Nobel Finance Sydney – Money Matters Newsfeed

By Javaid Kiyani

One of the best methods to find below market value property is through advertising. Placing classified adverts in your local paper should be part of your overall game plan to locate motivated sellers.

A motivated seller is basically someone who needs to sell his/her property very quickly due to circumstances beyond his/her control.

These circumstances could have arisen through for example divorce, death or debt.

When anyone experiences any one of the above, they may be ‘forced’ to sell their house and more often than not will need to sell very quickly. It’s this speed of sale that is more important to the seller than the final price achieved. This is why a sale via an estate agent may not be the best option for the vendor of the property.

These motivated sellers often turn to adverts in local newspapers to look for prospective purchasers of their property. If you’re not advertising in that paper, you could be missing out.

If you are financially constrained, don’t buy a half page colour advert! Try a small black and white advert first. I’ve known simple monochrome adverts to work just as well as their colour equivalents.

Test the market by changing your headline every week until you find one that works best for you.

When first deciding on the wording of your adverts, it is best to look at what your competition is doing. Try and find adverts that appear every week and emulate their style. These adverts obviously work otherwise they wouldn’t be used over and over again.

One thing to try would be to literally ‘copy’ a successful advert that appears every week. All you need to do is change the contact number at the bottom of the advert. Done effectively, you will ‘legally steal’ half of the original advertisers market!

When it comes to advertising in the paper, please be aware that success will not come overnight. You need to be persistent in your efforts, and continually test your strategies.

Also, an advert that may work very well in one paper may be a dud in another. You can avoid making expensive mistakes by continually trying different variants of your advert. I can’t stress this enough.

Once you have a successful advertising strategy, you will find that you are dealing primarily with motivated sellers. This will enable you to grow your property business very quickly and with very little of your own money.

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By Jacques Coquerel and William Coquerel

If you know the basics of real estate investing, then you know the key to making profits is basic economics – buy as low as you can and sell as high as you can. This is the case with any other kind of investment and real estate is no different. What makes a simple equation into something difficult is buying properties for a price low enough to make a substantial profit. Investors who work with distressed properties have found a niche that serves them perfectly.

Distressed properties have a lower market value because of certain factors that apply to the property. It may be in poor condition or have a bad appearance. Or, the property itself may be fine, only the owner is facing a difficult financial situation. Whether the property is in a physically- or financially-poor condition makes a difference in your approach.

While investing in distressed properties can be lucrative, it can be costly too. That’s why it’s important to choose these properties wisely. Choosing the wrong one could cost several hundreds to several thousands of dollars. If you had this kind of money to through away, you probably wouldn’t be involved with real estate investing.

Stay away from properties that need major repairs like a new roof or foundation. You’ll end up sinking so much money into these types of properties without improving the value enough to make a justifiable profit. Instead, choose distressed properties that require minimal repairs and provide a generous return on your investment.

Not all distressed properties need repairing. Some properties are distressed because the owner is having financial difficulty caused by divorce, death, and job loss, among many other factors. Although the owner(s) may be facing a difficult time, your investment can keep the situation from worsening. In many cases, where the property is financially distressed, you can resell the home without having to spend a great deal of money on repairs.

If you find a distressed property and you’re interested in offering a deal for it, you have to act quickly. Contact the homeowner as soon as possible to find out how you can help take the property off their hands. Get financing as quickly as possible. It helps to have relationships with a few lenders who can help you get funding. When you take too long, other investors swoop in with their own offers and before you know it, home ownership has already been transferred to another investor.

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By Steven Gillman

How do you maintain and increase the rental income from your properties? Start by keeping your renters happy. That’s what the first two of these tips are about.

Happy Tenants Mean More Consistent Income

1. Find out why tenants leave. Sometimes it is just because of a job transfer or the need for a bigger apartment. But if it is because the neighborhood is becoming dangerous, or because the other tenants are too loud, these are things you need to know and to do something about. More turnover means less rental income, because it takes time to get those empty apartments rented. But to correct problems that lead to vacancies, you need to know what they are – so ask!

2. Talk to your tenants, and resolve any meaningful complaints as quickly as possible. The longer they stay, the less time you spend with empty apartments. If they want cheaper rent, let them know what others charge, and that you are competitive. But if they want a new carport and are willing to pay a little more per month for it, run the numbers. You might increase your income and have happier renters.

Rent Quickly

3. Rent that vacant apartment out quicker and you’ll have more income for the year. One way to do this is to have a system in place and ready. Have the cleaning crew ready to go in the day the tenant moves out, and have advertisements ready to place in the paper the day before he moves out. Use a property manager if they are faster than you at turning an apartment around.

