REAL ESTATE INVESTMENT

A Step By Step Guide For Beginners Of Real Estate Investment

Table Content

Book Description. 3

Introduction. 4

Chapter 1: Real  Estate Investment 5

Chapter 2: Understanding the Real Estate Market 8

Chapter 3: Earning  Options In Real  Estate. 13

Chapter 4: 5 Steps  To  Finding  Affordable  Properties. 19

Chapter 5: Investment Strategies and Finances. 26

Chapter 6:Closing The Deal 32

Conclusion. 35

Book Description

What you will read in the next few pages will serve to inform you how you can succeed and get ahead in the real estate world. Just go ahead and tell yourself right now that you “will succeed” in real estate. Because really, the first step to anything is confidence, and that means that you have to believe what it is that you are saying. Real estate will help to lead you on to an entire lifetime of profit for yourself and your family.

Regardless of what your actual monetary situation is, you CAN improve it tremendously with the proceeds that you will be able to regularly pull in through real estate. You just have to have the mindset that doesn’t take no for an answer. I know that some of you may be living under certain situations that would cause you to raise an eyebrow or two as to what I have just said.

Perhaps, for example, you are living in an area where the property tax is going through the roof. But this is only a minor setback, and measures can be taken to counteract it. In reality, this excuse is just what it appears to be—an excuse. Because seriously, if a person applies themselves towards real estate, they will succeed.  Since the real estate market first began, there have been both windfalls and downturns, but in the end, everything always evens out. You just have to know how to ride the tide.

Introduction

The ancient Jews believed that there are three significant sources of wealth and investment wherein any man transacting with these would be wealthy. The first is ‘sheep,’ and for them, the category of sheep includes actual livestock farming and other forms of animal husbandry, also in this category is human resources and human capital development; which include businesses that transact with developing people, improving skills for people and working directly with people. So, organizations that are based on training people as in all forms of educational institutions, animal farming and feeding individuals, beauty, leisure, entertainment et cetera; when appropriately managed, will grow. The second category is ‘earth’ or ‘land’; this includes all forms of real estate, buildings, and construction. The third category is “gold,” which consists of every natural resource in our earth, covering investments in gold, diamond, oil, and other precious resources all around us. For the Jewish man, if he can find his way to invest in any of these in addition to his skill or job, he is sure to create tremendous wealth.

In a world where needs always outweigh resources, one has to have more than one source of income – primarily a combination of an active and a passive source of income. Robert Kiyosaki’s “Rich dad, poor dad” series really broke these things down for me a long time ago – you know, how he simply explained the cash flow, the difference between an asset and a liability; basic things about finance that we were not taught in school.

So come, let us begin this journey in this book to increase your financial intelligence as touching investing in the real estate market. We see that for true wealth, one has to travel his way from the employee part of the rich dad quadrants to the investor part of the quadrant – and real estate is one of those very lucrative areas we can invest our finance. There are four main investment varieties. These are the types of asset classes that can be used to generate some sort of income for you. Each asset class has its distinct features and pros and cons.

You can choose which investment vehicle to work with once you know their levels of risks, benefits, and match them with your risk aversion. You know it would not make sense to invest and have some kind of unrest while doing so. Hence, ensure your mind is at rest when you pick your investment vehicle.

Chapter 1: Real  Estate Investment

The real estate business constitutes the selling, buying, and renting of properties. It represents three categories, including residential, commercial, and industrial properties, each with their own rules and regulations that govern their transactions.

Investing in real estate is a strategic business because, for one to get returns, they have to assess whether or not the price of a property will increase or decrease. Real estate investors and property owners can make a profit when they buy or sell their real estate properties. The players in real estate business include agents and brokers who sell services to stakeholders in real estate business and make profits and commissions while doing so

There are a few different reasons why you may want to work with real estate, whether you decide to work with rental properties or with flipping homes. Some of the benefits that you are likely to see with this investment choice over any of the others include:

A Steady Income

Those who decide to invest their money in real estate do it because they want to earn a steady flow of cash. This is especially true when you are working with a rental property. You will be able to receive a payment from the tenant each month that they live there. And as long as you make sure that you do the calculations ahead of time in the proper way, you will take home a good profit while still paying off your mortgage.

This kind of passive income is a big incentive for those who are getting started with real estate. Depending on the area you decide to purchase in, it is possible to buy a suitable property. This property could help you to earn the right amount of income, enough to pay off all of the expenses that you incur with that property, and still give you a bit of money as profits or on the side.

You will find that there are some areas that are going to provide you with a higher income because they have a higher demand for places to rent out. These areas may include college towns or urban cities. If you choose the right property and price it outright, you will start with a steady flow of income for a very long time, and you can even use this as a way to save for retirement.

Even better, you don’t have to stop investing with only one property. You can pick up the pace a bit and choose to invest in more than one property. And with more than one property going, you will be able to increase the cash flow that you have in your portfolio.

Financial Security That Lasts A Long Time

The benefits of investing in real estate are going to provide any investor who is successful with the financial security that can last a long time. When you are investing in real estate, you are going to create a succession of cash flow that is nice and steady, and this will reward you with a lot of good profits for a long time.

When you get started with your rental property, it is going to give you a sense of security, especially since the value of the property is going to appreciate or go up over time. What this means is that the value of the property is going to increase over time because buildings, and the land they are on, are assets that will go up in value. However, even though this is generally true, there is no guarantee that the cost will go up forever. This is why you need to do your research and pick the property wisely before you purchase it.

The Tax Benefits

Another benefit that you will be able to enjoy when you get started with real estate investing is all of the tax benefits that you are able to get just because you own the rental property. This is another of the big reasons that a lot of investors choose to use this as their vehicle.

For example, when you calculate your rental income, it is not going to be subject to what is known as the self-employment tax. On top of this, the government is going to offer some more tax breaks for the expenses paid on the property, which include taxes, any legal fees, travel expenses, maintenance repairs, insurance, and the depreciation of the property. And as icing on the cake, the investor of real estate will be able to get some lower tax rates on these longer-term investments.

The Tenant Pays the Mortgage

The tenants you have in the property are going to be a significant benefit for investing in real estate. You are going to be making not only profits with this investment, but you will build up equity at the same time. The rental income that you receive from the tenant is going to be able to cover all of your expenses, and this includes any mortgage payments that you have.

While you are building up equity on your properties, a tenant is going to be the one who pays for the mortgage, rather than you. This is why as a landlord, you need to make sure that your tenants stay happy. This way, you can keep them in the property, and paying the mortgage for you, rather than having to deal with vacancies.

Real Estate Appreciation

If you are already investing in real estate, or if you have just started with this, you should understand that the real estate adventure is not a plan for investing in the short term. Instead, the benefits of investing in this choice are going to include how much capital assets, like the land or the property, will appreciate over the long term.

The longer that you own the property, the more it is going to be worth. If you purchase the property today and then decide to sell it after 30 years of earning a rental income on it, the value of the property will be higher in 30 years than it is today. This is one of the main reasons that investors will choose to enter into real estate with the idea that they will be in this investment for the long term.

Inflation

Unlike some of the other investments that are out there, investing in real estate will allow you to protect yourself, or hedge, against any inflation that you find in the market. When there is a high amount of inflation going on with the property, then this means that the value of your property is going to rise quite a bit. While other investors and individuals are going to be worried when the inflation rates go up too much, investors in real estate are going to welcome this inflation because it means their cash flow will go up.

You Get to Be the One Who Makes All of The

Decisions

Many of those who decide to go into investing do so because it allows them to leave their regular 9 to 5 job. This may not happen right in the beginning, and it could take a few years before you see the results of this. But, when you get good at investing in real estate, you can work it all out to become your boss.

This investment is going to be similar to what you can find with other kinds of businesses in that you will have complete autonomy and control over the strategies that you use for investing. But this also means that you are the one responsible for both your successes and your failures. You get the choice on which properties you would like to invest in, the tenants who get to move in, how much you are going to charge each month, and even who is going to be the one responsible for managing and maintaining the property.

