What Would You Do If You Were Starting To Invest In Real Estate Today?

What Would You Do If You Were Starting Today?

The very first thing I would do is get down on my knees and thank my lucky stars to be beginning my investment career at absolutely the best time of our lifetime!!!  Remember fortunes are made by investing at depressed levels and at the bottom or near bottom of cycles

Establish Your Deal Selection Criteria

After I have built my basic understanding of the market I would decide on what criteria I want to use to decide on what is and isn’t a good deal.  I recommend every investor pick one metric that is easily transferable between property types.  For me that metric is “Yield” or my expect return on all cash outlaid to secure and rehab a property. Today I personally look for expected yields in excess of 20% in my market.

Research Phase: Analyze Your Market & Learn What DEALS Really Are

The next thing I would do is get off my butt and start doing my basic homework.  I would go out and see no less than 50 and probably 100 properties in my investment area of choice.  I am not kidding!!! I would immediately build a spreadsheet with data on no less than 100 properties.  Things like Prices, Expected Rents, Repair Budgets, etc.  This would give me the basis or foundation to understand what is a good deal, what is a bad deal and what is a great deal!!!!

Find Passive Real Estate Investment Opportunities

Now if my market didn’t offer these types of returns or I didn’t have the time to devote to learning a new market I would still find away to participate.  I would find an investor with a proven track record, a simple to understand process and become a passive investor.  This would insure a decent return with a lot less headaches, reduced risks and still give me the upside I want.

Start To Make Offers

After understanding my market and deciding on my criteria for identifying a great deal I would start making offers on properties that met my criteria.  I would hold fast to my criteria and not let bidding wars drive up prices.  In fact you should only expect to get 1 out of every 10 properties you make an offer on.  If your success rate is higher than that I believe you are offering too much on your properties.

By following this strategy I am convinced I could secure 4 investment properties with Government-backed loans inside of 90 days and secure 10 properties inside my first year. Every property I bought would have a 30 year fixed interest rate and I would be a very happy man!!!!


In the end if I was starting today I would not let this investment cycle pass me by.  I would become a very active investor in my market and if my market didn’t offer returns I would find a way to be a passive investor in another market that offered great returns.

Top 10 Real Estate Predictions For 2012

There is a lot of talk in media about shadow inventory. When I hear reporters talk about shadow inventory, it's often reported incorrectly as though the reporters do not understand the term shadow inventory. This is not the number of homes going into foreclosure. Shadow inventory is the numbers of homes that have been foreclosed upon and yet not available for sale.

Bulk sales is typically the most profitable for investors because the discounts are steep. The catch is investors are required by the bank to buy a bundle of homes at one time to get that discount. Then, investors will fix up the homes and put them on the market, staggering the sales so the market is not inundated with inventory. That's because investors want to maximize returns on investment.

Investors have 3 ways to buy a foreclosure home. They can buy the home on the courthouse steps during a bidding frenzy, they can buy the home through MLS after an REO agent has listed the home, or they can buy a group of homes offered as bulk sales by the banks that have foreclosed on those homes.

How To Negotiate The Best Deal

Buyers are finally being able to take advantage of cooling trends in previously hot markets. Multiple offers are no longer being thrown at sellers as soon as the For Sale sign hits the front yard.
Competition has dwindled in many areas as investors disappear and buyers take to the sidelines. Unless a buyer thinks his local market is headed for a big downturn, this could be the pause that allows him to get into the market with a few perks unheard of in recent years as a bonus.

Here Are 5 Things Buyers Need To Know To Negotiate The Best Deal In A Market Shifting To Their Favor:

1. When you make an offer, know the recent comparable sales; it’s the best bargaining tool. “See what’s going on out there,’’ says Beverly Durham of ReMax Gold Coast Realty in Camarillo, Calif., where entry-level single-family homes begin at $500,000. “Make an offer $10,000 to $15,000 under what the last one sold. Even in this market, if you insult your seller, they won’t want to deal with you. Sellers know what the last one sold for. You want them to at least look at your offer.”

2. Multiple Listing Service (MLS) properties usually state what the seller owes. If not, your agent should be able to track down the figures. There’s a big difference in negotiating with an owner who owes more than the house is worth and one who has a lot of built-up equity.

3. Human nature is the biggest problem for sellers and buyers to overcome in a changing market. Prices stagnate or drop a few percentage points and it’s amazing how different buyers and sellers react. Sellers still think their house is “special” and immune to the market. Buyers figure every seller is about to be foreclosed on and make ridiculous low-ball offers. Smart buyers do their homework, know what size home they need, how much they can afford and then search the market for what they want and negotiate fairly.

4. Find out as much as you can about the seller’s motivation -- retirement, job, divorce, wants to move up but only if he gets the right price. Durham says if a buyer knows the seller’s motivation they can negotiate a better deal or move on to the next property.

5. “After 45 to 60 days the seller is usually absolutely sick of keeping their house spotless and sick of people walking through,’’ said Durham. This is when a seller may be the most anxious about selling their house as traffic to their house has likely fallen sharply.

