Banks and Mortgage Lenders

The standard way to get financing is to go to banks and mortgage lenders.  If you have good personal credit and put some money down, you should be able to get at least one loan.  Once you start regularly sending in payments, and again depending on how good your credit is, you should be able to get more loans.

Building a relationship with a local lender is the best way to get continuing financing.  One of the best places to find a good lender that you will be able to grow with are community banks.  Many of them don’t exist anymore because they are getting swallowed up by the big banks.  But if you can find a good community bank, start there because they will care about personal relationships more than a big bank.

Business Partner

Another good way to get financing is to find a business partner with a good bit of capital.  They can be a silent or managing partner.  Whatever the case may be, make sure they have money to invest in your business.  Real estate development and investing with a good property investor may be one of the best investment options in front of them.  So don’t sell this option short.

Get a business partner whom you can trust and work with.  Remember, you are risking their money.  Make sure it’s someone who you won’t regret using their money.

Selling Financing

Another way to do financing is to get your seller to finance it for you.  Work a deal with the seller to finance it.  Set up payments and a time to pay the remaining amount.  This will give you a chance to rent out the property and start getting the cash flow in.

If the chosen property is a rental house, who will rent it, collect the rent and do repairs? A property management company will do all or part of this, for a fee. If that investor wants to do the repairs and collect the rent, the investment property should be no more than 50 miles from home. This makes it convenient to oversee the property properly.

The three most important things in buying any Las Vegas real estate property is location, location, location. Local real estate agents know the market and are a good source of information. The time invested in talking to a several local agents will pay for itself in deciding where to make the property investments.

How long will the investor keep the rental property? If an investor has children going off to college in ten years and plans to sell that property to pay for the college, the investor has a ten-year plan. If the investor will retire in five years and use the rental income to supplement retirement funds, that investor has a longer-term plan. The property purchased needs to meet these goals; short-term goals require properties that need little repair. A longer term hold will require planning how to handle the long term maintenance issues of any property, like replacing the roof, heating and cooling systems. A solid long-term investment plan will have the money set-aside to cover any repair that is deemed necessary.
The right property investments will make money for any investor and assist him or her in reaching the long term financial goals.

Real estate bought and managed properly is one of lowest-risk asset classes available.  The problem is: most people do not know how to buy real estate properly and end up losing money.

Two Rules

There are two simple guidelines that constitute a good real estate purchase:

1) You must be “all in” including purchase, rehab, and closing costs for less than it will be worth after the rehab.

2) It has to cash flow after all monthly expenses including maintenance and occupancy.

In short, it has to have equity and cash flow.

Each real estate investor has his or her own preference on what kinds of margins they are comfortable with.  I am comfortable with equity above $15,000 and cash flow above $150 a month.  Those margins add protection against market volatility.

Sub Market

Another thing to consider when reducing risk in real estate is the sub-market.  A strong real estate market is located in a city with low unemployment and a growing population.  For me, investing in Texas real estate and the surrounding areas in the midwest is what I’m doing.

I would’t recommend investing in Detroit real estate even if it did have  a ton of equity and cash flow for this reason.  I would also stay away from some of the more volatile markets such as California and South Florida.

Investing in states where the highs don’t get too high and the lows don’t get too low is a good recipe for reducing risk.

Conclusion

In conclusion, investing in real estate is not risky if you buy with equity and cash flow in a stable market.  Most of the real estate investing horror stories come from volatile markets where people were investing based on speculation without equity or cash flow.

Many people make a living out of buying and selling real estate, and it can actually be compared to many of the other common forms of investments such as mutual funds, bonds and stocks. However there are two main differences. It’s possible to buy and sell other investments very quickly at the market price. Buying and selling real estate takes much longer, it can take months to sell. This means that there are some important considerations when buying or selling property.

Similar to other investments you should try to sell at a time when the market is high and then intend to buy it back when the market falls in price. This is easier with other investments, however it can be much more interesting (difficult!) with the housing market.

Most stocks are the same, it’s possible to compare them fairly easily. Real estate is much more unique. Every house is completely unique. There are also substantial entry and exit costs, when selling you need to find a new property to move into, you also need to wait until there is a house which you can afford to buy in the future. The costs of buying stock are minimal, whereas with the housing market they can be quite large.

The real estate market should be treated as a long term investment tool. It’s not possible to buy and sell very quickly in order to make a fast buck. Housing is a tangible product and is much less risky than the stock market.

There are a number of different ways in which you can improve the profits which you make from buying and selling real estate. One is to buy property at very low prices. This would be possible by looking at foreclosure properties, or looking at houses which need a lot of repair to get them up to scratch. If you’re a patient person then you will probably be able to find many foreclosures which are for sale at up to 35% below the market value of the area. You can find out about these by looking in local newspapers and on websites.

It is also possible to look at areas where sellers seem to be leaving, but it is still possible to sell property there. For example previously depressed neighborhoods in Manhattan are now quite valuable. Other cities have experienced similar situations. Try to guess which area will be the next up and coming thing by seeing which has the most money spent on it for regeneration.

If you’re good at DIY or know a friend that is then you could consider buying property which needs fixing up for it to be profitable. A house with a leaky roof and water damage could be 10% below market value or more.

It is possible to make a profit from the real estate market, even if it’s starting to slow down recently. It’s only really possible for people that are willing to be patient, do lots of homework, and not get too sentimental about the properties.