Sell Your Investment Property in Bad Economy,10 Simple Strategies

Real estate investors have made a big discovery. America is on sale. It is the perfect time to purchase good investment properties at bargain prices. Many new investors are considering this the perfect time to enter into the investment arena by purchasing properties hoping they can sell quickly and make a profit.

For investors purchasing with the intent to remodel there is an abundance of available homes in need of various stages of TLC can be purchased for deep discounts as REO properties and motivated sellers continue to increase everyday.

Selling real estate in a slow market is challenging. Everyone from President Obama to the person standing in line beside you at the local Wal-Mart is talking about the decline of real estate values and the difficulty people are experiencing selling their homes. Even with Michael Jackson dominating the news the conversations usually turn back to the housing market, job loss, and the economy, all which have a direct impact on the ability to sell real estate.

If we look at an overview of the real estate market across the United States, we find that many areas have experienced massive property devaluation, high foreclosure rates and poor home sales. Other areas have only seen a modest decline in values and sluggish home sales.

Recent housing reports hint at a glimmer of hope for a slight increase in home sales in some areas. The reality is that the sale of new and existing homes may show slightly improved sales in areas with more stable markets while others are continue to experience stagnated home sales.

Investors purchasing existing homes and remodeling to sell face challenges as they add their properties to a market overflowing with MLS listings and FSBOs.

The big question is this. If we locate a good investment property, purchase it at a deep discount and invest money to remodel it, can we sell it in todays market?

The answer is "yes."  You can stimulate your real estate investment property sales even in a slow economy if you educate yourself on the local real estate market before you buy, target desirable areas with increasing populations and stable or increasing home sales and invest in properties that have features appealing to a buyer. This process starts from the first moment you look at the property.

Follow these 10 simple strategies for selling your investment properties and you will increase your odds for success even in a slow real estate market.

1. Buyers today are searching for homes offering extra features, high value, reasonable price, and available first time home buyer financing or other financing programs. Ask your Realtor to provide current information on what type properties are creating the highest number of sales in the area. What is the sale price? Purchase properties that you can market in these price ranges or a small percentage below. Target homes in areas where USDA, FHA and first time homebuyer financing is available to attract first time home buyers. First time home buyers tax credit and other programs will offer you a pool of available buyers.

2. When you are considering an investment property, identify the qualities the home has that will appeal to a wide range of buyers. Choose homes that offer additional square footage, garages, large lots, fenced yards, maintenance free exteriors and other features. Determine the age range of your potential buyer and identify what features they will look for in a home. Enhance or create these features during your remodel and use them as a marketing tool when you list the property for sale. Tour new home open houses to get the latest ideas on what builders are offering then apply these ideas to your home.

3 Women usually make the final decision about purchasing a home, but don't discount the things that appeal to men. While women may fall in love with the spacious kitchen, stainless steel appliances or the master bath, men are looking for other things. Create a workshop area and a space for the John Deere Mower and yard equipment. A nice patio perfect for a family cookout will make the man of the house feel right at home.

4. Choose interior and exterior paint colors that create warmth in the home but at the same time are appealing to buyers in general. Avoid using multiple colors on the interior of the house since it will make the home look smaller. Have a professional to advise you on colors that are neutral but still add soft color to enhance the appearance of the home. Sherwin Williams, Home Depot or Lowe's offers professional information on choosing and coordinating colors.

5. Offer the little extras like book nooks, all season rooms, extra storage, special kid friendly spaces and family areas. The addition of motion sensor lights will offer the buyer a sense of security. Consider installing a home security system and paying the fees for the first year is a big bonus to a buyer.

6. Create a series of "wow's" from the time the buyer pulls into the driveway. A fantastic first impression can be made even if you are on a tight budget. Landscaping, a neatly manicured yard, fresh paint and sparkling clean windows make the home inviting. Coordinate your colors and style inside so that everything from the light fixtures to the floor coverings complement each other to create a total put together look. Pay specific attention to the details when remodeling older homes so everything blends in with the architectural style of the home. With older homes the key is to make everything look like it has always been there.

7. Think green. Install Energy Star appliances and other energy saving features. Even a few energy saving changes in an older home can be appealing to an energy conscious buyer. Your local power company, Home Depot or Lowe's will have information on how to make your remodel more Energy efficient and still stay on budget.

8. Choose properties with family friendly neighborhoods where buyers feel safe. Consult with the local police department for crime rates in the area. Neighborhoods where the majority of the homes are single family and owner occupied are the most desirable. Ask if there is a neighborhood park, pool or other amenities. Some areas have an active neighborhood association which plan family events and have active websites promoting their neighborhood. These neighborhood perks are excellent marketing tools to attract buyers.

9. Consider the surrounding area and the convenience it offers the buyer. Is it convenient to shopping, schools, parks, etc? Is the property on a quiet street or one with high traffic? What does the community have to offer the buyer?

10. Always strive to create a quality product. Nothing will sell your house faster than a home that has been remodeled correctly. Investors who are remodeling homes to sell are competing against large numbers of MLS listings and FSBO's in the same neighborhoods. Many of these will be newer homes. Your attention to quality and detail will set your home apart from other homes on the market. Adding some simple interior and exterior staging will enhance the appearance of the home, highlight desirable features and will offer visual suggestions for use of the space for the buyer.

