Basics to Real Estate Investing

Basics to Real Estate Investing

 

  With interest rates being so low, putting your money to work at the bank just doesn’t provide the desired return.  The uncertainty and recent decline in the stock market makes such investments risky, and to employ a broker with quality knowledge is expensive per trade.  Real Estate is the other common alternative.

  Today, you can’t turn on the radio or television without hearing someone advertise about their program for easy real estate investment with little or no money down.  I wish it was really that simple. The plain truth is that it is not easy or simple, and if it were, those same people would not be selling their program.  They would be sitting on their private island counting their money.

But don’t let me discourage you completely because I confidently believe real estate is one of the best available investments.  Why do I believe this?  

                                     Let me give you four core reasons:

•             Real Estate is finite.  Meaning, we cannot make any more land, so the supply is limited.
•             Demand is constant.  It fluctuates for sure due to the current economic conditions, but there is always demand.
•              Values for the most part always appreciate.  Like all things, they go up and down, but historically speaking land values ultimately only go in one direction.
•              Real Estate has utility.  You can use it unlike a stock or bond.

  So what do you really need to know to be a successful investor?  First you need a plan. Second, you need capital to support you investment.  Third, you need experts, and I would recommend a seasoned Realtor, a trusted lender and a qualified contractor.

 

The Plan – Your plan has to have both an entry strategy and an exit strategy.  Most failures occur due to not following the entry strategy, and not having an exit strategy. By the way, buy low and sell high is not a plan. 

  Any investment plan revolves around the capital available to invest.  You must anticipate all costs associated with the investment.  Down payment, insurance, taxes including income taxes on profits, repairs and maintenance, association dues, city and county permits, selling and closing costs. 

  

Each investment has to have a timeline.  House flippers typically do not account for delays to their timelines, and wind up making no return or even losing the investment entirely.  Your timeline has to be practical, and it must account for unexpected delays.  If there is no margin for error, there will be no profit in the end.

An exit strategy is the way you will realize your return.  The obvious answer is to sell for a profit, but a good strategy has a contingency plan such as rental income.  So during the investment evaluation process, the investment must be able to cash flow as an income producing rental property.

This article scratches at the basics of real estate investing which is a personal passion of mine.  I have been at it for over 20 years, and I still don’t have all the answers.  I do encourage those interested to jump in, and I enjoy assisting my clients in establishing their own person investment plans.  

So, if you have been considering becoming a real estate investor, let’s schedule a meeting. I won’t tell you it is easy.  I won’t promise that you will soon be a millionaire, but I will help make sure you have made the best investment decisions based on your plan and capital, and I will be with you every step of the way.

Bill Barkley, President and Broker of  River Valley Real Estate
19202 Huebner Rd, Suite 100 San Antonio, TX 78258
210-853-5327
www.rivervalleyre.com

 

Selling Your Home

                         Have you been thinking about selling your home?

The first questions sellers typically want to know are:

            How much will my home sell for?

        How long will it take to sell?

        How much will I have to pay in closing costs?    

  To answer the first question, River Valley will complete a detailed inspection of your property, and prepare a comparable market analysis based on the most recent sales and current listings within the immediate area. This analysis will provide you with specific residential sales history, and we will be able to give you a strong indication of your home’s value.

  The second question depends on three primary factors: the current state of the market, selling price and condition of the property.  Any of these three factors can have a dramatic effect on how long your home sits on the market. Overpricing a property or allowing a property to be shown in poor condition will ultimately increase the time your property requires to sell.

  Lastly, seller’s want to know what it will cost to sell their home. A good rule of thumb is 8% to 10% of the sales price.  The range is due to unknown variables such as real estate taxes, HOA fees, concessions, repairs requested by the buyer, and the buyers financing.  VA and FHA buyers typically request the seller to pay some of the buyer’s closing costs which can also increase the percentage.  Realtor fees or commissions are not fixed, however, the market does provide an indication of current commission rates.  Typically, the listing agent will offer half of the contracted rate to the buyer’s agent for bringing in a qualified buyer and for working the buyer’s side of the transaction.

  River Valley Real Estate will gladly provide you with our formal listing presentation at no cost. This presentation will outline our service, provide you with a competitive market analysis and demonstrate our marketing platform.  We are confident that after seeing the type of real estate brokerage service we provide, you will consider working with River Valley Real Estate Company.

Renters Vs. Landlords

    In San Antonio, the most common question that I get as a broker for both landlords and renters is what is the process and how do I handle this transition. Renters always seem to be confused about how to apply for a home, what are the qualifications and how to see the home?  Landlords always seem to have trouble in getting started. Don’t know how to find the right renter, price and up-keep of the property. In this article I will talk about both sides and what they need to know when dealing in the home rental market.

   When you are a renter looking for a home the hardest part about getting started is finding an agent that will help you and finding those available homes. Agents in San Antonio know that home rentals do not yield much for them in regards to commission for bringing a renter to the property.  Many see it as a waist of their valuable time to do a transaction that may end up losing money.   In the end, if it is not their listing, they may not call you back. The best way it start by looking at the public sites, such as Trulia or Zillow to see what is listed and calling the list agent directly. Before you start calling you want to make sure you can answer these questions:

• When I need to be moving in by?
• What area of town I need to be in?
• My price range?
• Number of bedroom/bathroom needed?
• Any pets?

    These are the main questions you should know so not only do you find a home that meets your needs, but shows the agent you are talking to that you are serious and worth working with. When calling on the listings from Zillow or Trulia be aware, it is possible that they could have just rented.   Rentals in San Antonio move fairly quickly, especially if they are well kept.   If rented ask the agent if he could search for others available in that area, they have the most up-to-date list and can help shorten the time on your search.

Once you find the home you want to rent you will need to fill out an application. REALTORS have the application and can help you in filling them out. There are additional documents that you will need to provide when submitting an application. You will need to have:

• Application fee – each is a different price but all require the fee to be in a money order or certified check
• Pay-stubs – Make sure to have about 2 months’ work
• Photo ID – Have a copy of your photo ID or driver’s license
• Picture of any pets that you may have

 These are the main documents that you will need to have. In Texas, everyone over 18 years old and living in the home will have to submit an application. The criteria on qualification will differ from between property managers so ask you agent to about the standards for that property.   Remember to be honest, application fees are non-refundable and don’t want to waste it if you think you are going to have an issue.

   Now that we have looked at the point of view of the renter, the other end is the landlord or owner of the home.  Home ownership is one of the biggest investments that one has and it can be scary to rent it out. In dealing with owners who are wanting to list their property for rent, the big issue is finding a tenant who will treat the property right. Stories of how renters do not take care of the home or are always causing problems has been a topic for a long time. Recently I helped a client who previously had a renter who not only didn't pay rent, but also caused a considerable amount of damage to the property. In the end, it was a cost of nearly $3,000 between lost rent and repairs.

 

   When asked if he did an application or background check on tenant he said no. “It was someone that heard about my place and said I wanted to rent quickly” – said the owner.    Also asked, “did you collect security deposit”, he said yes but only $300. We sat down and talked about how the process works when listing with a company to help in finding a renter.  A listing company will advertise and market your property so it reaches everyone who is looking to find a property. In doing so they will save an owner on the time they spend on the phone filtering calls and showing the property.

 

  Hope I was able to provide some valuable information in renting and that whether your a future renter or landlord you will feel prepared for the process.

   

Written by, 

Travis Reed, Associate Broker for River Valley Real Estate