real estate investing

What To Expect When You Buy A Fixer Upper

January 20, 2022 by khproperties Leave a Comment

It feels like you can’t turn on the TV and flip through the channels without seeing a home improvement show, but don’t be taken in by their simplicity. Remodelling your home is far more complex and usually more expensive than TV pundits lead you to believe. When they even bother to price the items of a project, the labor costs are often conveniently forgotten because they can be 50% of the total expenditure. Contractors don’t appear out of nowhere, and gardeners won’t just magically appear with half a forest for the backyard. You’ll learn an incredible amount about property ownership if you purchase a fixer-upper and set about a major renovation. But if you’re a first-time buyer who’s looking for a bargain to renovate, remember that while it’s a great strategy, you’ll need to be prepared for hard work before you enjoy the incredible satisfaction of creating a wonderful home.

Here’s a quick guide of what to expect to get you started:

Ignore TV shows: Nothing will put you in a world of renovation pain than believing the pricing you see in reality TV shows. Labor costs are a fundamental reality and rarely rate a mention. Budget for the real world.
Create a budget and then some: The most important aspect of remodeling a home is to create a budget that you can afford and then stick to it. But remember most renovations cost more than you think. Experts recommend you keep aside 20% of the project’s cost in case of problems.
Quotes come in writing: Always insist on receiving an estimate in writing rather than believing a verbal estimate that might be contested or ignored later. When the invoice comes in, you may find yourself with a nasty surprise.
Expertise counts: If your budget will stretch, call in the experts. An architect, lighting consultant and interior designer will transform your project. And given you’re investing in your most significant financial asset, consider the dollar value they might add.
Advice vs Opinion: Friends will offer their ideas and opinions, and architects and contractors will provide advice. Be sure to know the difference. Ultimately, the decisions are on you and you’ll need to live with the consequences of your choices.
Focus on you: Unless you want to flip the property, then remodel for your lifestyle and don’t worry about fashions or fads. If you’re flipping, the reverse is true. Make decisions that will maximize the sale price.
Minimize your role: Hire a general contractor who’ll coordinate sub-contractors for the entire project. Avoid the hassle of organizing tradespeople. One bad apple will throw out your timeline and cause friction with the others.
Stop and shop: It can be a good idea to avoid buying materials from multiple suppliers all over town. That quickly gets very confusing, especially when it comes to delivery schedules. Ideally, purchase from only one or two suppliers. Apart from construction materials, it’s also recommended to get a dumpster rental for a more efficient construction cleanup during and after the renovations.
Be tactile: Don’t rely on the internet when you shop. Faucets can look amazing online but turn out to be cheap and nasty when you open the box. Go to each store and literally touch the items you want to buy. Ask for swatches of cloth and colours, buy tester cans of paint, and take your time with all your decisions.

image courtesy of rocinante11

How to Spot Hot Markets for Real Estate Investing

July 8, 2016 by khproperties 2 Comments

If you’re thinking about getting into real estate investing, particularly buying homes for rental income, it’s no secret that you’ll want to find the hidden gems before everyone else. Buying in a neighborhood before it gets hot, at a low price, and being able to ride the wave of popularity as the Neighborhood Property Values grow can be a great investment strategy long term and help you build your real estate empire. But getting in early isn’t always easy. The whims of taste and cool can change overnight and buying in an area that everyone thought might be up and coming may not pan out.

There are some things to look for and with a little knowledge, research, and intuition, you may just find yourself sitting on the next hot property. And for you to be equipped with everything you need to know about real estate investing, then just navigate to this turnkey real estate investing site to learn more!

Real Estate Investing 101

The concept is simple. Buy homes at low prices that bring in rental amounts that exceed your mortgage payments and expense on the home. Your first step is to run the numbers. Need help with that? This post from BiggerPockets makes it so simple, you can calculate all the numbers you’ll need for rental property on a napkin. Like any investment, you want to see what’s coming in and what’s going out – the comparison of the two is where you earn (or lose) money on the deal. Some investments pay off long term, some pay off the day you purchase them. The goal is to be on the positive side as quickly as possible.

