How can I obtain financing for a development property I want to buy?
One of the things I always teach people is that when you're buying a property, don't get in over your head. I am not a big believer in no money down. When you buy a property that's no money down, you're really at the mercy of the market, and you may have to sell that property at a loss if the market starts to go south. If you have no equity in the property, you're at a disadvantage. I'm a bigger believer in buying a property that fits the amount of money that you can raise. If you only have $50,000, don't think about trying to buy a million dollar house. Think about buying a two hundred fifty thousand dollar condo or a smaller house in a transitional neighbourhood. It's really important to have some money down when you're buying a property, that's my advice.
Should I use a mortgage broker to get financing for a flip property?
When looking for a mortgage for a flip property, you have to realise that it's very different than getting a mortgage for a property you're going to live in permanently. Why? Because there's such things as prepayment penalties, and a lot of times banks don't want to loan to someone that they're going to know is going to sell the house in six months. I always recommend working with a mortgage broker rather than going with a bank, only because mortgage brokers have access to all the banks. A mortgage broker makes his money up front when the mortgage is obtained. A bank makes their money over time, so a bank that makes its money over time is not going to want to loan you a loan that's going to get paid off in six months.
How can I find the right mortgage broker?
When choosing a mortgage broker, be honest, tell them what you want to do, tell them that you're looking to invest in real estate and buy properties, fix them up and then flip them. One, he's then going to realize that you're going to be a repeat customer and he's going to love that. Two, never pay a mortgage broker any money up front, and if they ask for money up front, say "Thank you very much", and find someone else.
What if I am unable to flip my house at a profit?
One of the safest ways to invest in real estate, which means when you're buying a property that you're going to fix up and flip is having your exit plan ahead of time. What that means is that if you fix up a property and you want to go to sell it, I want you to find properties that you have the option to sell, hold or and rent it. You want to look for properties that are actually available, beautiful and wonderful and that someone might want to rent if you had to. That's called an exit strategy meaning that way you don't have to go and put it on the market if you don't want to. So, having a property that could be rentable is a great value and a great asset.
What makes a house 'rentable'?
What makes a property rentable is a great home, for example in a good neighborhood where there are good schools. A three-bedroom home seems to be about the average, and one that doesn't have a lot of things that need to be maintained. One without a huge, big backyard, one that's just a nice, great comfortable home with good amenities in a good location.
Showing posts with label Real Estate Development. Show all posts
Showing posts with label Real Estate Development. Show all posts
Thursday, July 31, 2008
Pros And Cons Of Real Estate Flipping
What are the advantages of buying property for resale?
One of the reasons that people get into flipping, one of the things is so fantastic about it, is that you are able to build a second revenue stream for yourself, which means you can do this part time - I was on a soap opera the whole time and I was flipping properties, so you can do it as a secondary income. And not only are you are able to then make a profit by buying the house, fixing it up then selling it, you will be able to take that money and roll it into the next one and do the next and the same thing. Then you can roll that money into the next so that you're literally building your real estate fortune. That's one advantage. The other advantage is the tax benefits of working in real estate. For example, buying a house, living in it for two years, fixing it up and then selling it. After two years, you walk away with 250 or 500,000 dollars tax free. There is no other investment in the world where you can do that.
What are the financial dangers of buying property for resale?
What's the one thing I should consider before flipping property?
The one thing is so important to know about flipping is that you make your money in flipping a property before you buy the property. That means, when you go to actually purchase that property you need to know exactly how much you're going to make before you even buy it, or else walk away.
What should every buyer be aware of before getting started in real estate flipping?
Probably one of the most important things that a buyer needs to know when they're buying any house, especially one that they're going to be working on and fixing up, is what their estimated costs are going to be. They also need to know where the market's headed. If the market is going down ten percent every six months, you better know that the house you're buying is going to be worth ten percent less six months from now, and you need to calculate that in ahead of time.
