Real Estate Investing - Rental Properties, Flipping, & Surviving the Market

Winter Real Estate Ideas - Warm Up Those Sales & Rentals!

G. B. Davis (Hyperopia Investments) — Sun, 15 Nov 2009 17:36:09 -0600

The cold face of winter is lurking just out the door, and with it comes slow sales, slow rental agreement vacancies, and slow enthusiasm from all your prospects. For many parts of the country we're entering the gray season, and for others the snowy season, but either way there's dramatically less real estate activity. What can you do?

Heat It Up Idea: Throw an Office Holiday Party - For the Public!

Every office has holiday parties for their employees, and that's plenty of fun, but doesn't exactly produce a lot of sales. Consider having a second holiday party this year, for everyone in the area to show up and kick back, have a glass of egg nog, and talk about their dream homes. Hell, free wine and nog is enough incentive to draw crowds, and hors d'oevres and Christmas music certainly don't hurt either.

But beyond that, use the opportunity to get people excited about the current low prices, about their dreams for 2010, about how this time next year they'll be relaxing by the fireplace with a glass of Chianti in their new dream home! Make the event as interactive as possible, engaging people to get excited about a new home, getting their business cards, having them sign up for your mailing list, or scheduling an appointment to go see a few of the dream homes whose listings you have prominently featured throughout the office. Set up computer monitors rotating through pictures of available homes for sale or rental, and show off loud and clear monthly payment quotes for all the houses for sale to show that they're within each dreamer's reach.

Heat It Up Idea: Offer a Free Personal Finance Course to the Public

In the wintertime, people tend to have quieter social and family lives than the rowdy and vacation-filled summertime, and are more available for an evening engagement. And, with the economy in turmoil, many people are re-evaluating their personal finances, making right now a perfect time to open a conversation about finances and how a new home might fit into them.

Effective points of discussion might include how to improve credit scores, how to save money each month, what kinds of costs associated with a new home (and mortgages) can be tax deductible, current types of low-monthly-payment mortgages are available from local lenders at the moment, and calculating how much house buyers can afford on various income levels. You can even compare the advantages and disadvantages of going with a sales contract versus a rental agreement, for both seller/landlords and buyer/tenants. Be sure to pepper the discussion with examples of homes that are currently available for sale, or recent buyers who had a fantastic home buying experience and are now snuggled up next to their new fireplace.

Heat It Up Idea: Host a Public Forum - Brews 'n Clues: Projections for Home Values in the Next 5 Years

A few things to note:

1. People love beer

2. People love supporting local businesses (such as the local craft brewer)

3. One of the biggest concerns of real estate buyers right now is that values will continue to slip, making a real estate purchase a bad investment.

By combining these three desires into a single event, you can satisfy people's need to feel like they're doing something good to help the community, you can win some affection by providing them with free local beer, and you can address head-on the biggest objection that many would-be buyers have to buying right now.

And, of course, you can point out some friendly stats about the very neighborhoods and streets where you have listings! (And have a great local microbrew beer in the process).

Don't be shy! Get the public in your office. Get the word out to people who aren't actively looking for homes. Most important, START A DIALOGUE!!!!

Good luck :-)

Post-Katrina Alabama Coastal Towns vs. The Ninth Ward: A Case Study

G. B. Davis (Hyperopia Investments) — Thu, 27 Aug 2009 09:49:04 -0500

There's an old cliche that "the squeaky wheel gets the oil," but at what point is the proverbial oil no longer helpful? What if the wheels can oil themselves if given the chance, but grow incapable over time of doing so if they are constantly oiled by someone else?

In coastal Alabama, many rural towns populated by hard-working veterans of the seafood industry are still struggling four years after Hurrcane Katrina devastated their homes. They have received little or no federal or state aid, while watching areas like New Orleans' Ninth Ward scream and hollar for more handouts from the government. And because they've received no aid, reconstruction efforts have moved far slower here than elsewhere on the Gulf Coast.

(for the full NPR story: http://www.npr.org/templates/story/story.php?storyId=112257238)

Yet these residents are subject to new government-imposed restrictions on where they can build, how they have to build, and even where they can live in rental agreement properties. If it sounds like they've been denied benefits while still having to pay the cost, it's a classic case of why government interventions rarely succeed in doing anything but waste money and impose its paternalistic will on its citizens.

Consider this for a moment: These hardy residents of coastal Alabama have never relied on government handouts, and always worked hard to look after their own interests. As a result, they've grown resilient, self-sufficient, and, given the chance, will rebuild their coastal towns with the same assets that have helped them survive all these years: belief in themselves, belief in hard work, and the willingness to do whatever it takes to survive. They will not see the kind of overnight success that comes with government spending to build new homes for them, but in 20 years from now, they will still be self-sufficient and the small local businesses will still control their own destinies.

Now, consider the infamous Ninth Ward in New Orleans. Even before Hurricane Katrina struck, only 41.2% of the population over 16 bothered to work (!!!). Enter Katrina, and then a (pardon the term) deluge of federal and state dollars to rebuild this already decayed slum, because the residents screamed and hollared and "squeaked" louder than anyone else on the Gulf Coast. But after 4 years and hundreds of millions of dollars, employment is even lower, there's little local "industry" to speak of, and in 20 years from now it will still be reliant on handouts from governments, charities, and do-gooders nationwide.

My question to you: is it better to create a population of people dependent on others for their basic needs, by domesticating them and feeding them every day, or promoting independence? I'm not suggesting that the government has no part to play in helping rebuild devastated regions, but I am saying that a keener perspective may be needed in developing strategies for long-term economic growth, rather than simply throwing money at people and making them dependent on Uncle Sam to think and work for them.

The Top 10 Real Estate Markets in America - And Why They've Turned the Corner

G. B. Davis (Hyperopia Investments) — Fri, 14 Aug 2009 12:24:41 -0500

Anyone who's made a real estate investment in the last five years, whether in their residence or for as a professional real estate investor, has probably felt the sting of the real estate crash. But there is good cause to believe that the national real estate market is turning around, as more and more individual markets turn upward and start appreciating again. Here are the top ten appreciating real estate markets in the US, along with (more interestingly) the reasons why they're doing so well.

Real Estate Market 1: Boulder, CO

Benefiting from a wealthy population, a collection of stable and large employers (such as the University of Colorado), and a natural defense against overdevelopment (the steep mountain slopes surrounding it), Boulder has felt relatively little pain in the last few years. Whether it helps or hurts matters, Boulder also happens to be one of the Top 5 Drinking Cities in America as well.

Real Estate Market 2: Spartanburg, SC

Once again, college campuses come to the rescue: Spartanburg has the highest student population rate in South Carolina (per capita), and those campuses provide jobs while the students provide money from out of town. It's also the headquarters of Denny's, which doesn't hurt the job market either.

Real Estate Market 3: New Orleans, LA

Between the thriving energy industry, the deluge of federal dollars pouring in and earmarked for home rehabilitation, and the ever-resilient entertainment and tourism industries, N'awlins is doing better than most cities these days.

