Realtors

Post by Alan Corey: How to Save Money when Buying a Rental Property

by Brandon · 0 comments

The following is a post from one of my favorite authors Alan Corey. Alan has been featured in multiple media sources such as  US News & World Report,  Money Magazine, The Boston Globe, The NY Post, CNN, CNBC, ABC, and Fox.  He has also appeared on several nationally and internationally-broadcast television shows including Bravo’s Queer Eye, NBC’s The Restaurant and the ubiquitous The Jerry Springer Show.

I first read his book “A Million Bucks by 30” several years ago and it quickly became one of my favorite financial books around. Alan was awesome enough to take some time writing a post just for RealEstateInYourTwenties.com.  Besides being an all around awesome guy, he also has great insight and experience into how to use real estate to propel your future.  Thanks Alan!

 

How to Save Money when Buying a Rental Property

By: Alan Corey

Alan Corey is the author of “A Million Bucks by 30”. You can learn more about him and his book at www.alancorey.com.

 

If you are looking into buying real estate to rent out for some passive income, it all comes down to buying a property at the best price possible. The following are some tips I’ve employed to get the purchase price down as little as possible, sometimes saving me as much as 25% on the purchase price.

The number one way to instantly save on a purchase price is to make your offer before a property is listed with a real estate agent or broker. The seller of a property is responsible for the fees paid to real estate agents and brokers, which can run around 5-7% of the purchase price. Knowing this, many properties are listed higher than necessary by homeowners just to cover these selling fees. So getting ahead of the agents can instantly save you 5-7% on your home purchase.

For me, finding properties that are not listed yet takes some leg work (literally). I begin by walking around neighborhoods I’m interested in buying in. If I see a vacant or abandoned home, I’ll talk to neighbors who may know who I could contact about purchasing it. Sometimes there are unclaimed mail and magazines on the front step for you to get a name, leading your internet research in locating the owner. You may stumble upon a house in pre-foreclosure, which could allow you to purchase it at a deeply discounted price.

Furthermore, while on my neighborhood walk, if I see a house getting renovated or under construction, it’s an also sign I have a chance to beat the real estate agents. Many times these houses are owned by house flippers looking to unload of the property as fast as possible. So the key here is to get in before the work is done. Often house flippers choose to put in expensive upgrades to have the house sell quickly by distinguishing it from other homes on the market. I’ve negotiated a lesser workload and lesser upgrades on a construction site in exchange for a reduced home price, to the benefit of both parties. A house flipper is always worried about carrying costs of a house while it sits on the market and secondly, a quick sale will allow him to start looking for his next project. In the end, the house sells for less money, which in turn saves you a lot of coin.

Lastly, walking and talking to people you meet in a neighborhood is another word of mouth way to network for properties. Someone you meet may know about a house about to get listed or one that was just taken off the market because it didn’t sell (a sign the agent contract has expired.) You can even talk to renters who are about to move out, which may be a concern to the homeowner and help pave the way for you to get a purchase offer on the table. Either way, you can start talking at a lower price point and it may lead you to bargain deal.

To recap, get in on a property before the agents do. Most times the cost savings all come down to timing. Cutting out the middle-man is a great way to save money, so the best time to buy a rental property is when you can buy it directly from the owner. It may take some patience and some persistence, but that’s the foundation of a great real estate buy. And great real estate buys make successful real estate investors.

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

You Killed My Father, Prepare To Die… And Other Lessons in Finding Great Deals.

by Brandon · 0 comments

One of my favorite movies of all time is The Princess Bride, and one of my favorite scenes is the epic fencing duel between “The Man In Black”  and Inigo Montoya (of the “You killed my father, prepare to die” type).  Immediately after the duel begins, Montoya asks The Man In Black, “who are you?” Getting refused an answer, Montoya says, “I must know.” The Man in Black’s response?  “Get Used To Disappointments.”

This is the mood I am in today: Getting used to disappointment.  I found a house on the market several blocks from my own a few days ago, and instantly fell in love (mistake number one). Not only was it in a better neighborhood but it had a huge yard, had natural gas heat, and was priced almost half of what other homes in the area sell for. With a few weeks of labor and a few thousand dollars this home would have been both the perfect investment and also the perfect home for me to move into.

This was on Monday. Today (Friday) I decided to begin my pursuit on this marvelous home and much to my surprise: the house already has sold (well, “pending” anyways).  Just yesterday the house was listed as “active” and today it’s gone. Had I jumped on this deal on Monday, I probably would have had it.

Real estate is often looked at as a “slow” investment – and it often times is.  However, there are many times in real estate that you truly have to be on the top of your game to get the great deals.  This lesson hit home with  me this week (no pun intended), and clearly I was not on top of my game this week.  But rather than moping around, feeling sorry for myself, I am using this experience as a learning tool.

