REAL ESTATE INVESTING GUIDE
5 Reasons to Invest in Real Estate
have you considered these?
Appreciation
Cash Flow
Less Volatility
Tax Advantages
Value-Added Improvements
Market Indicators Tell You When to Invest
learn when to invest
Job Growth
Housing Inventory
Number of Foreclosures
Multiple Offers on Homes
3 Ways to Make a Profit in Real Estate Investment
choose your path
Buy & Flip
Buy & Scrap
Buy & Subdivide
Profiting from a Fixer Upper
fixer-upper options
Buy a Fixer-Upper & Sell Again
In addition to offering a handsome profit, fixer-uppers can offer a true sense of satisfaction as you transform a dilapidated property into one with true appeal. But before you take the plunge, ask yourself three questions:
- Can I buy it far below market value?
- Can I do most of the work myself (or contract it out at reasonable rates)?
- Can I get the job done quickly?
Remember, every month you add to the project is costing you in lost rental income, taxes, insurance, utilities and more.
Buy, Raise the Rent & Sell Again
Quite often the tenants in a rental property are paying below market rates simply because the landlord hasn’t raised the rent in years or perhaps the property is not maintained well.
Both scenarios present you with a great opportunity to buy the building, raise the rent (making upgrades if necessary) and resell the apartment building at a higher price. This raises the GPI — the gross potential income — the maximum gross income generated from the rent if all the units were occupied.
How to Build a Real Estate Investment Team
team work makes the dream work
While serial investors (who buy additional rental properties without selling their current ones) are likely to invest with only the help of a real estate agent, other investors benefit from having a team of experts.
In addition to a real estate agent (and your tax advisor), some team members for you to consider are:
- A builder or general contractor who can evaluate the structural integrity of a unit
- A specialist in leases who is experienced in reviewing tenant applications, writing contracts and many other supplemental forms needed with leasing real estate
- An attorney who practices real estate law
- A mortgage professional who can offer you different financing options
Having a team of investors gives you more knowledge as well as more financial resources. Word of caution: while friends or family may be interested in joining your real estate investment team, it is best to pick individuals based on the experience they offer.
Investors Checklist: Real Estate Investment Property
invest wisely
Homeowners look for certain criteria when buying. Such criteria could include the school district, curb appeal, low crime rate, proximity to a job, number of bedrooms, the right layout, perfectly sized yard, and more. While the location is still a primary factor when you invest in real estate, most investors also add these to their checklist:
Good schools equal good investments- A neighborhood that is mostly a primary-home community (rather than renters)
- Square footage between 1,000 to 3,500
- 3 bedrooms, 1.0 bath, with 2-car garage and possibly a basement
- Nice yard but no pool (too much of a liability)
- Safe neighborhoods with little or no trash, no graffiti on public structures, limited fences, etc.
Another factor to consider is close proximity to your own home. Especially when starting out, you may need to visit your rental properties frequently — to pick up a check, make minor repairs, etc. For these reasons, any property more than 45 minutes away becomes less desirable.
It is important to remember you are not purchasing for your own use, but to attract a high-quality renter. Savvy investors choose properties based on the criteria above rather than their personal preferences. Doing so lets them pick from a wider base of homes and find a better bargain.
When you’re looking to invest, turn to Brandt Real Estate. We can guide you through the ins and outs and ensure you’re investing wisely, with ample room for revenue.
Investors Checklist: Get Your Property Ready to Rent
DRESS THE PROPERTY UP
Your property’s curb appeal will create an instant and irreversible first impression with every renter. Use this checklist to make sure your listing is dressed for success.
- Paint the trim and front door.
- Plant flowers and pull weeds.
- Clean the downspouts and gutters.
- Clean the screens and windows.
- Power-wash the sidewalk and driveway.
- Mow the grass and apply new mulch.
- Replace outside light bulbs.
- Wash the house exterior or paint, if needed.
- Clean or replace house numbers.
- Remove all cobwebs and spray for pests.
CREATE A WARM ENVIRONMENT
Every property should offer the potential renter a warm, friendly experience especially during the first showing. What greets the renter on the other side of the investor’s front door? Consider these helpful hints:
- Consider the smell of the home.
- Candles and vanilla can help.
- Replace light bulbs and clean drapes, blinds, and windows.
INVESTOR’S GUIDE CHECKLIST
- Have the carpets professionally cleaned or replaced if needed.
- Paint or wash the walls.
- Clean the doors, cabinets and closets.
- Dust the property and remove cobwebs.
- Clean the appliances.
- Paint or clean the baseboards.
- Re-caulk the bathtubs and showers.
- Replace cracked or damaged outlet covers.
REMOVE BARRIERS FROM THE RELATIONSHIP
Renters need to build an emotional bond with a property before they can make a decision to lease it. Help them by removing potential barriers.
- Pack and store seasonal clothing.
- Remove unused furniture.
- Remove personal photo clutter.
- Secure pets before each showing.
- Remove and replace fixtures not included with the sale.
TELL A STORY AND BE INTERESTING
Renters want a property that stands out from the competition. Does each room in your property tell a story? What can you visualize happening in each room as you walk through the home? This is often referred to as staging the property. We suggest:
- Setting the kitchen table.
- Turning down the master bed and place a book on the nightstand.
- Displaying an open game in the kid’s room.
- Starting a fire in the fireplace, if applicable.
- Turning on soft music.
- Displaying a family DVD near the entertainment center.
OPEN UP THE DARK AREAS
Renters want to know everything about a home before they decide to move forward. In most cases, this means they want to view every area of the property. Making this easier allows the renters to make a fully informed decision.
- Unlock and open all areas of the home.
- Clean the garage, sweep and pressure wash, if needed.
- Unlock outside buildings including shops.
- Clean out closets and pantries.
- Provide access to the crawl space or cellar.
- Provide access to the attic.
OFFER PROTECTION
OFFER INCENTIVES
According to a recent report, the average renter will look at 17 homes before making a purchase. How can your listing stand out from the crowd? Offer the renter an incentive. For example:
- Buy down the interest rate or pay their points.
INVESTOR’S GUIDE CHECKLIST
- Pay for limited closing costs.
- Pay for inspections or compliance work.
- Provide an allowance for upgrades.
- Provide a home warranty.
- Provide a selling agent bonus.
PREPARE FOR THE SALE
What would happen if a renter decided that he wanted to rent your property and close within a short period of time? Prepare for success by taking care of the sale details in advance. We suggest the following:
- Pre-sale inspections – pest and dry rot for the entire house (We may be able to have the costs deferred until close.)
- Moving and storage companies researched.
- Utility company list for switch over.
- Packing boxes ordered.
- All keys and garage door openers located.
- Loan numbers and estimated balances obtained.
- Relocation research started.
- Alternative short-term housing researched.
