Real Estate Investing - 2 Techniques That Long Term Will Make You A Fortune
As I was brainstorming what to talk about this month in my Riverview Property Management newsletter, I decided to explain a couple of techniques I use to improve my real estate investing. First off, I highly recommend you obtain a real estate license in the state you wish to invest in over the years.
I know the expense and effort puts people off. Granted, if you aren't interested in owning five or more rental properties across your career, it is probably not worth it, but let me explain why it has been a huge benefit to me as a Riverview Property Manager.
First, I can set up a search on the Multiple Listing Service for any foreclosure, short sale, or any other criteria I'm looking for in a rental property. I'll get a daily update of any new listings that meet my criteria, price drops, or sales. This is critical for developing a feel for real value. I look at about 25 properties a day through these emails. Once you've seen hundreds of them, you start getting a feel for what might be a good deal or not. One key indicator is price per square foot. If normal homes in a neighborhood are selling for $110 sq ft and a short sale is listed at $75 sq ft, I slam on the brakes and study that short sale intensely.Second, I can look at any property in person I'm interested in without having to schedule with a Realtor. This is a huge advantage because you can walk these properties at a convenient time for you and not be pressured into buying anything by the sales pitch of the Realtor. Good deals don't last long, so you must move immediately. You can also consider putting in under contract and then dong your due diligence.
A small number of realtors simply do not understand the value of the property and price it incorrectly. Other times, there is something wrong with the property, such as paint, flooring, or a leaking roof. The Seller doesn't have the money to fix it, so the property shows very poorly. I once bought a 4 bed/2 bath home in a gated community because the owner inherited the property and didn't have the money to put in new flooring and paint. Because I could close with cash, the owner didn't understand value, and I didn't mind the aggravation of doing these repairs, I picked up $50,00 in equity.
Finally, you combine the benefits of the license with a 30-year fixed-rate debt obtained through banks. Right now, the opportunity is limited, as 99.7% of all deals are full retail or would not make good rental properties. However, if you just bought one good deal every few years, this would turn you into a millionaire over time without taking undue risk. The key is understanding value, and for that, you need to see a lot of properties over an extended period of time.