Real Estate Blog

Author: Scott Hurst 

Contrary to what many believe, the real estate market is not at rock bottom, still falling, or as the media likes to call it - in recession.  Actually, it is back on it’s way up; time to start reading between the lines and get ready for the changes.  Just like the MCI debacle and the ENRON scandal, there will be rocky points in any market, the real estate market is no different.  For the last year, there have been corrections and interest rate drops and still the market does not follow the trends that Ben Bernanke sets with his 7th interest rate drop of the year, and its just March!  No..  The real estate market will correct itself, with no help from the government. 

There is more real estate inventory waiting for buyers than we have seen in the past 5 years, this is because the concensus is that the market is going to crash, a recession is looming, and we have no idea who is running the white house.  Let me make something very clear - a recession is NOT looming, in fact, our economy is doing better than average.  A recession would mean that the economy is in decline, but our country has a lower than 5% unemployment rate, job growth is on the rise, and overall, people are spending money like its christmas! 

With so much real estate inventory, owners are lowering prices and giving incentives to buyers that are very inviting.  Why then are potential buyers still holding out?  Actually, there are growing numbers of people applying for loans, but due to the federal government getting involved with mortgages, the restrictions are making it ever more difficult for people with descent credit to qualify for these loans.  In fact, it is more difficult to buy a house now, than it was 10 plus years ago, when the rates were hovering near 15%. 

Now, why is it again that people aren’t buying houses - the government!  We need buyers to apply for loans, get approval, and try to purchase the properties that are very competitively priced, not just to help build investments, but also to allow the market to correct itself.  Without people taking the steps to start getting pre-approved and looking for homes, the public will not know that there is a huge amount of potential buyers that are taking steps toward home ownership.

Author:  Scott Hurst 

Flipping a house comes down to 2 things:  Price and Price.  I say that because no matter where the house is, what it looks like, or even the age and condition; if its priced right for the market, BUY it!  With that in mind, there comes a time when you will finally start actually looking for properties to buy.  Once you do, you will have many avenues available for doing your research.  Whether it be driving neighborhoods, looking  to see who isn’t  putting out trash cans, mowing their lawn, or searching the probate listings, you will find what works best for you.  Once you have a method of searching for foreclosures and distressed owners, you will then start to really learn how to work this avenue of finding your prospects.

I will only be discussing online research, so please bear that in mind when you read this blog.  When you do research online, you will find that there are MANY different neat little places to get a bit of information to use in your house hunting.  You will want to bookmark each of them, until you have created a good reference list that you are comfortable with.  I have more than 50 bookmarks that I use on a regular basis for finding houses for flipping, but only 3 or 4 that I consistently use for deciding whether a property is ideal for taking a second look and making a offer.

Another thing you need to do, before you start your searches, is identify your criteria for what you want to buy.  Typically, a 3 bedroom/2 Bath/2 car garage with around 1200+ square feet of living space is ideal for a buyer, so this is what you can usually concentrate your efforts on.  Also, are you looking for homes in a particular part of town?  If you are trying to do your own management and you are going to buy and hold the properties, you may want to keep your purchases within a close proximity so you can easily make commutes.  Lastly, make sure you are aware of any major changes in the development in the area of your purchases, whether it be a new mall being build right down the road, or a new parking garage being built for the apartments around the corner; be aware of these details.  They will play a big role in what you are willing to pay, for a given property.

I cannot go over every avenue that is used for doing online research, but I will hit on some of the top places for finding deals, doing research, and finding out what your price point should be.  One website I particularly like to use for finding properties for Investment is www.southwestalliance.com; this site is great for finding houses that are controlled by HUD (Housing and Urban Development).  HUD has certain rules that you must be aware of when buying their properties and it is best to pay close attention to what you are buying, since most are not in move-in condition.

 You will most likely be doing some rehab work to make these houses livable.  On the site, it will list whether there are foundation issues (if known), whether the seller is willing to contribute funds toward repairs, and also information about the foreclosed house itself - size, square footage, pictures, etc..  You will see many that may be valued at an average of 15% under value and 1 or 2 gems that may be as much as 30-40% off.  Keep in mind that there are others that will be looking at these houses too, so be sure you know what you are buying.