Being a decision-maker can sometimes be hard for some individuals. They like to have someone over their shoulders, telling them what to do. If you are lost without having a boss to lead you and direct you, then real estate may not be the right choice for you. But if the idea of being your boss and calling all the shots makes you excited, then this investment could be an option that can push you far and helps you to see the results in no time.

Chapter 2: Understanding the Real Estate Market

Before we go too far into some of the specifics on the market and how to analyze and predict it, we need to make sure that we understand, and are on the same page, when it comes to the term real estate market. This is just a phrase that is used to describe the economic state of real estate, whether in the country as a whole or only in one area or market. This is often going to be based on the supply and demand for properties in that area.

This thought on the real estate market is pretty broad, and it doesn’t go into some of the more complicated parts of this market at all. When we are going to talk about some of the conditions of the economy in general with real estate, the details are going to be the part that is the most important. For example, you may want to consider some of the following thoughts when you hear about the real estate market, and tell if they are different or the same from one another.

• Are we talking about the real estate market and how it is doing in one specific location? The market for California could be widely different than what you are going to see in Iowa, for example.
• Are you looking at the real estate market and trying to see how it does in a specific niche? This could include things like hotels, office buildings, apartments, or single-family homes. It is possible that at this point, it is great to purchase a single-family home, but finding a good deal on an apartment complex may be out of the questions.
• Are you talking about the market for real estate for a specific user? The market may be quite a bit different for someone who wants to rent compared to someone who wants to purchase. A buyer may find that the market is great because there are a lot of properties on the market to choose from, but the seller has a lot of competition and may think that the market is bad.

No matter which of these you are talking about, the real estate market that we talked about above is going to be based on the demand and supply of real estate, regardless of what the user thinks, what the niche is, or even the location. Even with all these changes, there are going to be some patterns that you can analyze, which will help you out with your investment.

The Four Phases of The Real Estate Cycle

One thing that you may find interesting when you first get into real estate is that the whole process is going to be cyclical. What this means is that there will be a lot of repetition that you can watch out for. And if you miss one of the phases in the cycle, just hold on because it is going to come back around for you again. The cycle is not going to be steady, and it always moves at its own pace. Sometimes it will go quickly, and sometimes it will go slowly. And a single market may see that their cycle is going at a different speed or direction that you would find when you look at the national market as a whole.

There are four main phases of the real estate market, and once the four are done, the market will go back and start it all over again. These four phases are going to be known as:

• Recovery
• Expansion
• Hyper supply
• Recession

First off is phase one of recovery. The real estate cycle, which really doesn’t have a beginning and can start anywhere in the four phases, we are just starting here to make it easier, the market is going to be recovering from the downturn that is going to show up at times in the cycle. This is a time when the market is not in free fall that it was before, and it is starting to go through an upward trend.

For a home buyer and an investor alike, this is going to be a great time to purchase some real estate because it is often the bottom of the cycle, or when the properties are going to be at their lowest. If you wait too long after this time, then the market will go back up, and the property values will go up as well.

This phase of the cycle is going to be represented by a high level (even though it is starting to stabilize) unemployment, a high number of home foreclosures, and a lot of fear that the general population will have about the economy as a whole. This may be the time when you hear other people say that it is a bad thing to invest in real estate because they know so and so lost a lot of money when doing it.

Then there is the second phase, which is the phase of expansion. This is the place where businesses in that area are starting to add in more employees to their ranks, and you will see that many people are beginning to feel more confident in real estate again, which is making it grow.

This is the phase where you are going to see the prices of homes start to rise quite a bit, and it is going to be triggered by a decrease in the supply of available properties, but a climbing amount of demand. There are more and more people during this phase who are looking to purchase properties because they think that it is more of an advantage than living with their family or renting the property.

It is possible that during this phase, a lot of businesses are going to decide to expand as well, which cuts down on the available commercial buildings. Thanks to this expansion, developers in real estate are going to start building up new homes, as well as some unique properties, to try and cater to this demand.

When you are in this phase of the cycle, you know that it is the perfect time to start investing in real estate. The rising prices of rents can help you make more, while the costs of the properties are still pretty low. And a lot of people have a general outlook on the market that is optimistic. If you act early enough in this phase, you will still be able to find some good deals because the market is dealing with a bit of a mess from the foreclosures that were there before. You will have to put in a bit more work here to get them.

This is a great market to be a part of, but you need to act quickly and be on the lookout. It is possible that even during this period of growth, there are some big problems in the guise of speculators that will enter the picture. These speculators are a type of investor who is going to rely very heavily on the amount of growth that happens in this market to help them generate profits. And they are going to make sure that their numbers are based on this need.

Do not become a speculator. Many times, these investors are not playing it smart, and they are going to pay way more for an investment property than they should, simply because they can. This can lead to the next phase, and homes that are way overpriced for the market.

Now we move into what is known as the third phase of the market cycle, which is going to be a boom cycle of hyper supply. This kind of hyper supply is going to be caused, at least in large part, by a lot of builders who are willing to pay more for the land and any construction than they should. They are doing this because they are basing their numbers on the idea that the price they can set for rents will rise indefinitely, and this will justify what they are paying. House flippers who aren’t careful could end up doing the same thing, and this causes them to pay too much for the property, simply because they know that there is another person who will come out and overpay for the work that they did.

You will notice that the demand is going to start leveling off a bit during this time, as the supply that was built before will reach more of an equilibrium. This means that during the expansion phase, new construction is going to be built to accommodate the increased demand for real estate, and at some point, it is going to catch up, and the amount of supply will equal the demand.

Now, if we were living in a perfect world, there would be some stabilization in the market, and everyone would be happy. But because real estate development is going to be a slow process, and can take a few years, the construction that some people started during the last phase will continue at high speeds. The supply is going to overtake the demand, and there will be a rise in the vacancies. The house of cards that come here will be the greater fool theory, and it is primed for that wind, or the market cycle, to come and knock it over.

When you are in this period of the market, there can be a lot of stories about wealth, and how much people have been able to make in real estate, will come out. And these are not all lies because some people who got in early and made smart decisions were making money. But at some point, the costs will get too high, and the demand will go down, and it will stop. And way too many people, who jumped in without thinking through the process and how much longer it would last, will end up losing.

To avoid coming into the market during this time, when the costs are high, and there aren’t any profits to be made, to really crunch the numbers. There are going to be a lot of stories out there about how much money you are able to make. But if you crunch the numbers and it isn’t adding up, then it is time to step back and wait for the market to cycle out.

And now it is time to work on the final phase, the recession. In this phase, you can look at some of the building projects, the ones that were promising a few years before, can’t be sold, which will drive down the prices fast. The foreclosures are going to go high like crazy, and many owners are going to be underwater. Investors are going to find that it is difficult to pay their mortgage because they have to decrease the rents they charge, or because they have more vacancies as people can’t afford to rent either.

In some cases, this recession in real estate can happen along with a recession in the economy, like what was seen in 2007 and 2008, and it is easy to see why millions of homeowners were out of work, not able to pay their mortgages on time. We’re finding out that they paid too much for the property to start with.

This is maybe a wrong time for those investors who are already in the market and who purchased the property at a price that was way too high, but it is perfect for new investors who are willing to get into the market and hold onto the property for some time. While everyone else is worried and upset that they paid too much for the properties, the smart investors are waiting it out for the bottom so that the supply will once again dip below the demand where a great deal can be found.

Once the market does get to this bottom, this is the best time for an investor to get in and find some of the best deals possible, and help out other homeowners in the process. While other people may be running away from real estate during this time, a smart investor will see that the market is bottoming out, and that, since it is a cycle, it will go back up soon. They will take up properties at a high rate, and then rent them out and wait for it all out until the economy goes back up again. The market enters into the expansion or the hyper-supply again, where they can make a considerable profit in the process.

After looking at these four parts of the market cycle, it is time to analyze where you are currently, especially in the market where you would like to buy and sell. If you notice that it is in a recession, then it is time to hold onto your property and wait for things to go up. But it is the perfect time to purchase a property because you will be able to get it for a reasonable price. The recovery is another place to buy for the same thing.

