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Secrets of Making Money from Real Estate - Part 4
Analyzing and finding the right property deals: Firstly read my other article on how to Buy the property at a discount, this will cover the basics on how to buy property at a lower than market value price. This is very important because It can completely change the aspects and financing the deal. It is also good to have more equity than just your deposit on the house because you have created instant wealth and because now you will have more equity compared to debt than what the bank had planned the loan for, enabling you to take out bigger and more loans faster. You will also be able to borrow money against your home to help you finance the property 100% if needed. So aside from buying the rental property below market value you need to look at several other factors. Like the income from rent, interest rates and amount borrowed, expected growth, possible improvements, and other expenses. Rent can be found from asking people who live in the area, real estate agents, and by property management companies. Growth can be found from finding previous valuations of the property usually done by the government department in charge of housing, varies from country to country. If you can see how much the property increases by value from year to year you can usually get a good indication of what the capital gains percentage is. Expenses will consist of insurance for the property, interest payments on the mortgage, any taxes you may have to pay, unexpected repairs such as a toilet breaking, property management fees, closing costs for when you purchase the property and maintenance fees such as electricity (can be passed on to tenant). Renovation can be used to increase equity and weekly rent. Look here to for some good home improvement ideas. This is important because if you can increase weekly rent the figures will change. Lets look at this exampleYou find a motivated seller selling a three bedroom/two bathroom property.Because the seller is going overseas and needs the money quickly he is trying to sell it for a negotiable price over $140,000.You now get an independent evaluation which deems the property to be worth $155,000.You go and find out how much the value of the property has increased over the years. You also look into what new buildings such as malls are being built in the area which might increase the value of nearby properties. However You determine capital growth is a minimal 5%.You now find out what the median rent for a three bedroom/two bathroom property in the area of the property. You find out that its $220 per week.You now make an offer on the property for $125,000. The seller does not except.Three weeks later the seller is overseas and counter offers $130,000.Before accepting you go to several banks and find the best deal you can get is 80% financing with 6% interest. The mortgage will be for $104,000 with a down payment of $26,000. The yearly interest only payment will be $104,000*0.06 = $6240You then establish your other costs such as insurance which is $500 per year, the property taxes which are $1,200 a per year, the cost a property manager $1,300 per year.You do your calculating to find out the cash flow of the property. The income will be $220 per week which is $11,440 per year. Your expenses which are $500 + $1,200 + $1,300 + $6,240 = $9240. $11,400 - $9240 = Positive cash flow per year of $2,200, excluding any possible tax advantages you may receive! The positive cash flow will be enough to cover any unexpected repairs, the fees of solicitors for the closing cost, and any vacancy costs.Realizing how good the figures are, you accept the sellers offer.You then paint and remodel the kitchen, a job worth $15,000. You get the property revaluated to see its now worth $170,000. You have increased your equity by $40,000.Because the property's value has increased you can now charge more rent to your tenants. The new rent is $265 per week. This will increase your positive yearly cash flow to $4,540! The key now is...Don't get emotional: I'm sure you noticed how every figure in the previous paragraph is in bold. This is because as long as the figures work out to make you money, EMOTIONS DON'T MATTER ONE BIT! Just because the property has a really nice garden, do not show you think that and be willing to pay extra for it. You aren't going to be living in the house so do not buy a house which you want to live up your living expectations. You will also loose your negotiating edge when getting emotional. One of the worst times to show your emotions is if you are trying to buy the property at an auction. Auctions are designed to put pressure on the buyers. Never go above your limit because of a quick emotional decision, this could lead to huge financial disasters. Also, with auctions don't bid at all until you are very close to the "Third and final call". Settling and contracts: The two most important things when it comes to writing a contract or sales and purchase agreement are that you have someone with legal advise and experience in property help you write it (a solicitor), and that you always have a legal way out of a potentially bad deal. If you are looking to put the property into an asset protection structure, a good idea is to write your contracts under "As nominee" instead of your real name. This will allow you to legally buy it and put it into the asset protection structure. One of the best things about real estate is that the contracts you can enter can be very flexible if needed. Sales and purchase agreements can be drawn for such purposes as renovating or finding tenants. Say for example you could include clause saying that you have six months to work with the house before you pay the money, or one month to find a tenant before you pay for the house to prevent a loss in revenue. Due diligence is a way for both parties, the buyer and seller, to get out of the deal. If you can word a due diligence period of a few days into the contract you would have a few days to review the property and if unsatisfied with what you purchased, get out of the deal. Property manager or should you manage your own property? Now is the time to decide if you would like to use a property manager. I always use one because I can not be bothered fixing a toilet or shower at three in the morning. Property managers will take care of almost everything for you so you have more time. Some will even find tenants for you. Property managers will usually charge a small commission percentage. Some people argue that you shouldn't pay someone to manage your asset. I disagree because If you spend most of your time repairing and looking after one rental property, you will not have time to find new property deals. If you choose to manage your own property take these few points into consideration:Be sure to review rent every six months because rent prices will usually go up.Finding the right tenants will require some sifting skills on your behalf. Be sure the tenant is reliable, honest, and can make the rent payments. Check up on their previous renting history with other landlords if possible.Can you handle the tenants? If you have to evict a tenant do you know the exact process you must abide by in your area?Can you keep account of all rental payments? You need to file tax and have a good record of what you are earning from a property, especially if you want to be illegible for tax breaks.Your time is your most important asset, do you want become tied up in just one rental property? This article was written by John Whiteside. The original article can be found here http://www.use-your-equity.com/realestateinvesting.html . Use-Your-Equity can show you how to create value in your home, then show you how to use the newly created equity to make money. http://www.use-your-equity.com for more information.
