But Only Happens Through Action! - No Money Down Investing
Many beginning investors get stumped when trying to figure out exactly the best way to get started investing in short term real estate. They see people on TV, the internet and direct mail buying and selling houses for profit. I have put together a simple guideline to help these beginners. My favorite way of telling people how to get started in this business is to wholesale or "flip" their properties for a quick cash payout. This way they can also track the process of making larger profits by watching the more experienced investor. Remember wholesaling is nothing more than getting a property under contract with the seller of a property and then have another contract with your buyer (another investor) selling it for a higher price than you negotiated. Or as I prefer, just "assign" the contract to your buyer who will close on the property in your place. It's a great tool and an easy process! There is no risk, you don't need any license and you can do it with little or no money down! I would like to show how easy this process is to complete in 6 SIMPLE STEPS!
We will investigate this topic in this article. The conventional method of buying property is having cash, or getting a loan which also involves putting a considerable amount as down payment. This can be too expensive especially if you are looking to do many deals. Let us explore other methods of buying property with little to no money.
Make Your Offer to the Seller - Here you will make an offer and have them sign a purchase contract. I suggest you make your offer where there is enough profit for both you and your investor buyer. If not, make a lower offer or find another property. Your contract should always have a contingency clause that will let you cancel the contract. I like the "attorney review" clause which basically says that the contact is subject to your attorney's approval. Or another one is the contract is subject to your sole satisfaction on the home inspection report. This gives you time to find your new investor/buyer and also to check out the house. If your contract does not have this clause (which many already do have it) you can write it in and you and the seller both initial the addition. Also if the contract says you cannot assign the contract, I simply cross it out and replace it with the phrase that this contract IS ASSIGNABLE and both me and the seller initial the change. This is the language that I use. I am not an attorney nor do I give legal advice so you should ask the advice of your professional real estate attorney in your area what verbiage he or she prefers you use.
Not knowing or being comfortable with the "Estimated Cost of Repairs". This is another biggie. One way to overcome this stumbling block is to take a contractor with you when you inspect the house. If you do this on a few houses, you will become very efficient at estimating the cost to repair many items such as putting on a new roof, installing siding, and replacing windows and doors. You will also become familiar with costs for painting, landscaping, clean outs, new furnaces and kitchen and bath updates. Most of these items are on a "unit price" basis meaning putting in new replacement windows will cost anywhere from $175 to $200 per window. A new roof on an average size 3 bedroom ranch would cost approximately $5,000 to $7,000. A new gas furnace would cost approximately $4,500 to $6,000 installed. And siding on this same size house would be about $5,500 to $7,000. You can also do some practice runs. Pick a few vacant houses that are on the Multiple Listing Service and take your contractor there to give you some prices. Another way is to use the same house and have different repair professionals come out and give you estimates. For example, have a roofer come over and give you a price for a new roof. Have a plumber check the heating system and give you a price on putting in a new one. Ask a siding company to quote you new vinyl siding. Have a painting contractor give you a price on scraping and painting the outside of the house and a price for painting the entire interior of the house.
After getting these prices on a few houses, you will be able to easily compare similar houses. Use the estimates from your contractor(s) as a guideline for determining repair costs on other houses. If you received an estimate for a new roof with ripping off the old roof on a 3 bedroom ranch for say $5,000 to $6,000, what do you think the cost for a new roof on another 3 bedroom ranch the same size as the one you received the estimate on would cost? Right, five or six thousand dollars! This would be the same for the furnace, siding, painting, clean outs, steps, patios, pavers, driveways, etc. So you see how this is one way to get comfortable with estimating the costs to renovate houses? This method will give you a better understanding of cost estimates and will help you determine if you should continue with the evaluation of the deal. Keep in mind that your final repair cost figures should come from two or three estimates from contractors before purchasing the house.
Not knowing how much repair is needed. What to do and not do. This is more of a common sense answer than a text book answer. You should do only what the price range of the house warrants and not "over do" the renovations. By that I mean, fix the existing problems without trying to reconfigure the layout of the house. Yes, you can add closets, half baths, picture windows and new wood and tile floors. But be careful when contemplating small additions, dormers and moving bearing walls. This is where you can run into higher and sometimes unexpected costs that can blow your construction budget. I would leave those renovations to the expert investors or the true contractor investors. Also, you usually only find investors doing these type renovations in the higher end homes and neighborhoods. This is because adding larger room additions and changing the original layout of the house can be recouped with the higher selling prices. And even at that, you will usually only find these being done in pricier neighborhoods.
So basically, just fix it up nicely and add a lot of inexpensive (not cheap) features such as "goose neck" kitchen faucets, (high arch faucets to allow tall pots to fit underneath) two toned bathroom faucets, nice shower heads, solid front door handles, decorative interior door knobs, ceiling moldings in living and dining rooms, refinished wood floors, garden windows over kitchen sinks, tile floors, and nice landscaping in the front of the house. If you can patch the walls instead of gutting the whole room, you will save a lot of money. Spend the extra dollars in getting a good drywall installer to make the patched walls look like new. Throw in a new washer and dryer, refrigerator, new stove, microwave and always add a dishwasher if you can. The house doesn't have central air? It's not in the budget? How about buying a 15,000 or 18,000 BTU air conditioner and putting it in to cool the house? Look at it this way. How would you like the house to look if you were buying it? Well guess what? It's probably the same thing everyone else would want. So use some common sense and put yourself in the buyer's shoes. Renovate the house within your budget while making it appealing to the buyer.
You can also do the same thing with an option to purchase contract. You simply sign an option contract, giving you the right but not the obligation to purchase the property at a specific price for a specific time and then sell your option contract to your new buyer/investor for a fee. Here again you are assigning your interest in the property. It's that simple! This is just one way to make money in short term real estate!
Article Source: FxTradingStock.com
About the Author
Paul Amos His latest website is about Excellent analysis of No Cost Mortgage Refinance, Refinancing a No Closing Cost Mortgage.
by: Paul Amos
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Date: Fri, 11 Feb 2011
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