Real Estate Market 4: Binghamton, NY

Sometimes the easiest way to avoid falling down is to simply not climb too high, as Binghamton's economy and housing markets have stayed remarkably steady and stable over the last ten years. Commitment to its core industries and a lack of frenzied economic behavior have kept Binghamton immune to the rest of the nation's roller coaster ride.

Real Estate Market 5: Fayetteville, NC

Like Binghamton, Fayetteville remains a steady economy, benefiting from stable military jobs from Fort Bragg and Pope Air Force Base, and a thriving arts community made up of museums, galleries, and theatres.

Real Estate Market 6: Pittsburgh, PA

If you're surprised to see Pittsburgh on this list, you're not alone, but the fact is that Pittsburgh has successfully managed to re-invent itself as hub for education and research, health, and biomedical development.

Real Estate Market 7: Little Rock, AR

Yet another example of a city whose real estate values didn't spike sky-high, Little Rock is the beneficiary of Arkansas' tax dollars, as the state government provides a host of stable jobs, and its wind energy sector continues to boom.

Real Estate Market 8: Gainesville, GA

Education once again helps provide stability, in the form of universities and medical research. Retail and tourism help balance the economy as well, with the gorgeous Lake Lanier just around the river bend.

Real Estate Market 9: Burlington, NC

Like Pittsburgh, Burlington has successfully discarded the baggage associated with its old manufacturing economic base (textiles, not steel, in this case), and pursued a more diverse economy in the form of medical companies like LabCorp and Honda's upcoming light commercial jet manufacturing plant.

Real Estate Market 10: Oklahoma City, OK

Aside from its strong energy sector (unfortunately the dated energy models of oil and natural gas), Oklahoma City also benefits (like Little Rock) from being a state capital and having the rest of the state pay for its employees.

While the country's economy and real estate markets awaken from their slump, it's an excellent time to make a real estate investment or two, while we rest at the bottom of the curve. As dreary as the economic news was last winter, it's proving to be an optimistic summer and fall of 2009, as we see increasing numbers of markets start to appreciate in value again.

Coming Out of the Real Estate Woods - Are We There Yet?

G. B. Davis (Hyperopia Investments) — Sat, 18 Jul 2009 11:23:40 -0500

On Wednesday July 15, Fitch Ratings issued a 189 page report about the U.S. real estate market, and their belief that we are at or near the bottom of the real estate market collapse.

This is great news, particularly for real estate professionals such as realtors or investors forced to sign a rental agreement instead of a sales contract. That being said, the report's optimism was cautious, and warned that there is still a long way to go.

One of the reasons for hope, in evaluating the movement of the market, is the increase in builder confidence and decline in builder cancellations from Fourth Quarter 2008 to First Quarter 2009. New home inventories are decreasing (helping to limit supply), while builder cancellations are approaching "normal" levels.

One of the problem areas remains consumer confidence, and the lingering reluctance to buy out of fear that the market will slip further. Existing homeowners, who might otherwise trade up or buy a second home, are particularly fearful of further market decline, which leaves first time homebuyers and real estate investors as the main source of demand. These buyers alone, no matter how much they may want to get into the real estate game and sign their first rental agreement as a landlord, simply can't create the momentum needed for a full turnaround.

The report also noted that the Obama Administration's efforts have had little (if any) effect on the nationwide real estate market. While it is laudable to try and minimize the number of homes lost to foreclosure, the current attempt to push refinance and mortgage modifications has not delivered on its full potential. The Making Home Affordable initiative needs some revisions and additional approaches if it is to succeed, the report noted.

There is good cause for optimism, but unfortunately for each hopeful indicator, there's a negative indicator to counterbalance it. Still, while consumer confidence has not returned to the national real estate market, general public opinion about the economy continues to gradually improve, which will bleed into consumer confidence in real estate soon enough. In the meantime, first time homebuyers and landlords looking to add a rental agreement or two to their monthly income will have to continue to offer fresh demand and keep the real estate market afloat.

Actually Funny Real Estate Videos (Shocker!)

G. B. Davis (Hyperopia Investments) — Thu, 25 Jun 2009 10:53:19 -0500

Man, who would have thought there were actually funny real estate videos in the world? YouTube really is one of the greatest ideas of the internet.

Without further ado, here are the funniest real estate videos you'll ever see:

1. Funny Ad for MyRealty

2. Funny User-Made Video for EZ Landlord Forms (hehe - iPod)

3. Hitler the Real Estate Investor

See? Real estate videos can actually be funny!!!! Amazing. Just amazing.

Fun Real Estate Facts

G. B. Davis (Hyperopia Investments) — Thu, 11 Jun 2009 13:30:02 -0500

It's Thursday, and that means... well it actually means nothing, but I'm in the mood for something a little lighter (not atypical for my personality). So we're going to have some fun with real estate investing today.

Fun Fact 1: Cameron's House from Ferris Buehler's Day Off is For Sale!!!!

I'm convinced that there isn't a single English-speaking person in the world between the ages of 13-55 who hasn't seen Ferris Buehler's Day Off. And one of the more memorable scenes from that oh-so-memorable movie is when, that's right, Cameron sends his dad's 1962 restored vintage Ferrari out the back of the glass garage and into the revine.

This prime Chicago real estate could be yours for the everyday low price of $2.3 million! What are you waiting for? Go out and get an 800 year amortized mortgage, and start partying like it's YOUR day off!

Fun Fact 2: There Are at Least Two Spaceship Homes in the World (that We Know Of)

Ok, here's the bad news: they don't fly. But there is spaceship-shaped real estate in the world, one in Johannesburg, South Africa (right), and one in Chattanooga, TN (below).

In fact, the one in Tennessee was built as a model home, for an entire spaceship-home subdivision, that was (fortunately? unfortunately?) abandoned by the developer.

The Tennessee spaceship real estate model sold at auction for a measly $119,000 in December 2008, which surprised me at first. Where are the Trekkies, I wondered? What about the Star Wars nerds? Sci-Fi Channel regulars?

Then I remembered the property's in Tennessee, where they don't have electricity for things like televisions, and it all made sense.

I guess that's all the fun we're going to have today, class, but keep on keepin' on with your real estate investing, it's us investors who are going to keep this national real estate ship from sinking.

Happy Thursday!

PS Looking for more educational real estate investing articles? For the more serious-minded, here's an archive of real estate investing articles, specifically for landlords and rental investing.

Adding Summer Sizzle to Attract Buyers & Tenants

G. B. Davis (Hyperopia Investments) — Sun, 24 May 2009 11:22:03 -0500

Trying to add some sizzle to your real estate or rental listings? There are a lot of desperate sellers and landlords out there at the moment, so here are a few tips to add that extra spice and secure a signature on that sales contract or lease agreement!

Beach Party!

Remember in college when those wild men down the street threw a beach party in their house by filling it with sand? Well that's probably not a good idea for your open house, unfortunately, but what IS a good idea is making your open house more of a party atmosphere. A keg of beer, a five foot sub, and your nephew's band playing in the back yard will certainly draw the masses. Here's the trick: you want people to have to walk THROUGH the house to get to the party out back, but you have to keep the party ITSELF outside, to prevent damage to the house.

