Real Estate Investing Secrets

Posted by: theinvestortoday / Category: Articles

If you want to invest in real estate then there are some good techniques that will help you work more effectively. Even if becoming a full time savvy (and not to mention rich) investor isn’t something that you would like to do, it is still beneficial to know a few techniques to save money on property. Here are the top 7 insider real estate investing secrets that will get you on the fast track to getting a better deal today.

1. Learn how to buy a property for a discount

There are many ways to obtain a discount on a property. One example is getting your property for favourable terms as many buyers do not realize that price and terms are essentially the same thing. The important thing is to understand what variables would cause a seller to sell their property for less than it is worth. Knowing this will allow you to find the right set of circumstances that will allow you to profit. Great deals come about as a result of circumstances of the seller, not because of where the home is located. Great investors are always marketing to attract the right types of deals. I specialize personally in how to short sale.

2. Find out the seller’s bottom line

Many people confuse an asking price with a selling price.  Any good investor will tell you that an asking price doesn’t mean anything. If it was accurate, asking price would be the getting price and it rarely is. Here’s a simple way you can find out a seller’s bottom line without ruining the negotiation. If you like a home, have someone else go into the home and make a lowball offer under their own name that they can escape or void. That way, they won’t have to actually buy the property and you’ll know if the seller is offended by that offer. It gives you insight to know just how flexible the seller is on their price. Often they will counter back at 10-20% off of their asking price which is money you don’t have to give up. It really helps to know that when you walk in with a clean slate to begin your negotiations. When you know ahead of time that your seller will come down 10%, you can save yourself $1000s and a lot of wasted time of having to negotiate with an uncooperative seller. The best part is that they will never get offended by anything you’ve done either as they think the lowball offer came from a completely different source even though they were put up to it by you.

3. Have a voidable contract

Most residential real estate deals have clauses that say things like offer conditional upon home inspection within XX days. Include those terms on your purchase and sale agreement to give you a chance to change your mind after the deal is in writing. You do not need to prove you did a home inspection or that it actually met your terms. You can use this as an escape to make an offer and then back out if you are unable to sell the home for a higher price. Good investors make offers all the time that they can back out of because they know the value that controlling a property represents. Because you can back out of a deal that you haven’t already sold for more money first, there is actually a lot less risk most investors think.

4. Don’t use the lottery mentality with property

Hey, I sure like the brochure of that mutual company so I think I’ll buy some shares. It sounds silly but most people don’t give much more business thought than that to buying real estate. If the numbers don’t show you that your investment property will be profitable either take the time to do the analysis and find a good situation or don’t buy it. Buying a 2nd home that loses money or makes very little is not worth all the time you’ll have to commit. Buying a home without analyzing the numbers is just like buying from the company brochure. If you’re going to be swinging the hammer, at least know that it will pay well to do it.

5. Have a couple of exit strategies

The mainstream way of investing in real estate says buy, fix up, and flip. The problem is that real investors don’t make money that way and nobody gets rich from generic “cut and paste” ideas that are force-fed to the public. For instance, selling a property and holding a second mortgage often pays the same cash returns that a rental property does without all the added management. Make sure to know what all your creative options are before you take title. If you buy and then go looking for a renter, you’ve already lost. Make sure you at least know how to lease-option, hold secondary financing and assign a contract before you just buy and hold.

6. Buy and hold is rarely worth it

It’s fairly typical to make about 10-20% per month on a rental property. That means that if you’re renting for $1000/month, you can expect about $100-200 profit per month. How much is your time worth? Are you willing to fix toilets, walls and heating for $100-200 a month? Creative investors use creative strategies for a reason. Think about how the bank collects on your property without having to physically manage it. That’s the kind of thinking that makes you a profit without committing all your time. Being rich often means being detached from an investment. It’s just the way it is.

7. Marketing

You can either go out and find a great deal or you can learn to market so that great deals are naturally attracted to you. Just know that if you don’t know how to market for great deals, you’re not likely to find them. At the very least, you should have industry professionals like mortgage brokers and realtors keeping their eyes peeled for you for the right fit. If you’re really serious about making money in real estate, take hold of your own creative marketing strategies. While realtors and brokers can find good deals for the average investor, they really don’t do any investing. That means the really great deals never go through them and it’s up to you to develop a marketing system to capitalize on those very lucrative deals.

The biggest secret is that the best real estate deals always go through investors who know how to find them. Do you know how to find a great real estate deal?

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One Response to “Real Estate Investing Secrets”

  1. Simon Says:

    Great article!

    I always tend to find that my best deals come directly from motivated sellers.

    For this, I target people with legal trouble who own real estate, and whose recording date is at least 10 years (meaning they might have equity).

    I therefore target my marketing to this group and always have great leads flowing in.

    I do agree with you; in this market, it seems “asking price” is meaningless. Most people will accept your offer as long as it pays off the outstanding mortgage.

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