One of the reasons that people get into flipping, one of the things is so fantastic about it, is that you are able to build a second revenue stream for yourself, which means you can do this part time - I was on a soap opera the whole time and I was flipping properties, so you can do it as a secondary income. And not only are you are able to then make a profit by buying the house, fixing it up then selling it, you will be able to take that money and roll it into the next one and do the next and the same thing. Then you can roll that money into the next so that you're literally building your real estate fortune. That's one advantage. The other advantage is the tax benefits of working in real estate. For example, buying a house, living in it for two years, fixing it up and then selling it. After two years, you walk away with 250 or 500,000 dollars tax free. There is no other investment in the world where you can do that.
What are the financial dangers of buying property for resale?
What's the one thing I should consider before flipping property?
The one thing is so important to know about flipping is that you make your money in flipping a property before you buy the property. That means, when you go to actually purchase that property you need to know exactly how much you're going to make before you even buy it, or else walk away.
What should every buyer be aware of before getting started in real estate flipping?
Probably one of the most important things that a buyer needs to know when they're buying any house, especially one that they're going to be working on and fixing up, is what their estimated costs are going to be. They also need to know where the market's headed. If the market is going down ten percent every six months, you better know that the house you're buying is going to be worth ten percent less six months from now, and you need to calculate that in ahead of time.
Tips For Building Your House In The Country
Tips For Building Your House In The Country
The Progressive Farmer shows you what you need to know about building a country place. Here we talk about the land, where to place barns and the home, and other considerations to think about while planning your home.
Step 1:
Plan Your Position
What we're going to talk about today is site planning. That is, where do you put your home? Where do you put your barn? Where do you put other buildings? There's a lot to talk about before you build anything.
Our Country Place offers a great opportunity to illustrate all this. We started with a raw piece of land and built a place with a home and a barn. This is not ground for cattle or to grow hay, but it is land where your family lives, where what's growing is memories.
Step 2:
Decide What You Don't Like
When you're looking for a place to build your home or your barn or other outbuildings, the process is more about finding out what you don't like than what you do like. That helps narrow the process.
For example, do you want trees near your home or do you want a pasture out on the property? Do you want a creek nearby or do you want a pond in the back?
We really didn't want to build on top of a hill. The view from the top is great, but someday there'll be fifty acreage homes down here. The view from the hilltop will be rooftops. So we chose this area down low. It still has great views of these Texas hills, but the home is pretty well hidden among the oaks and elms. Walk away 100 feet and the home nearly disappears.
Step 3:
Think Practically
But don't let the scenery fool you when you're looking for a place to build, look around. Think practicality first.
Look for those things that may affect your construction plans or that will present a problem later that may affect the value of your property.
For example, below me is the well. You need to make sure there's enough water underneath your property that will supply the needs of the house. This well supplies an adequate amount of water, but not an overabundance. It's not a problem. It's just something you need to know.
Another thing to consider is do you have a place for a septic field? The field needs to have a kind of soil in it that will drain the waste away from the house.
Not too far away from this property is a landfill. It is several miles away, so odour isn't really going to be the problem. But one day, the trucks going in and out of that landfill may cause problems on the road leading into Country Place. My point is this. Know what's going on around your land.
Step 4:
Consider Everything
We took a lot of time to find just the right place for our home on the property.
We took two things into consideration.
First we didn't want the house to dominate the landscape. We wanted to kind of fit down into the landscape.
The other thing we took into account was energy conservation. The front of this house generally faces north and that lowers cooling bills in the summer. The back of the house faces south and that lowers your heating bills in the winter.
Step 5:
Use Resourcs Around You
There are great trees all over this property and the builder worked hard to save every one he could. These oaks and elms take a long time to grow and they are assets that cannot be replaced.
This is a real interesting feature at Country Place. I wasn't sure I was going to like this project, but I did and so I wanted to tell you about it.
This is what's called a coyote fence. It's made from discarded branches from cedar trees. This fence keeps out deer. It keeps out the coyotes. And it's a real nice way to use something that would typically be burned.