Wine Tasting

Everyone knows an oenophile or two who just won't shut up about wine. Invite them to host a wine tasting at your property, and tell them you'll pay for the wine, but they must stick to a certain budget and provide a certain amount of wine. Invite all your friends, and post flyers or other ads around the neighborhood, and make it a civilized affair! Cheese and crackers recommended.

Remember the Deck or Patio

When it's covered in snow in January, no one's thinking about the deck out back, but in summer cookout season, it will be fresh on their minds and they WILL notice if the deck or patio are in bad shape. Consider re-staining, re-pointing, or otherwise shaping up the deck or patio. Tiki torches can be a nice touch for the evenings, and they're cheap to boot.

Olfactory Staging

Everyone talks about (and spends a fortune on) visual staging, and some even get as far as auditory staging, but few remember the simplest and most powerful type of staging: tempting the nose! Two older tricks include baking cookies or brownies in the kitchen before a showing or open house, and they're a great way to instill a sense of home in the prospective homebuyer or lease applicant. Another great one is grilling steaks, cheeseburgers, or bacon, preferably with charcoal and smoky wood, to make mouths water and appeal to the carnal senses, and of course you can always serve samples of these at the open house to deliver on the promise. If food isn't your bag, consider lighting a few cinnamon-scented candles on each floor of the house.

Getting that sales contract or lease agreement signed is harder than ever these days, but summer is the right time to push, so go above and beyond, and get those signatures!

The Absentee Landlord Part I - How to Retire Within 18 Months to the Destination of Your Choice

G. B. Davis (Hyperopia Investments) — Sun, 26 Apr 2009 14:23:23 -0500

Part I: Introduction, Defining Destination & Budget Goals, and Becoming an Absentee Landlord

Whether you're a landlord, a real estate investor, or just a regular wage slave looking to escape the drone-like existence of 9-5, most of us have daydreamed about living on a tropical island somewhere sipping pina coladas and having income wander its way into our checking accounts.

What if you could live off your lease income alone? What would that take? What would it look like? No, it's not a get rich quick scheme, or some kind of snake oil I'm trying to sell, but merely a description of a lifestyle possibility that you may not have realized existed. Welcome to the three-part Absentee Landlord series: you are now reading Part I.

Introduction

Let's start with a disclaimer: The Absentee Landlord lifestyle is not ritzy or glitzy, it's not about shooting Kristal corks at your fellow rap star while girls dance in the background, and it will NOT make you rich. What it will do is allow you to live anywhere you like, stress-free, and work-free, with minimal obligations.

"So what does the Absentee Landlord lifestyle look like? Do I even want it?"

The average Absentee Landlord earns only a few grand per month, which is not much by, say, New York City terms. However, the Absentee Landlord can live anywhere in the world, so they don't have to pay New York City prices if they so choose.

The Absentee Landlord has a property management company handle their lease properties, so the Landlord is only minimally involved. Further, all of their payments are made automatically and electronically.

The Absentee Landlord is free to pursue their dreams, whether that means spending a year in Costa Rica learning how to surf, or becoming a ski instructor in the Swiss Alps, or moving to the mountains of China to become a Kung Fu master. The Absentee Landlord lives frugally but comfortably; they lead a rewarding lifestyle.

"All right, all right, I get the picture. In broad terms, what does it take to accomplish the Absentee Landlord lifestyle?"

First, you need to start building an investment portfolio, with a solid, long-term lease agreement signed on each one. Second, you need to maximize your cash flow from these lease agreement investments. Third, you need an excellent property management company, who can handle everything from tenant screening to landlord forms to eviction procedures, etc. Fourth, you need a Goal Budget, which will become more or less fixed. Fifth, you need a Destination, and the accompanying planning. Sixth, you need to go mobile.

The good news is that those steps do not necessarily have to be done in order. In fact, we're going to start with Step 5, before moving on to Step 4, and then we'll adjourn until Part II of this series.

The Destination

What are your dreams? To live in a coconut shack on a white beach with blue-green water lapping your feet? To ski every day? Maybe to help build infrastructure for outlying villages in third-world countries?

We live in a world that is, for better or worse, driven by money, so you'll have to consider the costs associated with your dreams before you can go about budgeting for them. It costs a lot more to live in Hawaii than it does in Belize, for example. Decide on your first dream, print off some pictures that embody your dream, and put them up around your office, cubicle, home, bedroom, refrigerator, and anywhere else where they'll remind you of what you're working towards. For the sake of argument, I'm going to say that my dream is living in an artsy little town on the shore of Costa Rica, where I can surf, sell my photography, and lead tour groups through the canopy of the rain forest.

Your Projected Budget

What is the historical exchange rate? What is the cost of living in this destination? What will your monthly expenses be? In my case, it will cost me roughly $1,000/month for the comfortable house I want within a ten minute walk from the beach, and within range of cell phone and internet services. I will not need a car, because I walk anywhere in the little town I've picked out. I will need to pay for my phone and internet bills, so I'll set aside $50 for each. I will also need roughly $250/month for food and another $250 for entertainment. I'm up to $1,600/month, and I'm going to add 10% for unforeseen expenses ($160) and another 10% for savings, plus $100/month for health insurance, or $2,020 total.

We now have a goal to work towards, so we'll spend Part II of this series going over the details of accomplishing monthly cash flow through lease agreement investing and other Absentee Landlord principles… see you next time!

Links to The Absentee Landlord Part II and The Absentee Landlord Part III

Customizable Lease Agreement through EZ Landlord Forms

Currency Converter

Demography, Geography, and a Long Term Real Estate Perspective

G. B. Davis (Hyperopia Investments) — Fri, 03 Apr 2009 11:05:45 -0500

If you're one of the four people in the world considering investing in real estate right now (five including me), you're probably looking to make the safest bet you can. While short term investment returns are pretty basic to predict, as the market won't shift much over the course of a few months, it's a different story if you're looking to sign a lease agreement and settle in for the long haul. What would a safe bet look like, over a long investment period?

This being an age of bu11$hit litigation and nervous legal disclaimers, let's start with this: there ARE NO bulletproof investments, in real estate or anywhere else. Your tenant could make up a reason to sue you and win, or your city could decide, in their infinite wisdom, that constructing housing projects right next to your rental property would be just peachy. There is risk in any investment, so wake up to that reality before pulling a dime out of your wallet.

That being said, there are certain long term trends that are pretty predictable, and can be identified. Let's take a look at a few of those, and see what we can dig up.

Population

This one is pretty basic: as population increases, so does demand, which of course increases value; just look at that ridiculous water park. Look for cities and neighborhoods that have high long-term population growth projected, and consider the most advantageous spots. Here's a hint: middle class white people don't breed well, because they want to protect their quality of life. Immigrant influx is the fastest vector for population growth, so consider buying in and signing a long term lease agreement here.