The expansion phase can work as well if you are careful and crunch the numbers. But you need to be careful. But once the phase of hyper supply comes, it’s time to sell if you are flipping homes and stay out of the market. The prices are way too high, and things are going to start going back here soon, which can cut you out of the profits in no time.

The best way to look at how the market cycle is doing in your area, and whether or not it is an excellent time to purchase or sell is the supply and demand. If you look around your market and notice that there are a lot of properties for sale, and they have been on the market for few weeks, then you are probably in a recession or a recovery. The prices are going to be lower because of the competition.

However, if you notice that the properties are going fast and that the prices are high, you may be in an expansion, or the hyper supply. This would be a good time to sell a property because you can get a high price on it. But it would be a horrible time to purchase because you will end up spending way too much and would have a hard time being able to sell for high enough to make a profit.

As you can see, having a good idea of how the market cycle works, and where you are currently in that market cycle will influence whether you are purchasing or selling properties. Being able to read and understand this market is the best way to ensure that you can make a profit through all of this.

Chapter 3: Earning  Options In Real  Estate

The real estate market might have produced more wealthy people than all other industries and investment methods put together, but many people are still scared and skeptical about it. Most people think that starting a real estate investment business requires considerable capital. However, that’s not always the case. With the proper training and guide, you can make a vast amount of money in real estate, even if you are a newbie. You can take a cue from Kent Clothier. He started in real estate with his first escrow starting at $500. What he did in starting the business was to link up to someone who needed to sell his house with someone interested in buying a home. Now, he is a big-time real estate expert, flipping over 1000 properties and also managing another 5000 through his real estate company. The business of real estate is a very profitable one if you have the right skill and guidance.

Another example is seen in Graziosi, who was able to build a successful real estate portfolio with no startup capital or other benefits. What is the point of all I have been saying? You don’t need much-starting capital to make money in the real estate industry. However, you do need the knowledge and the know-how –and this is precisely what I seek to bring to you.

Do not get it twisted, buying and owning brick and mortar can be much more complicated than owning stocks, bonds, equities, and shares. For a while, since time began, it has always been wise to own a piece of real estate or invest directly or indirectly in one. This is evident based on the fact that for the past 50 years, it had been a leading investment vehicle. However, it has its risks and rewards. So the beginner would have to be educated to avoid pitfalls. Land investments can improve the profile you have as a financial investor. This is because it offers returns that are quite competitive. Furthermore, more often than not, the land market is one of low unpredictability, particularly contrasted with other forms of investments such as bonds and securities. The land is additionally appealing when compared with more conventional means of income.

Another beautiful thing about the real estate market is how much investment can be diversified here. Real estate has a very low correlation with stocks and other major asset classes– this means that at the point when stocks are down, the land is frequently up. Actually, in 14 of the 15 past bear markets, returning to 1956, private land costs ascended, as indicated by information from Yale University’s Robert Shiller, the co-maker of the Case-Shiller Home-Price Index. There are exceptional cases: land failed alongside values during the Great Recession (however, this was an irregularity, Schiller contends, mirroring the job of subprime contracts in commencing the emergency). This implies that adding real estate to your investment portfolio would reduce how volatile it is and give a higher level of income per unit of risk. When you are directly involved in the real estate investment, you get to have better chances of not losing. Hence, it is not as risky as the more indirect ones, such as the publicly traded real estate investment vehicles. An example of such is REITs (Real Estate Investment Trusts). This is a bit riskier than direct real estate investment because they function just like the stock market.

Moreso, real estate investment has some level of protection for your dividends, on a lighter note, this stability is so because real estate is built on brick and mortar: there is minimal principal-agent conflict. The inflow of interest and dividend to the investor does not depend on the integrity of managers and debtors; it is dependent on the stability of the business–so you are sure of your returns, given that natural disasters do not hit.

Another remarkable advantage of the real estate market is what you can call the “inflation hedging.” The inflation-hedging capacity of land comes from the positive connection between GDP development and interest for land. As economies grow, the expanding interest for land drives rents higher, and this, this way, converts into more top capital qualities. This way, the land will keep up the acquiring intensity of capital, by passing on some of the inflationary pressure to tenants ,and by incorporating some of the inflationary pressure in the form of capital appreciation. This simply means that as the economy expands, because of the inelasticity of housing and shelter for living and other transactions, the return on investment in real estate gets even higher. This is another pro to the real estate market.

Also, you can use the power of leverage! Is it not awesome? Look at this; investing in real estate gives an investor one tool that is not available to stock market investors– influence. If you need to purchase a stock, you need to pay the full estimation of the stock at the time you submit the purchase request except if you are purchasing on edge. Furthermore, after its all said and done, the rate you can acquire is still a lot lesser than with real estate, thanks to that magical financing method called “the mortgage.” Most home loans require a 20% upfront installment. Nonetheless, contingent upon where you live, you may discover a home loan that requires as meager as 5%.

This implies you simply will manage the entire property and, therefore, the equity it holds by just paying a small amount of the general cost—the size of your home loan influences the measure of proprietorship you have in the property. However, you control it the moment the papers are agreed upon. Do you know what this means? You are leveraging other people’s money and resources to build yours. Only real estate gives you this leverage! This is what provides boldness to land or home flippers and proprietors the same. They can take out a second contract on their homes and put upfront installments on a few different properties. Regardless of whether they lease these out, so inhabitants pay the home loan or they trust that an open door will sell for a benefit, they control these advantages, despite having paid for a little piece of the total worth.

Well, I have shown you the major pros of the real estate market, but here are some of the cons so that you can effectively count the cost – as a beginner, you must be guided properly.

The first and significant disadvantage of real estate marketing is “illiquidity.” That is, there is the relative difficulty in converting from asset to cash and cash to asset. Unlike a stock or bond dealings, which can be completed in seconds, a real estate transaction can take months to close. Even with the assistance of a broker, merely finding the right counterparty can be a few weeks of work.

Every other drawback the real estate market can have is the typical drawbacks any business can have if they are not appropriately managed. So, having seen the pros and con of real estate investment; the next question, the beginner should be asking is, “what is my earning options?”. There are different ways to earn in the real estate market, depending on your capital, personality, choice or desire, and expertise. Amid the various earning options, I am going to be explaining. You will have to choose as to which to follow and begin to build around strategically. But the question of earning options is not the only question nagging the mind of the one who wants to invest in real estate; I know you might have other questions like:

Questions on Real Estate Financing

“How do I invest in real estate without money?” – You can take out a home equity line of credit; you can either borrow from the bank or get a hard money loan, finding, persuading, and bringing in an investment partner with cash. Assuming control over another person’s home loan installments, which may be in a suspicious circumstance, trade some of your fixed assets such as your jewelry and so on. You can also invest using seller financing options such as leasing, amongst others.

“What does a wholesale deal refer to in real estate?” – This is also known as flipping properties. However, here, you never actually take ownership of the home, you just flip it. In the later parts of this book, I would show you how exactly you can do this. I am just whetting your appetite.

“in a nut-shell, how does real estate investment work?” – Well, it works based on cash flow! That is, make sure that your income is more significant than your expenses – this called real income. This can work for both long haul private and business rentals, just as it will work for transient excursion rentals.

Now, I know there are several other questions in your mind – let’s get to digging.