Investors who take the time to properly evaluate properties, research the market for current home values and sales, consider the availability of financing programs for first time home buyers and who are selecting good properties in desirable areas can be successful even in a sluggish market, creating a good return on their investments.

New investors should contact their area Real Estate Investor's Association and find a qualified mentor who can advise and guide them through their first purchase and rehab. You can visit the website for the National Real Estate Investor's Association to locate groups in your area. Taking the time to learn will avoid mistakes and bad investment decisions that will be very costly.

Delivering more than your buyer expects and offering the home at a price just a little under value will give the buyer a reason to choose your homes over a competitor.

Summary

As real estate investors we are aware that America is on sale. It is the perfect time to purchase good investment properties at bargain prices. Many new investors are considering purchasing properties that they can remodel and sell quickly. For rehabbers there is an abundance of available homes in need of various stages of TLC can be purchased for deep discounts as REO properties and motivated sellers continue to increase everyday. But the question is this...Can we sell in a slow real estate market?

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Property Investment Tips , 2009

Contrary to the constant barrage of fear mongering by the media, most people are still in work and many still have a decent amount of money to invest. Most will also be aware that now is the best time to buy just about everything, judging by the deals that are out there. Property therefore is no different.

Decide what you want - it is important you get your strategy right from the start. Do you want income or capital growth for example? Do you want short-term or long-term? Once you know what you want, it is easier to decide which type of deals to enquire about. If you're unsure ask yourself if you want to have cash now, or cash later? In a down market, many investors wish to generate income now rather than speculate on getting it in 2 year's time, mainly because they need it now. In an upmarket, many tend to do the opposite and speculate as immediate income is less important.

Be prepared for ups and downs. As good as an investment may sound when you are looking at it, do understand that, barring extremely secure guarantees, it may not work out. Is this an amount of money you are prepared to lose? If not, you may wish to go for something more secure like bonds, or lower the amount you wish to put into a property deal.

Do your own research - this is critical, not just for your peace of mind, but so you become better at investing. Don't just take your broker's word for it, check the deal out. Are the rental comparables offered correct for the area? Is there plenty of independent evidence to support the perceived investment case? What other developments has the supplier built before and were they delivered as promised?

Ask for evidence to back everything up that is said - following on from conducting your own research, make sure any claim made is backed with evidence. Ask for title and building permits if it is an off-plan deal and get them checked out. If the product involves insurance, ask for a copy of the policy and check for loopholes. If you are buying off-plan, make sure you have copies of all contracts you will be signing so you don't have any nasty surprises further down the line. It takes some extra time and effort it is worth it in the long run.

View the property if possible - many, many investors have bought property over the phone, which may or may not be a good thing to do. If the deal is off-plan there is nothing to see but land, but going reassures you that the location is a good one. If the property is already built, go and view it if you can. Check out the condition and satisfy yourself.

Big is not always good - when using service partners such as rental management companies, lawyers, accountants, etc. using the most well known brand might not be the best move. Quite often the bigger companies have less time for you or are less willing to bend their rules. Local family run companies can quite often offer the decent, thorough and personal service you will be looking for. Again it is important to spend time checking these companies out.

Consider different styles of property deals - there are a number of different types of deals on the table today, such as off-plan, below market value (BMV) deals, Developer Joint Venture schemes, or in different sectors such as student lets, short business lets and nursing homes. Have a good hunt around to find the type of deal that suits or diversify your risk by investing in a variety.

Value a good broker - as much as many critise the role of the middleman, he or she quite often is the one putting the deal together, not the developer or supplier. As a broker myself I may be biased, but a lot of work goes into structuring the deals and bringing them to market, as well as assessing which companies to work with. Quite often the broker has a better overall knowledge of the market place than the supplier does so use and value their service.

 

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Investment Property Loans

 

You may find that applying for a mortgage is harder than it was first time around when you decide to purchase an investment property. However, there are a number of mortgage providers that will offer loans for investment property, so long as you bear a few important factors in mind.

When it comes to the down payment you should be prepared for the fact that many lenders will not give 100 percent loans, unless you are providing security for the loan. They could require a large down payment of around 30 percent of the total price of the investment property. However, if you do your research ahead of time, you should be able to find a lender that is a little more lenient and may offer 20 percent or less. You may even find some that offer 100 percent financing, although this can be a lot harder to be approved for.

The best option is to seek out a mortgage lender that specialize in loaning to finance investment property. These will have special plans available to you as they deal with people that want to invest in property all the time. They usually have special plans and features attached to their loans that are designed especially for property investors.

The features of loans for investment property are a little different to traditional mortgages. This can be a little daunting to new investors, but there are many options available to you as long as you are prepared to spend some time to research to find the best deals available to you.

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These Investment Property Financing Things You Should Know

 

A property fire sale as homes and buildings everywhere are being foreclosed caused by the current financial crisis makes it an excellent time to purchase properties as investments, the drying up of credit lines has made it a mite more difficult to secure loans from banks or credit unions that are in the best interests of the investor.

