Educate

First and foremost,  more education and information is the key to reducing your risk in any investment. So if you’re getting your information from reliable sources, you stand to reduce risk. That is why we suggest gaining all the knowledge you can before you dive into the flipping pool. Where to start? Our Flipping Houses University is filled with answers to questions and helpful tips.

Know the Local Law

No we are not talking about getting to know your local sheriff here. Know the real estate laws. It doesn’t matter if you are a novice or a savvy investor, ignorance of the rights and regulations of real estate in your farm area can put your investment at risk. You don’t have to become an expert on the matter or an  attorney, but you should be brush up on the laws that govern the market.

Leverage a Team

We have talked a lot about having the right team. The most important member is yourself and no one has more to loose.  So build your team to help you invest in real estate for the long-term.Your team should include a good attorney, Realtor, contractor, and property manager.  Your team will be able to provide you with the advice you need from acquisition through renovations–and long-term with property management.

Last but not least, know your boundaries and limits. Don’t over extend yourself or think you can do it on your own. You will most likely fail on your own. connect with a good mentor who has been there and done that.  Ask them questions and for advice. This will help you gain that killer confidence to close the deal with the result you want.

“To win you have to risk loss.” ~ Jean-Claude Killy

Here are so more great resources on how to reduce risk in REI:

http://www.streetdirectory.com/travel_guide/147385/investment/how_to_reduce_the_risk_in_real_estate_investing.html

http://www.creonline.com/blog/9-ways-to-eliminate-real-estate-investment-risks/#ixzz3D7SDkR2p

http://www.realtor.com/home-finance/homebuyer-information/lowering-risk-when-buying-an-investment-property.aspx

To learn more about Part-Time REI visit us at http://part-timerei.com/

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Disguise an Unattractive View

Wooden Shutters in a Bathroom

One thing about rehabbing is you might be buying in a shady neighborhood. With that being said, not all windows lead the eye to a beautiful landscape. If your window looks upon an unattractive view, like a roadway or parking lot, you can disguise this view by incorporating a beautiful printed or textured sheer fabric on your window. This will allow the sunlight to still shine through but will distract you from the view outside. You can also use a longer rod, you can set the window treatments in such a way that only the trim of the window is covered and all the light still shines in.

Add the Unexpected

Using old door knobs as tie backs

Add the unexpected by adding accents your windows with tiebacks, fringe, or beads. Old doorknobs bought at a flea market can be used to hang curtain panels or valances. It’s not only a clever way to get a unique custom look, but it will add a splash of the unexpected to your window treatment design. To get an expensive look with an inexpensive price tag, put your money into trims, cords, tassels and fringes. They dress up even the least expensive fabric. Speaking of fabric, you don’t have to spend half your budget on curtains. Instead, purchase discount fabrics or sheets and tablecloths from a local discounter to create curtains and toppers.

Interior shutters  can also be a nice surprise. They are found in a variety of colors and price ranges in both wood or (faux wood) vinyl, which would be a great option for bathrooms.

Decide Your Effect

Before you select a window treatment design, it is important to decide on the overall effect you would like your window to have. You must decide how striking you want the treatment to be.  Do you want the treatment to serve as a quiet background that pulls  your room together, or would you prefer to have your window be the focal pint and become center stage?

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MORTGAGE BROKER

Like any broker, they are the middle man. There is the lender, the borrower, and sometimes the Mortgage brokers. They do the grunt work: gathering paperwork, documenting everything – and then passing it along to a lender who makes the final yes or no decision.

INCOME PROPERTY MORTGAGE

This is a loan given to real estate investors for both residential and commercial properties that are bought with the intent to rent them thus creating income from the rent.  Income property mortgages are a bit trickier to qualify for as lenders need more facts and not every lender does them.

CAP RATE

Also known as the capitalization rate. This just refers to  your annual rate of return on a real estate investment property based on the expected income that the property will generate. Be sure to use our Property Repair Estimate Sheet from the get go to start your numbers off right!

CAPPED RATE

Not to be confused with the above Cap rate. We thought we would cover this too since there is some confusion. A capped rate is an interest rate that has some leeway. In other words it can vary. Good news is it can not go past a set capped rate agreed upon in advance.

