Chapter
14: But Condos can be a Good Investment
Thankfully, you can still buy condominiums as investments without the fireworks
and razzle-dazzle taking place in some cities. Done right, a condo purchase
can actually be a better investment than a home in terms of increased values
and appeal. Condos, however, have differences that you need to consider carefully.
Chapter
15: As Gine Sales Fall, Rentals Boom
For the past few years, rents have stayed relatively flat, compared with the
zooming housing market. Low interest rates and imaginative mortgage programs
created millions of home buyers. This dried up the rental market pool and
dumped a glut of rental units onto the market.
Chapter
16: Two-Family Homes -- When One Family Carries the Other
In almost every way, two-family homes (also known as duplexes) might be the
perfect investment. For example, the owner gets a house to live in, along
with an apartment above or aside that generates rental income to help the
owner pay his mortgage. In addition, the owner gets to write off his or her
own housing expenses every tax season and also cashes in on the tax benefits
from being a landlord--depreciation, upkeep, repairs and all the rest.
Chapter
17: Rental Income from a Small Apartment Building
Six- to 10-unit apartment buildings can present you, the investor, with a
potential entree into the world of commercial real estate on a respectable
scale. Indeed, many of the same principles needed to operate multi-family
buildings successfully will also apply to renting space in a strip mall to
store owners.
Chapter
18: Being a Landlord is Easier Than You Think
Too often would-be investors, with all the desire and skills they need to
achieve success, shy away from buying rental properties. They've heard horror
stories about tenants not paying their rent, destroying their apartments and
having to be evicted--a costly and, in some states, incredibly difficult proposition.
So, instead of investing and receiving the generous tax and income benefits
that rental property provides, they go elsewhere.
Chapter
19: Profit from Recession-Proof Fixer-Uppers
One thing I've learned over the years is that somewhere, someone is always
banging up and neglecting a perfectly good house. In the process, these folks
lose value in their most important asset, and always have to take their medicine
when they sell. Then again, I've also learned that their loss is an investor's
dream come true. I have snapped up deals in the span of an afternoon that
have netted me tens of thousands of dollars in just a few weeks, and with
a small investment in repairs and rehabbing.
Chapter
20: Using Contractors (and Not Getting Used
By One)
Seasoned investors usually have their 'dream team' of specialists in place
to call on whenever a new project comes along. But since everyone starts somewhere,
I'll use this chapter to help investors find a 'keeper' in the construction
trades. One of the best reasons to have an experienced contractor on your
side is so that you can turn to him or her for answers or cost estimates.
Since everything we do in this business revolves around numbers, the potential
to overspend or overpay is always there. Having a contractor you can trust
can mean the difference in having thousands of dollars either in your bank
account or out the window.
Chapter
21: How to Assess a Rehab and Put Cash in Your Pocket
The worst part of bear-market real estate deals is that it puts downward pressure
on our asking prices. Even though we buy properties at much less than market
value, we must flip them for less than we could have a year ago. In a market
that's fading fast, some unlucky investors can easily get hamstrung. They
purchase a promising fixer-upper only to find that local values are dropping
too fast to make their rehab project a profitable venture.
Chapter
22: Pre foreclosures: Do Everyone a Favor (Starting with
Yourself)
Here's another nifty segment of the real estate spectrum in which you can
make handsome profits as long as you're extremely careful and willing to do
your homework first. Pre foreclosure investing has become an investors' hotbed.
Pre foreclosures work in a buyer's market, like the one we're in now. The
bursting housing bubble is dropping thousands and thousands of pre foreclosures
onto the marketplace. Homeowners have begun defaulting on their adjustable,
balloon and jumbo loans, and property values in many formerly frantic market
are plummeting.
Chapter
23: REOs--Banks with Properties on Their Hands
Although I've met people who believe otherwise, no bank wants to repossess
a house. Banks hate playing the Snidely Whiplash role; truth is, taking in
houses instead of monthly payments is a millstone around their necks. Fortunately
for them, we investors are more than willing to take these houses off their
hands, right? Well, yess--if you can get them at the right price.
Chapter
24: Foreclosure by Public Auction (Beware of the In-Crowd)
One of the hallmarks of every late-night TV 'make a million in real estate'
pitchman is: "After you study my course, you can scoop up all the property
you want at the next sheriff's sale and make a fortune reselling it".
If only it were so easy! Here in the real world, I've found it takes skill,
patience and perseverance to get really good at property auctions.
Chapter
25: Bankers Need to Make Loans - Why Not To You?
One of the best things about the recent housing bubble was the explosion in
loan programs that banks used to get into the property-investment game. Now
that the bubble is over, we can use those programs to our advantage to finance
the deals coming our way. These days, there are special programs for investors
like us, offering competitive rates and generous terms. I prefer such products
because they're tailored to our line of work. Of course, there are always
conventional programs available, but in many ways, I find them to be ponderous
and outdated. If you're still financing your acquisitions like your grandfather
did, get with the program!
Chapter
26: Cash Is King
If you've been socking away your nickels and dimes, hoping someday to jump
into the real estate investment market, your time has come. Cash always rules,
and now for the first time in years, your dollars can go miles further. The
properties you can acquire are at depressed prices--it takes less cash to
buy them than it did in 2005--and you'll have total control.