Urban Planning

Some cities are FAR more organized when it comes to urban planning, and will make efforts to combat sprawl and consolidate wealth in areas that are already developed. These make for far better long term investments, as sprawling suburban strip mall communities will just keep expanding outward, making supply infinite.

Water

People love water. They love boating on it, swimming in it, fishing in it, and having a view of it. Waterfront property is a fixed supply, while demand will always rise. Caveat: beware of flood plains and hurricane alleys, as these are already hard to insure, and you might end up like these poor schmucks with your car underwater.

Stable Institutions and Employment Providers

Some institutions aren't going anywhere, and provide a LOT of jobs. An example would be a local governments, universities, hospitals, etc. People want to be as close to their jobs as is practical, so find out where the employees like to live, research that institution's long term expansion/relocation/etc. plans, and consider these neighborhoods for a safe long term lease agreement.

This is a short list, but hopefully gives you some ideas in your area. Good luck, and here are a few good sites for a lease agreement (EZ Landlord Forms), rental listings (Hotpads), and credit checks (NTN Online).

Spotting Problem Tenants BEFORE They Worm Into Your Rental Property

G. B. Davis (Hyperopia Investments) — Wed, 18 Mar 2009 22:35:05 -0500

Some tenants just plain suck. I'm looking at you, Mr. I-Can't-Pay-Rent-This-Month-Because-My-Pet-Pigeon-Died, and you Ms. I'm-Going-To-Call-You-Every-3-Days-And-Whine. You and all of your friends are a pain in my a$$, and this post goes out to you.

As the years of being a landlord go by, I've found that gut instincts regarding tenants are almost 100% accurate. We justify putting a tenant that we don't feel great about into our rental properties, saying "Oh he had a couple problems in the past, but now he's got a job, and he seems to really like the property…" etc. NO MORE. Here's what to look for when you hand out rental application forms to prospective tenants.

First of all, what do they do for a living, and how long have they been at their current job? Watch for anything that sounds like an excuse.

Garbage: "Well, I was doing construction, but that wasn't working out that well, so I started doing work on cars with my brother, but…"

Legit: "I've been a mechanic for about nine years now, over at J&J Automotive."

Look for definitive, declarative sentences, and watch their body language. Do they look down, or up, or away? Or do they look you in the eye? Sounds like a lot to concentrate on at once, but just listen to your gut.

Second, ask about their housing history. Where do they live now? How long have they lived there? Who do they live with? You want someone who has been living as independently as possible, at the same place for as long as possible.

Garbage: "Things were a little hard for a while, so I was crashing with my brother in law, but it's time for me to get my own place, so…"

Legit: "My husband and I have been living down in Mount Vernon for the last five years, but we're really looking to move out of the city so we can have a yard."

Again, watch out for vague nonsense, and watch out for people who bounce around a lot, or who have been living for free with friends or family.

Finally, ask them about their current landlord. Don't ask how they get along with the landlord, because that'll tip them off, but ask "How's your landlord right now?"

Garbage: "My landlord's such an a$hole, we've been on him for six months to fix this broken plank in the fence, but he won't get off his a$ and actually do anything…"

Legit: "My landlord's been all right. He didn't fix this broken plank in the fence, but for the most part he's been ok."

Basically, you want to see if they're going to be demanding or antagonistic, which MANY tenants turn out to be.

Don't make excuses for rental applicants; if they give you a bad vibe, don't even give them a rental application. There are good tenants out there, but you'll have to put in some work to find them, and if you do you'll be rewarded with a headache-free (and lawsuit-free) experience as a landlord.

By the way here's a free rental application form if you're new to the landlord game, good luck.

Dominoes

G. B. Davis (Hyperopia Investments) — Mon, 23 Feb 2009 15:56:37 -0600

We know what the last domino in the chain is: the global economy circles the toilet bowl, and 6 billion people (myself included) all start crying and whining and jumping up and down looking for someone to blame. It's the mortgage lenders! It's the banks! It's Wall Street! It's the CEOs!

The public cries for heads, and the U.S. Government starts looking for unpopular people to blame. What do they do then? They slap the scapegoats with regulation, making it harder for anyone to do business in the future, and a longer economy recovery period. But these are all shallow answers when investigating the true chain of dominoes, because it's all misdirection and finger-pointing, hosted by people who want blame elsewhere so they can be re-elected. So we're going to look at the chain of dominoes a little closer, and discover where this chain started.

Domino 1 (1977): President Carter signs into law the Community Reinvestment Act of 1977, requiring mortgage lenders to lend to borrowers and neighborhoods that they normally would not have. Subprime lending is now mandatory.

Domino 2 (1994): President Clinton approaches the Department of Housing and Urban Development (HUD), and pushes an initiative called The National Homeownership Strategy. Under this initiative, both public and private lending programs are highly encouraged to create looser and more creative lending guidelines, to encourage homeownership for all Americans. They released a document entitled “The National Homeownership Strategy: Partners in the American Dream;” perhaps it speaks best for itself in this little excerpt:

"For many potential homebuyers, the lack of cash available to accumulate the required downpayment and closing costs is the major impediment to purchasing a home. Other households do not have sufficient available income to to make the monthly payments on mortgages financed at market interest rates for standard loan terms. Financing strategies, fueled by the creativity and resources of the private and public sectors, should address both of these financial barriers to homeownership."

Sound familiar?

Domino 3 (1994-2005): Homeownership in America rises from roughly 64% to 69%, due to both private and public lending institutions' newly loosened lending guidelines.

Domino 4 (2001): President Bush continues pushing this moronic initiative.

Domino 5 (2001-2004): The Federal Reserve, led by Alan Greenspan (appointed by President Bush), overheats the economy with extremely low interest rates. Money is now both cheap AND available to everyone, regardless of credit-worthiness.

Domino 6: A real estate buying frenzy is created, due to the cheap and ubiquitous availability of money.

Domino 7: Real estate prices spike precipitously, due to the heightened demand.

Domino 8: Foreclosure rates spike, as undeserving homeowners (inevitably) start defaulting, creating a plethora of inexpensive supply.

Domino 9: Real estate prices drop even faster than they rose.

Domino 10: Bank assets, in the form of mortgages, which have now been traded worldwide in massive securities bundles, are suddenly worth a lot less, as the holders realize that they were inaccurately rated by credit rating agencies, and the collateral they're secured against are worth substantially less than they were 2 years ago.

Domino 11: The world economy collapses.

My question to you: if it was government intervention and regulation that brought us here, through the actions of three bumbling, myopic presidents and their respective congresses, then is more regulation the answer? Is blaming the companies who unknowingly bought up these assets the answer? Maybe blaming the people whose only crime was to COMPLY with government regulations and mandates?

Of course not. The answer is that government regulation to promote a political agenda makes for a bad economy, and we would do well to remember that in the future, instead of letting ourselves be placated when the government (who got us here in the first place) starts offering us scapegoats, and then goes back to the hyper-regulation drawing board to pump out more garbage for businesses to try to bend and twist to maintain compliance.