4. Another way to get those units rented out quickly is to have a ready supply of renters. For this, there are two things you can do. Keep files of recent (and qualified) applicants and call them when a unit becomes vacant. They might still be looking for a place. Keep in touch with other landlords and “trade” tenants. When they are full, they can refer renters to you, and you can do the same for them.

Other Ways To Protect And Boost Rental Income

5. The obvious way to increase that income is to raise the monthly rent you charge. You can’t do this arbitrarily without losing tenants, but it may be worth checking the rents of comparable properties if you haven’t done so in a while. If you raise rent to market level, or even a bit higher, tenants may not like it, but there won’t be enough incentive for them to move. If you are raising to market or below, include examples of area rents in the letter notifying the tenants.

6. Noticed that four of the ways above are really about reducing vacancies in your rentals, or to look at it from the other perspective, they are about improving the occupancy rate. The more time those units are full the better (assuming the renters are paying). One way to accomplish this is to rent to people who stay longer. How do you know who will stay longer? Start by asking, and then rule out any who say, “This will do for now.” But more important is their history. Those who have moved every eight months for years will likely continue that pattern, while the family that spent eight years at their last apartment will likely stay with you for a long time. That really helps keep that rental income consistent.

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By Luanne Pazos

Considering real estate investing? Or looking for the next big idea in real estate? People nationwide are continuously searching for new ways to sink their teeth into the lucrative market that is real estate investing. Before you choose your next big move in real estate be sure to analyze current market trends and choose a strategy accordingly.

There are several avenues to take within the rather large realm of real estate investing. Whether you execute more traditional types of real estate investing such as buying low and flipping or accumulating rental properties, there are several profitable routes to take. Consider using a combination of strategies in order to diversify your real estate portfolio and ultimately maximize profits.

One significant trend forecasted for the coming years is the rise of foreclosure investing. Due impart to exotic loans and the rise of interest rates, the amount of foreclosures nationwide is predicted to skyrocket in the coming year.

Perhaps you’re more interested in a preemptive move? Along the same vein as foreclosure investing is the trend of pre-foreclosure investing. Some of the same sites that offer foreclosure lists also offer pre-foreclosure listings. You can even get helpful tips on approaching owners who are in a financial bind. With pre-foreclosure investing you can avoid the auctions and wield more control over your transaction. Most importantly you would be helping the homeowner avoid a credit disaster.

With all the resources available online, foreclosure and pre-foreclosure investing is much easier than once considered. Some websites such as Foreclosure.com provide listings for foreclosures and pre-foreclosures. Foreclosure listings services also have helpful tools and resources making them a one-stop real estate investment shop.

Along with foreclosure and pre-foreclosure investing seems to be the strategy of holding the property as opposed to flipping and selling it right off the bat. Because the market has seen a rather abrupt slowdown, the profit is no longer in the flip but in the hold. Consider other options such as residual income from a rental property. Or it may be wise to invest more time and money to improve the property seeing as though there is no longer a need for conveyor belt housing.

Whatever your real estate flavor of the month may be, one thing is certain, real estate investing will always be a safe bet.

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By Lane Bailey

Digging a little deeper in Buy and Hold strategies

In Real Estate Investing 101, Part II, we covered buying and holding property for long term appreciation and wealth building. This is by no means a get rich quick scheme, but is one of the most proven ways to build wealth over time.

Finding an appropriate property

Just like with flipping, property is a required ingredient. In fact, the same sources will work for buy and hold strategies as for flipping. The primary difference is that buy and hold strategies are generally a little less stringent on cost control, as well as condition. One can be in the property for a little more money because there isn’t a short term margin to mind. REOs (bank owned property), pre-foreclosure, short sales, older homes needing updating and strong but ugly properties are still the best options.

Rental homes are more price sensitive for marketing. While a flip may be done at any price level, rentals are a bit more picky. While it certainly requires knowing the market, generally in the Atlanta area, the best options are in the $125k to $250k area. There are opportunities below that, as well as above, but the meat of the Single Family Residential (SFR) market will be around this range.

Under $125k- Pro- Just as with a flip, these properties are easier to carry when they aren’t producing. Con- Even with a generous appreciation, the actual cash value will not go up as much as with more expensive properties.

$125k to $250k- Pro- This is the most active area of the market. There are more renters available, so it may be easier to keep the property occupied. Con- This is the most active area of the market. There are more properties to compete against for the renters.

$350k to $500k- Pro- These are executive rentals, and usually the renters will be more mindful of the property. There are property owners that concentrate on this market because it is quite profitable and low hassle. Con- There are higher costs to carry the property when it isn’t rented, and it may require more expenditure between renters to update the property. The renters will be pickier about amenities, fixtures and finishes.

