Tag: rehabbing houses

How to Create Cash Flow On Your Rental Properties…

Normally, most people will use a 30 year fixed loan. That might be OK if you intend to hold on to the property for that long. Most properties will be sold within five (5) years or maybe exchanged through a 1031 exchange. Even if you hold it for 30 years, the first five to seven (5-7) years you made nothing. The bank on the other hand, made money since those first few years most of your payment went towards interest only and maybe reducing your principal balance by approximately $1000.00 a year. Not a good return for having the bank use your money is it?

Be advised, this article is not intended in any way to provide financial advice or to suggest that this product is right for you. An accurate assessment of your risk tolerance is always advised on any investment. Please consult your mortgage or financial adviser.

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calculator-385506_1920All of you have experienced the need or flexibility for multiple exit strategies. After all, that is the first consideration you should make when evaluating an investment property. However, the strategy might manifest itself sometimes when you end up renting the property-Or maybe that was your exit strategy to begin with.

In addition to your exit strategy, you have to determine your acquisition strategy. Are you using OPM such as Sub2, Lease Option or are you using HML with the hope to flip the property short term. The reality is that unless you structured the deal right you might not have any positive cash flow. You might just break even-once you take into account PITI and MVM (Management, Vacancy Rate, and Maintenance). Well, what happens when OPM is not available and you have to hold the property even if for mid-term (2-5 years)? You have to find your own financing!

Normally, most people will use a 30 year fixed loan. That might be OK if you intend to hold on to the property for that long. Most properties will be sold within five (5) years or maybe exchanged through a 1031 exchange. Even if you hold it for 30 years, the first five to seven (5-7) years you made nothing. The bank on the other hand, made money since those first few years most of your payment went towards interest only and maybe reducing your principal balance by approximately $1000.00 a year. Not a good return for having the bank use your money is it?

I.e. $100,000.00 30-yr. Fixed @ 8% rate.

Pmt No.

Beginning Balance

Total Payment

Principal 

    Interest

Ending Balance

Cumulative Interest

1

 $      100,000.00

 $          733.76

 $           67.10

 $         666.67

 $    99,932.90

 $        666.67

2

99,932.90

733.76

67.55

666.22

99,865.36

1,332.89

3

99,865.36

733.76

68.00

665.77

99,797.36

1,998.66

4

99,797.36

733.76

68.45

665.32

99,728.91

2,663.97

5

99,728.91

733.76

68.91

664.86

99,660.01

3,328.83

6

99,660.01

733.76

69.36

664.40

99,590.64

3,993.23

7

99,590.64

733.76

69.83

663.94

99,520.82

4,657.17

8

99,520.82

733.76

70.29

663.47

99,450.52

5,320.64

9

99,450.52

733.76

70.76

663.00

99,379.76

5,983.64

10

99,379.76

733.76

71.23

662.53

99,308.53

6,646.18

11

99,308.53

733.76

71.71

662.06

99,236.82

7,308.23

12

99,236.82

733.76

72.19

661.58

99,164.64

7,969.81

As you can see in the example above your average, payment towards principle is only .09% with a reduction of principle of $835.36 for the first year. On the other hand, the bank received total revenue of $7,969.81 Consequently, you have to do justice to yourself and structure a fair deal for you, which will still allow the bank to make its money.

How can you accomplish this? It is simple…find the right financing for you. By that I mean, reassess you goals and if it is a short to mid-term holding or even if it is a longer than five (5) year term look for the right loan that will allow you to pay more towards principle. Thus, accelerating you mortgage, this in turn will create cash flow in addition to reducing your principle and creating additional equity when you sell the property.

A good product to do this with is a 2/1, 3/1, 5/1 or even 10/1 Option ARM depending on your holding period. It is important to make sure that if you have prepayment penalties it will not prevent you from getting out of the property should you need to do so. Option ARM loans might go by different names depending on the financial institution. Some call it Pick a Payment loan or Option Payment loan, etc.