Step 6:
Decide Where To Place Your Barn
To be honest, the barn was a tough one to place. Any great country home needs a great barn and you want it close enough to the house that it's easily accessible, but you don't want it so close that it's blocking views.
One thing that you do need to know, though, is make sure there's no zoning codes or covenants that restrict where you put your building.
Here at our property, I wanted to place the barn out there. I was concerned it would block the view from the master bedroom over there. The builder was concerned about access to the barn from the road and this drive. It was really an economic decision for him. It cost less to build access to the barn from here to there. And you know in the end, he was right. The barn is really well screened by the trees outside the master bedroom.
Step 7:
Learn All About Your Property
There are three other things you want to consider before placing your home and outbuildings.
I'm standing down here in the middle of a wash. Most of the year, this is probably dry, but during flash floods, these washes channel water very quickly. I've seen the water get up and out of these banks, so you don't want to have a building anywhere near these.
You need to know where your property lines are. If there is any fencing, know who owns it and who's responsible for maintaining it. And if a neighbour's fence is on your property, you have a decision to make. You can leave it alone or you can fix the problem.
If you leave it alone long enough, many state laws say that portion of your property essentially becomes your neighbour's.
Step 8:
Care For Your Land
Now we didn't find any arrowheads or Native American pottery on this land, but there are some old buildings like this one. There's really nothing preventing us from tearing them down, although we don't plan to, but one thing you need to be aware of:
Some states do have laws that protect antiquities and historically significant sites. I'm going to guess you're a lot like me. Your best day is a day you don't have to cut the grass. Well, out here, a lawn wasn't even appropriate. It's just too dry. So we tried something else. We call it landscaping with nature.
Basically what we did was keep the construction traffic off and then we let this area regenerate itself and we're kind of letting nature do what it's going to do here.
Step 9:
Protect Future Generations
We've covered a lot of the do's and don'ts about putting homes and other buildings on your property. We've covered them pretty quickly.
If you're interested in more information, go to progressivefarmer.com. There you're going to find an in-depth series talking about this whole process.
In the meantime, think about this. This is something you want to get right, because it has implications for generations to come.
The Progressive Farmer shows you what you need to know about building a country place. Here we talk about the land, where to place barns and the home, and other considerations to think about while planning your home.
Step 1:
Plan Your Position
What we're going to talk about today is site planning. That is, where do you put your home? Where do you put your barn? Where do you put other buildings? There's a lot to talk about before you build anything.
Our Country Place offers a great opportunity to illustrate all this. We started with a raw piece of land and built a place with a home and a barn. This is not ground for cattle or to grow hay, but it is land where your family lives, where what's growing is memories.
Step 2:
Decide What You Don't Like
When you're looking for a place to build your home or your barn or other outbuildings, the process is more about finding out what you don't like than what you do like. That helps narrow the process.
For example, do you want trees near your home or do you want a pasture out on the property? Do you want a creek nearby or do you want a pond in the back?
We really didn't want to build on top of a hill. The view from the top is great, but someday there'll be fifty acreage homes down here. The view from the hilltop will be rooftops. So we chose this area down low. It still has great views of these Texas hills, but the home is pretty well hidden among the oaks and elms. Walk away 100 feet and the home nearly disappears.
Step 3:
Think Practically
But don't let the scenery fool you when you're looking for a place to build, look around. Think practicality first.
Look for those things that may affect your construction plans or that will present a problem later that may affect the value of your property.
For example, below me is the well. You need to make sure there's enough water underneath your property that will supply the needs of the house. This well supplies an adequate amount of water, but not an overabundance. It's not a problem. It's just something you need to know.
Another thing to consider is do you have a place for a septic field? The field needs to have a kind of soil in it that will drain the waste away from the house.
Not too far away from this property is a landfill. It is several miles away, so odour isn't really going to be the problem. But one day, the trucks going in and out of that landfill may cause problems on the road leading into Country Place. My point is this. Know what's going on around your land.