Chapter
27: Fix Your Credit
Some lenders will tell you that having great credit is better than having
cash. It's amazing what money will buy, true enough, but it's even more amazing
what good credit buys you! Investing in real estate involves hefty numbers.
Saving just a half-percent interest on said numbers is huge. And the reason
why I'll get a better rate than a competitor, on the exact same transaction,
is my credit score shines brighter than his.
Chapter
28: Custom Mortgages for Low Payments and Quick Resale
As I said previously, the dearly departed housing bubble has left a buffet
table of customized mortgage products that we can use to feather our portfolios.
And since many investors will be rehabbing and selling in short order, we
must target loans that cost the least amount of working capital. First, my
advice regarding fixed mortgages is this: for comparison sake, find out what
the local prevailing rates re as you shop. This way, you'll have some idea
how other kinds of mortgages stack up. Rare indeed is the situation where
a fixed-rate mortgage will actually have better terms than anything else at
our disposal.
Chapter
29: Have the Seller Finance the Mortgage
Chapter 27 focuses on convincing you to fix your credit report if it's shaky;
by taking steps to boost your creditworthiness. If you are still skeptical,
here's another reason to do it: Seller Financing. In these deals, the seller
offers to guarantee your mortgage. For the seller it's a way to collect a
hefty down payment from you while linking up a revenue stream at an attractive
interest rate. It's a much faster and less expensive way to sell, and has
tax deferral benefits too.
Chapter
30: Buy with Wealthy or Creditworthy Partners and Your
Sweat Equity
Earlier in the book I talk about how to purchase, flip, rent or hold properties
that needed work. Most investors in these kinds of assets, besides being sharp
negotiators, know a thing or two about carpentry, plumbing, electrical and
other crafts, too. This is the essential definition of sweat equity: using
your time and talent to do work on a property that increases its value. You
skillfully use your abilities to increase value by sidestepping the need for
professional work. You do it yourself. This not only saves money during the
improvement process, but it also enhances your bottom line at settlement.
Chapter
31: Finding Hard Money
You've spotted a proverbial diamond in the rough--a fixer-upper in such bad
shape that no bank will touch it. But you've done your calculations and know
you can rehab this dump into a money machine. Where do you turn? You use hard
money. If you've never heard the term, 'hard money' lenders (also known as
private lenders) and investors have had a working relationship going back
at least half a century. The loans these lenders make are on the asset itself--thus
the term 'hard money'. Loans like this are very short-term, high-interest
products. They often come with lender's fees of three to six percent.
Chapter
32: Buying a Property, from A to Z
By now, you should have a rock solid understanding of both the bear market's
impacts on your investment opportunities, and how to capitalize according
to the circumstances you'll encounter. Now, let's put it all together and
see how each step in the buying process can be best handled to save you time,
trouble and most importantly, money. This, of course, assumes that you've
done your homework to identify a property, budget your needs, determine your
return on investment and line up your financing beforehand.
Chapter
33: Take Your Real Estate Lawyer with You
A lot of what I've discussed so far involves hard bargaining. After all, as
real estate investors, we aren't exactly newlyweds with stars in our eyes,
looking for our first dream home. We need to be steely-eyed opportunists who
aren't afraid to fight for our deals. We must approach every lender, every
seller and every property with calculation and self-interest. We have small
fortunes riding on the outcome of our dealings and in the end, only we can
make our dreams come true.
Chapter
34: What about REIT's and Mortgage-Backed Securities?
When you take a portfolio of big-time real estate holdings and add a professional
fund manager to oversee it, you get a REIT: that's Wall Street-speak for Real
Estate Investment Trust. REIT's are basically trusts. They repay 90 percent
of their rent and interest income as dividends to shareholders. In exchange,
they operate free of corporate taxes. Equity REIT's hold office towers, hotels,
malls, and other major commercial properties. Some, called Mortgage REIT's
provide mortgages and development financing for commercial clients. Hybrid
REIT's do both.
Chapter
35: Moving Into Commercial Real Estate
Just as you wouldn't take your first swimming lesson in the deepest end of
the pool, I would never recommend that you leap into commercial real estate
transactions before you gain some solid experience in residential properties.
That said, I do recommend that you set your sights on this highly profitable,
extremely challenging segment of real estate. It's the Holy Grail of property
ownership, and if you can obtain it, you will have make it to the Big Leagues.
Chapter
36: Survival Strategies for Weathering the Storm
We've just spent 35 chapters in creative mode, looking for opportunities in
a bear housing market cycle and finding all sorts of way to do so. I want
to dedicate this chapter to some survival strategies that will help get you
through the hard times ahead.
Chapter
37: The Wild World of Mortgages and Financing
You could spend the better part of a month researching each and every mortgage
and financing option available to buyers and investors. But since you've got
better things to do--namely, finding opportunities to make money in real estate--I'll
devote this chapter to helping you work your way through the maze of programs,
terms and jargon. Afterward, I'll include a glossary of terms that you're
likely to encounter in your real estate transactions.