You should know that investment property financing is different from financing a residential property. For one thing, it usually requires a better credit history. For another, the down payments tend to be considerably larger. However, with a decent enough credit history, proper diligent research and enough knowledge of the current market it is possible to secure a fixed rate mortgage to cover the entire cost of the property for 15 or even 30 years. Should this prove impossible, however, there are still many other ways to obtain investment property financing. In cash strapped times like these, for example, it is not uncommon for seller financing to be a possibility. Seller financing is, in essence, establishing a separate mortgage with the seller. If the bank's mortgage only covered 50% of the cost and the seller is willing, he can carry the other 50% as a personal debt and be paid in installments to be contractually determined by himself and the investor. It is even possible, in buyer's markets such as this one, to get seller's financing for 100% of the cost if a bank is unwilling to offer a loan. Should seller financing prove inconvenient or impossible, other possibilities remain such as taking out a home equity loan or even receiving legal personal loans from third parties in order to cover the down payment.

The current buyer's market presents a unique and potent opportunity to buy investment property. The multitude of options available for investment property financing ensure that each investor can find a plan that is beneficial to him or her as long as he is diligent and disciplined enough to do the research.

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The Land Speculation

You should always consider land speculation when buying investment property. A lot of people have heard stories about how someone got rich speculating on land. Sometimes we hear stories about how someone just missed out on the investment opportunity of a lifetime by passing up on buying that land.

Some of the best land speculation happens when you have a use for land and can afford to hold it for a long time. Buying land close to towns and farming the land is a great way to speculate over time. Other uses of large tracts of land such as the old drive-in theaters proved to be an excellent way to provide income while holding land. These theaters are rarities these days, but you get the idea. Try turning land into a salvage yard, outdoor storage facility, campground, or any way you can think of that will allow you to affordably hold onto the land.

Here is a true story: When the first generation of a family came to America, they worked very hard to save enough to buy a property. All the children wanted to buy a big piece of land outside the city. The parents nixed their plan, however, since you could not walk to town from the land. So, they bought a home in the city instead of the big piece of land down the road. Had they bought and held the land, it eventually would have become part of a high value uptown St. Louis neighborhood.


Land speculation does not need to involve a large tract of land. Whenever you purchase a home, you are still speculating that the ground it sits on will increase in value. Try to look for houses that border nicer neighborhoods or are close to a large improvements, such as a new train station.

Whenever you look to buy real estate, always look beyond the structures on the land and its current usage. Look past the properties current value and towards the potential of the ground itself.

Buy Investment Property in The Early Stage of Construction

You may probably hear about buying brand new homes in the pre-construction phase of development and having their home value increase as its being built. These stories usually involve someone getting in during the earliest stage of development when the builders initially release the new homes for sale and typically offer home buyers good incentives and competitive pricing to pre sell as many new homes as possible.

Many new home buyers have found that new-construction purchasing is the best way to own a new home or reserving a price in the market, but postponing their closing date until the new home is completed, in some cases, can take as long 6-12 months to complete construction on the new home community.

Giving buyers time to sell their current house, save for additional down payment, or find a competitive lender. Along the same lines, most builders only require the buyer to put down a small amount of down payment money when purchasing a home in a new home community upfront. After making this payment, one does not typically need to put more money down or make a single mortgage payment until the new home is built, or they close on it. So, if you are still making mortgage payments on your existing home, there’s no need to worry about making double mortgage payments until your new house or investment property is completed and you close escrow.

Another benefit of buying a new home in the early stages of construction is the home owner can be assured that their new home will be low maintenance once the new home is built. Builders are required by law to give specific minimum warranties to ensure that one will not face any major problems during the first few years of living in your new home. One of the warranties is a minimum of 1-year “bumper to bumper” warranty, which ensures that everything in the home is covered by the builder. There is also a 2-year warranty that covers all systems in the home. Another warranty is the 10-year structural warranty that covers foundation and other structural problems.

One more benefit of purchasing a pre-built home is that the buyer will get to choose many features in their home. Depending on the progress of construction, one can often choose flooring, cabinetry, light, plumbing fixtures, etc. A buyer can either go with the upgrades, or they can keep the standard features in order to keep costs down. When buying a new home during the early phases of development, he or she usually has the option to choose the floor plan they want to use and the lot they want to build on.

Take the Advantages of Investment Property

What kind of benefits can investment property afford?

Stability in Investment Property

Although taking risks on the stock exchange may yield higher returns, investment property can provide you with a stable, steady income and a relatively secured level of return on investment. When looked at with a long-term view the investment property is unlikely to ever lose you money. You may have to pick the right time to sell a property but as long as you keep looking at this investment with a long-term view you will be hard pushed to go wrong. Property is historically stable and if you are prepared to wait it out you can make money on it.

Financial Gain

If you do your homework and consider your investment property as a long term investment the financial gains to be won through investment into property are fairly substantial. In short, one of the most significant benefits with regards to investment property is that as long as you have a bit of free capital you are able to borrow money from the mortgage lenders, in order to buy a property which you can then let out and charge tenants money in order to pay back the mortgage lender. In affect you become a middleman who is set to earn a good return on investment as long as you decide to follow a few basic steps.

Return on Investment.

Studies suggest that, on average, a home doubles in value every seven years and whilst this is not guaranteed as long as you have the property correctly evaluated and you buy in the right area you can feel certain that you are making a good, financially sound investment. This means that if you have a lump sum of money which you are interested in investing then Investment Property is certainly a type of investment worth having a look at.

Be Careful When Buying Investment Property

With the real estate prices dropping steadily, it is more tempting than ever to jump into the real estate investment game. But before you go out and buy an investment property, there are a few things you should keep in mind.