Step 4:
Consider Everything
We took a lot of time to find just the right place for our home on the property.
We took two things into consideration.
First we didn't want the house to dominate the landscape. We wanted to kind of fit down into the landscape.
The other thing we took into account was energy conservation. The front of this house generally faces north and that lowers cooling bills in the summer. The back of the house faces south and that lowers your heating bills in the winter.
Step 5:
Use Resourcs Around You
There are great trees all over this property and the builder worked hard to save every one he could. These oaks and elms take a long time to grow and they are assets that cannot be replaced.
This is a real interesting feature at Country Place. I wasn't sure I was going to like this project, but I did and so I wanted to tell you about it.
This is what's called a coyote fence. It's made from discarded branches from cedar trees. This fence keeps out deer. It keeps out the coyotes. And it's a real nice way to use something that would typically be burned.
Step 6:
Decide Where To Place Your Barn
To be honest, the barn was a tough one to place. Any great country home needs a great barn and you want it close enough to the house that it's easily accessible, but you don't want it so close that it's blocking views.
One thing that you do need to know, though, is make sure there's no zoning codes or covenants that restrict where you put your building.
Here at our property, I wanted to place the barn out there. I was concerned it would block the view from the master bedroom over there. The builder was concerned about access to the barn from the road and this drive. It was really an economic decision for him. It cost less to build access to the barn from here to there. And you know in the end, he was right. The barn is really well screened by the trees outside the master bedroom.
Step 7:
Learn All About Your Property
There are three other things you want to consider before placing your home and outbuildings.
I'm standing down here in the middle of a wash. Most of the year, this is probably dry, but during flash floods, these washes channel water very quickly. I've seen the water get up and out of these banks, so you don't want to have a building anywhere near these.
You need to know where your property lines are. If there is any fencing, know who owns it and who's responsible for maintaining it. And if a neighbour's fence is on your property, you have a decision to make. You can leave it alone or you can fix the problem.
If you leave it alone long enough, many state laws say that portion of your property essentially becomes your neighbour's.
Step 8:
Care For Your Land
Now we didn't find any arrowheads or Native American pottery on this land, but there are some old buildings like this one. There's really nothing preventing us from tearing them down, although we don't plan to, but one thing you need to be aware of:
Some states do have laws that protect antiquities and historically significant sites. I'm going to guess you're a lot like me. Your best day is a day you don't have to cut the grass. Well, out here, a lawn wasn't even appropriate. It's just too dry. So we tried something else. We call it landscaping with nature.
Basically what we did was keep the construction traffic off and then we let this area regenerate itself and we're kind of letting nature do what it's going to do here.
Step 9:
Protect Future Generations
We've covered a lot of the do's and don'ts about putting homes and other buildings on your property. We've covered them pretty quickly.
If you're interested in more information, go to progressivefarmer.com. There you're going to find an in-depth series talking about this whole process.
In the meantime, think about this. This is something you want to get right, because it has implications for generations to come.
Buying A 'Fixer-Upper' For Resale
What is a "fixer-upper" property?
The term fixer-upper actually means property that you can go and buy, and then actually make renovations to the property and do the necessary improvements to put value into it, and then go ahead and either live or sell the property. Its different than something that's a tear down property that someone would just come in and bulldoze. Its one that has a lot of potential for upgrade or that you going to actually do to work or hire someone to do the work and fix it up.
How much work goes into selling a fixer-upper at a profit?
Fixing up a property isn't just about going in and painting the walls white, and having somebody come in and put in new carpet. If you want to make money in flipping a property, you're going to have to go a little bit deeper than that. I talk about doing actually six levels of improvement when you flip a property. That's, of course, getting all the systems, which is the plumbing, the electrical, the piping, the roof, and even the windows; they all need to be upgraded. Remember, you're going to be selling a home to somebody that is a done or completed house. All the systems need to be working as well. Chances are you're probably going to have to upgrade the kitchen. There's lots of way you can do that. You can usually work with what you've got, or you can completely renovate a kitchen and the bathroom. There are certain areas that people expect, when you're fixing up and flipping a property, that are done and completely redone. Kitchens and baths are another. Landscaping, curb appeal, backyards, and all those things are things that you're going to have to do. Yeah, there is some work involved but the profit potential is enormous when you know what you're doing.