What a nation of fools we are. We make problems and find scapegoats, just like Homo Erectus did 100,000 years ago.

Run, Do Not Walk, to Exit Real Estate

G. B. Davis (Hyperopia Investments) — Fri, 13 Feb 2009 15:22:39 -0600

It's an interesting time in the real estate business. Ok, "interesting" is something of a euphemism, but regardless, these are not normal times. The national real estate market has never fallen this far, this fast, in the history of America, which has lead many experienced and intelligent real estate professionals to flee the industry, while others have respecialized, while some crazed individuals are actually trying to LAUNCH a career in real estate.

Unsolicited Advice Point 1

If you're considering real estate as a career, the only area where it makes sense to enter right now is as a long term real estate investor or landlord. Prices are low, inventory is high, and interest rates are low, which makes it a great time to buy and hold for the long haul. It does NOT, however, make it a good time to become a realtor, as the market is crowded with good, experienced realtors who are struggling, and if THEY'RE struggling, you'll definitely have a hard time.

Unsolicited Advice Point 2

If you're considering going into the mortgage industry, similar advice applies. There is room, in the industry, for debt negotiators, who work with defaulting borrowers to renegotiate the terms of their note, but loan officers, processors, and underwriters are all scrambling to keep their jobs, at the moment. Unless you're a rock star salesman, it's probably not the right time to become a loan officer.

Unsolicited Advice Point 3

If you're thinking of moving, you've probably already considered the difficulty involved in selling at the moment. The solution is to lease your current home out, after buying your new home, and waiting a few years for the market (and economy) to recover from its current state of anemia. This is easier in some neighborhoods than others, but there's a good chance that your current home would make an excellent rental property. If you need it, here's a link for some free rental forms, to help get you started.

It's ugly out there right now, but it won't always be, so hang in there, and put yourself in a position to make a profit in a few years from now when there's a little more life in the market.

Bad Tenants - Take Out the Trash

G. B. Davis (Hyperopia Investments) — Tue, 03 Feb 2009 18:14:53 -0600

Bad tenants suck. They trash your rental property, leave you with months of unpaid rent (and mortgage, insurance, tax & utility bills), cook crack in the basement, invite a rat infestation by leaving their kids' half-eaten pizza lying around, and leave turds in the closet as a going away present for you to find. Not cool.

So what do you do, if you're a landlord, to protect yourself against such savages?

1. Strong Lease Agreement

That crappy lease agreement you bought at Office Depot for $3.99 ain't gonna cut it. Get a lease agreement that's customized for your state, first of all, and make sure it's a ball-buster. Sometimes state government or municipality websites offer them for free, so check there, and if you don't have any luck, a site called EZ Landlord Forms offers a custom lease agreement builder.

As a final note, make sure your lease covers things like late payment fees, cleanliness, and who's responsible for which maintenance & repairs.

2. Disclosures

Bad tenants love to run crying to Legal Aid or some sleazeball attorney when they don't pay their rent and (surprise!) get an eviction notice. So you have to make sure you follow the tangled mess of landlord-tenant laws, and give your tenants a rainforest worth of legal disclosures. Lead paint disclosures are a big one, but some states require others, so find out what your state requires, and don't slack on these, because bad tenants would love nothing better than to take you for all you're worth over some minute legal technicality.

3. Bribe 'Em

It may leave a bad taste in your mouth, but sometimes it's cheaper to offer bad tenants a deal to vacate than it is to evict them. So head over to your rental, clean the half-eaten chicken bones off the couch, sit down with them, and tell them that if they can be out within a week you'll withdraw the eviction, leaving their credit whole, and you won't get a judgment against them. If you need to, kick in a $75 gift card to Best Buy or something, and if they still refuse, move quickly on the eviction and secure a judgment.

4. Follow Eviction Laws

Every state has different eviction laws, so be careful here. You can hire a real estate attorney or eviction specialist (the latter are much cheaper and usually as good) to do this for you, or you can do it yourself if you're strapped for cash. If you decide to DIY, there are usually waiting periods between when you mail the tenants a notice to vacate, file for eviction in the courthouse, etc., and sometimes special forms for your state. If you're going the DIY route, either get the forms from a fellow landlord or you can get your state's eviction down-low on that same ez Landlord Forms site.

Prevent, prevent, prevent! Follow the rules like a good little boy (or girl), and you'll be able to slam those bad tenants quickly and effectively. If you're lax on this stuff, they'll be the ones doing the slamming, so beware!

How to Succeed in Real Estate without Really Trying

G. B. Davis (Hyperopia Investments) — Sat, 24 Jan 2009 11:49:31 -0600

Real estate can be an infinitely fun and lucrative business, but it can also be tedious, litigious, and miserable. Fortunately for you, there are some things you can do to keep yourself in the territory of the former.

First of all, we're going to recite a cliché for a moment and restate that less is, in fact, more. More properties means more opportunities for something to go wrong (and believe you me, things DO go wrong in real estate all the time), so you'll want to minimize the number of your real estate transactions and maximize your profit from each. For example, some real estate investors are volume investors, who do as many deals as possible with a few causing losses and most creating small profits. This model works for some, but leave them open for much more exposure to lawsuits or other complications that cost time and money.

The alternative scenario is to work on a few lucrative transactions, which means less time wasted on work, and less ownership exposure to the real estate.

How are these lucrative deals discovered? Like everything else in business, the shortest way to success is through networking. Start working on that rolodex, and suddenly you'll find that people come to YOU.

Networking can be a tricky beast at first, so consider the following places to start. The easiest place to start meeting people is through an investment club, so look up some local ones and start chatting up your fellow real estate investors (here's a directory of local real estate investment clubs).

You'll need relationships with at least two local hard money lenders, who can settle quickly on real estate purchases. Ask around your investment club and see who other investors are using, and start establishing a relationship with them. You'll also need several small, local banks, who serve a similar function as the hard money lenders. Likewise, ask around the real estate investment club, and look up local banks on the internet who serve as a neighborhood resource.

Contractors and handymen will be useful, both for doing work on your properties and for giving you tips on what's going on in the neighborhoods where they work and live. Sometimes they can turn you on to real estate deals, or they might tell you about plans for businesses moving into the neighborhood or find good tenants for you. Cautionary note: only use contractors and handymen that are referred to you by someone you trust, as many aren't worth the lint in their pockets.

If you have any tenants, talk to them about what's going on in their neighborhoods. Tell them you're interested in buying more properties, and that you'll cut them deals on their rent if they tip you off for any good deals in the neighborhood.

Get to know at least one good property management company, as you might need their services. They can also turn you on to good contractors, tell you about what's going on in various neighborhoods, and possibly turn you on to good real estate deals.

The point here is the best deals (just like the best jobs) aren't advertised; you find them through your contacts. Build relationships, and maintain them well, because you can avoid many of the headaches in the real estate world by choosing a few lucrative real estate investments and staying away from the garbage.

