fliprent

I still believe that this is the best time to get into the real estate investing business.  However, the strategy used in this market may be the key to your success.  I’m not so sure that all of the creative strategies taught buy the self proclaimed gurus will work in this current market.  The differences in the strategies can make or break you as an investor.  For example, if you are looking for short term investments in which you control or own the property for less than 4 months, i.e. house flipping, this market should scare you some.  No one knows where the bottom is, including the gurus and even at a 20 percent discount (in today’s market) you could still be over priced in three months.  Wholesaling (house flipping on speed) may be a safer route to take since in most cases, you only control the property for a very short time frame.  The down side is you run the risk of not finding a buyer and potentially loosing deposits or down payments.  Don’t get me wrong I am still a proponent of house flipping, however only as one car in your freight train to wealth.

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I’m a firm believer in not placing all my eggs in one basket.  Diversification is not just another buzz word to me.  Investing in real estate has the added benefit of flexibility.  Buy and hold investors tend to have more freedom and for many, it’s really a side business.  House flipping can be a full time job itself, especially if you manage the projects or do the work yourself.   I believe that a strategy that involves both renting and flipping offer the fastest and most secure road to wealth for full time investors. 

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As a house flipper, you should be constantly looking for ways to raise money.  Friends, family and associates can be a great avenue to get started.  However, you will want to be careful on the amount and the terms used for the money you receive.  Lets say your grandfather wants to help you get started in your house flipping business.  He offers to give you money for this duplex that you just got under contract.  This doesn’t mean that he can just write you a check for any amount and of you go.  Uncle Sam may want his cut. 

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The Housing Choice Voucher Program (once called section eight) was put in place by HUD for low income families to rent property.  Many landlords choose this program for one reason…guaranteed rent every month on time.  Unfortunately, it’s not always that simple.  In some areas the tenant uses 30 percent of their income towards housing when enrolled in the program.  For example, if the tenant makes $25,000 per year they are required to pay $625 of the monthly rent.  If your rent is $900/month then the program only subsidizes $225/month.  The $225 is the only portion that is guaranteed by the government.   The rest must be collected from the tenant and there are no guarantees.   This is a common misconception of the section 8 program.  However, there are no guarantees at all when renting to anyone else.   If you have been a landlord for a while, you have experienced this first hand.

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As we all should know by now real estate is local.  Even in the midst of this bubble/crash or whatever they are calling it these days, there are still hot markets around the country.   Thanks to the military, some area markets are drawing tens of thousands of new residents and in turn real estate investments.  Why thanks the military you ask?  Well if you haven’t heard about the defense base realignments and BRAC, I suggest that you look it up.

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Real estate tax sales are another avenue to acquire investment property.  They can require some research and comfort with having your hard earned dollars unavailable to you for a period of up to two years in some cases.  The good news is that the rules usually require the original owner to pay the lien holder interest if they are able to redeem the property.  In some areas the interest can be up to 24%!!  That’s what I call a great savings account.  In fact many investors use them for just that. 

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Good question.  The answer nine times out of ten is yes.  Small jobs such as painting, minor changes of bathroom and kitchen fixtures will not require a permit.  However if you plan on doing anything electrical, plumbing, HVAC, structural, landscaping, etc a permit is normally required.  It also can save you money in the long run by avoiding costly fines, and stop work orders.  When you go to sell your property, you will be able to disclose to the potential buyer whether not you pulled proper permits.   There can also be insurance problems when collecting on fire damage when a permit was not used to do the renovations.  Better safe than sorry I say. 

Don’t quit your day job.  We all know this infamous phrase to mean something negative.  But does it have to be?  I am often asked about real estate investing and whether or not it can replace income from a job.  My answer is that it can, but usually not right away.  The good news is it doesn’t have to.  You can do it on the side.  Author Richard Paul Evans calls it “winning in the margins” in his book The 5 Lessons A Millionaire Taught Me About Life and Wealth.  He refers to winning in the margins as investing or creating wealth through extra income.

In his book he talks about is wife’s grandfather who scraped gold from the hood of a GOLD smelting furnace.  He also talks about Lance Shiffman who’s made millions from Xango Juice, which he originally started selling on the side.  Real Estate investing is another great way to win in the margins.  It can be used to create passive income while providing tax benefits and appreciation all at the same time.   Another great thing about real estate is that you as the owner control it.  So before you go thinking that you need to quit your job to get rich, think again.  You can start off  in the margins.

There are many ways to buy and sell real estate.   The main objective for a real estate investor is to make money.  In a down market like the one we are in now, many house flippers are jumping ship.  This opens the gate for the ones that choose to continue and whether the storm.   The question still remains.   How can I make money investing in a down market?  Much of what we see on the house flipping television shows and what we read in house flipping books says that houses should be flipped quickly.  The longer we hold them the more they cost.  While this may be true if you are carrying the note without a tenant, it does not mean that you cannot make just as much if not more by holding the house over a longer period of time.  Many houses are sitting on the market for a year and counting.  This is where the lease purchase exit strategy can pay big dividends. 

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Getting good water pressure in your flip or rental is essential to happy home ownership.  I for one cannot stand it when I get in the shower only to get that soft sprinkle of water that takes ten minutes to get the soap out of my hair.  This typically occurs in older homes and in the inner city where the pipes are older and the water lines require upgrading.

 One way to begin diagnosing the problem is to use a water pressure gauge.  You can use these to check the water pressure outside of the home.  If the pressure falls between .40 to .70 it usually indicates normal water pressure coming to the house.  If it’s less, you may want to call your water company to see about increasing it.  If your pressure is within this range then the problem could be the flow inside the house itself. 

If you are flipping an older house then you probably have old corroded pipes which will restrict the flow of water to the fixtures.  Many of these older homes have galvanized pipes as well.  Have a plumber run a new copper main cold water line from outside the house where the pressure is normal.  In some cases you will need to call the water company to have this done.  You can also run a new line directly to the shower/tub that you are installing.  The plumber can also run a hot water line directly from the hot water heater.   Another cheaper option may be to use a shower head that actually boosts water pressure with volume controls.