| Real Estate investing is probably the easiest way for
ordinary people to earn extraordinary profits and regular retirement income. But how do
get started? Follow these simple steps and you won't go too far wrong: 1. Scan the
Area
In most areas the local realtors will produce a regular publication that lists the
prices of houses for sale in the area. This might be in a newspaper format, or it might be
an Multiple Listing Service (MLS) book that lists every single property for sale.
Whatever it is, get hold of a copy. Then go through it and find every property for sale in
the area in which you are interested - make a note of the location (e.g. street) the size
(e.g. 3 bedrooms) and the price.
Talk to some of the realtors and get an idea of how quickly prices are going up (or down!)
and what their predictions for the future are. Ask them to justify why they think prices
will continue to grow (or not) at that rate.
Do the same for rental properties, making a note of the rents being asked. Phone up some
of the rental agencies and ask them how quickly they get filled, and what average vacancy
rates are.
2. Decide your strategy
Once you have all the raw data, you can then decide what strategy is likely to be the
most profitable - are you better off buying to hold and rent, or buying to renovate for a
quick resale? Are you better off buying a one-bed apartment, or a three-bed duplex?
To do this you need to do some number crunching. Fortunately there is a neat spreadsheet
calculator (The Real Estate Profit Calculator) that will do
all that for you.
First you enter all the house prices and rents, and it will give you the average price per
room, average rent per room, and the rent to price ratio, for each of the different types
of house. From this you will immediately know if a one-bed or three-bed is going to be
more profitable. You can also use it to help you decide which street or area would be
best.
Once you had done that, then use your figures for average price, rent, and vacancy rates
to work out the potential profit of buying to rent. Don't forget to include all the buying
costs, maintenance fees, taxes etc. (Again, the Real Estate Profit Calculator makes this a
snap).
If this looks viable - great. If not, perhaps buying cheap and renovating might be a
better plan.
3. Buy Cheap
Whatever strategy you use, the cheaper you can buy, the more money you make. You now
know the average prices - don't pay more! Better still, find a distressed seller (widow,
divorcee) and get it even cheaper. Foreclosures are a great way to get really cheap
properties. An excellent resource that will tell you exactly how to do that can be found
at www.real-estate-profitcalculator/foreclosures.html
4. Use Leverage
How do you turn a 10% ROI into 40%? By using a mortgage or financing to buy the
property. If you earn 10% by paying cash, if you take out a 75% mortgage you can probably
turn this into 30%. Buy with no money down and you can earn even more! But take care.
Crunch the numbers very carefully before you dive in. More info available at www.real-estate-profitcalculator/nomoneydown.html
5. Cut Costs
When it comes time to sell, do you really want to give 5% of the price to a realtor? If
your property has gone up a nice 25% since you bought it, that 5% commission would
represent 20% of your profit! You might prefer to sell it yourself and pocket the
difference. It's not difficult to do, you just have to go about it the right way. An
excellent how to guide on this is available here; www.real-estate-profitcalculator/fsbo.html
That is really all there is to it! However, there are pitfalls that can catch the
unwary so, as with any other investment, you are well advised to spend a bit of time and
money on your education first. Use this article as a springboard and you can quickly get
started on building your real estate empire!
-oOo-
Dr. Noel Swanson is familiar with the property markets from first-hand experience in
North America, UK, and Spain, and is now developing a real estate portfolio in Panama.
Realizing the need for accurate analysis of potential investments, he developed The Real
Estate Profit Calculator which he now regards as his most essential tool. More information
about real estate investing can be found at:
www.real-estate-profitcalculator.com
This is a "Shareware" Article
(what's that? read on...)
This article is shareware. Give this article away for free on your
site, or include it as part of any paid package as long as the entire article is left
intact including this notice. Copyright © 2004 Noel Swanson.
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Text-only version available here |