Fun, Novel, and Totally Impractical Real Estate Ideas

G. B. Davis (Hyperopia Investments) — Tue, 06 Jan 2009 22:13:18 -0600

Cold weather, cold worldwide economies, cold real estate markets... baby it's cold outside!!!!

Well, when all else fails, have some fun, right? Here are a few ideas to help heat up your real estate properties that are just sitting on the market for sale or rent, and who knows? Maybe one of them would even work.

Heat It Up Idea 1:

Install a sex swing in the master bedroom. (If you really have a dark sense of humor, put it in the second largest bedroom for some teenage daughter's dad to flip out over).

Alternative: leave it in the closet and let them find it for themselves!

Heat It Up Idea 2:

Install a wet bar in the living room or finished basement, fully stocked with booze and mixers. Apologize that the beer taps haven't been installed yet.

Heat It Up Idea 3:

Transplant a few marijuana plants in the garden, and when you show the house, tell them they were leftover from a prior tenant, and you can "have it removed if you like, or if you just want to remove them yourself that's fine too..." Keep a tally of how many people want them gone immediately versus how many will "deal with it themselves."

Heat It Up Idea 4:

If your property is not in great shape and has a mold problem, when people ask about the mold splotches reply with a straight face "Oh that's not mold. That's Tareintulat, and he's from the planet Xenanthum. The greenish splotch over there is his mate, Amanda."

Heat It Up Idea 5:

Install a flat screen TV in the living room and leave a midget porno playing for when your visitors walk in. Then apologize and tell them that the last visitors weren't into the bestiality, so you had to mix it up somehow.

Happy selling and renting!

Internet Marketing - SEO, PPC, and Online Advertising

G. B. Davis (Hyperopia Investments) — Wed, 17 Dec 2008 13:02:00 -0600

If you’re a realtor, whether in Vancouver, British Columbia or Destin, FL, you need internet exposure to help draw new clients. This is particularly true in today’s stone-cold real estate market, where finding buyers is about as much fun as drilling teeth.

You may or may not have experience with website building, internet marketing, SEO, PPC, or any number of confusing contractions, but here’s an idiot’s guide to internet marketing, which should at least set you on the right path.

Step 1: Create a Website

This is as complicated or as easy as you want it to be, tech-knowledge-y not required. If you want to spend some money on web development (but not a LOT of money), consider hiring a freelance web designer, through Craigslist or Elance, or perhaps even better hire a college student to do it for you.

Or, build it yourself. There are websites out there that offer free web hosting, and free web-based applications that allow you to build websites just by choosing a design, filling it in with your own pictures and text, and VOILA! It’s up and running. Weebly.com or 350.com are two such sites.

Step 2: Target a VERY Specific Clientele

Let’s be honest: you can’t compete with websites like Realtor.com, so don’t try to target everyone looking for a realtor. What you CAN compete for are clients in your specific zip code or neighborhood, for example, so fill your website with references to that specific neighborhood (these phrases, such as “Vancouver Heights realtor,” will become your keywords and keyphrases, that will hopefully lead people searching Google for them to find your site).

Step 3: Get the Word Out

It’s time to drive traffic to your site. There are several ways of doing this; through search engines, through natural traffic, and through internet marketing (the least expensive of which is usually pay-per-click, or PPC, advertising). You’ll want as many links as possible pointing to your site, which helps both people surfing the web to find your site naturally, and for the search engines to think better of your site. Blogs, forums, articles, anywhere you can create buzz about your site is a good place to start.

If you don’t feel you have the time or expertise to do this yourself, you can always hire someone to do it for you. So, in trying to get more clients for your target neighborhood of Vancouver Heights, you might hire a company specializing in Vancouver internet marketing, though internet marketing companies can really work from anywhere (so realtors in Vancouver could hire an SEO specialist in Destin, or vice versa). They can also handle your PPC marketing campaign as well.

Don’t let the big bad world wide web scare you, there are plenty of services out there to either help you do it yourself, or do it for you. In today’s world, you need a website, and you need people to find it, so roll up your sleeves, and dive in!

Suriving in a SLOWWW Real Estate Market

G. B. Davis (Hyperopia Investments) — Sun, 16 Nov 2008 12:12:12 -0600

Smart investors can earn a living in ANY real estate market, and being a smart investor is not as difficult as it might seem. Here are a few practices for bringing home the bacon as a real estate investor, even if your real estate buddies shout that the sky is falling.

Practice 1: Foreclosure Auctions

You know why the media yells and screams about foreclosures? Because they sell for less than their MLS-listed counterparts, so when there are too many they can drag down the market. But they’ll ALWAYS sell for less, because there are so fewer buyers. See the entry below about buying real estate at foreclosure auction, and find a good discounted property.

Practice 2: Renovation

You don’t have to be a veteran contractor to renovate shells (though it will still save you money if you are). Fixer-uppers sell at a discount, because so few people are willing to take on the headache, which means you create equity by buying dilapidated real estate and improving it. You’ll need a bank or hard money lender who offer rehab loans, a solid contractor, and the patience & funding to wait a few months for your pay check. You might even consider buying a shell at a foreclosure auction and then renovating it, effectively creating a double discount.

Practice 3: Find Your Inner Landlord

Let’s be honest: being a landlord is not for everybody. It requires capital, patience, and comfort with a non-liquid, term investment. That being said, there’s no better way to thrive in a cold market than to acquire while it’s cold and unload a few years down the line when the market’s hot. And let’s face it: being a landlord is not without its perks, particularly cash flow spilling into your checking account each month (see below for maximizing cash flow through rental properties).

Make sure you have an airtight rental agreement, and (here’s where the business plan really gets strong) consider the following model: buy a shell at foreclosure, renovate it, and then keep it as a rental property.

You don’t need me to tell you that slow markets are the time to buy, and while you can still make money selling (see above), you stand to earn a lot more if you have the patience to wait. Play your cards right, and this slow real estate market could be the best thing that ever happened to you.

How to Buy Real Estate Investment Properties at Foreclosure & Other Auctions

G. B. Davis (Hyperopia Investments) — Mon, 27 Oct 2008 14:52:50 -0500

A lot of people talk about buying real estate for a steal at foreclosure auctions, and most of them have never actually done it. From someone who actually has, here are a few tips.

Tip Number 1: observe a few auctions before bidding. On the most basic level, you’ll need to understand the procedures; showing proof of funds for deposit, understanding what they're talking about in the legal description, etc. Beyond all that, though, there’s a rhythm to auctions, and you need to get a feel for it.

Tip Number 2: Be prepared. Would you go bid on a Baroque period armoire without knowing when the Baroque period was (or worse, what the hell an armoire is)? Likewise, do some research on the house and the neighborhood. When was the home built? How many square feet does it have? How many beds and baths? Has it been renovated recently? What kind of work does it need? What are the local comps selling for? And the list goes on, but the bottom line is: what is the thing worth right now?

If you know what it's worth, you can decide what you’re willing to pay for it. Which brings us to...

Tip Number 3: Always know beforehand what you’re willing to bid, and stick to it. It sounds easy, but you'll be tempted to bid more when you're actually there, and it'll cost you money.