The neat feature of this product is that you can choose your payment whether, interest only, 30 fixed-fully amortized or a minimum payment that will be lower than the interest only option. The interest rate you’ll pay on this product will be lower, in average about 2.5% lower, than the regular 30-year fixed rate.

You might be thinking-how could you favor these products, if these are the type of products that got us in a mortgage industry chaos? The truth is that it was not the product what caused it but companies that were not ethical and did not educate their customers as to the pros and cons. Reality is that if one does not know how to swim one should stay on shallow waters, or swim at your own risk! As consumers, particularly as investors, we should be responsible for our professional growth and know what we are getting into.

Remember, there is risk with everything you do-that’s why it is important for you to do your homework and make an assessment if the financing product you choose works for you. The Pay Option ARM is a hybrid adjustable mortgage. It is normally fixed for the first 2, 3, or 5 years and then it becomes variable. Meaning, the fluctuation of the future interest rate will depend on the performance of a normally attached index, such as LIBOR, COFI, MAT, CMT, etc.

To illustrate this approach, the interest rate, and payment of an Option ARM vs. 30-Year fixed loan is as follows:

Fully Indexed Rate:

5.390%

Minimum Payment (1.00% Start Rate):

$321.46

Deferred Interest  

$127.71

Minimum Payment (2.00% Start Rate):

$369.82

 

(Only Applicable when LTV > 80% and/or Non-Owner Occupied loans)

Deferred Interest

$79.35

Interest Only Payment:

$449.17

Fully Amortized Payment:

$560.91

$100,000.00 30-yr. Fixed @ 8% rate

PmtNo.

Beginning Balance

Total Payment

Principal

Interest

Ending Balance

Cumulative Interest

1

 $      100,000.00

 $          733.76

$           67.10

 $         666.67

 $    99,932.90

 $        666.67

As you noticed the difference in the Option ARM fully amortized payment and the regular 30yr. Fixed is…

$172.85 ($733.76- $560.91 = $172.85) The $172.85 x 12 = $2074.20

The difference between the interests paid on the 30-yr. fixed vs. the Pay Option interest only payment is…

$ 217.50 ($666.67 – $449.17 = $217.50) $217.50 x 12 = $2610.00

Can you imagine $2610.00 in cash flow?–especially if it is additional cash. Can you see the benefit?

$2610.00$2610.00$2610.00
X 2 yearsX 3 yearsX 5 years
$5220.00$7830.00$13050.00

The additional cash can be used as either additional working capital or a way to build up equity. Remember, financing and interest rates are just variables, that to a degree, you can control to your benefit. This is the beauty of thinking outside the box and the uses of the creative intuition investors have.

“An Obstacle is something you see when you take your eyes off the goal

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How to Improve Efficiency with Team Work and Real Estate Flipping Software

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If you need to organize your house flip expenses, simplify the scheduling process, have at your finger tips estimates of project profitability and compare estimated project expenses, then you will need real estate flipping software that provides report and picture documentation for current and future use.  There is a lot more to flipping property than buying a house, applying a fresh coat of paint, trimming some bushes, and reselling the home for profit. Flipping is not that easy, and even more so when it comes to managing all of the above without the help of real estate flipping software.

The more skills you have, the better equipped you will be to enter into real estate transactions and investing.  Now, if you thought you could do this alone, let me stop you right there. It takes team work to make this work. So the first thing you’ll want to do is to form your own team comprising of real estate agent, attorney, contractor, accountant, home inspector and an insurance agent. Flippers typically work against the clock, so to renovate a home on budget and then turn it around and sell before overheads gobble up your profit, you’ll not only require a good team, you will also need real estate flipping software to ensure that the work is completed in a timely and efficient manner.

Some people say that until you can do things like change a sink, install a countertop, do basic electrical and  plumbing work or fix a roof, you’ll be unable to turn substantial profit in house flipping. Well, arguably, house flippers that make the most money tend to be handy people, but you’re going to be surprised to find out that having the ability to step in and lend a helping hand when time or money constraints kick in isn’t the be all and end all. I’m not a handyman myself, and yet I’ve built and renovated property with attention to detail and perfection by employing a team of experts on the field, needless to say, my savvy and good taste do come in really handy. With time, even you will develop that instinct that distinguishes you from the average house flipper if you take interest in your work and put your mind and heart in it.