You need to consider the type of investment property you are interested in. Are you looking for a fixer upper that you will flip for a quick sale or are you more interested in a rental property. If you are looking for a flip, you will need to find a property well below market value which is in need of only cosmetics updates. You will need to be very careful in budgeting the renovations as they tend to take longer and cost more than originally planned. When it comes to rental properties, you must once again be careful to buy something that offers you good rents to cover the mortgage, taxes, upkeep, etc.

Before buying an investment property as home you need to understand the real estate market dynamics in your selected area. Location is very important in purchasing investment properties, almost more so than in buying your own home. Even though you may have lived in a particular area for a very long time, make sure you look at its potential from an investment standpoint. Do your research whether you are considering a neighborhood or area you know well or a new market. Most towns and cities will have areas that are more desirable than others so try to keep in mind specific postal codes, average median income, sale price of homes, schools, shopping, and any other factor that may impact on your investment property.

The help of a real estate professional will save your time and aggravation. Try to choose a real estate professional with experience in investment properties. This person will have invaluable information to help you make the right decision. They will be your eyes and ears when searching for the perfect investment property. They will also have access to comparative material to help you review prices and rents.

You will need to have a good credit rating and or collaterals as well as a substantial down payment to purchase an investment property, particularly one that is a rental property. You may also need to make cosmetics or mechanical repairs to the home before being able to flip it or rent it out. Make sure you are aware of the type of investment needed to bring the property up to date for a quick sell or to bring it up to acceptable living standards to attract great renters.

Property investment is a challenging and rewarding business. Those who do it are often addicted to it. However, the rewards may be great for certain investors, there are also a number of them of fail. Careful planning and number crunching with the help of a good real estate professional will help you choose the type of real estate investment that's right for you.

Find Investment Property in Tax Foreclosure Market

Tax foreclosure real estate is property that has been taken by the IRS due to the home owners' inability to meet the demands of his tax bill. While the Government is loath to take this property away from home owners, if the home owner makes no attempt to contact them and rectify matters, they will do so. This means that thousands of homes have been taken in tax foreclosure and the Government has to sell them to recover their debt.

Not many of people who know investment property can be found in the tax foreclosure market are aware that they can take advantage of this market.There is a great deal of information available in the internet that helps anyone wanting the take advantage of this market.

If you inform yourself of all the processes required to take advantage of the market then the world can quite literally be your oyster. Just be prepared to do some homework and have patience and you might just find the tax foreclosure home of your dreams. Real estate obtained at tax foreclosure auctions offer the buyer much better value for money. At present the economic climate is such that the market is flooded and real bargains can be had.

Tax foreclosure real estate is generally able to be viewed prior to the date of sales. So do your utmost to ensure that you have viewed the property. You would never purchase a motor vehicle sight unseen and real estate is a large investment, so don't purchase anything you have not seen in person. Of course, don't worry about dirty carpets and cracked windows. These are relatively minor problems, however steer clear of any property that has major structural damage, these are duds in the long run and will not see you getting a bargain.

The more you know about this process the better armed you will be to deal with it when it comes to auction time. But it is not only important to know about the processes that take place, it is also important to have as much knowledge of the property as you can. The more you know about the property the better; this will give you the knowledge to place your bid so that you cane either make a good return on your investment or make a wise choice in terms of the kind of home you will be living in.

Make use of a detailed inspection list and evaluate what repairs are needed as well as what they will cost you. This enhances your bidding ability and also lets you know if your purchase will be within your budget. Make a short list of properties that you think suit your investment criteria and always stick to your budget.

Should You Buy Investment Property

When you invest, you have a virtually unlimited array of ways to make money. But that entails being able to make choices. You have to decide how much you will learn about each aspect of real estate, whom to add to your team, where to seek properties, whether a particular property is a good one for you—and on and on.

What to do with a property once you have purchased it. You may not be the type of investor who wants to buy a property and hold on to it for a long time. You may not want to deal with property managers and tenants or to see to the upkeep of a piece of real estate. If these things don't appeal to you in the slightest, your other option is flipping.

Flipping a property is simply the practice of selling it as soon as you buy it, often at the same closing. At the very latest, flippers tend to begin the selling process the day of the sale. Some even begin before they own the property, which is very risky business. However one goes about doing it, flipping always entails a mad rush to the auction block because an empty property is always a liability.

When you hold a property,however, you have the opportunity to raise that property's value. If you get a really good deal, the amount you have paid for it will probably be a drop in the bucket compared to what you stand to make from it. And when you do decide to sell it, you will be able to do so at your leisure and get more than you would have by flipping.

This holds true especially if you property is a multi-family dwelling such as an apartment high rise. If it is a good property in a good location, and you take care of it, chances are that occupancy is going to stay up. With a property like that, your earnings tend to increase exponentially. With good management, that is almost guaranteed.

Speaking of management, you will need to decide whether you will do that yourself or hire a management company to do that for you. If you own a particularly large piece, or if you own many pieces, you will have to hire a manager. Ken McElroy, author of “The ABCs of Real Estate Investing,” strongly suggests that you hire a real estate management company so that your talents and your time will be put to better use elsewhere.

Ultimately, however, whether you flip a property or hold it depends on what you would rather spend your time doing. Perhaps you thrive on the fast-pace workday that flipping entails. Maybe the adrenaline rush feels like an adventure to you. In that case, you should learn the proper way to flip properties.