Real Estate Investing Basics

The details of real estate investment can be overwhelming. There's a whole new language to learn: closing costs, resale value, liquidity, and inspections. But if you're willing to overcome your apprehensions, you'll find that real estate can be a wise investment. If you are considering investing in real estate, it's important that you do your research so that your investment will turn into a profitable venture. It's harder to get out of real estate than a stock or bond purchase, so educate yourself and make sure you understand exactly what you're doing.

You must consider inflation when investing in real estate. Believe it or not, a real estate investor can reap profits from inflation alone. Check out this example. An investor has $30,000 worth of equity in a $100,000 property. With a 3 percent inflationary increase in property values, her holdings are now worth $103,000 — a $3,000 increase. That $3,000 increase on her $30,000 investment translates into a 10 percent return — due solely to inflation.

A real estate investment is generally tangible — you buy land or property that you can actually see. Think about how stocks and bonds work. You invest your money in a company you do not physically own. By buying shares, you are in essence lending the company your money and hoping for a profit. With real estate, you own the “company,” so you need to sell “shares” of it to see a profit — by selling or renting the property

“Americans Will Downsize And Live Multigenerationally, In Order To Offset The Fraud They Know Exists In Real Estate.

A searing indictment of The Bernanking System in Business Insider:

Once people start to come out of negative equity, even more of them will sell and try to get out from under the cloud they are under. So, the housing bubble orchestrated by the Fed and by the hedge funds and by the wealthy could free up massive inventory. The average person fears negative equity. The Fed will not erase that memory.

Keep in mind that about 4.4 million houses were sold in 2011 and only 2.4 million mortgages were taken out for purchase. That is a mortgage depression and the rise in house prices has not changed that mortgage depression.The only way people will risk negative equity is if their house prices are cheaper than rent. But the artificial inflation of housing prices will do nothing but push the average Joe away from housing.

People are learning that the uptick in prices is a scam, both by banks withholding massive inventory, and by the Fed making more easy money available to the rich. Once they own most of the inventory, they will be forced to initiate a housing bubble or they will be stuck with the properties. 

Where Is The Real Estate MarkeIt Going Today???

It’s the age we live in; every data point, story, press release, blog post triggers a monsoon of pundits and analytical analysis that either sends you running for the hills or tripling down on your latest investment.  If you don’t believe me, scroll through this reputable blog and tell me how I should be the most confident in years on Tuesday then be disappointed in home sales twice only a week later.  With everything out there, how do you find the truth?

First, understand the basics of real estate.  Unlike the stock market, real estate is slow moving, plodding, and a hyper-local asset class.  Despite what the headlines might say, you have not missed the bottom in many locations.  If you are looking to buy a single family home, tomorrow will be just as good a day as yesterday, as will six months from now.  Interest rates tend to move on a quarterly basis and rarely increase more than 0.25% in that time span.  Sure, your neighbor might have a 3.75% interest rate, but your 4.25% will put your payments close enough and will still be historically, the lowest in our history.


Second, understand the underlying data.  As it relates to real estate, one needs to be especially cautious.  Data may or may not be adjusted for seasonality, it may or may not be a selection of particularly poor or particularly good markets, it may be new homes vs. existing homes, etc.  With the need for new headlines every hour, data can and will be manipulated to tell whatever story is the flavor of the moment.  Personally, I always start at one of the sources.

Last, but most importantly, understand your market. National real estate statistics rarely add value to a local buyer. Real estate is cyclical everywhere; however, the size and length of the peaks and valleys can vary dramatically. If GM moves a plant in your neighborhood to another state, you can bet prices will move aggressively downward no matter what the national real estate market is doing. Understanding this differentiates great realtors from the rest of the pack.

Amazing realtors don’t parrot pseudo-facts from newspapers or websites; they utilize stats to enhance their local market knowledge. Acting as the knowledgeable voice of reason to clients inundated with misinformation will only serve to build trust and respect for your craft.

Here’s What To Expect From The Housing Market For The Rest Of 2012

2012 has been good to the US Housing Market. In most places home prices are up, demand is up, money is super cheap, and transaction volume is up. Banks are unloading their backlog at steady but not disruptive pace. Not surprising with the improving market conditions, new delinquencies are declining rapidly. The press and traditional housing market data folks have caught on.

 what should we expect for the rest of 2012? Do we dare call it a “recovery”? Here’s what you need to know:

1. Home prices across the US are already up 10% year-to-date. You’re going to seefive more months of “Up” headlines before the next cycle of home price declines make their way into the news.
2. Note that our earliest leading indicators – the data that leads 6 or so month out, have plateaued and are showing the end-of-year declines. Nothing scary in this data yet. Most of the rest of the year is dominated by bullish headlines.
3. In tandem with home prices, rents are climbing. I’ve described this virtuous cycle previously.

All of these factors combine to make real estate investing a hot market for the rest of the year. Lots of cash that has been sitting on the sidelines is now chasing a few properties with cheap financing and strong and improving yield. These are the makings of a bull market.

So there you have it. That’s the second half of 2012. Amaze your friends with your prescience.