I wonder if you’ve realized how critically important it is for the buyer to know about the area in which they are buying property. It helps to know the acreage, number of rooms, and the type of homes that are the most desirable in the area in which you’re looking to buy. And just as important, you’ll want to know what houses in the general vicinity have recently sold for; and if there are any future development plans in the pipeline… such as new schools, condominiums and shopping malls, as this could affect supply and demand.

If you’re the kind of person that wants to improve efficiency with real estate flipping, then team work is of paramount importance because it helps you streamline your workflow into more manageable segments under supervision by experts in their field. That said… you’ll also benefit tremendously with real estate flipping software because it will enable you to log AND to manage your projects by providing important financial and project viability data on prospective projects. Needless to say, it can become an invaluable member of your real estate flipping team.

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How to Invest in Real Estate for Better Returns without Over-Improving Property

hobalIf your only experience is that extensive remodeling projects add significant value to the price of a home no-matter their location, then you’re about to find out in this article that, unlike homeowners who splash out on remodeling when putting their homes up for sale, savvy real estate investors looking to flip property to turn a quick profit would do quite the contrary. More often than not, extravagant upgrades fail to pay for themselves. Read on to find out how to renovate strategically and which renovations really add value to your property IF you want to invest in real estate.

The difference between investors and owners is that, investors carefully choose their remodeling projects. They tend to focus more on properties that will result in the most value for the least amount of effort and cost. They would pay close attention to the other homes in the neighborhood to avoid over-improving the property. Adding expensive amenities in a more down market area, for example, is unlikely to result in a significantly higher selling price.

So a savvy real estate inves more living space. According to the National Association of Realtors, siding, kitchens and windows are the most beneficial upgrades, often recouping 80% or more of their costs during resale. If you’re the kind of person that wants to turn a tidy profit when you invest in real estate, then learning how to invest cost effectively for better returns without over-improving your property will be exactly what you’re looking for, IF what you want or will have their wits about them all the time, to ensure that their investment turns the maximum profit possible.

The more strategic your approach to remodeling and sprucing up your property prior to putting it on the market, the more significant your return on investment will be when you sell. You’re going to be surprised to discover how effective a little more thought and care with your remodeling expenditure can add to your profit margin. Some investors say that until they’d learned the hard way, how to implement these important cash control strategies to investing in real estate, they’d consistently failed to hit their income projections.

I wonder if you’ve realized that projects that offer the most bang for the buck include new siding, remodeling the kitchen, bathroom, fitting in new windows, decks and adding more living space. According to the National Association of Realtors, siding, kitchens and windows are the most beneficial upgrades, often recouping 80% or more of their costs during resale.If you’re the kind of person that wants to turn a tidy profit when you invest in real estate, then learning how to invest cost effectively for better returns without over-improving your property will be exactly what you’re looking for, IF what you want is to make a success of investing in real estate.

Make sure you steer well away from personal preferences like swimming pools, tennis courts, hot tubs, wine cellars, basement game rooms and ponds.Chances are other people may be unwilling to pay extra to have these amenities. There’s certainly no harm in adding these items to a house you plan live in, but don’t expect potential buyers to be willing to pay a premium to get them when you are ready to sell. And when you’re buying to sell, even more so—you’ll want to tailor your projects to suit the marketplace, first and foremost, because remember: you are investing in real estate to make profit.

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5 Minute Online Investment Property Analysis Strategy to Save You Time

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If you have only experienced looking at every single property listed online in person, then you will appreciate information on how to do an investment property analysis to save you time. Since it’s impossible to go and look at every single property that grabs your attention, this article will show you how to quickly analyze an investment property just to see if it’s worth looking more into. I know a lot of properties come up all the time, and so here’s a five minute analysis tip sheet to help you figure out whether the property you THINK you want is something you should pursue.