An important thing to remember is that these homes you’re buying are investments. As investments, you’ll want to protect them long term. Take care of them and they will take care of you. The biggest mistake we see new investors make is not taking real estate investing as a serious long term endeavor. If the house needs repairs, don’t ignore them. Those problems build up the longer you put them off and they can get much more costly the longer you wait. Regular maintenance of systems in the home will help you avoid costly malfunctions. Treat your properties well and they will treat you well too.

Spotting Hot Markets for Real Estate Investing

The first step is playing the simple numbers game – look for areas with low sales prices and higher rents. Be sure to check rental prices over time – are they rising or are they falling? Are there large amounts of student apartments for rent or luxury apartments for sale available in the area? How long do the rentals stay on the market? Look at individual properties – do they stay rented or is there a lot of turnover (and beware too much short term turnover, such as every few months)? The more you look at the activity in the neighborhood, the better. Your real estate agent can help show you the comps for the area, both rentals and sales.

Watch out for other investors who were looking to spot trends for real estate investing and may have misjudged the market. Look for homes that were bought and sold within short time periods. Were they improved and flipped or is someone cutting their losses because the area didn’t pan out? There may be bargains there, but buying a property you can’t rent down the road isn’t going to be to your advantage.

Listen. There is always chatter out there about what’s hot and what’s not. Look to where your target renter spends their time and listen to them. They’ll tell you where the trends are going. Social media can be a great tool for this kind of research. Read the business papers and see where developers are putting their money. You don’t want to wait until the last second though, so be ready to move quickly if you think you’ve spotted an uptick in interest. Of course, your intuition comes in handy here too. See something that just seems too good to be true or only one person seems to be gravitating towards? Remember, not all investors get it right and sometimes even the biggest projects fail.

When analyzing the sales data in a given area, look for days on market. Is there a sudden downward trend? When the average days on market starts to fall, it may indicate that investors are starting to snatch up properties because there’s something going on. Be careful however, as it may just signal a normal spike in activity. This is where long term trends can really help you get a better picture. Comparing the long term and short term trends can help you see whether this is normal or there’s actually something going on. Remember, when days on market trend downward, prices tend to move upward. Shorter days on market typically precede price hikes, so be sure and time your entry carefully, you never want to be on the growth side of prices.

Look to the commercial market. Corporations spends millions each year on market research. They don’t randomly choose their next location, so if you see development happening, you can be sure they see value in the area. Learn where the businesses are going in before they start building. Know your target renter’s likes and dislikes as well. Stores like high-end grocers and coffee shops are popular these days, so look for Trader Joe’s, Whole Foods, and mom and pop artisan coffee shops. The more you know about the local commercial trends, the better you can spot activity before everyone else does.

Connect with the city. Attend planning sessions, committee meetings, public hearings – the more you know about what’s happening in your city the better. Pay special attention to any meetings that involve the public being able to speak. Listen to their concerns and thoughts and get the insight on what’s happening in their local communities. Serve their needs and give them what they want and you’ll find yourself in a much stronger position. Listening is probably the investor’s greatest skill – the people will tell you what they want and need.