What are some common mistakes people make when buying fixer-uppers to develop?
Probably the biggest mistake people make when they're buying a property to fix it up is what we call overcapitalizing, meaning they don't take into account, and they don't do their homework to find out, what's going on in the neighbourhood. They'll go ahead and upgrade things that either don't need to be upgraded, meaning they'll put in granite countertops when all the neighbourhood homes just have tile. Or they'll put in a spa or Jacuzzi when no one else in the neighbourhood does. Or they'll do the opposite. They won't bring the house up to the standards of the other houses in the neighbourhood - meaning they don't make the house up to standard. If every house in the neighbourhood has granite and a beautiful swimming pool, you're probably going to have to do that. So, not being aware of the competition is one of the biggest mistakes that people make.
Should I live in a fixer-upper while it's being improved?
If you're going to live in your house while you're flipping it and renovating it and fixing it up - it's a challenge I'm going to warn you about. Yes of course you are saving money by living in the house, because you have to live somewhere, but you need to know how to do it properly and I always try to teach people it's about making sure you have a working bathroom, make sure that one of rooms is always sealed off. It is incredibly challenging and I've seen many relationships go down the toilet when the toilet goes out into the driveway. So if you are going to do it, be very careful and do a little research and read up on to it to find out all the ways to make it as simple and as comfortable as possible for yourself.
What are the most expensive improvements a fixer-upper might need?
When you are fixing up a property, one of the big chunks of your money is going to go to the kitchen. That is generally where the biggest improvement takes place, because you've got appliances, you've got cabinetry, you've got countertops and you've got plumbing and sinks and all of those elements. That is generally where a big chunk of your budget goes. Another big chunk usually goes to the roof or upgrading the electrical or the plumbing. Those are some of what we call the “big tip” of items when you're renovating.
What is one of the least expensive improvements a fixer-upper might need?
There are two things that are really simple improvements that give you the biggest bang for the buck. They're really the ones that create the biggest lifestyle appeal to people. Landscaping, and people forget all about that. People, when you're buying a house, please plant all you're planting early. If you're going to keep a house for six months or a year, get your plants in now. It doesn't cost you much to buy them small and let them grow over the year. But, get your landscaping down right away, and let it grow in. Because there is nothing more inviting than a beautiful lust green front yard and backyard with lots of flowering plants and landscaping.
What resources do I need to get started fixing up a property?
When renovating a home, it takes a village, so you need a team, and I call it the dream team. So what you're going to do, especially on you first property that you fix up, is remember that these people are going to work with you from house, to house, to house. So you want to start lining up a good roofer, you want to look for a contractor that you will like, you can even go to home improvement centres and have them do some of the work in your first home. You're going to want to start to accumulate that team, so that would include: electricians, plumbers, sub-contractors, contractors, and you're going to want to start interviewing. And do this before you close on a property so you start to begin to have a team in place.
What are some improvements to avoid on a fixer-upper for resale?
The best way to avoid the most common flipping mistake is overcapitalizing, is by doing your research. You really need to be going to all the open houses around the neighborhood. Find out what the other houses in your neighborhood have, so that you need to know what you need to have and also find out what they don't have so you can avoid having to spend money on things you don't need.
The term fixer-upper actually means property that you can go and buy, and then actually make renovations to the property and do the necessary improvements to put value into it, and then go ahead and either live or sell the property. Its different than something that's a tear down property that someone would just come in and bulldoze. Its one that has a lot of potential for upgrade or that you going to actually do to work or hire someone to do the work and fix it up.
How much work goes into selling a fixer-upper at a profit?