Bearing in mind that the more you scour through property listings online, the more properties you see and the more you’ll want to go out to view potential buys, this quick property analysis strategy will help you whittle down your options right in front of your computer screen before you even set foot outside your door. So let’s get started by looking at the numbers.
You’re going to be surprised how quickly and easily you can do an investment property analysis and just how effective it can be for you.  Let’s say you’ve seen a fourplex property you like and the asking price is $119,900. You then take a look at what they say the rent is—not always reliable so don’t take their word for it. Flip through pictures of the rooms to assess what work would need to be done to revamp the property and roughly estimate what that might cost. Now let’s take a closer look at the numbers. At $119,900 I would round it up to 120,000. Now let’s say I’m going to put down 20% ($24,000) down payment on a mortgage, which puts the figure at $96,000 on a 30 year repayment. I’m not going to figure tax and insurance to it just yet, and so I’m left with a principal and interest of $515.92. Now let’s take a look at the 50% rule on a property like this, which says 50% that comes in goes out to expenses and whatever is left is what you pay your mortgage with.

Some people say that until you understand your area very well, making a sound property analysis would be far more challenging at best. In this particular area a two bedroom apartment is going to rent for $500, and a one bedroom apartment for $400 a month. So let’s say our fourplex property generates rental income of $1,700 a month, minus 50% expenses would leave us with $850 to pay the mortgage (which is around $515 a month); which leaves you with $335 per month, which gives you $4,020 per year. Now let’s combine the down payment of $24,000 with perhaps a few thousand dollars in closing costs. Let’s say that ultimately we’ve put down $30,000 on this property, we’d be making a 13% return on investment. What I would look for more importantly is the cash flow numbers—in this case $335 a month. At minimum, I would shoot for $100 per unit per month. I wonder if you’ve noticed that looking at these figures as they are, they’re clearly not very enticing.

Now supposing our mortgage is for $20,000 less and we put down around $24,000. Now let’s say we leave all the other figures the same, this time the principal and interest come to just over $400. At that point it does make sense as it leaves your minimum $100 per month per unit requirement. So THAT becomes more enticing, wouldn’t you agree? So very quickly, that is how to analyze a property before driving out to look at it. If you’re the kind of person that wants to save time on researching for properties to buy, then knowing how to make a quick investment property analysis will be exactly what you’re looking for.

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How to Profit from Rehabbing Houses Using Other People’s Money

Rehabbing HousesIf you have only experienced getting a mortgage to buy property and you’ve experienced difficulties from time to time, then you will be delighted to learn that there’s always the hard money lender to turn to. What is a hard money lender? Hard money lenders are people or companies in some cases (in a lot of cases), that have a lot of money lying around. It’s a situation where, specifically, they target people who are involved in rehabbing houses. They will loan you the money to buy a house, and they will also loan you the money to rehab the house. Better yet, they will loan you a 100% of the money to buy and to rehab the house. Maybe you’re thinking, ‘hey my credit is terrible there’s no way they’re going to do this for me.’ Or ‘I’m just too deep in debt and I can’t do this.’ Or ‘I have no money so I can’t do this.’ But the reality is this: hard money lenders are more concerned with the structure of the deal than they are with your credit or your particular situation. Don’t get me wrong, hard money lenders are looking for you to have some character, and they’re also looking for you to be able to start something and to finish it. Because the last thing they want to do is wind up with your house. But the way they structure a deal, that’s the important thing. That’s what they are most concerned with.

The more you know about how to profit from rehabbing houses, the more you’ll want to get started. So let me give you some round numbers here. Let’s say you find a house and you find it at a fairly cheap price. Let’s say you could buy it for $30,000. You have determined through research and perhaps talking to some realtors, and doing what we call comparative analysis—that this house is worth $100,000 when it’s finished. The hard money lender is going to want to be in the house at around $65,000 with the purchase price and with all the rehab. Put yourself in his position. Here’s the way this works. Since he is limiting this investment to be 65%, he feels like you do—that the house is worth $100,000 when it’s finished—he’s in it pretty good. He’s in a situation where if he needed to get out of it he could. So therefore he is not so concerned with your credit.