Finally, your mom was right when she taught you not to put all of your eggs in one basket. While you may want to purchase more than one property in a trending neighborhood, real estate investing is a long term strategy and trends do come and go, you can also look up other investing opportunities like Forex or day trading, check out ironfx withdrawal for more info. There are numerous online trading platforms out there that can help you get started. You should also spend enough time doing due diligence and find a trusted online broker united kingdom to make the most of your trades. While downtown areas are experiencing a surge all over the country, there was a period where they were abandoned for the suburbs and suffered greatly for it. Spread your investments around so that you have a cushion of safety in case one area doesn’t pan out or finds itself suddenly on the “not hot” list. Like the stock market, some good planning will help you weather any storms that may come in the local areas housing market.

image courtesy of 401(K) 2013

Investing in Real Estate for Rental Income

May 23, 2016 by khproperties 4 Comments

When you’re looking to invest in real estate, particularly for rental income, you should always head into the process with as much knowledge as possible and weigh in the pros and cons of wholesale real state investing carefully. Rental income can be a great way to generate positive cash flow, but renters are also putting your investment through normal wear and tear and perhaps much more. There is a careful balance between a rental that continues to generate income year over year and a money pit that can negatively impact the bottom line of even the savviest investors. Going blind into real estate investments is never a good idea and today, we have a cautionary tale from our very own Gail Overton. If you’re ready to make the plunge into the world of real estate investment and are looking to generate rental income, read on and learn from other first time investor’s mistakes.

Sylvia* purchased a home with the intent to use it to generate rental income for her new venture into real estate investing. She placed an ad on Craigslist and promptly found a renter. She was overjoyed; she could now sit back and watch the money roll in! Within 6 short months, her renters had vacated the property, but not before stripping the property of appliances, light fixtures, security systems, and even the kitchen sink! Making matters worse, they used the fireplace poker to poke a single devastating hole in each of the first floor tiles (1,200 square feet of tile). Needless to say, the place was destroyed.

Trying to save money, Sylvia opted to not pay for homeowners insurance (in particular, a policy designed to cover an owner who rents their property) assuming the renter would cover everything with renter’s insurance, something she did not require in the lease. She met with the police and reported the crime, but the police were unable to assist since she had no witnesses nor could she prove the renters had done the damage to the property and so she went to the robbery crimes practicing in California, who helped her in the best manner they can to help her to recover her loss. Having opted out of a homeowners insurance policy, she could make no claim for the damages or theft. The cost to repair and replace the stolen items exceeded $30,000 and the responsibility of paying that rested solely on her shoulders.

So what did Slyvia do wrong?

She lived 3 hours from the property and was unable to make regular checks on her property or the tenants
She used Craigslist to find the renters and did not do background checks, verify the tenant’s income, or run credit checks on the tenants
She undervalued the rent at $800/month when the average for her home in that neighborhood was $1,350/month
She did not insure her property against damage or theft with a comprehensive homeowners policy that included the use of her home as a rental
She never met the neighbors who assumed the renters were the owners so were not suspicious when the robbery took place

What should Sylvia have done differently in order to prevent this situation? What should you do? Whether you’re new to real estate investing or just adding to your current rental portfolio, be smart and make sure you’re covering yourself and your property.

Unless you live nearby and plan on routinely checking on your property, hire a property or association management company, they provide invaluable services to you as an owner:
- Perform uniform credit and background checks on every tenant over the age of 18
- Use regulated real estate contracts which protect both the owner and the tenant
- Provide accurate rental rates for your property, so that you can price it correctly
- Ensure the rent is paid and repairs are made
- Can require renters to show proof of renters insurance
- Renters call them with the headaches instead of waking you up in the middle of the night for emergencies
- In the event a renter must be evicted, they take care of the necessary procedures on your behalf
Always insure your property:
- In the event of a crime, you are protected
- In the event of an accident on the property, your liabilities are limited
- In the event of theft or damage, you are protected
Meet your neighbors! They are your eyes and ears and your first line of defense. Share with them your contact information or better yet, your property manager’s information.

Whether you’ve done it a thousand times or are just buying your first property for rental income, remember to work smarter, not harder. Real estate investing can be costly if you make the wrong mistakes, so consult with a real estate agent that has experience with investment properties or property management so that you can avoid some of the pitfalls that can come along and turn a great investment into a nightmare property.

* Sylvia is a fictitious name and is an amalgam of several different situations and stories.

image courtesy of Philip Taylor PT