Over $1m- Pro- The rental rate to cost is usually higher because of the rarity for SFRs. Most of these properties will be commercial, which usually have longer leases and often don’t require the landlord to make the improvements of maintain the property. Con- For the SFR market, this is a rare rental. There certainly are some out there doing well, but they will be shorter term (usually) and require more and more expensive marketing to fill. For commercial properties here in Atlanta, one needs to be very careful because there is a LOT of available commercial space.

Putting together the numbers

As with the flipping article, I have an Excel spreadsheet to examine the deal more closely. It isn’t fancy, but it does help keep all of the important points front and center so that the details don’t get in the way of the big picture.

When filling out the spreadsheet, the light gray areas are for users to input information. The light green areas have calculated values. Remember, the more accurate the input information, the more accurate your profit analysis will be.

As with flipping, it is very important to know what the upfront costs will be, both for acquisition, but also for any required renovation. However, unlike flipping, if the investor wants to reduce costs, and has the needed skills, doing more work themselves, instead of hiring contractors can be more manageable. Most investors aren’t going to have a bunch of projects running at once. If one DOES plan to have a lot of project going at one time, or if one is not appropriately skilled, hiring contractors is a better plan.

On the linked worksheet, we can see that the fictional investor purchased a property for $200k. It needed a further $25k in renovations. After renovation, the unit has an expected rental of $2250/mo. and requires about $1800/mo. to carry. I factored vacant periods in, as well as needed maintenance through the use of set-asides and reserve funds. These are included in the monthly carrying costs. I specifically expect a 90% occupancy rate. That may be a bit high, but I also tried to balance that by under shooting the expected annual increase in value.

As we delve into the numbers, what we find is that the cash flow accounts for a total of over $550k over the thirty year period. Further, the property increases in value by over $300k. This means that if the property is held the full thirty year term, the mortgage would be paid, and the investor would have collected almost $1.1m over the thirty year term, after selling the property. Even after discounting the original total investment, there is still a profit of $800k.

But, the real magic is in the leveraging. In this example, the investor fronted less than $80,000 and ended up with over $1,000,000. If one actually spends a little more for a property that doesn’t need as much renovation at the beginning, one may have a better total return.

Putting together a good team

Any good investor needs partners. These are the people one needs to have available:

Real Estate Agent- A good agent will know what is on the market. The agent should be able to help minimize the initial costs, while making sure that the property is suitable for renting, and will be readily marketable for that purpose.

Rental Agent- Knowing what a given property can rent for is valuable information. Also having someone ready to market the property as soon as practical is valuable to cut down non-productive time.

Inspector- Spending a few hundred dollars for a good inspection is money well spent. Missing a failing HVAC system or a roof issue could cost thousands. Knowing that a particular siding or electrical system has shown itself to be unreliable can also be very valuable. If one can find an inspector that will give good cost estimates of repairs and upgrades that need to be performed, one may be able to cut down on the number of contractors that need to be consulted prior to buying a property. The inspector can also provide invaluable insight into the long-term viability of the expensive systems in the property.

Mortgage Loan Broker- Unless one is going to owner/occupy the properties for a number of years at the beginning of ownership, one needs to work with a mortgage broker that understands investment loans. Structuring the loan appropriately for the investor can decrease the monthly costs, and increase the cash flow of the property.

Rental Marketing Strategies

The whole point of this exercise is to get the property rented and keep it that way. There are a few things to keep in mind to maximize the long term return, and minimize risk.

Hire a good rental agent. They are part of the team. A good agent will help get the right exposure for the property, as well as make recommendations that will make the house more marketable. These are specialists. Depending on the individual agency they are with, there may be a one-time fee or they may be a monthly percentage.

Stage the property. A vacant house makes it harder for renters to mentally move in, just like buyers. A few rooms that are well staged will really increase the value in the minds of renters, so it is generally well worth the cost. This is especially true for higher end homes, but may be the thing that tips the balance for ANY property. With rentals, this may be a real standout, as few rental properties are staged.

Set rent appropriately. To get, or more likely keep, a good renter, be flexible. A good renter can cost less money between rentals. If it is a longer term renter, there will be fewer vacant periods.

Be flexible on lease/purchase possibilities. I have heard that about 1 in 8 lease purchase sales actually close. If offering a lease purchase is what it takes to get a good renter, or to keep a good renter, remain open to the possibility. It may be well worth the risk that the property may sell. Also, if the buyer/renter would like some of the rent credited to down payment, most lenders require that only the amount above market rent be applicable to down payment. Usually this money is forfeited as earnest money if the sale doesn’t close.

Research. Plan. Prepare. Remember the old adage that it takes money to make money. This holds true in buying real estate to hold as well. Targeting the money is less important than in flipping, but spending it appropriately is still important. Also, understand your own market and your own limitations.

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