Profit from Rehabbing Houses

Now let’s go through this again and you’re going to be amazed to discover just how powerful this method is for you. You’ve found a house that’s worth $100,000 finished. You can buy it now for $30,000—and you know that. Now the question becomes, can you do all the rehab for an additional $30-35,000 so you’re in it at $65,000. If you can do that and if you can put that down on paper and you can show a basic budget for the rehab and if it comes out to be within the 65% range total—purchase AND rehab—your hard money lender is probably going to be in.

And now you’re saying, well, where can I find these guys? Well, I don’t know if your local area has real estate investment clubs, most major cities have them. If your city doesn’t have one, perhaps you can drive to the next city and join that. You can bet for sure that the hard money lenders will be there. If they’re not there, their cards will be there or they’ll have a representative there. You can also find them online. My recommendation to you is that when you’re going to deal with a hard money lender, you deal with someone who is local and one who is familiar with your market. Dealing with someone out of the market sometimes means they don’t have a complete understanding of your market. So ideally, you’ll want to deal with some who is familiar with your market.

Rehabbing HousesAnd so that’s the hard money lender. The second way you might want to get started is to partner up with someone. Yes, you could find someone that will do a joint venture (JV). And maybe you’ll find someone that has the money but doesn’t have any time. Their money is not making any money. Some people say that if you give 1% at the bank you can lose all your money in the stock market. I wonder if you’ve realized by now that JV partners are interested in real estate because real estate is here to stay. It’s a sure thing. Worst case scenario you make a mistake on your budget but it’s still worth something. And they’re probably in the same situation with the same thinking that as long as we’re in it finished at a reasonable amount of money, how can we possibly go wrong? Of course the idea is way to make money. So you might want to partner up with someone. Now when you partner up with someone, obviously you’re going to have to split some profit. But the key here is to get started. Figure out a way to get started because once you get started, things start to fall together. There’s an old saying: the harder I work the luckier I get. Well the reality is, you’re out there things start to come to you. Things start to get better and better. And when you sell your first house and make $30-40,000 and put that in your pocket, you’re going to know what I’m talking about. It’s the best thing I’ve ever done. And I think it’ll be the best thing you’ve ever done. But you do need to get started. If you’re the kind of person that wants to get involved in rehabbing houses to make a tidy profit, then this will be exactly what you’re looking for.

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Related Article :-  Cash Flow AnalysisHow To Flip Houses With No Money, What Do You Need To Buy A HouseHomes For Sale InHomes Rent To OwnReal Estate Valuation SoftwareRent To Own By OwnerRent to own homes free listingsSteps To Selling A House

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Driving for Dollars? Consider Real Estate Investment Software Apps for Smart Phones

If you are in the habit of driving for dollars around neighborhoods and are yet to experience the easiest way ever to dig up information on houses you like, then you will love the infinite advantages of Smart Phone apps to make your work a heck of lot easier. Real estate investment software helps you pull up detailed data on property with a simple snap shot. That is quite honestly how easy it is. This article will expound on the simplicity of gathering all of the information you need on properties you drive by and wish to invest in, using your Smart Phone.

Real Estate Investment Software

The more you spend time driving around neighborhoods in search of vacant houses that may be suitable to invest in, the more you’ll want to find a way to gather important information on properties more efficiently. The world has moved on. There’s absolutely no need to hang on to archaic methods when there is something on the market that simplifies an otherwise long and meandering process. So let’s take a closer look at how a real estate software download free app for Smart Phone actually works.

Real Estate Investment Software

If you’re going around neighborhoods and you find a vacant house, what an Smart Phone app for real estate investors will do is pretty neat and simple—to say the least. Quintessentially, it’s got a camera button on there that allows you to hold up your phone and take a picture of a house. It’ll then save the photo on your phone and then it’s going to go and look up the information from a database to show you the address, and more information about the property, such as: number of bedrooms, square footage, the last sale date and so forth. The important thing is it will save all of this information on your phone so that once you’ve done all your driving around in search of properties, when you get home you can quickly retrieve information on all the properties you took pictures of.