However, if the idea of nurturing a property appeals to you, then buying and holding is the way to go. Depending on your talents, you personally may be able to make more money working one way as opposed to another. It's totally up to you.

Buying Your First Investment Property

Here's my tips on what to buy and where to start to maximize your investment.

For most first-time investors, the choice is usually between a Single Family Home or a 2-4 unit property, commonly called Duplexes, Triplexes and Fourplexes. There are large differences between both and you should fully understand them before plunking your money down. In this segment we're going to focus on Single Family Residences or SFRs for short.

SFRs provide an investor with the greatest leverage possible, meaning you can put the least money down. It's not unusual to buy these types of deals with 10% down, meaning on a $150,000 home, you'll only need to come up with $15,000 plus closing costs. This makes these types of investments very affordable for most young investors who don't have a lot of capital to begin. Be prepared, however, to feed the alligator every month, because these properties typically don't debt cover, which means the rent you collect every month probably won't be enough to cover your mortgage payment, tax bill and any other expenses you have.

Most often these properties are purchased as pure speculation or appreciation plays, meaning the goal is to create equity over time. For example, if you bought a property for $150,000 with 10% down, and were able to resell it in 3 years for $175,000, you'd earn $25,000 on your $15,000 investment, which equates to a 167% ROI over a 3 year hold.

Be careful when buying these types of deals, because your goal is to come as to close to break even as possible, so you don't have to come out of pocket. And remember, if you're tenant moves out for any reason, you won't have any money that month to cover the mortgage or expenses, so make sure you have 3 months of mortgage payments in reserve for a rainy day.

And remember, the more SFR's you own, the more tenants and properties you have to manage. It's easier to own a 10-unit apartment building than 10 SFR's since you only have 1 roof and 1 lawn to mow, versus 10 roofs and 10 lawns. Finally, as soon as you're able, take your equity gains from the SFR's and 1031 into properties with multiple units so you can begin your climb up the Property Ladder.

Tax Shelter Benefits You With Investment Property

Thanks to the tax shelter benefits provided by the tax code, a real estate investment can shelter some of its own income from taxation and occasionally shelter income received from other investment sources as well.

There are two allowable deductions for real estate investment properties that provide tax shelter.

The first of these deductions is for mortgage interest. The IRS allows you to deduct the interest you pay on the mortgage you obtained to acquire the income property. The benefit to real estate investors is that interest is really a cost associated with acquisition of property rather than operating it, and the argument can be made that tenants really pay the mortgage interest for the real estate investor.

The second source of tax shelter is through depreciation deduction, which the tax code now calls cost recovery, but we'll continue to call depreciation for our purposes. In this case, the IRS allows you to assume that the buildings (not the land) are wearing out over time and becoming less valuable, and as such permit you to take a deduction for that presumed decline in the value of your asset.

Okay, now here's what's great about real estate depreciation.

Depreciation is a non-cash tax shelter deduction. In full compliance with the tax code, you get a deduction that is not an operating expense and therefore does not affect your cash flow. Moreover, depreciation can shield some or all of your property's year-to-year income from taxation and in some cases when the depreciation deduction is large enough, it can even exceed the amount needed to shelter the property's own income and provide tax shelter for other investment income as well.

Though you won't find a simple formula for the tax shelter component of a real estate investment, here's the idea.

Income less Operating Expenses = Net Operating Income

Net Operating Income less Mortgage Interest less Depreciation (Cost Recovery) = Taxable Income

Example: Let's say you own an income-producing property that generates rental income of $48,000 and operating expenses of $19,200, leaving a net operating income of $28,800.

To calculate your taxable income, you would then deduct your mortgage interest and allowable depreciation from the net operating income.

Unless you have an interest-only loan, your mortgage payments are made up of both interest and principal. Only the interest portion is deductible, which we will say is $17,559.

The amount of depreciation depends on several factors: The useful life of the buildings as specified in the tax code, which is currently 27.5 years for residential property and 39 years for nonresidential property, and the percent of the investment real estate allocated to buildings and land. Only buildings can be depreciated, and for our purposes, we'll say that the deductible amount for depreciation is $10,037.

Here's the calculation: $28,800 - 17,559 - 10,037 = $1,204

In other words, you must pay Federal income tax on a taxable income of $1,204.

There are other components to tax shelter. For instance, you can typically depreciate capital additions over the same useful life, starting when they are placed in service. You are allowed to amortize closing costs associated with the acquisition of an investment property over the same useful life. And you can amortize loan points over the number of months of the loan term and write them off.

How to Buy Investment Property By Numbers

Buy investment property without seeing it is a numbers game. Whether or not you see the property before you make an offer isn't nearly as important as making sure the numbers make sense.

A man in California used to just send out offers on a hundred MLS listings at a time, offering 25% less than the asking price on each one. Occasionally a few sellers would accept his offers. He never had to look at the homes beforehand. Including an "inspection and approval" clause in the offer meant he could always back out of the deal later when he saw the house. Meanwhile, he efficiently found the truly motivated sellers.

This true story demonstrates that with a good clause or two in the contract, you don't have to worry about making an offer before you see a property. It's true when you buy investment property or your next home. When it isn't everything the seller says it is, you can reject the deal with little or no loss. So why wouldn't you want to look at the property?