CASH EQUITY

Cash is king! This is what you have in liquid assets to put down on the property. In other words the amount of money you have to invest in a property you purchase

ALL-CASH DEAL

No banks needed, so no  financing needed. Perhaps the easiest transaction as there is no mortgage needed. Just a switching of deeds!

CASH-ON-CASH RETURN

Some may refer to this as your equity divided rate. What will be your ROI on this property?  That’s what the cash-on-cash return is all about.

ABSOLUTE TITLE

Absolute. Final. The End. What this means is that the title to a property is now free and clear of any deficiencies or problems that could bother the owner. The owner of the perfect, or absolute, title can not be challenged and has unequivocal rights to their property. No liens. No Judgements. No attachments.

TENANCY AT WILL

A tenancy agreement where a tenant occupies property with the consent of the owner, but without an agreement that specifies a definite rental period or the regular payment of rent. Tenancy at will is also known as estate at will.

These are just some of the more common terms that you may hear out there. Remember we are here to help. Be sure to educate yourself. Our Flipping Houses University is a great start. Don’t forget to surround yourself with people that have that investor mindset, and connect with a good mentor too. Leave a comment if you have any questions!

To learn more about Part-Time REI visit us at http://part-timerei.com/

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1. Do Learn the Art of Leverage

Please don’t be this guy; the one that thinks he can do all the trim work, the landscaping, the listings, the cleaning…get our point? Don’t overextend yourself. Be sure to keep your ambitions in check and don’t bite off more than you can chew. One of our main lessons in the Flipping Houses University is how to build your investing team and choose the right dependable people to help you accomplish your investing goals. Remember this word. LEVERAGE.

2. Don’t Be Too Big for Your Britches

Remember your mom telling you that? Don’t try to act like you know everything when in fact you are just starting out your flipping career. In reality, whether you are just starting out or have been investing for years… be yourself and be real. You will gain many more meaningful relationships that way–ones that you can use to your benefit. See LEVERAGE. Admit to what you know and what you don’t know. Don’t dismiss the advice of those who have been investing for years. They’ve seen both the ups and the downs in the market, and really know what they are talking about!

3. Do Use a Property Repair Estimate Sheet

One of the more important documents you need is Property Repair Estimate Sheet.   This document should include a list of all of the major items (roof, hvac, kitchen, paint, flooring…) as well as cost estimates for each item.  You should complete one of these during your initial visit of every house you look at.  The 2 main benefits of the form are 1) to save you time and 2) to give you confidence to proceed with the deal.

4. Do Know “Why”
Always know your why. Keep the main thing the main thing. Don’t get side tracked in all the hype. Keep in mind the reason you chose investing in real estate as your alternate income revenue. Maybe you want to be able to retire early. Or you are trying to pay off your house, or save for your kids’ futures. We provide these blogs so that what is important to you stays important. For example like spending time with your family. Don’t ignore your family while trying to build your business because then you would be sacrificing the very goal you are  trying to reach.

To learn more about Part-Time REI visit us at http://part-timerei.com/

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1.) Don’t Forget to Do Your Homework
Not many people naturally know about investing in real estate. That is one of the reasons we exist; the help educate future investors on how to actually invest part-time. Don’t jump into something you know nothing about. Do your homework. Know what you are getting into. Flipping is not as easy as the TV shows make it look. Just because you saw it on TV, you read it in a blog post, doesn’t mean you are Barbara Corcoran from Shark Tank okay?

So take the time to learn your craft, do your homework, read the books, listen to the Podcasts, and check our our Flipping Houses University while you are at it.

2.) Do Research Your Farm Area

What is your poison? Do you like single family houses, multifamily, or commercial. What ‘s profitable in the area you plan on making your farm area? Is it better to flip, buy and hold, wholesale, or is land-lording the way to go in your market? These are all good questions you need to check into. Also make sure if you do not have your real estate license that you get a good Realtor on your investing team. She can help you find comps to potential investment properties and furthermore help you research pricing and rent levels.

3.) Don’t Invest in Something You Don’t Understand

This kind of goes back to the #1 rule when investing in real estate. If you try to invest in something you don’t know, how can you be successful? To quote the most successful investor we can think of, Warren Buffet, “Never invest in a business you can’t understand.”