For making money through real estate, there are three major ways to do it. You can either use real estate as a passive means of income,.where you buy real estate and sell it at a later date after it has increased in value, or you can make it an effective means of income where you purchase property, renovate and sell it as soon as possible. This is known as home flipping. Thirdly, you can buy real estate and then lease it out to tenants. In a nutshell, that is it. Of course, there are perpetually alternative ways in which to directly or indirectly take advantage of real estate, like learning to concentrate on more difficult regions like duty lien declarations. However, those three things represent a more substantial part of the salary, and extreme fortunes, that have been made in the land business. By figuring out how to exploit them for your portfolio, you can add another advantage class to your general resource allotment, expanding both expansions and, whenever actualized judiciously, lessening risks. So, as someone venturing into the real estate, you have to answer the question of – what earning option am I breaking into the real estate market with? Let us look at some earning options:

Earning Options in Real Estate

Home  – renovation flipping: The fix-and-flip culture has detonated. Because of the ubiquity of home redesign appears, we’re encountering a monstrous blast in the current remodel flip market. While there can unquestionably be a ton of cash to be made here, exploring these waters, to start with, can be dubious. When you come up short on the learning or the experience, you could end up on the losing end on the off chance that you don’t choose the right home. Matt Larson has flipped over 2,000 houses in Iowa and Illinois. Through the span of that time, he’s found out certain exercises on what to search for and what not to search for when flipping a home with a remodel. Do you know what his recommendation is? “Choose the ugliest home in the most beautiful areas.”. That is the place the genuine worth is. The other trouble here isn’t possibly finding those homes when you’re not well-connected with realtors, yet in addition, understanding your after-fix worth. What amount can the house be esteemed once you have put resources into fixes and fixes? To precisely decide the response to that question, you need a stable association with a general temporary worker and an on-location voyage through the property. While purchasing locales “concealed” at a closeout may appear to be charming, except if you truly recognize what you’re doing, you could lose cash. In any case, profiting on a home-remodel flip can be reasonably clear – as long as you comprehend the necessary expenses and potential worth. Do not be nervous. This will also be explained thoroughly in later.

Long term residential rentals: One of the most common methods for making money in real estate is to leverage long-term buy-and-hold residential rentals, that is, you get a place, hold on to your status of ownership and then rent it out to tenants. Individuals will consistently require a spot to live, and that implies engaging with investment properties. You have to do the correct measure of due determination to source your property by keeping these three basic principles in your mind: 1. location, 2: location, and number 3. You guessed, right, location! It is almost like a real estate cliché, be that as it may, location is everything with regards to land. In addition to the fact that this applies for really an expanded resource esteem after some time, yet besides in your capacity to rapidly lease that property to a long-time occupant – families, business organizations and other kinds of organizations are particular about their neighborhood; sometimes it a show of class and credibility for them, so it is essential. When you are considering long-run residential rentals, look for a great location. The location of your structure is more important than the current state of the property itself. Run-down homes in nice locations are one of the most effective investments you’ll be able to build. This earning option includes a progressively customary way to deal with profiting in the land advertise. It means purchasing a property with some money close by to make an initial installment and, after that holding that property as long as possible. So, to get into this angle of the real estate market, you have to have some cash handy. So, if the owner of a piece of real estate wants to liquidate for any reason, it is necessary you have some money at hand.

The lease option: Lease alternatives can be an extraordinary method to engage in the land without setting up a lot of capital or even have incredible credit at the start. You’re renting with an alternative to purchasing. This will, in general, function admirably when the land market is climbing since you’re making a pre-set cost at which you can later buy the property. For example, the value of structures or land is increasing in an area, you can get a lease on the structure and negotiate at that same point how much you can buy it if the property is being sold, and you can land a reasonable price before the price of the property significantly increases. What makes it considerably progressively magnificent is that you can even pivot and offer your privilege for the buy to another person. For whatever period that this is an alternative, you can practice and not something unchangeable that says, “you need to buy toward the part of the bargain notwithstanding,” at that point, you could turn a benefit.

Contract flipping or becoming a broker: One way that you can profit from the land without setting up particularly capital or credit is to flip contracts. You should simply locate a troubled vendor and a propelled purchaser; at that point, unite them. The stunt with contract flipping is to distinguish the upset dealer and find a prepared to-go purchaser. By finding the merchants and the purchasers previously, you can, without much of a stretch, go into an agreement with the certainty that you won’t stall out shutting escrow on the property. To do this, you need to distinguish either empty homes or homes that are behind on their home loans. That is the dubious part. You’re adequately attempting to discover troubled vendors. However, homes that are as of now empty are prepared for an open door like this. So basically, being a broker is being able to connect a buyer and a seller, take your cut and walk away – it is not as easy as you think; of course, the experience will teach you that.

Short sales: you can earn through this option as well; short sales happen when the person who currently owns the house defaults on the mortgage payment and needs to have it settled. With the goal for this to occur, all gatherings need to consent to the exchange since the property is being auctioned off for not precisely is owed on the current home loans. This can be an extraordinary chance to make a brisk benefit without putting resources into protracted remodels. Be that as it may, prevailing with short deals or some other default-type sell-offs is regularly troublesome. You need to pay for the homes through real money.

In some cases that need to occur without you seeing the site or structure is paid for ahead of time, so you need to be careful  .it takes a lot of experience in the market, networking with older brokers that have been in the real estate business to pull this off successfully. Except if you’re a prepared speculator, hopping in without an investigation and complete audit could be unsafe. Getting a short deal open door requires some serious energy, yet trust me; it merits the pause. Many thousands to a huge number of dollars can emerge when the property buy experiences because the bank is immersed in an awful venture. Be that as it may, don’t hope to get the property for a take – you will, in any case, need to arrange a generally reasonable cost. Contingent upon how gravely the bank needs to empty that property, it could lounge around and hang tight for another purchaser, so do not try to be too greedy.

Vacation rentals: Vacation rentals can exhibit a rewarding way to benefits in the commercial land center. Not exclusively would you be able to make some side hustle pay from vacation rentals, yet you could conceivably make a lot of cash and develop a significant secure revenue stream if you are in a highly-trafficked tourist location. Places like Los Angeles, Miami, and other tourist hotbeds are well known for having a high demand for these short-term rentals. The beautiful part about this is that you do not need to own the home to be in this earning option; all you just need to do is negotiate well with the owners of the building and provide a high-end, high-class consumer experience then watch the money swim towards you. How do you participate? Leverage existing relationships with house owners in your Environment – Network with others. Build bonds. Create systems. Ensure the utmost marginal satisfaction of your clients. Go well beyond for anybody remaining at the homes you oversee. What’s more, perceive how you can take a portion of the time and worry off of the present proprietors’ current rental organizations. If you have a property, show it on some renowned sites and other platforms before managing vacation rentals for other owners.

Hard money lending: you can also penetrate the real estate market by; going into “hard money lending.” These kinds of lenders give loans on short-term loans to people who usually are not qualified for those loans. To do hard money lending, you need to have money in the first place. You can lend and gain perfect interests because the loans are for a very short period. You can also be the hard money lender with the backing of legal practitioners. It is a good bet, but you will need to have some capital. The interest rates here are excellent – and as the saying goes, “no risks, no reward” There is more risk but also more reward in hard money lending. It can be a way to let your cash remain liquid and still generate some good profit, especially short term.

Commercial real estate: One of the incredible open doors in land for making a lot of cash is to put resources into business land. Business land designers center around flipping properties as well as on creating them, enhancing properties so as to build their total compensations through remodels and redesigns. They additionally counsel on ventures that may take a lot of prepared property speculators to see to realization. Ali Safavid, the organizer of 5209 Investments, says business land is one of the most worthwhile hotspots for both salary and benefits in the land showcase; I observe this to be extremely valid. For whatever length of time that you’ll see manners by which to add worth to the trade, putting resources into business land can be one of the biggest pay generators you’ll discover. Individuals continuously would like office space and retail to run their businesses. These physical locations are bread and butter within the property niche. As you grow, you’ll realize ways in which to open up shopping malls, develop massive scale buildings, and a lot more. However, you have to start somewhere.

Having looked at your capital, expertise, and personality type, you will have to choose one or two or a combination of these options with which to earn cash. Having done that critically, you then move on to research the real estate market around you with more depth.

Chapter 4: 5 Steps  To  Finding  Affordable  Properties

The five steps to finding a lucrative yet affordable rental property are:

1. Find the right market
2. Find the right price
3. Find the right team to work with
4. Have the right tenants
5. Invest in yourself through mentoring

Each of these steps is crucial – if you are missing any of them, you are not following the system. We will go over them each in turn below.