Buy Investment Property By Numbers

The main reason you might skip looking at a property before making an offer is time. This is certainly true if the property is far away. If you don't get a price that makes sense, why spend your time traveling to look at real estate investments? A price and terms that make sense - this is what is important. Of course you'll probably want to look at the actual property eventually, but looking at the numbers is how you invest.

Investors value income property according to current cash flow,so start by verifying income. Get the actual income figures for the past 12 months. Always consider the potential income if rents are raised, vending machines are added, etc., but base your offer on the current income.

Verify all expenses with investment properties. If any expenses listed by the seller seem unusually low, they most likely are. Just substitute your own best guess in place of any suspicious numbers.

After you determine the net operating income, apply the appropriate capitalization rate to arrive at the value. If you're not sure how to do this, get help. However, you really should understand the principle of how to figure a cap rate. This is a numbers game you're playing.

Calculate loan payments, and see how much cash flow you'll have. Then you can figure your cash-on-cash return based on how much of your own money you put into the deal. Just divide the cash flow by your investment.

When the numbers work, you can safely make an offer. Inspections will tell you if there are problems that will affect the cash flow. You can always renegotiate if there are such problems.Of course, you can even go take a look now that you are truly ready to buy that investment property.

Proper Research Before Buying Investment Property

If you want to buy investment property you can go ahead with the plan. But yes, you need to make proper enquiries and do adequate research.

First,you shall find about the area where you are planning a purchase. Is the area strategically placed? Are major constructions in the pipeline in the area? Is the area safe in terms of criminal behavior? Is it fairly attached to the network of roads? Lastly, but most importantly, what is the property-escalation scenario according to the experts there?

You shall check with the deeds of the property. You must ensure that it is not a case of multiple deeds. This is where a property investment company comes handy. It lets you secure a legally safe portfolio. It checks on the liens, property arrears, accrued interests, and fraudulent property transfers. Of course, a property investment company can be an asset if you have a smart portfolio (at least 10 properties)

Buy investment property with an eye towards flipping it. Get one through the various loan programs and then modify it in an aesthetic way, no structural modification is required. All you need to do is to add interiors and give it a smart paint. People will make a beeline for your property in no time.

Protect Yourself from Economy Crisis with Investment Property

The recent stock market falls decrease wealth and liquidity in the economy with property prices falling they could fall further.There are however solutions that allow anyone in investment property to protect themselves against falling prices and lock in their current value regardless of how far the market goes down.

The background

We have had a great rise in property prices across the board but this is now coming to end and prices are falling and they could due to the size of the rise plunge.

The facts are:

1. Interest rates have risen.
2. Many people who started with low starter rates have moved to the full rate - the equivalent of an interest rate rise to them.
3. The huge property boom has seen a glut of new housing that is proving hard to shift.
4. Uncertain economic conditions are seeing people stay put rather than move.
5. First time buyers due to the cost are finding it hard to get on the property ladder.

Lessons from History

It's an economic fact that when interest rates are up and liquidity is decreased the housing market slows.With the huge boom we have just seen prices could tumble and if stocks turn into a bear market this will make things worse.

Peace of mind

There are companies that for a small premium will guarantee the value of houses at a specific rate.

Protection against falls

If prices tumble then you can sell and get the full locked in rate.
On the other hand, if prices rise then the gain is the property owners.

Gains are unaffected

Of course these schemes charge but it’s a small fraction of a percent annually and for many people in investment property this is a small price to pay for peace of mind.

Buy new property with locked in value

It also allows speculators to buy property with a fixed lock in rate of value so that even if they think prices may rise they are protected against falls.

These schemes have done very little business due to the huge bull market we have seen in the US economy, but they are set to do increasing business as investors take a more conservative approach.

How to Choose Investment Property Loan

Most of the individuals who purchase investment properties do not live on the land. Although many individuals who purchase investment properties do have enough for a down payment, most do not have the cash needed to buy investment properties in full. Others do not want to tie up their personal money. This is why many decide to finance investment properties with a loan obtained through banks, brokers, or finance companies.

Many individuals are purchasing real estate because they gain larger returns than the average investment. Many are purchasing condos, apartments, single family homes and foreclosed. To qualify for financing, you will need good credit, a description outlining how you will spend the money and at times a collateral too. The lender will want to know a few questions before deciding whether to give you money. For example, they will want to know what you are borrowing the money for and how much is needed. They will also want to decide how long it will take for you to repay the loan. In addition, you may want to research the location of the property crime statistics, and conduct a cost benefit analysis to see if the property is worth purchasing. If you have properly researched your potential investment, then it shouldn't be answering the questions shouldn't be that bad.

Choosing a lender can be a difficult task. If you choose a lender with high fees and interest rates, then this will negatively affect your profits. There are a lot of companies that can help finance investment properties and these will be most familiar with the specific type of financing that you may need. You can either visit a loan office or apply to one online. After applying for a line, the person agrees to pay for the loan gradually by paying the monthly payments. Once it is paid off, the person can use the property for personal use or continue renting it.

There is a fixed mortgage rate, which means the mortgage consists of a fixed amount of monthly payments or installments with a fixed interest rate. There are two sub-types of fixed mortgage rates, such as a 30 year mortgage or a 15 year one. Adjustable rate mortgage means the rate fluctuates according to the market conditions. The balloon mortgage rate is a specific amortization schedule with variable terms. Those investors who plan to sell their property within five years are usually advised to try out an adjustable rate mortgage. An investment property can definitely have an effect on the amount of taxes you pay. You will have to pay state and local property taxes.

