue to cover various methods in future posts.

I guess it would be fitting to start with foreclosure investing given the current market that we are experiencing . Investing in foreclosure real estate in simple terms, is going down to the courthouse steps and bidding on a home at the foreclosure auction.

Now I'll back up a little with pre-foreclosure investing. Investing in pre-foreclosure real estate is when you buy a property that is in default, before it actually goes to auction.

Moving ahead, an REO or "Real Estate Owned" are properties owned by the bank. The bank ends up with the property when they don't sell at the auction.

Short sale real estate are properties that are sold for less than what is owed on the mortgage. Banks are willing to accept less than the amount owed under certain circumstances. It just so happens that the particular set of circumstances are occurring at this moment. A huge inventory of homes has placed downward pressure on home values. Many homes are now worth less than the mortgage owed. A large percentage of homes purchased in the last 2-5 years were financed with variable rate mortgages. These mortgages are resetting, borrowers can't afford the payments so more homes are being dumped on the market creating further downward pressure on prices. A viscous cycle in the real estate market for sure!

I need to wrap it up for now but there will be plenty more to come. Thank for visiting Real Estate Investing for Beginners. In the next post I'll cover some more techniques for investing in real estate.

Until next time

Welcome to Real Estate Investing for Beginners

2008-02-19T20:48:00.000-08:00

Welcome to Real Estate Investing for Beginners. This site provides tips, methods and information on various techniques for beginners in real estate investing. Feel free to post questions about anything related to investing in real estate.