Tip Number 4: Have your loan lined up beforehand. Whether it's a hard money lender or a local bank, establish a close relationship and earn their trust. Make sure they can move QUICKLY, because you'll have to settle within a short window of time.

Tip Number 5: Keep your competition close. There aren't a lot of people who are serious about picking up real estate at auction,which means you’ll see the same faces again and again, so play nice with the other kids in the sandbox. Have a pizza with them, buy them a beer, get to know them. Find out who they borrow from, who their realtors are, what neighborhoods they’re investing in, etc.

Real Estate Investment Strategies – Part III - Cash Flow

G. B. Davis (Hyperopia Investments) — Thu, 02 Oct 2008 11:30:39 -0500

Some real estate investors are interested, not in a one time payout (now or in ten years), but in earning a consistent, monthly income from their properties. Who hasn’t daydreamed about living solely off of their investments, off of passive income? It’s a tantalizing dream, and one I intend to make a reality.

So where does one start, on this journey from working for a lousy wage to earning income while tanning on a beach?

Start from the following concept: maximizing cash flow, specifically maximizing the cash flow from each specific property. Because, as we’ve seen, landlords are targets for litigation (see How to Protect Your Rental Property Investments - Landlord Legal Guide), and every single property you own is a legal liability.

The simplest (not to be confused with easiest) way to do this is to buy rental properties with cash, and only owe taxes and insurance on them. As that’s hardly practical for most of us, we’ll simply leave it that it is a wise investor who carries no debt.

Beyond that, here’s what you need to look for: neighborhoods with a gap between market rents and market sales prices. Look to spend 60-70 times market rent on a property, but no more, if possible. This is easier said than done, of course, because neighborhoods with greater rents than pricing tend to self-adjust by market forces, but here are a few signs to look for:

-College towns/neighborhoods (side note: they usually pay rent on time, but they’ll trash your house, and yes that includes the girls too)

-Immigrant strongholds (statistically speaking, the population will grow faster here)

-Gentrifying neighborhoods (just make sure you’re in early and not late).

Additionally, take a long, careful look at multi-unit buildings, because they tend to offer the best cash flow. However, there are some catches. First of all, be extremely careful about zoning, and never assume you can change it. Here’s a hint: look for the number of utility meters in the basement. Second, they’ll cost more money up front, which you may or may not have.

To maximize your cash flow you may want to amortize your mortgage for thirty years to minimize your monthly payment, which is fine, but consider paying extra principal every month to pay it off early. If you can pay off your rental properties in full within five or ten years, then you’ll be sitting pretty on a beach somewhere sipping pina coladas long before the rest of us.

Finally, this is perhaps the most important point of all: stay capitalized. Never, ever, EVER let yourself slip into a situation where you don’t have the capital to maintain your mortgages and your investment properties, because it will leave you with nothing but ugly options: selling the real estate or borrowing more money. Sometimes the phone will ring at two in the morning, and you’ll find out that the roof just collapsed on one of your properties, and it will cost $3,000 to repair. Sometimes you’ll have vacant rental properties, and you’ll have to carry the mortgages out of pocket. Sometimes tenants will threaten (and if you’re unlucky, more than threaten) to sue, and when all of these things happen you’ll need cash, and lots of it.

It’s a beautiful dream, and it’s possible for every real estate investor. As a final note, I recommend every landlord hire a property manager, if for no other reason than to reduce stress, though of course there are many other reasons (experience and knowledge of landlord-tenant laws being high on the list). For a particularly colorful example of why you should use a property manager, check out Junior Brian's hilarious Diary of a Slumlord blog.

For further reading and resources for landlords, I recommend the following database of landlord articles and real estate forms, and there are certainly a lot of fantastic information right here on Active Rain. Good luck, real estate can be a fun industry, and I wish you the best in it.

Real Estate Investment Strategies - Part I - Short Term Investment

Real Estate Investment Strategies - Part II - Long Term Investment

Long Term Real Estate Investment Strategies – Part II

G. B. Davis (Hyperopia Investments) — Thu, 18 Sep 2008 16:37:07 -0500

In some ways, long term real estate investment is easier than short term investment, because landlords remain somewhat immune to periodic spikes and dips in the real estate market. They also have a longer period to recover costs and allow the property to appreciate, if their expenses goes over budget.

That all being said, there are certainly plenty of pitfalls for landlords and other kinds of long term investors. Lawsuits are constant threat, since the ownership exposure is so much longer, and tenants love to sue landlords (see here for Landlord Legal - How to Protect Your Real Estate Assets). Maintaining cash flow is another concern, though one we’ll discuss more thoroughly in the third and final installment of this series. Finally, speculation on real estate market trends is a double-edged sword, and there are certainly plenty of smart investors who have been burned by highways being erected and urban decay.

So, how does one begin looking for a good long term investment?

First of all, determine your risk tolerance. Investors who favor low risk and low returns are well advised to invest in stable, middle class neighborhoods that are well established. Those who are not averse to risk might favor lower end neighborhoods that have a higher potential to shoot upward quickly, but also breed crime and may only worsen (for a light, humorous look at slum landlording, see Diary of A Slumlord: Landlord Tips, Tricks, Rants, and Rage).

If you’re taking the safer route, take a close look at the school systems of the neighborhoods you’re considering, as they tend to be a good indicator of the health of the community. Also consider the stability of the job market in that area, along with the age demography (look for a high percentage of families). Most parents will sooner put their children in a good school than be fifteen minutes closer to work, and families are far more stable than young professionals or the elderly.

If you’re looking to speculate on low end neighborhoods that will be the next to take off, it’s a little harder. When urban neighborhoods do turn the corner, the first wave to move in is composed of young professionals who are less concerned about crime than families. They like nightlife like bars and restaurants, they like artistic institutions like galleries and museums, they like water (bays, rivers, harbors, etc.), they like sports stadiums, and they like subways and metro stations. Speculators are wise to pay close attention to municipal plans to add any of these attractions to a given neighborhood, but beware: there are thousands of others monitoring just as closely, so sometimes it pays to wait until after the initial excitement dies.

One final word for speculators: don’t over-improve. That neighborhood you’re watching may well take off in five years, but between now and then, you still have to rent to low income people. They can’t and won’t pay extra for a hot tub on the rooftop deck, so wait until the yuppies move in before shelling out extra cash.

There is much to be said about the art and curse of being a landlord, and it would fill several large tomes. For starters, nascent landlords would be well advised to take a look at some of the following: How to Screen Tenants - A Landlord's Guide, and Landlord Articles for First Time Investing.

The good news for long term real estate investors is that real estate does tend to appreciate over time, and if you have the patience (and the capital) to wait it out, you can earn an excellent return.

Real Estate Investing Strategies - Part I - Short Term Investments

G. B. Davis (Hyperopia Investments) — Tue, 02 Sep 2008 16:12:20 -0500

Real Estate Investing Strategies

People who invest in anything, whether it’s real estate, commodities, futures, etc., all have different financial goals. Some investors look for long-term profits, others look for short-term gains, still others try to create cash flow. Here’s a brief look at the investing strategies associated with each, in several installments, starting with short term real estate investing.