MORE RESOURCES: Real estate transactions — April 10-16 SteamboatToday.com Real estate is facing the worst fair housing crisis since the ‘60s Real Estate News by RealEstateNews.com Real Estate Transfers ~ April 3, 2025 The Bedford Citizen Norwalk's 2024 grand list drops to $16.2B, led by $1.3B decline in real estate values - Norwalk Hour Prince Harry and Meghan Markle Have Made Some WILD Real Estate Moves in the Past 8 Years House Beautiful Seeking Alpha Quant picks in the S&P 500 real estate sector heading into earnings (XLRE:NYSEARCA) Seeking Alpha Former executive sues Pat Connaughton's real estate company Milwaukee Journal Sentinel Real Estate Investing: 5 Ways to Get Started NerdWallet Real Estate Market Report (Feb./March) highlandscurrent.org Agent Spotlight: Jim Smyth The Grand Junction Daily Sentinel The Michael Houck Real Estate Guide for April 20 Oil City News How the Pandemic Changed New York City Real Estate Behind The Hedges Vendor & Real Estate Partners Dollar Tree Beyond the Boardroom: LIVE Real Estate Group's Dionne Clifton The News-Gazette Mandatory NAR membership facing a new legal challenge Real Estate News by RealEstateNews.com Brokerage Beat: News from Compass, eXp, The Agency, more Real Estate News by RealEstateNews.com Many first-time homebuyers are pushing 40 as millennials wait in vain for a better market - NBC News Accused Houston real estate fraudster connected to dozens of stolen properties caught attempting new deed filing Click2Houston Zillow just started an all-out war over real estate listings Business Insider Houston real estate lawsuit: Harris County suing couple in forgery case and theft of 35 properties ABC13 Houston The Hollywood Reporter Celebrates the Big Apple’s Top Real Estate Agents at New York Power Broker Awards The Hollywood Reporter Portland homebuyers rush into combative spring market OregonLive.com Tucson, Ariz.: Western Skies and Competitive Home Prices The New York Times Who’s Buying What in the Big Apple? Ask NYC’s Top Realtors The Hollywood Reporter Real estate options slim for Grove City dispensaries The Columbus Dispatch Mumbai’s Rush to Rebuild Comes With a Warning Bloomberg.com See how much real estate prices have changed in Petaluma last week The Press Democrat Trump Official Scrutinizes N.Y.’s Attorney General Over Real Estate The New York Times Housing Market Crash Alert? Zillow Turns Negative on Home Prices Norada Real Estate Investments Trump’s latest crypto venture will be a video game, and sources say it will be like Monopoly Fortune Q1 Estin Report for Aspen Snowmass real estate shows growth AspenTimes.com Sandwich house on market in 'awesome location' for $680,000 Cape Cod Times Real estate Sales include business buildings in Westfield, Jamestown observertoday.com Dodge County Real Estate Transfers Fremont Tribune Real estate sales in Peoria, Tazewell and Woodford counties for April 19, 2025 - Peoria Journal Star Real estate sales in Peoria, Tazewell and Woodford counties for April 19, 2025 Peoria Journal Star Page C13 Post and Courier Page C12 Post and Courier Page C10 Post and Courier Licking County real estate transfers for March 31 to April 4 reach $2 million in Granville The Newark Advocate $20M Coldwell Banker real estate calls class action settlement Class Action Lawsuits Real Estate Notes: Rutledge Hill hotel to open July 1 Nashville Post Phoenix land on Camelback Mountain with Frank Lloyd Wright-inspired home for sale for $30M The Arizona Republic Historic flooding locally impacts commercial real estate market The News-Enterprise MLS that quit enforcing Clear Cooperation gets back on board Real Estate News by RealEstateNews.com Imran Chaudhary, leading the real estate project in East Plano, says his planned Islamic Center is misrepresented by politicians IslanderNews.com House of Week: With its indoor heated pool, this Marcellus property is ‘like a vacation’ Syracuse.com Post-hurricane real estate market hard to pin down Your Observer Main Line home with 3 golf holes on former Penshurt Estate asks $2.3M The Business Journals Stafford County supervisors vote to increase real-estate tax rate by 3 cents Fredericksburg Free Press Battle Of The Listing Sites. Zillow Bans Pocket Listings, While Homes.com Welcomes Them Yahoo Finance Berkshire County Real Estate Transactions for March 31-April 4 The Berkshire Eagle Buc-ee's travel center may mean more residential, commercial development in St. Lucie County Treasure Coast News Richland County property transfers recorded April 7-11 Mansfield News Journal Real estate mogul Mattson turns to 5th Amendment as bankruptcy cases heat up The Press Democrat How Eliminating Property Taxes Could Impact Florida Homeowners U.S. News Real Estate Kohl’s real estate head joins CBRE’s retail group Chain Store Age Westmoreland County Real Estate Transfers The Latrobe Bulletin The Mountain city where thousands are selling their million-dollar homes amid 'cloud of uncertainty' Daily Mail CoStar CEO takes on Zillow in letter to agents Real Estate News by RealEstateNews.com Real estate news: 2-tower office campus in Newport Beach sells at a loss for $33M Orange County Register Penn owns over $3 billion in University City real estate, DP analysis finds The Daily Pennsylvanian Lisbon commercial real estate gains momentum The Portugal News $2.1 Million Homes in Muskoka, Ontario The New York Times Housing Market Predictions for 2025 Ramsey Solutions |
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