Real Estate Investment SoftwareYour next step would be to look up on the public records to find the owner of the properties you’re interested in (and you’re going to be amazed at how simple and effective this really is for you), and send them a letter in the post or via some other kind of communication to make an appointment to view the properties. Some people say that the easier it is to find information on-the-go, the more fun real estate valuation software adds to the experience. I wonder if by now you’ve realized just how quick and simple it is to find information on properties you want to buying a house with cash. If you’re the kind of person that needs to minimize the workload in searching for property, then I’m sure you will appreciate that real estate investment evaluation software is exactly what you’re looking for. It certainly doesn’t get better than this for the real estate investor. In the shortest time possible, best real estate investment software will make a world of difference in helping you find the ideal house to invest in.

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Related Article :- Cash Flow Calculator, What Do You Need To Buy A House, Avoid Foreclosure Options,  Cash Flow AnalysisHow To Flip Houses With No Money, What Do You Need To Buy A House

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Kaleidoscope into the Day of a Real Estate Investor Involved in Rehabbing and Flipping

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If you have ever wondered what the day of a real estate investor involved in rehabbing and flipping property was like, then this article will walk you through the life of a real property investor and shed light on how they check out property they’re interested in; and why they use rehab analyzer software to speed up their assessment of the viability of potential properties to buy. You’re going to be fascinated to discover just how effectively rehab analyzer software can work for you when you learn from an insider. So let’s go take a closer look!.

Let’s call our real estate investor Bill. Bill wants to buy a property in a neighborhood—let’s call this neighborhood Flipping Street. Now, before touching the property he decides to drive around Flipping Street to look at other properties. His mission is to find out what property was selling for in the neighborhood. He then finds out from the Multiple Listing Service (MLS) that other homes in the area were selling for between $60,000 and $75,000. A quick mental calculation tells our Bill that he might have to invest $20,000 on renovations and after all is done there could be a substantial profit to be made. With this in mind, he figures that this deal warrants a visit to the home that’s up for sale.

A drive around Flipping Street suggests that the neighborhood is in far better condition than he’d expected. There weren’t many “For Sale” signs in the area; the lawns were well manicured; there were no junky cars or boats around; by and large it was a neighborhood of homeowners who were proud of their properties and took good care of them. An inspection of the house in question indicates the usual upgrades and renovations are needed. Bill notes the house needs a good lick of paint both inside and out. It also needs a new roof, kitchen, flooring, lighting and several other minor bits and pieces. After inspecting the house and its neighborhood, Bill uses a rehab analyzer to quickly and easily analyze rehab opportunities to make profit projections. The analyzer indicates that the profit he stands to make from this property is between $20,000 and $28,000 which he feels is a good return on investment for a small deal such as this. He quickly makes an offer a little above the asking price of $22,000 just in case other investors are also bidding on the property, and sure enough, he is notified the following day that his offer had been accepted and that they would close the deal in 30 days.

The more you dither after identifying a lucrative property to flip, the more likely you are to lose a golden opportunity to another bidder. I wonder if you’ve realized how smart our Bill was as he went about purchasing this piece of real estate for flipping. He did his research by checking out the neighborhood and the going rates for property in that neighborhood. He then took a look at the property in question to see what it looked liked and what needed fixing, AND what it was going to cost to rehab. He ran his findings through rehab analyzer software to get an estimate on repairs and whatnot. And voila, he made an offer the minute he found out that there was money to be made. Bill is testament to the fact that until you’ve input the information to hand into the rehab analyzer software, you’ll have no idea within a reasonable degree of accuracy whether or not the property you’re interested in buying is a sensible purchase based on your investment criteria. If you’re the kind of person that wants to turn a quick profit in real estate flipping, then Bill’s simple but sound strategy would be just what you’re looking for.

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