More and more mortgage companies have been popping up because the demand for loans has increased. There is stiff competition among the companies. Many companies are offering introductory rates and these rates continue for a set period of time. Before you decide to get a loan, please investigate the company and terms of the loan carefully.

Choose Investment Property

There are a number of factors to consider before you make your decision because each differs from the other.The first decision you must make before looking for your investment property is on the type of property you want.

What to Look For

1. General location - location is the mantra in real estate. Unless the property is located in an area that will sustain or boast rents, and in turn be able to be sold for a profit, forget it.

2. Site improvements - Does the property require repairs that might eat away at your cash flow, or are there repairs that can be made that would substantially increase your cash flow and return?

3. The lease form used - In the case of a commercial building are you locked in to a favorable or very unfavorable lease? In other words, are you buying a favorable or unfavorable income, and for how long?

4. The income produced - How much income does the income property generate and is it realistic, and can it be sustained? Is there room to increase the income?

5. Type of expenses - What does it take to keep the property operational? Is there anything out of the ordinary, and is there a chance that some expenses can be reduced or eliminated?

7. Management requirements - Will the property require a professional management company, perhaps a resident manager, or is it something you can handle.

8. Financing - Can you leverage the property? What about the rates and terms will you and/or the investment property qualify for the best loan possible? What are the loan payments?

9. Depreciation benefits available - How much of your income can you defer by depreciating the property?

10. Unique features - Is there anything about this particular investment that sets it apart from other real estate investment opportunities? Perhaps its location, construction, or maybe it offers great upside potential.

Types of Investment Property

1. Apartment Complex - This is the most popular form of real estate investing and can include anything from a duplex to a high-rise building. The size and mix of the individual apartments are usually keyed to local market demands and typically include studio apartments and larger. Apartments can be rented on an annual lease basis or month-to-month. When present, coin-operated laundries and storage facilities or garages can produce a small addition income fro the owner. A well-managed apartment complex can be a highly profitable investment and a great way for new investors to get started.

2. Office Buildings - This type of investment property requires more savvy then multifamily property, so first time investors should be cautious. Office buildings are generally leased on a square footage basis rather than a flat price per unit; typically including a cost for a proportionate share of common areas like entrances and hallways. Depending on the lease, tenants might also be required to pay a proportionate share for parking lot and roof maintenance, and as a rule, tenants will pay all or part of the cost of finishing the interior of his suite. Office buildings generally make for a sound and relatively easy-to-manage investment.

3. Shopping Centers - In many parts of the country this type of real estate investment is very popular, but as with office buildings, contain some unique features of which an individual investor should be cognizant. A shopping center can mean anything from a couple of stores (known as a strip center) to large regional malls. Tenants generally sign a lease and are expected to share in the cost of maintaining the common parking lots, landscaping, daily cleaning of the grounds, etc. in what is known as common area maintenance (CAM) charges. Small neighborhood centers with a moderate cash requirement can be a great way for a beginner to start in this type of investment.

4. Warehouses and Industrial Buildings - Rental warehouses provide small-to-large bays or rooms used for storage and small workshops. These typically rent on a month-to-month basis and thus (because tenants can move out at anytime) make it one of the least stable of all real estate investments. Industrial buildings are usually characterized as larger space and generally leased on longer terms to more stable tenants such as manufacturing plants. The ultimate investment here is a "sale/leaseback" situation wherein a major company sells you their building and then leases it back from you on a net basis but are difficult to find because they are excellent investments.

5. Mobile Home Parks - This type of real estate investment has become one of the most sought after in recent years because it provides retirement-age people and young couples a reasonably priced home. In this case, a pad with water, sewer and electricity hookups, plus a concrete patio area and tie down rings is rented to someone who wants to place a mobile home there. Other improvements include the streets (which may be deeded to the local municipality, thereby relieving the owner of street maintenance), recreation facilities (perhaps with a building), and laundry facilities. Because mobile home parks are profitable and easy to manage, they can make for a very good investment.

You should never purchase investment property without doing a thorough real estate analysis. Quality real estate investment software makes it very easy. So be sure to check it out.

Refinance Investment Property

Refinancing your investment property mortgage loan is never a simple matter, but there are a few things which you can do to insure that you get the best refinance rate possible. Here are 4 tips you can use to help you in the process:

1. Get the Best Refinance Investment Property Interest Rate by Doing Your Homework

Even if you choose to use a mortgage broker, you will find that interest rates constantly change, literally hour by hour. By taking the time to educate yourself about mortgage rates you can help yourself to better gage when the rate is at its best it is likely going to be. By reading about mortgage rate trends, the U.S. economy and other financial news you can help insure you get the best refinance mortgage rate possible.

2. Get the Best Refinance Investment Property Interest Rate Possible by Using a Mortgage Broker

Brokers are professionals in their trade. Just as an accountant is the best person to do your income tax returns, a commercial mortgage broker is trained and skilled in helping you to find the best refinance investment property rate possible. A broker has access to literally thousands of lenders and programs to choose from. They can suggest lenders for just about every scenario possible. If you have bad credit, if you are self-employed, etc., no matter what your unique situation is a commercial mortgage broker can help find you the absolute best deal possible.