Step One: Find the Right Market

There is no one right market. They exist all over the country and across the globe. The right market is a highly-targeted niche market that is full of high-quality homes that need a little renovation. Also, what is the right market for one person might not be the right market for another. So much of how you build your rental property portfolio should be personal, and not just regurgitating cookie-cutter advice.

Of course, part of understanding what the right market is is understanding what the wrong market is.

The wrong market is in overpriced cities like New York, San Francisco, and Austin. Markets that are exceptionally tenant-friendly are also tricky. Cities like New York, where rent control and the existence of laws that make it difficult to evict a tenant who doesn’t pay rent on time, are havens for ‘professional’ tenants that are hard to get rid of.

Other things to look for to determine if you are looking at the ‘wrong’ market are:

• Jobs leaving the area
• Cheap properties, but only in neighborhoods with high crime rates
• Extremely low rents
• Houses that are in extreme disrepair

If these conditions exist, you are in the wrong market, with the wrong inventory and selection. The financial payoff is meager, and you won’t be able to get the cash flow required to gain real financial independence. Expensive home renovations mean that the costs are too high for the property to be cost-effective to own as an investment. The income generated will be too low to offer you financial freedom. Crime in the neighborhood – or, the wrong kind of crime, like we’ll talk about later – will keep away stable, long-term renters. Remember, we want 20-30 years of steady income – it’s not hard, but you have to know how to be just a little bit discerning.

So now that we know what the wrong market is, what are the things you want to look for to see what the right market is?

In the right market, you’ll find a massive inventory with which you can quickly build your portfolio. It won’t be overly competitive. Competition, after all, drives up prices, and we’re looking to buy low. The higher the supply, the less the demand, and the fewer bidding wars for the same property. In the right market, rents are relatively high compared to the price of the property. The neighborhoods are safe with low crime rates. These neighborhoods are full of ordinary, hard-working people who pay their bills on time every month. These properties can run for years without having problems, and the tenants stay to raise kids – that can be 30+ years with a stable, long-term tenant—passive income like clockwork for a long time.

When you find these houses in the right market, you can get an affordable start to investing in the real estate market. With costs this low, it is relatively easy to get the funding and financing. They are easy to launch and scale.

There are thousands of these markets to try – but you only need to find one. I guarantee you there is one near where you are right now if you know how to look.

Remember, it has to be the right market for YOU, with an emphasis on Y-O-U. Some people are more comfortable in urban areas, and some people are more comfortable in rural areas. There’s no right or wrong; there’s only your comfort zone.

How far you are willing to travel is another issue. If you need to move out of state, can you drive to where you need to go? How expensive are plane tickets? Is there a similar market that is cheaper to fly to? Do you have family or friends in the area who will let you stay with them when you go, or will you pay a hotel expense? If you do pay for travel and hotels, how much does it cost in one location versus the other? There is a lot to consider than just the property. You should list all of these factors side by side and make sure to include these in your calculations.

Step Two: The Right Price

Real estate prices can vary in different parts of the country. Urban areas tend to be more costly than rural areas, and growing cities tend to be more expensive than ones on the decline. So how do you know if the property you are looking at is the right price?

You’ll know it is the wrong price if you find that your estimated cash flow will be less than $200 a month. You may be told that ‘appreciation’ is the reason for the high cost – that’s a red flag as well. Some other signs that you are not looking at a house at the right price are:

• It takes twenty-five or more years to have a cash flow of $800 – $2,200
• It takes up too much of your debt-to-income ratio⁴
• You won’t be able to handle the costs associated with the house if it is vacant for a while
• The financial payoff is meager
• To purchase the home, you have to over-leverage your other assets, which limits your ability to fund future endeavors
• You don’t have much wiggle room to handle the regular ups and downs that happen
• The income generated from the property is too low
• It will take too much time to recover the costs of your investment

So, now that we know how to recognize the wrong price, how do we know how to understand the right price?

The right price is one where you can easily cover the carrying costs in the event of a temporary vacancy. You would still get significant tax benefits, and the total time to complete cash flow (paying off the mortgage and keeping all the rent for yourself) is only three to five years.

The reason why this is the formula for the ‘right price’ is that it allows you to get a cash flow that overgrows over time. You can build an extensive portfolio quickly in a way that is easy to acquire and fund. You won’t go over-leverage yourself. In this way, you can assure yourself safety and security. Isn’t that what you want for yourself? I know it is what I crave.

I had a client that only liked Polish, working-class neighborhoods – the kind in which she grew up. And that’s OKAY.

Sure, that neighborhood had more expensive homes (55k-70k), and slightly lower cash flow – but she was happy to build that, and it was still cheaper than what mainstream advice suggested. It’s okay if SUB30k means 60k for you – because that’s your comfort level. So, follow YOUR instincts, and do what you feel good about – and don’t always chase the cheap dollars if you’re not comfortable with it. You have to live with it, not the person who gave you the advice. And it’s NOT always about money. It’s still a fine line of discerning how inexpensive investment is weighed against how we envisioned our investment portfolio to shape up.

Step Three: The Right Team

Before you even choose a market, ALWAYS verify that it’s the right market with the right TEAM! And, you should have this checked before you PURCHASE your first investment. I’ll show you what I mean in Chapter 9, “Investing Out of State.”

I am NOT a landlord – I am a rental property owner who has chosen the right investment and infrastructure around it to receive passive income and financial freedom. I am NOT a landlord. I take calls from my property management company only, not tenants. I do not call contractors for repairs, as that’s not my job – my team handles that. So, if you want true financial freedom, finding a market that already has the right team in place is critical to creating a business and not another job.

Like most things, you are not going to be able to do this entirely on your own. You will need to assemble a team to help you through some of the steps of this process. You may need a real estate agent, a plumber, an electrician, a general handyman, a painter, a lawn care service provider, a banker, a home inspector, and any number of other professionals. Some of these people or businesses will be great, and others will just take your money and do a substandard job. Others may foul things up in a way that costs you more money in the end. That’s why it is so essential to assemble the right team.

The wrong team won’t come with any references. There’s nothing wrong with finding someone out of the phone book or through a Google search if you get independent recommendations.

References (online reviews are JUST as valid as seeing photos on the contractor’s phone) will tell you how trustworthy or competent this person is. Did tools, appliances, or other equipment go missing? Did they bump the walls or scratch the floors during the process? Did they show up when they were supposed to and finish the job by the date promised? Were there hidden costs? There are specific questions you should ask the references – it isn’t enough to just get a written recommendation. It could be a family member or friends that wrote the recommendations.

The wrong team won’t ‘get’ you the results you want. You know what I mean by this – how many times in your life have you tried to explain something to someone, and they just look at you with that blank stare? Or maybe they smile and nod and then speak as if they haven’t heard a word you said. It’s a great feeling when someone gets where you are coming from. That’s worth waiting for.

As much as I love a good bargain, I’ve learned over the years that you get what you pay for, especially when it comes to your team. Beware of super-cheap providers you find on Craigslist or other sites. You might find the right contractor looking for a side hustle or just starting, or, more likely, and you will find someone who can’t get business any other way.

If you find yourself with the wrong team, you run the risk of losing money during the renovation as the costs skyrocket. You need to know on the front end if the people you hire are going to finish their job well, with integrity, and with the care and awareness that their reputations are at stake.

Time is money. If the people you hire take six weeks to do a two-week job, then you miss out on four weeks of rent. With a rental business, you need a quick turnaround. Missing a month or two of rent unnecessarily can be the difference between being profitable and losing money in the short term.

Real estate investing is a location game. You need a team that is familiar with the particular market in which you are investing – you don’t put granite countertops and copper pipes in a $25,000 home in a working-class neighborhood, for example. No one living in these neighborhoods needs wants or expects complicated wainscoting or fancy cabinetry. You need location-specific information to make sure that your property fits within the aesthetic and expectations of the neighborhood in which you are investing.