 Contact your local realtor, if you want to bid on these properties; there is a bidding process, so a realtor has to be involved in all bids.  The best way to win a bid on these properties is to constantly watch the site for properties that keep reappearing.  Sometimes they will get overlooked by the investors if they have had too much exposure on the site, then you may be able to step in and offer a lower bid and win. 

The second thing you can do, if you are the type that likes to buy a house and move in, do your own repairs, and make an offer on the property is a “owner occupant”.  An owner occupant is a person that will occupy the property as a primary residence; they have bidding priority over all other bidders and are most likely able to not only offer a lower bid amount, but also have much less competition for the purchase.  What you will have to remember as an owner occupant is you must live in the home for at least 1 year and cannot actually sell the home until 2 years after purchase.  If you are not buying as an owner occupant, this rule does not apply.

www.trulia.com and www.zillow.com are 2 great sites for looking for properties for investing and also flipping.  Bear in mind that when you start looking at the commercial sites for properties to buy, you are also potentially decreasing the profits you can make.  Most properties that you see on Trulia.com and Zillow.com are also listed on conventional sales sites with the most popular being the Multiple Listing Service (MLS).  There will still be some great deals to find on these sites, but they are not as easy to find as doing your due-dilligence and walking subdivisions yourself.  In order to work these deals, you will actually be doing some calling the owners and realtors to find out more about the houses.

Both Trulia.com and Zillow.com offer the ability to narrow searches down by location and parts of town, so if you are particular on where you want your property searches to concentrate, this is a good feature for you.  Additionally, they both offer history reports of prior sales so you can see what other houses in the neighborhood sold for.  You can query these sites for home sales trends, average sales prices, and even specific reports on subdivision average sales price.  Without using a real estate agent, you will have to use these many tools to find out what the property is most likely worth.

A great way to capture information on all the residential properties in MLS is by using the website www.realtor.com.  This site collects the MLS data for recently listed homes and populates its database with the detailed information for the listing.  I like to use this site for doing my comparables because it has recent information and can most closely help you find other houses that you can compare against the one you are buying to see if it’s a good purchase. 

Another part of research for your purchase will be the rental market; this can also be retrieved from realtor.com.  We want to collect this information for the sole purpose of seeing what our future purchase will most likely rent for.  Do a query on the site and write down as many mls numbers and contact info as you can find comparables.  We DO want to know what the list rental price is, but more importantly, how much they RENTED them for.  By keeping records of active listings, we can call the owners and ask them if the property is still for rent, if it is not, we will ask how much it rented for.  By getting this info and comparing it against 4 or 5 others, we can reasonably tell what our future purchase might rent for.

Every city has local realtors that sell and rent properties for that given city or town, we want to try and use these resources for our purchases.  If you can develop a good repore with a realtor, you may be able to get valuable information about your purchases.  Some of these include history reports on past sales, current lists of what is in MLS that meets your criteria, comparables on the properties you want to buy and even current and older pictures of them.  Realtors have access to many valuable tools to their disposal and if you are lucky enough to know or have one, your one step ahead.  That doesn’t mean you will get a better deal than someone who doesn’t use a realtor, it just means you have more tools available to help you narrow down your purchase price.

Last thing we will address in this blog page is finding local websites for available properties.  In San Antonio, for example, there are online records that can be attained to assist in finding foreclosures and lis pendens (letter of default sent to owner).  One I frequently use is www.netronline.com , this site is great for getting records for foreclosure notices, deed records, and even public notices.  Another one I like to use is www.ustreas.gov/auctions , which has information on everything from Veteran Administration foreclosures to IRS and U.S. Marshall seizures.

As you can see, there is a vast amount of avenues that can be used to find foreclosures and not all of them cost a penny to use.   Finding discount real estate is not a trick or a secret list that only a few can get, but it is the result of a lot of research, study, and due-dilligence on the part of the buyer.  To be successful in real estate, you will need to find the houses that deliver profit, and the way to start is by learning to find the deals!

Author:  Scott Hurst 

There are many avenues to making money in real estate and we will start this chapter off by going over Flipping and Investing.