So what did I do wrong this week? When I looked at my mistakes in pursuing this house,  I came up with three principles that I dropped the ball on this week. The following are those three principles that must be adhered to in order to find success in finding great deals.

  1. Be Decisive –  If you want to find a property, you need to decide that is what you are going to do. Successful investing requires focus. Great deals are not going to magically find their way into your hands from your indecision.  I don’t believe you need to be decisive all the time, focusing on scoring great deals every day for the rest of your life. However, when you are ready to buy – commit fully.
  2. Be Aggressive – Once you find the property you want, make it happen. Don’t wait on the phone for a day for a call-back. Make it happen. Be the one making the waves, not the one riding them.
  3. Be Resourceful – One of my favorite quotes of all time is “You don’t lack resources, you lack resourcefulness” by Tony Robbins.  When you are trying to make a Real Estate deal happen quickly, you will run into bumps. Lenders will buckle, investors will get worried, and people flake out. You must have several strategies and back-up strategies in place so you can overcome these hurdles.

I’ve written these principles not just for your benefit but also for my own. Even seasoned real estate investors need a good reminder that good deals will pass by if we sit by and let them.

 

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

How I See My House…

by Brandon · 3 comments

I received this email yesterday from my good friend, designer, and creative genius Krister from Plank Island Studios (www.PlankIsland.com) and found it hilarious and very true. If you are a homeowner you will especially appreciate this.

 

 

 

 

How I View My House:

How I View My House

 

 

 

 

 

 

 

 

How My Buyer Views My House:

How Buyers View My House

 

 

 

 

 

 

 

 

How My Lender Views My House:

How my Lender Views My House

 

 

 

 

 

 

How My Appraiser Views My House:

How My Appraiser Views My House

 

How My County Tax Assessor Views My House:

How My County Tax Assessor Views My House

 

 

 

 

 

 

 

 

 

 

 

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

Getting Started Investing in Real Estate – Part 3: Creating Criteria

by Brandon · 4 comments

This article is part three in a four part series on Getting Started Investing In Real Estate (to read part one, click here or to read part two click here) I first explored the importance of gaining an educational foundation before anything else in real estate. Next, I explained the necessity of creating a plan so you are not wandering like the Old Testament Hebrews in the desert. Today, it’s time to formulate the criteria for the house you will be searching for.

What Your First Investment Should Look Like

Your first purchase should be your own home. However, in the words of Robert Kiyosaki and his Rich Dad Poor Dad book, “Your home is not an asset. It is a liability”.  In other words, a typical home – while it may increase in value over time – is not an investment.  It will usually end up taking money out of your pocket, not putting money into it.  That’s not to say it isn’t important, but how can you combine the need for shelter with an investment that makes sense?

Simply, don’t follow the blind masses and go search for that perfect home with the white picket fence that pushes the bounds of what you can afford.  You will have plenty of life ahead of you for that home and much more if you desire.  However, if you want to build a solid foundation for using real estate to fund your life adventures, you need to buy the correct house that is an asset to you and fits with your investment plan.

What should I buy?

I recommend that you look into a small multifamily building such as a duplex, triplex, or 4-plex.

Why?

A small multifamily property has several distinct reasons for making it the ideal first purchase.

  1. Easy To Finance: Multifamily properties with 2-4 units are as easy to finance as single-family homes. You can get into a home for around 3.5% down payment and ask the bank to pay the closing costs. If the property is already filled with tenants, you will also receive the security deposits from the existing tenants when you take over.
  2. Easy to Gain Experience: Multifamily properties will get your feet wet in the landlord business. I’m not saying you need to be the one fixing toilets at 3 a.m. (see my 5 Tips for Hassle-Free Tenant Management). However, the experience you gain from these small units will translate into a lifetime of headache saving skills.
  3. Easy to Cashflow: When starting out in Real Estate, your goal should be to get your cashflow as high as possible. This means the money that goes out in bills must be much less than the money coming in. As landlord – you get to keep the difference. This is cashflow.  Multifamily homes are generally much easier to get good positive cashflow on, thus they are the perfect tool to get you out of your day job and on with your life.
  4. Less Competition:  Small multifamily houses are outside the radar to most home buyers, so the law of supply and demand is on your side in getting a killer deal. Less competition = a better deal for you.

Are you going to fail miserably if you go out and buy a typical single family home as your first purchase? No. However, the financial benefits of a multifamily home will put you far ahead in your investing career and set you up for a higher likelihood of success. Tomorrow’s post will be the last in this series and will focus on the actual steps to purchase your first home.

Leave a comment below and then click here to go to part four in this series “Getting Started Investing in Real Estate”

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.