The right team is reliable and experienced and has several contacts that you can use to expand your team. They are familiar not only with the market itself but with you. They take the time to get to know you and your particular wants and needs. It’s also essential that they understand the laws governing your rental in that location. Wouldn’t it be awful for an agent to sell you a house that is not zoned for the type of rental you want to do? Or for an electrician to do work that didn’t comply with the codes in the area?

The whole idea of this type of investment is passive income. Passive income means that once it is set up, you don’t have to do much but own it – your team takes care of the day-to-day details. This can only happen with a trustworthy team. When you know they are going to do right by you; then you can rest peacefully and comfortably, knowing that your investment is working for you and not against you.

You can learn a lot from the right people. An excellent real estate agent can teach you a lot about the neighborhood you are considering. A good handyman may be able to suggest other materials or ideas for your home, which will last longer or save you money. You can’t be an expert in everything, but you can learn from the experts you hire. They can help you fill in any knowledge gaps you might have when entering a new market.

In any given market, there are hundreds of professionals to choose from. You only need a few to get your real estate business running on autopilot – the only trick is to make sure that those few are the right few.

You might think it is putting the cart before the horse, but make sure you get that team in place before you make your purchase. In fact, get that team in place before you even settle on the market. You won’t be able to successfully invest in a market if you can’t build the team, so it makes sense to build the team first so that you know you will have the right people to rely on once things get cranking. Choose the market based on the support structure; don’t find the support structure after you’ve chosen the market. You can’t. It might not be there.

Step Four: The Right Tenants

Having the right tenants in your property can make the difference between having smooth, passive income and having a massive headache and constant stress. So how do you make sure you have the right tenants?

It’s essential to have a thorough application process that will screen out the wrong tenants. However, it needs to be appropriate for THAT neighborhood. Don’t expect someone who makes a decent income, but is not a high net worth individual (i.e., earns 70k a year – and yes, for many that are high net worth) to not have a credit blemish in these neighborhoods. However, you shouldn’t allow anyone with multiple “charge-offs” of non-paying credit accounts in either. You can accept people with evictions and multiple charge-offs, but discerning investors know how to circumvent their risks by collecting more upfront for the security deposit (first and last month’s rent, two to three months of security deposits). That’s the art of learning how to invest in these neighborhoods. Here are some things to look for:

The wrong tenants are ones who don’t earn the minimum amount necessary to pay the rent each month. They also don’t have a very good track record at meeting their regular obligations. Running a credit report will give you this information. Potential tenants who have court records – not just criminal records, but civil records as well indicate that they are not the type of responsible people you want to have in your rental property. We’ll talk more about the specifics of the screening process later.

The idea that tenants should have “first and last month’s rent” is a cliché for a reason. If they don’t have enough money to put down a deposit, whether you call it a security deposit to cover potential damages or “last month’s rent,” they aren’t likely going to meet their obligations down the road. Things happen – cars break down and need repair; people get hurt or become ill and need to take off work, potentially decreasing their income, or they get a traffic ticket that they must pay. While these things can be tragic for the people involved, they can also mean that you aren’t going to get the money you are owed for providing them a decent place to live. People who can’t come up with a deposit are usually people who haven’t planned for emergencies or even foreseeable contingencies.

The last thing you want is for your monthly rental income to become unreliable. After all, the reason why you started this whole thing was to create regular income. You don’t want to have to involve the Court system to resolve disputes. Courts don’t move as quickly as you might like, and they can be expensive and inconvenient to utilize. Often it is more cost-efficient to cut your losses and not even bother, as the time and expense of Court involvement are more than what you’d gain if you win your case. Don’t hesitate to use the courts as needed, but the point is trying to be discerning enough so that you don’t have to go to that level in the first place. It’s doable.

Of course, there are bad tenants. I’m here to teach you how EASY it is to avoid them if you know what the heck you’re doing. And we do.

The right tenant, on the other hand, is someone who can be a reliable, long-term tenant. You want to look for someone who has a documentable habit of meeting his or her obligations, a consistent employment history, and an appreciation for your property. One to two blemishes are normal and acceptable – but more than that requires you to collect additional financial reserves upfront. Ideally, this is not just a place for them to lay their head at night and store all their junk – this is their home for the time being, and they should take as much pride in it as you do.

When you have the right tenant, you won’t have to worry about bothering with the legal system, either calling the police because of illegal activity (or having the cops called by neighbors or others) or engaging the Magistrate or other civil courts to handle eviction or proceedings to be reimbursed for expensive damages.

The right tenant can give you peace of mind. Not just emotionally, but financially. You can have a steady stream of reliable income year after year. No extra time or effort is needed to run your business. You can spend your time doing what is needed to improve or expand on your business, not manage the headaches that go along with a bad tenant.

There are so many reasons that getting the right tenant is an important part of the system I’ve devised. You just need to know how to find them in your particular market. Each market is different, and you will have to use different criteria to evaluate them. Figuring out what those criteria should be is the trick. But don’t worry – you can find the right tenants anywhere. If you follow these steps, you can find quality tenants in your rental, wherever it is, and receive a rental income.

Remember Kim and Chuck, the brother and sister team I talked about in Chapter Two? Remember how they found a triplex in D.C. for $75,000 – that’s only $25,000 per unit. They were fortunate that the house came with two good tenants who were paying $1,100 per month each. It didn’t take long before they were able to find the right tenants for the third unit, who is paying $1,300. That means that Kim and Chuck are getting $3,500 per month on a house they only paid $75,000 for. That’s what the right tenants did for Kim and Chuck, and what they can do for you.

Step Five: Invest in Mentoring

When building a successful real estate business, you can go about it in two different ways:

1. You can figure it out all by yourself and waste a ton of money and time by making mistakes on your own. Or,
2. You can get help from someone who has already made the mistakes and learned from them. Someone who has already paid the price can fast track you on to the road to success.

Of course, it is important to find a mentor you trust. Do your research and talk to other people who have used that mentor to make sure you are getting what you need from that person. I’m never offended when people want to know about my qualifications and successes with mentoring. Asking those questions is just part of the due diligence you should be doing.

It’s important to find the right mentor. The right mentor is someone who, like me, is willing to meet you where you are. There is no one size fits all solutions to every problem. Your individual needs, goals, and desires are different from anyone else’s. Make sure your mentor recognizes that and doesn’t try to make you a clone of themselves. Your investment portfolio should be as unique to you as your fingerprints. We learn best by being in the energy and presence of those who have experience in a field, and this is no different.

When you find the right mentor and engage their services, you will get a number of benefits such as:

Return on Investment. Think of what you pay your mentor as ‘tuition.’ You wouldn’t expect to be a doctor or lawyer without going to medical school or law school. And, despite the high costs of medical school and law school, wannabe doctors and lawyers go to those schools because they know they will ultimately gain way more than what they pay. It’s the same with mentoring – you have to pay in advance for the knowledge you need in order to be an expert. And when you do, you will find that you get paid back in multiples. You will get into the market faster, and more strategically, you will make fewer mistakes, and overall you will have the quicker acquisition of property and conversion to rental income. Mentoring pays for itself and then some. And you’ll leave saying, “Investing in real estate is EASY!” Trust me, this isn’t everyone’s story, but it can be your story.

Leverage. You can leverage your mentor’s experience for your advantage. Wouldn’t it be great to stand on someone’s shoulders to reach the top instead of climbing all the way from the bottom by yourself as I did?

Accountability. Doubts often creep in at night and affect your ability to function during the day. It’s easy to ignore what isn’t right in front of you. The distractions of everyday life can make getting things done difficult. A good mentor will hold you accountable to your goals. You will set deadlines, and your mentor will make sure you meet them. If no one is looking over your shoulder, would you get it done?

Access. A good mentor can open doors for you. You will have access to their contacts, knowledge, and resources. They can give you good intel on the ground, and the phone number of a reliable contractor.

Focus. A mentor can keep you focused on. On your own, you might play the “what if” game to your detriment – what if I do it this way? Or that way? Or these things, too? A mentor can help you keep your eyes on the prize. In this case, the title is a low-cost property between 30 and 50 thousand dollars that gives you immediate cash flow: one single focus, one single intent.