Fixing up a property isn't just about going in and painting the walls white, and having somebody come in and put in new carpet. If you want to make money in flipping a property, you're going to have to go a little bit deeper than that. I talk about doing actually six levels of improvement when you flip a property. That's, of course, getting all the systems, which is the plumbing, the electrical, the piping, the roof, and even the windows; they all need to be upgraded. Remember, you're going to be selling a home to somebody that is a done or completed house. All the systems need to be working as well. Chances are you're probably going to have to upgrade the kitchen. There's lots of way you can do that. You can usually work with what you've got, or you can completely renovate a kitchen and the bathroom. There are certain areas that people expect, when you're fixing up and flipping a property, that are done and completely redone. Kitchens and baths are another. Landscaping, curb appeal, backyards, and all those things are things that you're going to have to do. Yeah, there is some work involved but the profit potential is enormous when you know what you're doing.
What are some common mistakes people make when buying fixer-uppers to develop?
Probably the biggest mistake people make when they're buying a property to fix it up is what we call overcapitalizing, meaning they don't take into account, and they don't do their homework to find out, what's going on in the neighbourhood. They'll go ahead and upgrade things that either don't need to be upgraded, meaning they'll put in granite countertops when all the neighbourhood homes just have tile. Or they'll put in a spa or Jacuzzi when no one else in the neighbourhood does. Or they'll do the opposite. They won't bring the house up to the standards of the other houses in the neighbourhood - meaning they don't make the house up to standard. If every house in the neighbourhood has granite and a beautiful swimming pool, you're probably going to have to do that. So, not being aware of the competition is one of the biggest mistakes that people make.
Should I live in a fixer-upper while it's being improved?
If you're going to live in your house while you're flipping it and renovating it and fixing it up - it's a challenge I'm going to warn you about. Yes of course you are saving money by living in the house, because you have to live somewhere, but you need to know how to do it properly and I always try to teach people it's about making sure you have a working bathroom, make sure that one of rooms is always sealed off. It is incredibly challenging and I've seen many relationships go down the toilet when the toilet goes out into the driveway. So if you are going to do it, be very careful and do a little research and read up on to it to find out all the ways to make it as simple and as comfortable as possible for yourself.
What are the most expensive improvements a fixer-upper might need?
When you are fixing up a property, one of the big chunks of your money is going to go to the kitchen. That is generally where the biggest improvement takes place, because you've got appliances, you've got cabinetry, you've got countertops and you've got plumbing and sinks and all of those elements. That is generally where a big chunk of your budget goes. Another big chunk usually goes to the roof or upgrading the electrical or the plumbing. Those are some of what we call the “big tip” of items when you're renovating.
What is one of the least expensive improvements a fixer-upper might need?
There are two things that are really simple improvements that give you the biggest bang for the buck. They're really the ones that create the biggest lifestyle appeal to people. Landscaping, and people forget all about that. People, when you're buying a house, please plant all you're planting early. If you're going to keep a house for six months or a year, get your plants in now. It doesn't cost you much to buy them small and let them grow over the year. But, get your landscaping down right away, and let it grow in. Because there is nothing more inviting than a beautiful lust green front yard and backyard with lots of flowering plants and landscaping.
What resources do I need to get started fixing up a property?
When renovating a home, it takes a village, so you need a team, and I call it the dream team. So what you're going to do, especially on you first property that you fix up, is remember that these people are going to work with you from house, to house, to house. So you want to start lining up a good roofer, you want to look for a contractor that you will like, you can even go to home improvement centres and have them do some of the work in your first home. You're going to want to start to accumulate that team, so that would include: electricians, plumbers, sub-contractors, contractors, and you're going to want to start interviewing. And do this before you close on a property so you start to begin to have a team in place.
What are some improvements to avoid on a fixer-upper for resale?
The best way to avoid the most common flipping mistake is overcapitalizing, is by doing your research. You really need to be going to all the open houses around the neighborhood. Find out what the other houses in your neighborhood have, so that you need to know what you need to have and also find out what they don't have so you can avoid having to spend money on things you don't need.
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