3. Get the Best Refinance Investment Property Interest Rate by Buying Down

Assume for a moment that the best commercial mortgage rate available today is 6%. By buying down your rate you can lower your interest rates over the length of your loan. This is also called "paying points." If you were to buy down the 6% rate, you might easily end up with a 5.5% mortgage. The cost to you would be a few thousand dollars at closing; however, this would save you tens of thousands of dollars over the life of your mortgage term. Paying points always makes sense if you have the available capital and do not need to use it in other areas of your business.

4. Get the Best Refinance Investment Property Interest Rate by Negotiating

A little known fact is that mortgage rates and even fees are always negotiable. By playing two lenders, or even two brokers, against each other, you can come up with an absolute rock-bottom interest rate. Successful negotiation requires that you are always prepared to walk away from the deal, that you say "no" until you get what you are looking for, and that you are both patient and well educated.

By educating yourself, using a mortgage broker, paying points, and using simple business negotiation skills, you can get the best refinance investment property interest rate available. Whether you have excellent credit, or not so good credit, you can find an excellent rate and refinance your current commercial mortgage. By doing your homework you can save yourself thousands of dollars over the life of your investment property loan.

Estimate Investment Property Market Value

There are three basic methods used by appraisers to determine the fair market value of income producing property that property investors might find helpful when buying investment property.

1. Income Approach 

You use the return you desire from your cash investment and then capitalize that percentage by the net operating income being produced by the property.

For example, you desire a 8.5 percent return on your investment and you estimate the net operating income for the subject apartment to be $38,500. Here's the computation:

$38,500 / 8.5 = $452,940

You would be willing to pay $452,940 for the apartment complex based upon its income stream and your desired return on investment.

2. Market Data Approach 

The market data approach makes use of a list of properties comparable to the subject property and determines a property value-price per unit. In this case, these comparable properties should be in similar areas, with similar apartment sizes, amenities, appearance and rent structures, and should all be buildings that have sold recently.

You would then divide the prices at which each building sold by the number of units in each apartment complex to determine an average price per apartment to use as a multiplier. The average price per unit is then applied to the subject income property.

For example, you create a list of six comparable apartment complexes in the local area and determined that they sold for an average of $60,000 per apartment. By multiplying the $60,000 average unit price times the number of units in the subject property, you arrive at market value of $420,000 based on the market value approach.

3. Cost Approach 

The cost approach method estimates what it would cost to replace the entire apartment complex.

First, you must determine the land value. If a study indicates comparable land is selling for $10 a square foot and the subject property is on a 100 x 200 foot lot or 20,000 square feet, then the land is worth $200,000.

Second, you must determine what it would cost to replace the site improvements such as the parking area, lawn, shrubs, trees, etc. 

You determine it would cost about $30,000 to replace them.

Finally, you must compute what it would cost to duplicate the building. If the subject apartment complex has seven one-bedroom apartments of 600 square feet each or a total of 4,200 square feet, and it would cost $60.00 a square foot to build, then the cost of a replacement structure will be $252,000.

The total cost of a new building is $200,000 + $30,000 + $252,000 or $482,000.

But the subject income property is several years old, so we must establish a comparable by figuring a depreciated value on the $252,000.

In this case, assume the subject income property has depreciated 20 percent or $50,400. This would leave a depreciated value for the building of $201,600. To this amount, add the $30,000 in site improvements and the $200,000 land value, giving a total market value using the cost approach of $431,600.

Estimate of Market Value 

1. Income Approach: NOI of $38,500 capitalized @ 8.5% = $ 452,940

2. Market Data Approach: 7 Units @ $60,000 per unit = $ 420,000

3. Cost Approach: Land of 20,000 square feet @ $10.00 square foot = $200,000 Site Improvements = 30,000 Duplicated Building (less 20% depreciated value) = $201,600 Cost of replacement = $431,600

4. Final Estimate of Market Value = $440,000

It should be noted that the final line on the analysis is an estimate of market value. How did we arrive at it? We correlated all three of the appraisal methods and simply made a judgment by putting a slightly heavier emphasis on the income approach. Other property investors might arrive at a different estimate of market value, but you get the idea.

Be Careful Buying Investment Property

There are lots of things that go into determining whether or not the property you purchase will be worth something in the end.

Don't make the mistake of assuming that all properties will be worth more than their value in a few years. Instead, try and follow some simple steps that will lead you towards a real investment. Below, you will find some of the things that should be considered before purchasing any kind of property.

Before you buy investment property, think about the location of the property itself. The property that you are considering should be located in an area that has a lot of job opportunities. This location should also include schools, shopping, transportation, and it should also be relatively easy to locate and reach when you need to visit your property.

Lastly, make sure the area is safe. If you are going to purchase a rental property, the next thing that you need to do is find out what the going rental rate is within the neighborhood that you choose.

Find out what price other rentals are being let at by speaking to local landlords, and find out how other landlords in the area are doing with the current market. This is the best way to buy investment property. If you rush into purchasing any kind of property, you will likely live to regret your decision.

However, a well informed decision is one that is worth your time and energy. You should never be in a hurry to purchase any kind of investment property. Instead, you should always take your time to find a property that meets the criteria listed above.

Remember to look for location above all else, and never try to rent a property for more than it's worth.

A good investment can turn into a lucrative venture, but a bad investment is a bad choice for everyone involved. If you aren't sure about investing in property, make sure to give a knowledgeable real estate agent a call because sometimes, helpful agents can be your best defense against a poor choice.