Chapter 5: Investment Strategies and Finances

Market and financial knowledge and a well thought out strategy is the mixture that investing in real estate needs to be successful and profitable. What is the strategy that you will implement? Will you use more than one? Do you know how many strategies there are? Which one will you choose?

A strategy depends on whether you are going to make a short-term investment for a quick profit, or own and maintain a property in a long-term rental investment and continuous cash income. How the strategy is decided on what option you use is really about what type of person you are.

Are you a risk-taker and want to get the cash profits in a short period? Or is the strategy that you think will be best is at a slower pace and would like to keep a property on a long-term basis while being open with the possibility of other avenues opening to do overtime

You know that to be profitable, you will be investing in properties that can be flipped, that is, rehabbing, upgrading, and re-selling to a buyer for it to become their primary residence. The other way to be profitable is to purchase properties that can be rented to others and create continuous cash flow.

Short-Term Investing

Short-term investing is a strategy that targets a quick profit in a short period, approximately five years. This is a stimulating strategy because it opens up the opportunity of making a substantial profit relatively quickly. There can also be a risk in going this route, especially when understanding the numbers is a problem.

There are several things to consider when you invest in the short-term. You invest in a property at a convenient time and sell the property before the value diminishes, or there is a substantial competition that slows down the turnaround of selling the property. This type of strategizing may feel more like a gamble than an investment. All the elements of this strategy have to meld together for this strategy to be successful.

Flipping and Fixing Properties

“Flipping” houses mean buying them at below market value, rehabbing them, and re-selling them. The strategy to flip the property is as follows:

• Invest in a home
• Rehabilitate or upgrade
• Flip (sell) the property for a profit

Set a budget and have an inspector go to the property with you to inspect the home, a contractor to go over the details and approximate pricing of renovations that are needed to bring the property to a sales level and an appraiser to check on any issues that may or may not pass the bank’s standard to make a loan if you are financing the transaction.

Short-term flipping properties will get you a quick profit, and the profit may not be as much as you think. Along with the purchase price, there are closing costs, property taxes, insurance, and, if not purchased with cash, mortgage payments as long as you own the property, which as long as the property is going through its rehabilitation and finally listed on the market. The rehab costs are additional expenses.

If flipping houses is a strategy, you want to use in property investing, understand that gaining the profits can be quickly done if you price the property right, the renovations and upgrades are financially within reason and that the timing to accomplish and complete the renovations will not be too lengthy. Overall, this strategy comes with risks, so being financially prepared is key to its success.

Long-Term Investing

Long-term investing doesn’t give a quick profit, but it is a more profitable strategy in the end. Patience is the key to having this type of strategy to be successful. You will gain sizeable profits with a long-term strategy. If the initial investment is a good one, the better it will be to have the property as a long-term investment.

What makes this strategy a better choice if you want a profitable, minimum risk investment? Time. Time is what makes this a better strategy, and the risk is less than the short-term.

The financial budget is the most critical element of a long-term plan. The financing needs to include purchase price, insurance, taxes, closing costs, the mortgage payments until the property is rented, and funds that are set aside for possible renovations. The majority of the costs will happen in the first year of ownership when a profit may not occur, and you may break even. However, if you’re willing to wait, and the strategy is well-executed, the investment will gain increased profits if you have the patience to wait.

Long-term Buy and Hold

Long-term buying and holding fall under long-term investing. If you purchase the property as a rental for the cash flow or use it for the growth of your capital doesn’t matter. When you buy a property and own it over a lengthy period, it is considered a buy-and-hold property.  (On Property)

When you purchase a property as a buy and hold investment, researching the neighborhood, market, and expenses of the property is key. The goal is to create positive cash flow. If the property is to be a rental, managing the property will also be part of the financial outlay. You might consider hiring a property management company unless you want to manage the property yourself, which is time-consuming in itself.

Capital growth and rental rate increase over time make this strategy considerably profitable. The rent paid by the tenants would pay down the mortgage if the property was financed by a lender. After taxes and maintaining the property, the rental provides lucrative cash flow. Additionally, there are the tax write-offs that can be taken on the property as well. You can hold on to the property and continue to use it as a rental or hold it until you feel the property will have considerable value, and you can sell it or a substantial profit.

Airbnb Investing

Airbnb is a short-term rental, but a long-term investment. Short-term in the sense that the tenancy is only for a brief period, but long-term that they can be either buy and hold property or a property that is a long-term property that an investor uses over and over to rent to people for a short time.

If you are considering an Airbnb as an investment, the closer it is to shopping, tourist places, or other sites that are preferred by travelers, the bookings for the property could probably be pretty continuous. If it’s at a distance from all the attractions that tourists want to see, the rental demand will reasonably pretty slim and few and far between.

Short-term vacation investments in certain parts of the country are seasonal. San Diego, Miami, and Austin are good areas for Airbnb properties. However, there are new rules as of August 2018 in New York and San Francisco. These cities allow Airbnb properties, but the “host” must be a full-time resident of the property, the property cannot be rented for longer than 90 days, and the host must register the property with the city as an Airbnb.

Major cities in Florida, like Orlando and Fort Lauderdale and many beach cities in between, can probably have almost year-round bookings. Other parts of the country can provide Airbnb rentals where there are skiing and other winter sports. However, if there is a bad snow season as in no snow at all, the property may be a struggle to maintain financially.

The maintenance of an Airbnb or any vacation rental that is an investment property is time-consuming. After a tenant leaves, the property has to be cleaned and restocked with any amenities and essentials that are offered to renters. If an investor does not have the time to care for the property, a property management company, or a house cleaning service can be hired. The expense of a cleaning service or management company should be included in the financial budget.

It would be a good idea to check out the area where a property is located and see if there are any restrictions in using a rental as an Airbnb or seasonal vacation property. There can be legal rules and regulations that can impact on this type of investment opportunity.

Rent-To-Own

Since you are beginning to invest in real estate, this is an investment that you may consider this type of rental investment. This type of investment is also known as a lease with the option to purchase, or purchase option.

The process of transacting a rent-to-own property has a renter who is seeking to own the property after renting it for some time and then purchase it. The renter is a prospective buyer, will rent the property for 1-3 years, and, at the end of the rental lease, will purchase the property. The purpose of the lease requires the property to be bought by the renter. Additionally, while the renter is leasing the property, the investor can’t be listed for sale to the public. It remains off the market.

Prior to the rental lease being signed, a non-refundable deposit will be paid to the investor. This deposit is put towards the purchase price of the property and is about 2-7% of the purchase price of the property.  The deposit is what would normally be deposited if this person was putting a deposit on a home that was a straight sales transaction. The deposit benefits the renter when they look for a mortgage to fund the remaining price of the property.

The property is going to be sold for $200,000 to the renter at the end of the lease.

The upfront non-negotiable deposit is 2% of the price of the property would be $4,000. This will be credited to the purchase price when the renter buys the property. The purchase price is now $196,000. This is the amount of funding the renter will borrow a lender to fund the rest of the property’s sale.

This deposit is also beneficial for the investor. An immediate profit is garnered by the investor when the renter begins to live in the property. The deposit is non-refundable and is not counted as a security deposit that would normally be part of a lease rental agreement. Additionally, if the sale of the home falls through and the renter breaches the lease by not purchasing the property, the renter will not be able to have the deposit returned.

The continued cash flow that comes from a long term rental is another benefit for the investor. In addition, the tenancy will be long term, the investor can charge a higher rent than the going rental rate in the area. A 10%-15% increase above the average rental rate is used to offset the property being off the market. This fee, as well as the non-refundable fee, will be set aside in escrow and, if the purchase of the property goes through, will be used as part of the property’s purchase price.

If the renter purchases the property, they will already have funds that are considered a deposit towards the purchase price of the house and the initial agreement that they sign at the beginning of their lease should indicate that arrangement. If the renter breaches the agreement to purchase the house, they forfeit the deposit and the 10%-15% of the additional rental monies.

