Do your homework!

You have heard it said trust, but verify. This holds true for nations, and for real estate as well. Do your homework! Don't rely on other's analysis of costs, profits, etc. Check everything yourself, and get second opinions. If you are hiring a contractor to do repair work, get several estimates. If you are being offered a deal no matter how reputable the seller, have your own trusted contractor price the deal for you. Verify that the potential rental price quoted is indeed in keeping with similar rentals in the area.Real Estate is a demanding, active business. If you allow others to do the legwork, you set yourself up for failure. The successful investors are those who do their own verification of costs and potential profits. Sometimes seemingly simple things are what topple those who lack due diligence. For example, there are cases where someone claims to own a property, when indeed he does not. Something as simple as not checking titles oneself can lead to disaster! Scam artist tenants will sometimes try to sell property as their own. Always go to the registrar of deeds and pull the tax records. Many times this can be done online. If the county operates such that it is not easy to pull up this information on line, many people will not bother, and sometimes great deals can be found by those willing to invest the time. Ask lots of questions- ask other realtors, management companies, attorneys, REA groups- is the property you are considering able to rent at the price being claimed? Gather as much information as you can yourself, and ask those who might know. Don't just trust the seller's word. Find appraisers who will do "desk comp work", where they will pull up information for a nominal fee and be able to tell you what neighboring property is worth in rental potential. By just driving through the area yourself, writing down all property for sale, and then calling the realtors and finding out what the other properties are going for, you can become a remarkably accurate appraiser of the value of the property you are interested in.The way to develop an accurate feel for the value of a property, its rental potential, and learn to smell the spectacular deal is be willing to do the work yourself. Very few people in real estate get rich letting someone else manage all the details. Trust others, but verify that what they say is true with your own diligence and work.

Investor Tip on Estimating Repair Costs

The next tip in our investor series is to avoid the common error of underestimating the need for and cost of repairs. One can never be pretty enough and one can never have enough money set aside for rental repairs. A good rule to follow is always considering the worst case scenario. When you see a soft spot in the floor, even before you consider the cost of replacing the floor board, consider that the joists underneath may be rotten as well. Rarely will you see a fix-over come in under budget. When you are discussing costs of repair with a potential seller, a good strategy is to double it. When you underestimate repair budget and overestimate what a great deal you believe your first big purchase to be, you have a recipe for disaster, and one many enthusiastic newbie investors fall into.When going into a sale, underestimate what you believe the value of the house is, and overestimate what you believe it will cost to rehab it. With this set of expectations, you will more often be pleasantly surprised rather than bankrupt when all is said and done.This mindset is also critical when dealing with contractors discussing the cost of their services. Never settle for an hourly rate; you will almost always spend far more than the original estimate. Get specifics, and be sure to get the contractor's worst case scenario numbers. Set a timeframe, and get it in writing. In fact, if they tell you the job will take 2 weeks, include in your contract the deadline date, as well as a daily charge to them for each day over deadline. This helps keep everyone on a realistic schedule.So remember, prepare for the worst, get everything in writing, and you will be purchasing many sequels to that first sale.

Hot Tip for Landlords

Hot Tip for Real Estate Investors, particularly those in Rental Property, is Always Have a Reserve.This tip is especially critical if you plan on fixing up the property before renting. That of course seems obvious but it is equally essential to have a reserve for those in-between tenant times, when repairs and upgrades will always be needed. If a tenant is willing to settle for shabby quarters in disrepair, they are not the kind of tenants to whom you want to rent.You do not want to face the prospect of having to qualify for a new loan if you have run out of cash, the property goes vacant, and not only are you losing income, but the carpet and paint need replacing.If you own your own home, you should be sure to have an equity line of credit open and available for use. Oftentimes when you most need credit is when you are least able to secure it, so it makes sense to plan ahead with this simple step. Not only can you then finance and borrow with your own money, but you protect yourself in the unfortunate case of lawsuits. Even if your house is paid off, the attorney sees a mortgage amount of your HELOC, and your assets are protected.It is also important to realize that a lender will only count 75% of rental profit as income. They know that 25% of that cash flow will be needed for repairs and vacancies. In securing future loans, it is critical that you consider that.Remember, be prepared with a ready reserve. If by some miracle you don't need it, you have lost nothing, and if you do need it, it may make the difference between disaster and success.

Best Rental Houses

Buying Rental for ResaleWhen you are looking for the deal of the century, be sure to consider the best use for the property given the neighborhood and size of the home. There are many neighborhoods that are perfect rental area, others are ideal retail areas, and some better for lease/purchase options. Some are mixes of all three. When buying and fixing up a property for quick sale as rental property, it is important to analyze the best potential of that area's specific market.Additionally, when purchasing property for rental potential, it is almost always to your advantage to find a 3 bedroom as opposed to 2 bedroom home. Most customers interested in purchasing rental property will pass over the 2 bedroom, unless it is in a high demand vacation location, like a beach house. In unique and unusual areas, one may also be able to effectively market 2 bedroom rentals. Generally however, for rental resale, the best deals are the small 3 bedroom houses in the $50-$70,000 range which will rent on average $500-$700 monthly . A 3 bedroom will almost always be preferred by a renter over a two bedroom. When looking to purchase a 2 bedroom home, always look at the floor plan and consider if there is a way to convert it to a three bedroom to most advantageously market it as rental property.While it is difficult to attract buyers for rental purchase with a 2 bedroom house, it is similarly a small market interested in the high end as well. The cost/profit margin is just too small to make it as attractive to the real estate investor in most cases. Most investors able to secure loans to purchase a 2 bedroom rental home can often qualify for the 3 bedroom home too and a positive return is more likely.So know the area, know the potential, and convert to 3 bedroom when possible to most effectively market rental property.