Short Term Real Estate Investments: Contract Flipping or Renovation Resales

So, you want to invest in real estate and get paid within, say, six months. There are really two avenues available to you: flipping real estate purchase contracts and renovating properties to resell. Each requires a different skill set, but both require you to be able to purchase real estate investment properties at below-market prices, so we’ll start there.

First, you’ll need a realtor, to give you listings of what’s available properties, but more importantly to give you a second opinion on neighborhood values, so find someone who really understands the specific market you’re looking to buy into.

Second, you’ll want to talk to wholesalers. They’ll all try to sell you on their properties, so be wary, but sometimes there are good deals to be found here. To find some good wholesalers, talk to a few local hard money lenders, as they’ll know a lot of the wholesalers in the local real estate market.

If you’re looking to flip contracts, then learn as much from the wholesalers as you can, because that’s what they do. They find deals at 60 cents on the dollar, and sell them to you for 85 cents on the dollar (or 100; be wary of these).

Also, keep in mind that any contract you sign as a buyer, you may not be able to flip, so you’d have to renovate and sell. The next leap of logic is that you may have a hard time selling even after renovation, so be prepared to put a tenant inside and keep it as a rental property, if need be. This all underscores the main point: buy under market value, because it will keep more options open to you.

Ok, you found a property to put under contract. Awesome. What next? If you’re going to flip it, you’ll need a buyer, and fast. Start with your realtor, and ask if she has any investors looking to pick something up in that neighborhood. Then call up some loan officers who specialize in renovation loans, as they’ll each have a network of investors. Try Craigslist, if only because it’s free. You might also try those hard money lenders, as they usually know plenty of hungry investors.

As a final note on contract flipping, ONLY flip to professional real estate investors, as the homeowner buyers will be using conventional bank financing, which doesn’t allow flipped contracts.

If you’re going to renovate it, then make sure you have a good contractor lined up. If you don’t, then ask some of those same contacts who they recommend. Hard money lenders have contractors, realtors know contractors, rehab loan officers know contractors. Make sure you get several prices on each job, just to be sure. For substantial jobs, always use a licensed contractor, and always have them pull work permits for the jobs (this is critical, because your municipality will shut down your job otherwise).

You may want to use a hard money lender for the renovation, or you may want to save money and use a local bank, depending on your time urgency, credit, and income. Regardless, make sure you have enough money to finish the renovation, because otherwise it will take twice as long and end up costing you twice as much as you pay for carrying costs, have to get contractors in there many different times, etc.

A few small things that make big difference when renovating real estate:

1. Jacuzzi tub: they’re not much more expensive, and people love them.

2. Off-white paint: beige, tan, blues, whatever, make it tasteful but different.

3. Central Air Conditioning: if possible.

As I mentioned above, there’s always the chance that you can’t sell the property, so always be prepared to lease it out as an investment property if necessary. Here are some free property management forms and resources, though a more thorough discussion of long term investment strategies will be covered in Part II of this series.

Good luck, and remember there are plenty of other real estate investors willing to talk and share ideas and knowledge with you.

Join Me on Facebook

G. B. Davis (Hyperopia Investments) — Thu, 21 Aug 2008 14:23:36 -0500

Friend me on Facebook, and join my group, the Landlords & Real Estate Investors Union. It's a place where fellow investors share resources, tips, comments, and advice, and it's pretty friendly!

Technorati

G. B. Davis (Hyperopia Investments) — Wed, 20 Aug 2008 19:49:41 -0500

Real Estate Legal Protection - A Must-Read for Landlords

G. B. Davis (Hyperopia Investments) — Wed, 20 Aug 2008 19:19:50 -0500

Introduction

The market is soft, so you might be thinking now’s the right time to buy a rental property and hold it. And you’d be right, it IS a good time to buy and hold, but there are a few things you should know before writing any big checks and diving in headfirst. Here are few ways to protect yourself from litigation and other legal issues related to real estate and being a landlord.

Legal Protection Strategy 1: Real Estate Ownership Type

All too many smart people make an easy mistake when they first start buying real estate as an investment: they buy it in their own name. This has some serious legal implications, as it will immediately show up as an asset if someone decides to sue you. Furthermore, if the tenant of that property sues you, they can legally go after all of your OTHER assets, which is clearly a problem.

Solution: Create a legal entity (e.g. an LLC) to purchase property under, and make sure someone else (a spouse, for example) owns it with you. This will make it harder, though not impossible, for someone to take your hard-earned assets from you in litigation. As a final note, restrict how many properties each of your LLCs owns, as anything owned by that LLC is vulnerable if the LLC is sued.

Legal Protection Strategy 2: Use An Airtight Lease Agreement

If anything goes wrong with the tenant or property, EVER, then the first piece of paper produced in court is the lease agreement. What makes a good lease agreement? Well, that’s the subject of an entire article in itself, but first and foremost it must conform with state and local laws. Try here for a good database of state-specific lease agreements , that can be customized to contain the legal language you want to include.

Legal Protection Strategy 3: Issue Proper Real Estate Legal Disclosures to Your Tenants

This cannot be understated: if you don’t issue to your tenants the legally required real estate disclosures, THEY CAN SUCCESSFULLY SUE YOU LATER. The most common example is lead-based paint disclosures, which legally must be given to tenants (typically along with a lead-based paint inspection certificate) when they sign the lease agreement. However, each state has different laws regarding what must be disclosed and when, so use the State Assist in the site above to check local real estate and landlord laws, and if need be contact a local real estate attorney, specializing in landlord – tenant law.

Here are some landlord - tenant legal disclosures that may be useful in your state.

Legal Protection Strategy 4: Screening Tenants and Good Property Management

How to Screen Tenants is an art that needs more attention than I’ll give it here, so read the linked tutorial.

Property management is also a nuanced and tricky beast, but to be brief, an attentive landlord who responds to his tenants when they call will be drastically less likely to be sued. When your tenants call about a problem, call them back. When there’s a problem with your real estate investment property, fix it. Establish a personal, first-name relationship with your tenant. They’ll appreciate it, and be less likely to sue you for your legal assets if there’s a problem.

Conclusion

No one likes to be sued, so do everything you can to avoid it by finding good tenants and keeping them happy. And, of course, prepare for the worst by being protected in your legal ownership of your real estate investment property. Good luck, and hopefully, you’ll never experience the nightmare of a real estate landlord lawsuit.

Free Web Resources for Real Estate Investors

G. B. Davis (Hyperopia Investments) — Tue, 19 Aug 2008 15:23:11 -0500

Well, Active Rain is the ultimate free resource, but there are others too. Who said there's no such thing as a free lunch?

Free Real Estate Legal Docs

How to Screen Tenants - Easy step by step breakdown of the basics

Mortgage Payment Calculator

Cyberhomes - free valuation tool

Craigslist - free rental listings

Good luck, and feel free to add to the list!