Buying New Construction Homes

New construction homes are a great way to profit from a small down payment. Some builders in Florida and elsewhere require a modest $1,500 down with no payments until the home is finished. A clever investor will have the house sold at that time and will capture a sizeable gain without ever having to pay on the monthly mortgage payment. Rent to own is another great exit strategy for the new home. By getting a tenant buyer in the house you can ride out one to two years additional appreciation gain while having the tenant buyer pay some or all of your monthly mortgage payment. One of the great benefits to understand about new construction is that your risk is limited to your earnest money, otherwise known as your down payment. If the project tanks you can usually walk away losing only your earnest money. Be sure and do your research on the market you choose to get the right town for growth. Then be sure and pick the most popular type of home that the buying public demands. It might be a two bedroom one bath condo or a four bedroom three bath three car garage house. Calling realtors off of realtor.com and asking what's the most popular type of home for their area will help you pick a winner. As long as you complete a detailed analysis for the market your chances of making a good profit is likely.

Why Use a Mentor

Real estate investing has many pitfalls and using a mentor will help you stay clear of some costly ones. Most seasoned real estate investors are happy to share what they have learned with newbies. Try a local real estate club to find such a person. Chat boards can also be a source to find a mentor. There are several good mentoring programs offered from the guru's that can cost you anywhere from $2,000 to $10,000 and can be well worth the money. They will typically spend three days on the ground with you walking you through any and all investing methods and forms needed to get you where you need to be. The main thing is don't invest blindly like I did in the beginning.

Using Title Companies for Help

Title companies offer investors a variety of services. Chicago Title gives me access to their site where I can search property details. I can find out who the owner is and when they bought the property. I can also get the price paid for the property when the current owner bought it. Sometimes there are sales comparables for the property. It's best to call around to different title companies to see what services they offer. Most of these services are free and will help you become a better investor.

Searching Commercial Real Estate Online

Loopnet.com is a great free resource to search many types of commercial property for sale on the internet. This site features land, apartments, strip malls, dr offices and more. There are realtors and for sale by owners listing property on this site. When you bring up loopnet it will ask for your information to access the site and several times a pop up will solicit you to upgrade to premium membership. Most investors do not need this upgrade. This service reaches most major and minor markets. It's also a good way to find a realtor as you can see who has what type of listing and how many.

Another Tool For Real Estate Investing

If you have not heard of realtor.com it's a great tool for determing value in a new market. I use it by narrowing the search to the type of homes I'm looking for and calling the agent who has the listing. From the agent I ask several questions such as, how many days has it been on the market, what's your market's sale price average versus list price, what's the average days on the market for this type of property. I also ask what has the trend been in your market the last year. Quite often the listing agent is full of good information and willing to give it for free. They might tell of job growth or other factors that make their area a good one to consider investing in. Some investors will find a home on realtor.com and by it without even going there to see the property. This can work if you have a management company in that area give their opinion of it's viability as a rental and then have it professionally inspected.I've never done this but many investors do it all the time successfully. Realtor.com can be used for searching multiunit properties and land but it's strongest use is in single family homes. In the bigger markets there are lots of homes listed which makes it easier to determine value.
Next time I will share a resource for searching commercial properties on the internet

Where There's Job Growth There's Appreciation

In this new age of real estate investing one of the keys I look for in a new market is job growth. How many of you have seen the headlines in the newspapers about job losses? Like Ford Motor Company and GM laying off 30,000 plus workers. The ripple effect of these layoffs is huge in each market where they occur. If the jobs are not replaced the service sector loses 2-3 jobs per professional jobs lost over a 2-3 year span. Conversley when a market has professional job gains then 2-3 service sector jobs are created over the next 2-3 years. When you have these new jobs in large numbers it drives a real estate market up. You have large numbers of people moving to that market and supply and demand take over. Looking back to 1995 the huge job growth in Denver in the tech sector made for a 5 year run of mostly double digit appreciation.
One of the tools I use to find these hot new markets is ecodevdirectory.com which stands for economic developement directory. Each major and most minor markets have a economic developement agency that promotes the area to businesses looking to relocate. You can search every state in the US or even outside of the US for info on where the jobs are. Some of these agencies post which companies they have brought to their market and the ones that are in the process of relocating. Or you can call them up and ask what is going on in their market. Pay close attention to the type of companies and how many employees they will have. The auto companies have a bigger impact on a local economy then most others because when they relocate the parts manufacturers tend to relocate too. That adds more like 3-4 service sector jobs to the area in the next 2-3 years. Just look what's going on in San Antonio right now with Toyota moving in. That market is going nuts. I suggest spending time cruising ecodevdirectory.com and see if you can find the next hot market.
Until my next post happy investing to all.

Investing in Markets Out of Your Area

One of the ways I invest in real estate is to look to markets all over the US. I use the website ofheo.gov as one of the tools for my research. OFHEO stands for Office of Federal Housing Enterprise Oversight. When you go to their website click on House Price Index, then click on House Price Index for the 3rd Quarter,{or whatever the most recent quarter is} and then scroll down to page 15 and 16 for appreciation by state. There you will see how each state compares in appreciation. Go to page 26 for the top MSA's, {Metropolitan Statistical Areas} to see which has the highest appreciation. Some investors target the top appreciation MSA's for investing. This can work well as long as you get in before things start leveling off. Just ask an investor who got in too late in Las Vegas for the huge run up in appreciation in 2003/2004. I know of several investors who are dontwanters there because they got in too late. That's not to say there aren't any good deals left in Vegas, it's just that before 2004 it was pretty much a slam dunk if you bought there.
The other way to use the ofheo website is to go to page 27 for the bottom appreciating MSA's. Some investors watch these types of markets very closely for signs of a turn around. These are markets that offer huge upside potential. Investors who got into the Denver market in 1995 reaped huge gains from this strategy. I suggest looking at both ways and decide which way you feel more comfortable using in yur real estate investing strategy and read other parts from the website to find other information that is useful.
Next time we will look at another internet tool for real estate research in markets outside of your geographical area.

What's an Investor to Do?

When CNNMoney.com posts an article about the King of Real Estate cashing out of his US holdings it's hard not to pay attention. Real Estate investing used to be easier in the US that's for sure. It used to be a new investor with some guts,education and motivation could make a killing in real estate investing. But things have changed rapidly over the last two years.The biggest change in the arena of investing has got to be the amount of investors out there chasing the deals. As Tom Barrack says in his CNN article "there's too much money chasing too few deals, with too much debt and too few brains". The internet has changed things in a big way also. With those two big changes an investor has to have a bigger better tool box to succeed in this era of incresed competition. Over the course of the next two weeks I'll be sharing some of the tools I use to find the deals. So come along for the ride and see if you can grab some new tools for the investor toolbox.

RWREI