These are by far, not only the most common methods, but also the hardest to master.  I have found that just when you think you’ve seen everything there is to see about a particular type of investing, that’s when you get hit with a big whammy that you don’t know how to handle.  Knowledge is the key to being prepared and armed with the tools to make the most out of every transaction. 

According to the wikipedia, “flipping” refers to the practice of buying an asset and then quickly flipping it for a profit. I would rather say that flipping is the practice of buying real assets for the eventual goal of making a profit.  Whether you are  holding an asset for a short or long time, your still flipping.  This is why I like to talk about investing and flipping as being closely related.  If you buy a property and decide to sell it in a month because you didn’t like the neighborhood, this could be considered flipping and if you lived in the same house for five years and then sold for a 50k profit, that is still flipping.  Flipping is not restricted to short term and quick sales. 

Investing in real estate is a form of flipping and vice versa.  There are many forms of investing, but we are going to only be discussing long term holding.  I like to think of investing as an almost free 401k plan.  You basically put in a little bit during the tenure, but instead of paying the bulk of it, someone else is doing it for you!  This is great for those people who have trouble putting away money for long term due to always wanting to take it out to buy that big TV or dress they always wanted.  When you invest in real estate, you are making the initial deposit on a property and your tenants then make your payments for you until it is paid in full.  How nice would it be if your cars value increased instead of decreased and someone else made your payment.  You’d need a  larger garage for the cars!  Now that you understand the difference in flipping and investing, you can see how they are interchangeable and closely related.  During the rest of this blog, we will be focusing more specifically on flipping an investment for profit.

Understanding the power of leverage is vital to your success as an investor. Leverage is the act of using small amounts of cash or capital to own and/or control large amounts of assets.  Investing is the product of using leverage in the arena of real estate and your profit is the bi-product of both.  If you were to invest 1000 dollars in the stock market today, you would be able to control only 1000 dollars worth of stock; alternatively if you invested 1000 dollars in the purchase of a real property, you could potentially control many thousands of dollars with just your 1000 investment.  We could also say that the 1000 dollars you invested in the stock market went up 10% over the year and you would make a 100 dollar profit.  On the other hand, what if you had controlled a 100,000 dollar property with an initial investment of that same 1000 dollars, you would have made a 10,000 profit over that same year, with the same investment!  Can you now see why leverage can bring a higher rate of return than stocks. Lastly, what if the stock market crashes, how long do you have to pull your 1000 out; days or maybe weeks.  In investing, you are able to determine your risk in the beginning by the purchase price that you offer. 

Unlike stocks, you don’t pay market value because your an investor right?  We don’t buy retail, we buy low and sale high.  No matter when you bought a stock, your bought it retail; whatever that stock sells for, is what its market value was at the time you bought it.  Leverage makes investing in real estate viable, and properly leveraging your investments will assure you of great profits.  We all want that! 

Author: Scott Hurst

Thank you for taking the first step in learning real estate!  I will be discussing the things they DON’T tell you about in real estate flipping and investment books.  I plan on laying it all out for you, show you the pitfalls, the pay-outs and the less that spectacular work involved.  As this is my first blog entry on Real Estate Investing and Flipping Houses, it will signify the beginning of a long and descriptive series of  blog entries discussing different aspects of real estate investing and flipping in easy to understand lingo, so you, the regular person can understand it AND apply it.  This isn’t some pay course that only gives you a fraction of the information and makes you pay to see the rest blog.  I will be giving away all the information you will need to flip or invest, you just have to apply it!

First off, let me tell you a little about myself and how I came to learn the field  of real estate and what you might be able to learn from my experiences.  I am 33 years old and have been doing real estate investing for more than 7 years.  I started mysapro.com to market myself as a realtor, but have also been using it to disciminate free information about investing in real estate to clients and investors.  During the course of its creation, I have been bombarded with questions about how to flip houses or how to buy them at a discount; this prompted me to start writing about the subject, and here we are! I have bought and sold millions in real estate and have learned that real estate investing is about calculated risk, healthy purchase advise and knowledge of funding opportunities.  When I first took steps to learn how to become an investor, I spent almost 2 years of studying and research before making my first purchase.  Even after that I have continued to develop and hone my love for knowledge so that I could better understand how to not only buy good deals, but to also fix them, market them and even SELL them!  As you will learn about me, it is all about CALCULATED RISK!