While the property is being leased, the investor is still the owner during the lease period. The insurance and property taxes will continue to be paid by the investor, as well as HOA dues if applicable. Continued maintenance of the property is also the responsibility of the investor.

An assignment of the maintenance of the property can be assigned to be the responsibility of the tenant and included in the rental lease. This will give the investor the ability to claim tax deductions on the property, repair costs will not be incurred against the cash flow provided by the monthly rent, and the maintenance will be handled by the renter. The tenant is renting the property to purchase it at the end of the rental lease will probably make any repairs that are needed to maintain the upkeep of the property they will own.

Even though this transaction is a rent to own, if the tenant breaches the rental lease before it comes to term, the investor has a right to evict under the guidelines outlined in the lease. If the tenant causes extensive damage, does nothing to make any repairs that are necessary to maintain the property, causes any extreme damage, are incurring undue noise that disturbs the neighborhood, the lease is considered breached and can be terminated.

Holding a Property and Continuous Rental

Two other types of investment strategies that many investors use are holding property and then selling it and having a continuous rental, where the property is continuously used as a rental over and over again.

A property that will be used as a rental and “held” will increase the property’s value. The investor will decide when selling the property would be a beneficial time to sell the property.  An investor who knows what happens in the real estate market, as well as the where the property is located, can have the advantage of holding the property until its value has increased and then selling it for maximum profit.

This type of investment is similar to a rent-to-own investment, but the property will be sold when it is listed and for sale to the market. The tenant will have their lease honored until it ends and then will need to vacate and find another place to live. The rental lease is simply for the renting of the property, and there are a security deposit and first month’s rent that is returned to the tenant when they leave if there is no significant damage.

Once the property is listed for sale, the tenant can purchase the property. If they are in a financial position to agree on the purchase price, submit a deposit, and fund the transaction, they can purchase the home.

Continuous Rental

This type of rental is when an investor purchases a property and uses the property strictly as a rental. The tenancy is usually a one year lease to begin, and then, if the tenant decides to stay, and the investor feels they are good tenants, the tenant can be on a month-to-month lease. An investor may want another lease signed after the first one year lease and offer a one year or two-year lease to the tenant. Maintenance and upkeep are continuous, and you may want to hire a property management firm to collect the rents and attend to repairs and other issues that may arise.

Location is Key

It can’t be emphasized enough that the location is an essential key to your investing success. Explore areas that appear to be most profitable. Location, along with the good, affordable housing, is what brings the renters to the area.

Real estate investing brings quite a few opportunities to other investments. Research and review the different strategies presented in this chapter. The information will give you a better feel of what will be profitable and fit you as an investor of the future.

Chapter 6:Closing The Deal

Finding a Closing Agent The most important criterion when it comes to selecting a closing agent is to find one that able to follow up on a property in less than four days. Anyone who takes longer than four days to check up on deeds and titles is quite literally not worth your time. Most closings happy simply enough that they scarcely need a closing agent, but there are a few that couldn’t be done without them. It is for the latter that a good closing agent could make a real difference. Also, some states require the use of licensed closing agents.

How to Handle a Troubled Title It’s a problem child of free and clear house titles; it’s that one title that just doesn’t seem to want to cooperate. There you are with the deal almost signed, and you think all of your t’s are crossed, only to find that you have unforeseen problems with the titleholder of the property. Every property has a title that encompasses all encumbrances and liens against it. In this detailed history, such things as back taxes, tax liens, and delinquent mortgage payments are all listed for all to see.

If the property in question has a “clear title,” this means that there are no such hindrances attached to the history of the property. Having that said, there are some instances in which you can sell a property with a compromised title, but they are few and far between. Typically, unless they are a friend or relative wishing to help a delinquent debtor out, no one is going to buy a house with a murky history.

Another problem with a bad title is that no insurance company will agree to insure the property until it is in the clear. So how do you ensure that you are getting a clean title? Here are a few steps you should take:

• Do a thorough Background Check on the Property

This check should serve to clarify that there is no pending litigation on this property, such as liens, lawsuits, fines, or defaults.

• Make sure there are no back taxes

No one wants to purchase a property they thought was a bargain only to find themselves immediately saddled with the motherload of back taxes. To avoid this, you will need to contact the local assessor’s office to make sure that all taxes are current.

• Confirm that the seller does own the property

There was a story that made the rounds on the nightly news not too long ago, about a man who broke into a house, turned the electric on in his name, and then proceeded to attempt to sell the home that he had stolen! Sound nuts, but such insanity has actually occurred. And while you most likely will not have to face anything quite so extreme, you will have to confirm that there is no confusion—such as between various relatives—as to who actually owns the property.

• Make sure that the “Transfer Certificate of Title” is authentic

As soon as you get your title, you will need to take it to the “register of deeds” office to have them help you confirm that the copy that you have is indeed a “certified true copy.”

• Confirm that all info is accurately written on title

Yes, it doesn’t do anyone any favors to be on the verge of closing a home only to find that the title is riddled with typos. Not only is it embarrassing to hold a title that appears to have been written by an 8-year-old, but it is also very dangerous. If even one letter or number of the property’s street address is out of place, for example, it could lead you to an unbelievable headache later on. So yes, you must confirm that all info is accurately written on the title before you close the property.

• Do your due diligence before closing the deal

Whether you have your eyes on an old single-family home, or a multiple unit apartment complexes—whatever it is that you may be purchasing, you need to practice enough restraint so that you can do your full due diligence before closing the deal. Because in your excitement of buying property, it can be pretty easy to miss out on pertinent pieces of information. So, take a deep breath and take a look around before you finalize your contract.

Get a Quiet Title when Needed. When the owner of a large vacant property is in dispute, investors can move to get a “quiet title.” It’s not called a quiet title because the previous owner is talking too loudly, it’s called a quiet title because it temporarily quiets down the dispute as to who owns the property. This measure occurs quietly in the foreground, without any disturbance of the immediate real estate market.

To get a quiet title in motion, you will need to petition the local government for a measure to do so. In this petition, you need to bring forward anyone else’s claims and have them listed as the defendant in opposition to your claims. In your petition, you will need to clearly explain who you are and what your claims/desires for the property are.

You will also need to adequately describe the type of property you are petitioning for, listing whether or not it is a single-family home, multiple-family units, warehouse, or what have you. Be sure to hire your attorney to consult with and represent you during the proceedings.

Be Ready for Simultaneous Closings. What if two properties close at the same time? This is what happens with a simultaneous close, in which you have a couple of properties deals collide into each other. If, for example, you are buying a house that is simultaneously being bought by the person who is selling it to you, you will then be forced to face a simultaneous closing. There are situations in which someone may take the money you are using to close a deal, to close a deal of their own, thereby creating a complicated circle of funding.

Know-How to Handle Double Closings Aren’t double closings the same things as simultaneous closings? No—not exactly. A double closing is when the 2^nd party of a transaction, uses their money to close a transaction, and then turns around and sells. Double closings almost always result in two separate contracts, two sets of titles, double fees, and double escrows.

Give At Least 30 Days to Close the Deal You may have heard that most home sales take about 30 days to close. It isn’t just an arbitrary number; there is a reason for this. This 30-day window of time is given since its determined to be a long enough period for the buyer to carry out inspections and secure financing. Thirty days should be more than enough time to get these things done. Make sure you repay this courtesy in all of your transactional dealings as well, as you march toward completion of closing.

Conclusion

Although you’ve finished reading this e-book, learning about real estate investment doesn’t end. Exploring and implementing all the real estate investment information this book has covered and developed the vision of what you want to achieve are the only ways to realize the real estate returns you wish to gain.

The next step to invest in real estate properties is to put the information you found in this book into practice and action. Do your due diligence by checking the economic climate, real estate availabilities, and locations. What the current trends are in your area before you decided on the property you want to purchase.

Talk with lenders, contractors, realtors, and property management companies and develop alliances. Ask the questions that will help you in developing your investment skills.

When you were beginning to invest in real estate, it can be a bit overwhelming. However, with the information provided in this e-book, you can begin investing much better prepared than when you began to read about it.