We would be wise to adhere to Mr Buffet’s words of wisdom. If you don’t get it, then maybe flipping houses isn’t your retirement plan after all.

4.) Do Surround Yourself with Like Minded People

One of the best ways to learn about investing in real estate is to surround yourself with successful investors. Ask them questions, a lot of questions. Go to networking events. Join an online chat room about flipping houses. There are also plenty of cities out there that have REI groups that you can join and get the investor mindset.

Be sure to check back next week for Part 2 of The Do’s and Don’t of Investing.

To learn more about Part-Time REI visit us at http://part-timerei.com/

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Have you ever overlooked any of these items when flipping a house?

1. Vanishing Vandals

Rehabbing property is not a one day job. Depending on the time of year, it can take several months to finish. An empty piece of property is vulnerable to vandalism. Vacant Home Insurance is not required in all states and will cover vandalism only during the first month that your property is unoccupied, after that you are on your own. Keep in mind these easy tips:

• Cover windows with sheets or drapes
• Request the police for extra patrol and also explain to them that you are rehabbing
• Barricade all windows and doors that do not lock
• Change the locks
• See #2

2. Light it up!

If you were a buyer, would you buy a house that is full of shadows and dullness or one that is adequately lit and looks like it has some life in it? A well lit house looks less depressing and livelier.

Yellow lights are a no no. You can easily establish an upbeat mood with a bright set of lights so it’s a good idea to go for those. Another thing that you should never forget to replace is flickering lights. Some people associate flickering lights with horror films with gory murder scenes. Overall, proper lighting is a very economic way of showing potential buyers what you have done with the property.

3. Conforming and Comparing

If you are going to install new fixtures in the house at least ensure that they match. For starters, door knobs and hinges should match and so should shower heads, faucets and towel racks.

If you are going to purchase new appliances ensure they are all from the same brand or at least have the same style. Make sure your upgrades are comparable to other in the neighborhood as well.

4. For Sale Only When Finished!

Curb appeal is one way of attracting potential buyers but if a buyer sees a “for sale” sign outside a house that looks like it survived a storm, they might make a mental note never to return. Also don’t list a house with a picture before the renovating the front of the house. If the front of the house is dilapidated, that is what buyers will see on the picture. If you want to sell your house as soon as possible, this would be a less than ideal way to begin.

5. A New Mailbox

What’s the first thing you notice when you pull up to a house that you are interested in buying? Most people notice the mailbox.

Don’t mistakenly give potential buyers the wrong impression with an old rusty mailbox. This could tell them that the inside of the house is probably just as rusty. After all, if you didn’t bother to take care of it, what other thing did you also forget to take care of inside the house? Remember that mailboxes are not that expensive. You can get custom mailboxes from any of the local shops in your area for under a hundred bucks.

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 1. Recognize that  investing is a business.

Being a landlord and an REI is different from being a private homeowner — it’s a business and you need to treat it like that. Have a good business plan. This type of investment is not hands-off. It can be passive but it requires involvement. It requires your time. It requires certain knowledge and skills.

2. Start small.

Don’t get in over your head right away. Starting with a single house or smaller multiple-dwelling unit, perhaps with a partner, is a good staring move to see if the business really suits you. Starting with a single home will allow you to get a feel for the maintenance, bookkeeping and other work required.

3. Know your Farm Area

As with any business, location can be critical. And we all know real estate is all about location, location, location. A home that seems to be a steal might be priced lower because it’s in a neighborhood most people wouldn’t actually want to live in — one that has higher crime, noisy streets or poor schools. For that reason, investing in out-of-state property is a gamble. Do your research and get comps from your Realtor and only  buy in neighborhoods you know well or have carefully researched.

4. Figure out the right rent and rentors

Rents differ widely around the United States. Zillow, Craigslist or a real estate agent can give you an idea what they are where you’re buying. Then you need to determine if that rent will be enough to cover your costs.

Too often, people take a look at their loan and think if they cover that, they’re doing fine. But you’ll need to pay property taxes and insurance. Don’t forget though about regular maintenance. Things break, and you will need some money in the bank to deal with unexpected expenses.