Investing in real estate is a risk, just as buying stock is a risk!  If you do not take time to understand what you are doing, you will fail; you will not be able to succeed without arming yourself with the knowledge of making calculated accessment of what your risk is and making your purchases based on that calculation.  If I were to tell you that there was a nice 100,000 home in your neighborhood that you could get for 80,000, you might think that is a good deal.  For some this may be, but for the true real estate investor, this does not constitute a great purchase.  Many great writers and teachers will tell you that you make your profit when you buy it, not when you sell it.  We are not prospectors, we are investors of the product of proven application of the real assessment of value.  The product being the real estate assets you purchase from applying a calculated assessment of its real value.

Let me quickly address the difference between Flipping and Investing.  Flipping a house is the purchase of a distressed and/or delapidated house that is repaired and sold quickly on the market for profit.  Investing is the strategy of purchasing property to hold for long term to maximize income and profit. When buying a property specifically for holding as an investment (I will discuss Flipping later in the blog series), there are key elements that should be looked at before coming up with your purchase price.  The reason im discussing this at this time is because I feel you need to know how to bake a cake before you get started, so you should have your ingredients to your cookie cutter real estate cake before you even start the oven.  Without all of these ingredients, you will not be able to make a cake that taste just right. 

Here are the things you need to ask yourself:
 
How much is this property worth if it were in perfect condition? 
How much is the property taxes and insurance on this property? 
How much to deduct for maintenance fees, rent loss, and management fees?
How much will it cost to repair the property to make it move-in ready? 
How much would the property rent for after repairs?
and finally..
How much do I offer for the property?

This list that I gave you is the heart of what you will need to invest in or flip  real estate.  Over the course of my blog entries, we will dive deeper into why these are the basic elements you will need, how to apply them and why they work.  Please check often for Chapter II of  “The TAO of Flipping and Investing” AKA Free information on Flipping Houses and Investing in Real Estate!

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#5.  Build a team – If you are going to be a success in the real estate market, you need to have a team of people that can help you on your way to riches.  Researching your purchases, presenting an offer, making repairs, and marketing the sell are all things that you will be doing; why not enlist people to help you with this so you can do what your suppose to do, find deals!  Having the right realtor, contractors, and brokers can help you get in/out of deals fast, so you can move on to bigger and better flips.  

#4.  What you DON’T see is also what you get – I don’t know how many times I have inspected a property to find something wrong that ended a deal.  On the other hand, I’ve seen people buy a property without doing the proper inspection and learning  later that they had a major leak, foundation issues, mold, or even title problems.  Always inspect before you buy and better yet, hire an inspector!  Even the big boys like the Trademark Properties, Montelongo Home Buyers and the like buy site unseen, not good practice and not good for a FLIPPING business. 

#3.  Educate yourself – Would you go buy an airplane without learning to fly, of course not!  Take your time and learn your market before jumping into the real estate flipping field.  There is a lot to learn and don’t be afraid to ask veteran flippers for advice or visit your local investor group.  If there’s one thing I know, it’s that FLIPPERS love real estate and they love to talk about it even more! 

#2.  Make your profits – You might be buying that 200,000 property for only 170,000 and have a nice amount of equity built in, but have you calculated for closing costs on the front and back-end, marketing, repairs, holding costs and even realtor fees?  There’s more to flipping than buying at a discount.  You make your profit when you buy, not sell, so make sure that you have calculated for all expenses before making your offer. 

#1.  Love it or leave it -  Its one thing to talk about flipping and doing some research and even making offers, but its another thing to actually reel in a deal.  If you’re not sure about real estate, or if you’re just curious because of all the hype, you may want to look into some other job.  There are many fields related to real estate that do not require putting your money on the line such as Loan Officers in the Mortgage field and even getting your Realtors licence.  Being a flipper is a dedicated and tough job that requires a high learning curve and alot of time to master.  If you are unsure of where to get started in investing in real estate, contact your local investors group or a ixperienced agent in your area that can assist you.