Okay Frugal Men and Women here is a guide which will help you learn “How To Make Good Money in Real Estate.” It will help you get started building a real estate portfolio that can make you a lot of money and also good income over time. After you finish this article you will know “How To Make Money In Real Estate.”
First Things First
Pick Your Niche
Foreclosures, probate, commercial properties, tax liens, raw land, single family homes etc.
Decide what your target market will be. Specialize in one area of real estate. If you want to be a successful real estate investor and make money it is best to focus, focus, focus.
When To Buy
Real estate is cyclical and cycles have some degree of predictability.
Prices tend to overshoot on the upside and downside. Real estate tend to get way overvalued and way undervalued. Usually real estate cycles last for years.
Take advantage of this. After a long downtrend look for signs that prices are starting to turn up. This is a good time to start accumulating properties.
I am going to give you the single most important secret for making money in real estate over the long term. If you are young two or three times in your life real estate is going to crash and get way undervalued. When properties are selling for way less than replacement value you can safely buy properties and be almost guaranteed to make money over the next two to ten years.
As an example many years ago when I lived in Colorado there was a very bad period when both the high-tech market and the oil market collapsed. This caused a depression in Colorado real estate values. I purchased a condo on a bank foreclosure. Things were so bad that banks just wanted to get all real estate off their books as fast as possible.
I bought the condominium for about 60% of replacement value. In other words I bought the condo for 40% less than it would have cost to build new at that time. The condo was only five years old. Seven years later I sold the condo for a 500% profit when the market was flying.
More recently when the Florida real estate market collapsed I bought a condo for $75,000 that had sold for $220,000 five years before. There were foreclosures and short sales everywhere at the time. The market has since strengthened and the condo is already worth around $140,000 not to mention the monthly income I get from renting it.
If you get nothing else from this article remember to buy real estate after it has collapsed and is selling for way less than replacement value. When you see lots of foreclosures, short sales and people walking away from their houses it is time to buy.
Of course these opportunities only come along two or three times in your life. Normally you will be dealing with a market that is either moving up slowly or moving down slowly. You need to assess the market and decide what is a wise investment
One thing I would like to really emphasize is as you build your real estate portfolio do not leverage yourself to the hilt. If you do and there is a downturn in the market you can be wiped out pretty fast.
Have A Plan
Decide what your long term real estate goals are. Are you looking for income or are you looking for capital gains over a long period of time.
Be tenacious and consistent. Real estate is not a get rich quick scheme but can make you very rich over time. You’ve got to follow your plan and stick with it.
You need to be able to analyze properties quickly. This comes from experience and also having a system. The internet makes this all very simple.
I remember in the old days I had a realtor friend who would lend me his Multiple Listing Book so I could study the properties that were on the market at any given time. Today you can find all the information that you need on the internet with a couple of mouse clicks.
It is an information and numbers game. What is the market like? What is the neighborhood like? What is the property worth? What does the property need for repairs? If you are going to keep the property what can you rent it for? What price can you get the property for so it makes economic sense? It all comes down to numbers.
You need to become a very good negotiator. Becoming a skilled problem solver will help you get properties that others don’t. Be ready to wheel and deal and for me that’s where the fun is.
How To Find Motivated Sellers
There are many ways to find motivated sellers. One of the best is simple word of mouth. Tell your realtor and everyone else you know that you are looking for good deals on properties.
Many years ago just as the Colorado real estate market was starting to perk up after being slaughtered a friend of mine sent out 20,000 postcards to different neighborhoods in Denver.
The postcards said she was interested in buying a property in the neighborhood. She received a number of responses and ended up buying a few properties at way under market value.
Keep your eye on short sales. Short sales are properties where the owners are delinquent on their payments but have not gone into foreclosure. The property owner and the banks are usually motivated to make a deal. The condo that I bought in Florida was a short sale.
After you have a located a motivated seller you need to make an offer that is good for you but is also good for the seller. Ask yourself what is motivating the seller and then make an offer that resolves their problem as soon as possible.
The property owner is probably in a tight spot of some kind and you can save them from public embarrassment.
If you are new to buying real estate go by a few of the highly recommended books on Amazon and get educated in the different techniques and strategies for buying real estate.
Here are a few tips
Pick a growing area or just outside a growing area where the growth is going to spread.
Learn everything you can about the market where you are looking. You have to know the area very well so that when you are see a bargain you know it.
Always make any offer contingent on an inspection. You will already have found a licensed inspector who can check out the property. If you find a major problem you want the ability to walk away from the deal. If you find a number of minor problem you might use it as a leverage to try to get this seller to lower the price a little.
How To Make Money In Real Estate
Simple appreciation of the property is the easiest way to make money in real estate. You buy a good property, at a good price in a rising market. You just hold and wait. To really get the most appreciation in value, however, you should buy in an area where demand is growing faster than the supply.
Some people buy properties clean them up and then resell them. They create value in this way.
They repair everything and make cosmetic changes. They look creatively and carefully to find improvements to make. They concentrate on improvements that increase the value of the property.
You can also walk into equity in the property the first day you buy it if you pay less than market value. In other words if you buy a house that’s worth $100,000 for $90,000 you will have $10,000 in equity on day one.
People sell properties under market for a number of reasons including, fast closing, cash offer, and short sale etc. They may have lost their job or been suddenly transferred. They may be getting divorced or been living beyond their means just to name a few.
What about income? You want to buy income property in the right place, at the right time, in an area where it is easy to rent. If you do this right your renters will be paying all of your costs and what’s left over will be yours.
Want to make a million dollars in Real Estate. Over a period of time buy $1,000,000 in income producing properties and let your tenants slowly pay off your mortgages. OK it not quite that simple but its also not that complicated if you educate yourself and are conservative.
When To Sell
If you are a long-term investor and willing to ride out the bad times then you can hold your real estate forever. If not then try to time your purchases after a long downturn and sell when everyone is excited about properties.
When your friends and neighbors who have not been involved in real estate tell you they are looking to buy properties because real estate only goes up in value it is time to sell.
When you start seeing get rich in real estate seminars and commercials all the time you know you’re getting close to the top of the market for the current cycle.
When people are speculating on new construction by putting little money down it might be a good time to sell your property’s.
What To Do Before You Sell
Paint and then the paint some more. This is the least expensive way to make your property as presentable as possible. Use paint that is light and cheery.
Light it up. Open the blinds and let as much light in as possible. Dark places don’t show well and they don’t sell well.
Make sure everything is working even the little things.
Tools You Need To Make Good Money In Real Estate
The first thing you need is an experienced realtor that knows the area where you are looking for properties.
Next you need to figure out what a property is worth.
Realtors, appraisers, and banks determine what a property is worth by looking at comparable sales or comps. They check out sales of similar properties that have recently sold in the same neighborhood.
You must be able to do the same. Either your realtor can do this for you or you can go online and do your own research. Compare properties based on square footage, bedrooms, bathrooms amenities etc.
Okay so I have given you a basic knowledge of how to make money in real estate highlighting the main points you need to know in order to build a real estate portfolio.
Please talk to people in your area and read a few books for more detail.
If I was a young man or young woman today I would concentrate on building a stable safe real estate portfolio. This is a great way to build your assets, your income, and it is not hard to do. If you want to be your own boss like most frugal men and women then this is one of the avenues you can take.
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