You’ll also want to know the rate of return you’re getting on your investment. There are formulas, such as the “capitalization rate,” to help with this, but you might want to turn to a professional. A good accountant can make sure the purchase makes sense.

Finding a good first tenant is also an important step. Run background checks if you can. Finding and keeping good tenants is the heart of successfully investing long-term in real estate.Happy tenants are critically important. They’re your customers and the way you keep them happy is by keeping the property in good shape and treating them with respect

 5. Leave it to the professionals

If you decide to manage your property, you’ll probably need to consult a real estate lawyer to get a solid lease and learn the rights of tenants. You may want an accountant, and you’ll need a list of good plumbers, electricians and tradesmen. Building your investment team is very important; so is leveraging other people’s talents. Your goal is to have a second income, not a second job.Turning to a property management company can be a smart move. It’s usually worth it to pay 7% to 10% of our rental income to a manager.

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Why was this not disclosed to you? Do you have to disclose this to your potential buyers? Reality is rules are different in each state. Here’s what we would suggest.

1. Death in the Home

Some buyers may have concerns or superstitions about purchasing a home in which someone has died, so it’s important to know if your state requires sellers to disclose a previous death in the home. Keep in mind each state will have slightly different requirements for disclosure. A seller is required to disclose deaths related to the condition of the property or violent crimes though. For example, if a previous occupant’s child drowned in the swimming pool because it didn’t have the proper safety fence, the seller would need to disclose the death even after remedying the safety issue by installing a proper pool enclosure. There are, however, circumstances where sellers do not have to disclose a death on the property.

There are no states in which there is an obligation to disclose the death of a person who has deceased under natural conditions though. But even when disclosure isn’t required – for example, Georgia does not require the disclosure of homicide or suicide – you may want to err on the side of giving the buyer notice of a death on the property. You would want to know, right?  Remember how you learned of the suicide? They will hear about it from the neighbors anyways.

2. Neighborhood Nuisances

A nuisance is a noise or odor from a source outside the property that could irritate the property’s occupants. If you are investing in North Carolina, that state requires sellers to disclose noises, odors, smoke or other nuisances from commercial, industrial or military sources that affect the property. Michigan requires sellers to disclose farms, farm operations, landfills, airports, shooting ranges and other nuisances in the vicinity, but Pennsylvania leaves it up to the buyer to determine the presence of agricultural nuisances.

3. Environmental and Natural Hazards

If the home is at an increased risk of damage from a natural disaster or has known or potential environmental contamination, you may be required to disclose this information to the buyer.

Texas law requires sellers to disclose the presence of hazardous or toxic waste, asbestos, urea-formaldehyde insulation, radon gas, lead-based paint and previous use of the premises for the manufacture of methamphetamine. 

New York’s Property Condition Disclosure Act requires sellers to notify buyers about whether the property is located in a flood plain, wetland or agricultural district; whether it has ever been a landfill site; if there have ever been fuel-storage tanks above or below ground on the property; if and where the structure contains asbestos; if there is lead plumbing; whether the home has been tested for radon; and whether any fuel, oil, hazardous or toxic substance has been spilled or leaked on the property. 

 California’s Natural Hazards Disclosure Act requires sellers to disclose whether the property is in a seismic hazard zone and could therefore be subject to liquefaction or landslides after an earthquake. 

While most disclosure requirements are governed by the states, the federal government mandates one: the disclosure that lead-based paint may be present on any property constructed before 1978. 


Check in next week for What You Must Disclose Part 2!


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Build Rapport with Your Clients.

It is much easier to get through a delay if you have a good rapport with your clients. Although delays at closings are no laughing matter, being able to joke or cut up with them can definitely lighten the mood. No one likes to wait so nice conversation will also make the time go by faster.

 Check and Recheck

Document problems can be as simple as a name misspelled or a transposed number in an address, or as serious as incorrect loan amounts or missing pages. One of our team members was at a closing table and the loan officer had her birthday wrong on ALL the documents and so the whole stack of papers had to be reprinted thus delaying the closing. Any type of  glitch can cause delays of hours or even days because everything has to be in order before closing.

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